-----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, M8S5uaBGf8wFNpSY0MRaUfDvntmKW2DR6FnNscaUkmbGyXCJDRXkJ9ktH9XkeE03 c3Wu/W02+ODkAXJqONv9eQ== 0000950130-97-000893.txt : 19970307 0000950130-97-000893.hdr.sgml : 19970307 ACCESSION NUMBER: 0000950130-97-000893 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 19970305 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTEGON CORP /DE/ CENTRAL INDEX KEY: 0000878660 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 133559471 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-22839 FILM NUMBER: 97551268 BUSINESS ADDRESS: STREET 1: 500 W FIFTH ST CITY: WINSTON SALEM STATE: NC ZIP: 27152 BUSINESS PHONE: 9107702000 MAIL ADDRESS: STREET 1: 500 W FIFTH STREET STREET 2: 500 W FIFTH STREET CITY: WINSTON SALEM STATE: NC ZIP: 27152 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTEGON CAPITAL I CENTRAL INDEX KEY: 0001035091 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-22839-01 FILM NUMBER: 97551269 BUSINESS ADDRESS: STREET 1: 500 W 5TH ST CITY: WINSTON SALEM STATE: NC ZIP: 27152 BUSINESS PHONE: 9107702000 MAIL ADDRESS: STREET 1: 500 W 5TH ST CITY: WINSTON SALEM STATE: NC ZIP: 27152 S-4 1 FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1997 REGISTRATION NO. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 INTEGON CAPITAL I INTEGON CORPORATION (EXACT NAME OF REGISTRANT AS (EXACT NAME OF REGISTRANT AS SPECIFIED IN SPECIFIED IN ITS CHARTER) ITS CHARTER) DELAWARE DELAWARE (STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION) 6719 6331 (PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER) CLASSIFICATION CODE NUMBER) APPLIED FOR 13-3559471 (I.R.S. EMPLOYER IDENTIFICATION (I.R.S. EMPLOYER IDENTIFICATION NUMBER) NUMBER) c/o INTEGON CORPORATION 500 WEST FIFTH STREET 500 WEST FIFTH STREET WINSTON-SALEM, NORTH CAROLINA 27152 WINSTON-SALEM, NORTH CAROLINA 27152 (910) 770-2000 (910) 770-2000 (ADDRESS, INCLUDING ZIP CODE, AND (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA TELEPHONE CODE, NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) OFFICES) JOHN B. YORKE, ESQ. c/o INTEGON CORPORATION 500 WEST FIFTH STREET WINSTON-SALEM, NORTH CAROLINA 27152 (910) 770-2000 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) With a copy to: MARK S. BERGMAN, ESQ. PAUL, WEISS, RIFKIND, WHARTON & GARRISON 1285 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019 (212) 373-3000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the Securities registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] --------------- CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE - -------------------------------------------------------------------------------------------- 10 3/4% Capital Securities, Series B of Integon Capital I....... $100,000,000(2) 100% $100,000,000 $30,304 - -------------------------------------------------------------------------------------------- 10 3/4% Junior Subordinated Deferrable Interest Debentures, Series B of Integon Corporation(3).......... -- -- -- N/A - -------------------------------------------------------------------------------------------- Integon Corporation Guarantee with respect to 10 3/4% Capital Securities, Series B(4). -- -- -- N/A - -------------------------------------------------------------------------------------------- Total(5)............... $100,000,000(6) 100% $100,000,000(6) $30,304
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457. (2) The maximum aggregate Liquidation Amount of 10 3/4% Capital Securities, Series B that may be issued pursuant to this Registration Statement. (3) The 10 3/4% Junior Subordinated Deferrable Interest Debentures, Series A issued by Integon Corporation were originally purchased by Integon Capital I with the proceeds of the sale of the 10 3/4% Capital Securities, Series A and the 10 3/4% Common Securities issued by Integon Capital I. No separate consideration will be received for the 10 3/4% Junior Subordinated Deferrable Interest Debentures, Series B of Integon Corporation distributed upon any liquidation of Integon Capital I. (4) No separate consideration will be received for the Integon Corporation Guarantee. (5) This Registration Statement is deemed to cover the Junior Subordinated Debentures, the rights of holders of Junior Subordinated Debentures under the Junior Subordinated Indenture, the rights of holders of Capital Securities of Integon Capital I under the Trust Agreement, the rights of holders of the Capital Securities under the Guarantee, and the Expense Agreement entered into by Integon Corporation. (6) Such amount represents the aggregate Liquidation Amount of the 10 3/4% Capital Securities, Series A to be exchanged hereunder and the aggregate principal amount of the Junior Subordinated Debentures that may be distributed to holders of Capital Securities upon any liquidation of Integon Capital I. --------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS IS SUBJECT TO COMPLETION + +OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN + +FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT + +BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION + +STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO + +SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF + +THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD + +BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS + +OF ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED MARCH 5, 1997 PROSPECTUS $100,000,000 INTEGON CAPITAL I OFFER TO EXCHANGE ITS 10 3/4% CAPITAL SECURITIES, SERIES B, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR ANY AND ALL OF ITS OUTSTANDING 10 3/4% CAPITAL SECURITIES, SERIES A (LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) FULLY AND UNCONDITIONALLY GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY INTEGON CORPORATION THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED Integon Capital I, a Delaware business trust (the "Series B Issuer"), and Integon Corporation, a Delaware corporation (the "Company"), hereby offer, upon the terms and subject to the conditions set forth in this Prospectus and the accompanying letter of transmittal (the "Letter of Transmittal," and together with this Prospectus, the "Exchange Offer"), to exchange up to $100,000,000 aggregate Liquidation Amount of 10 3/4% Capital Securities, Series B, having a Liquidation Amount of $1,000 per security (the "Exchange Capital Securities"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement (as defined herein) of which this Prospectus constitutes a part, for a like aggregate Liquidation Amount of outstanding 10 3/4% Capital Securities, Series A, having a Liquidation Amount of $1,000 per security (the "Outstanding Capital Securities"), of the Series B Issuer, of which $100,000,000 aggregate Liquidation Amount is outstanding. Pursuant to the Exchange Offer, the Company is also exchanging its guarantee of the payment of Distributions (as defined herein) and payments on liquidation, redemption or repurchase of the Outstanding Capital Securities (the "Outstanding Guarantee") for a like guarantee of the Exchange Capital Securities (the "Exchange Guarantee"), and all of its 10 3/4% Junior Subordinated Deferrable Interest Debentures, Series A (the "Outstanding Junior Subordinated Debentures"), of which $103,093,000 aggregate principal amount is outstanding, for a like aggregate principal amount of 10 3/4% Junior Subordinated Deferrable Interest Debentures, Series B (the "Exchange Junior Subordinated Debentures"), which Exchange Guarantee and Exchange Junior Subordinated Debentures have been registered under the Securities Act. The Outstanding Capital Securities, the Outstanding Guarantee and the Outstanding Junior Subordinated Debentures are collectively referred to herein as the "Outstanding Securities" and the Exchange Capital Securities, the Exchange Guarantee and the Exchange Junior Subordinated Debentures are collectively referred to herein as the "Exchange Securities." The terms of the Exchange Securities are substantially identical to the terms of the Outstanding Securities, except that the Exchange Securities (i) will have been registered under the Securities Act and will not contain terms restricting the transfer of such securities, (ii) will be entitled, to the extent applicable, to the benefits of qualification of the Trust Agreement (as defined herein) and the Junior Subordinated Indenture (as defined herein) under the Trust Indenture Act (as defined herein), and (iii) will not provide for liquidated damages in certain circumstances under the Registration Rights Agreement (as defined herein). The Series B Issuer will accept for exchange any and all Outstanding Securities that are validly tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange Offer expires, which will be , 1997, unless the Exchange Offer is extended (the "Expiration Date"). Tenders of Outstanding Securities may be withdrawn at any time prior to 5:00 p.m., New York City time, on the business day prior to the Expiration Date. The Exchange Offer is not conditioned upon any minimum number of Outstanding Securities being tendered for exchange. However, the Exchange Offer is subject to certain conditions which may be waived by the Company and to the terms and provisions of the Registration Rights Agreement. See "Exchange Offer." Outstanding Securities may be tendered in whole or in part only in the aggregate Liquidation Amount or principal amount of not less than $100,000 or any integral multiple of $1,000 in excess thereof; provided that if any Outstanding Securities are tendered for exchange in part, the untendered aggregate Liquidation Amount or principal amount thereof must be $100,000 or any integral multiple of $1,000. The Company has agreed to pay the expenses of the Exchange Offer. Holders of Outstanding Securities whose Outstanding Securities are not tendered and accepted in the Exchange Offer will continue to hold such Outstanding Securities. Following consummation of the Exchange Offer, the holders of Outstanding Securities will continue to be subject to the existing restrictions upon transfer thereof and the Series B Issuer and the Company will have no further obligation to such holders to provide for the registration under the Securities Act of the Outstanding Securities held by them. SEE "RISK FACTORS" BEGINNING ON PAGE 18 FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE EXCHANGE SECURITIES. The Series B Issuer will not receive any proceeds from this Exchange Offer and no underwriter is being utilized in connection with the Exchange Offer. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------- The date of this Prospectus is , 1997. On February 10, 1997, $100,000,000 aggregate Liquidation Amount of Outstanding Capital Securities and $103,093,000 aggregate principal amount of Outstanding Junior Subordinated Debentures were issued and sold in a transaction not registered under the Securities Act, in reliance upon the exemption provided in Section 4(2) of the Securities Act. Accordingly, the Outstanding Securities may not be offered, resold or otherwise pledged, hypothecated or transferred in the United States unless so registered or unless an applicable exemption from the registration requirements of the Securities Act is available. Exchange Securities are being offered hereby in order to satisfy the obligations of the Series B Issuer and the Company under the exchange and registration rights agreement (the "Registration Rights Agreement"), dated February 10, 1997, among the Company, the Series B Issuer, Goldman, Sachs & Co., Deutsche Morgan Grenfell Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial purchasers (the "Initial Purchasers"). See "Exchange Offer--Purpose of the Exchange Offer." Based on no-action letters issued by the staff of the Securities and Exchange Commission (the "Commission") to third parties, the Series B Issuer and the Company believe that the Exchange Capital Securities to be issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than (i) a broker-dealer who purchases such Exchange Capital Securities directly from the Series B Issuer or the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is an "affiliate" of the Series B Issuer or the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such Exchange Capital Securities are acquired in the ordinary course of such holders' business and such holders have no arrangements with any person to participate in the distribution of such Exchange Capital Securities. Eligible holders wishing to accept the Exchange Offer must represent to the Series B Issuer and the Company that such conditions have been met. Each broker-dealer that receives Exchange Capital Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of Exchange Capital Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The Company and the Series B Issuer believe that this Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Capital Securities received in exchange for Outstanding Capital Securities where such Outstanding Capital Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Series B Issuer and the Company have agreed to use their best efforts to make this Prospectus available for a period of 180 days following the consummation of the Exchange Offer to broker-dealers who have identified themselves as such for use in connection with resales by such broker-dealers of Exchange Capital Securities received in exchange for Outstanding Capital Securities acquired by such broker-dealers for their own accounts as a result of market-making or other trading activities. In that regard, each broker-dealer who surrenders Outstanding Capital Securities pursuant to the Exchange Offer will be deemed to have agreed, by execution of the Letter of Transmittal, that, upon receipt of notice from the Company or the Series B Issuer of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in this Prospectus untrue in any material respect or which causes this Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference herein, in the light of the circumstances under which they were made, not misleading, or of the occurrence of certain other events specified in the Registration Rights Agreement, such broker-dealer will suspend the sale of Exchange Capital Securities pursuant to this Prospectus until the Company or the Series B Issuer has amended or supplemented this Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to such broker- dealer, or the Company or the Series B Issuer has given notice that the sale of the Exchange Capital Securities may be resumed, as the case may be. See "Plan of Distribution." THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION. HOLDERS OF OUTSTANDING CAPITAL SECURITIES ARE URGED TO READ THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR OUTSTANDING CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. The Exchange Capital Securities and the Outstanding Capital Securities (together, the "Capital Securities") represent preferred undivided beneficial interests in the assets of the Series B Issuer. The Capital Securities are 2 fully and unconditionally guaranteed, to the extent described herein, by the Outstanding Guarantee and the Exchange Guarantee (together, the "Guarantee") of the Company. The Company is the owner of all the beneficial interests represented by common securities of the Series B Issuer (the "Common Securities" and collectively with the Capital Securities, the "Trust Securities"). First Union National Bank of North Carolina is the Property Trustee (as defined herein) of the Series B Issuer. The Series B Issuer exists for the sole purpose of issuing its trust interests, purchasing the Junior Subordinated Debentures, effecting the Exchange Offer and engaging in only those other activities necessary or incidental thereto. All proceeds to the Series B Issuer from the sale of its Common Securities and Outstanding Capital Securities were invested in the Outstanding Junior Subordinated Debentures. The Outstanding Junior Subordinated Debentures and the Exchange Junior Subordinated Debentures (together, the "Junior Subordinated Debentures") will mature on February 15, 2027 (the "Stated Maturity") (which date may be shortened to a date not earlier than August 15, 2016 in certain circumstances as described under "Description of Capital Securities--Conditional Right to Shorten Maturity or Redeem upon a Tax Event" upon the occurrence of a Tax Event (as defined herein) if certain conditions are met). See "Description of Capital Securities--Conditional Right to Shorten Maturity or Redeem upon a Tax Event." The Exchange Capital Securities will have a preference under certain circumstances with respect to cash distributions and amounts payable on liquidation, redemption or otherwise over the trust interests represented by the Common Securities. See "Description of Capital Securities--Subordination of Common Securities." Holders of the Exchange Capital Securities will be entitled to receive preferential cumulative cash distributions accruing from the date of original issuance and payable semi-annually in arrears on February 15 and August 15 of each year, commencing August 15, 1997, at the annual rate of 10 3/4% of the Liquidation Amount of $1,000 per Exchange Capital Security ("Distributions"). The distribution rate and the distribution payment dates and other payment dates for the Exchange Capital Securities will correspond to the payments and payment dates on the Exchange Junior Subordinated Debentures. Subject to certain exceptions as described herein, the Company has the right to defer payments of interest on the Exchange Junior Subordinated Debentures by extending the interest payment period thereon at any time or from time to time for up to 10 consecutive semi-annual periods with respect to each deferral period (each an "Extension Period"), provided that no Extension Period may extend beyond the Stated Maturity of the Exchange Junior Subordinated Debentures. Upon termination of any such Extension Period and the payment of all amounts then due, the Company may elect to begin a new Extension Period subject to the requirements set forth herein. Accordingly, there could be multiple Extension Periods of varying lengths throughout the term of the Exchange Junior Subordinated Debentures. If interest payments on the Exchange Junior Subordinated Debentures are so deferred, Distributions on the Exchange Capital Securities will also be deferred and the Company will not be permitted, subject to certain exceptions described herein, to declare or pay any cash distributions with respect to the Company's capital stock or debt securities of the Company that rank pari passu in all respects with or junior to the Exchange Junior Subordinated Debentures. During an Extension Period, interest on the Exchange Junior Subordinated Debentures will continue to accrue (and the amount of Distributions to which holders of the Exchange Capital Securities are entitled will accumulate) at the rate of 10 3/4% per annum, compounded semi-annually, and holders of Exchange Capital Securities will be required to accrue interest income for United States Federal income tax purposes prior to receipt of cash related to such interest income. See "Description of Junior Subordinated Debentures--Option to Defer Interest Payments" and "Certain Federal Income Tax Considerations--Original Issue Discount." The Company paid $10.75 million of the net proceeds from the sale of the Outstanding Junior Subordinated Debentures into a Reserve Account (as defined herein) established and maintained by the Debenture Trustee (as defined herein), the funds in which will be applied to pay interest on the Junior Subordinated Debentures on the first two Interest Payment Dates (as defined herein) for the Junior Subordinated Debentures. See "Description of Junior Subordinated Debentures--Reserve Account." Holders of Outstanding Capital Securities whose Outstanding Capital Securities are accepted for exchange will be deemed to have waived the right to receive any payment in respect of any unpaid dividends on the Outstanding Capital Securities that have accumulated to the date of the issuance of the Exchange Capital Securities. Consequently, holders who exchange their Outstanding Capital Securities for Exchange Capital Securities will receive the same dividends on the Exchange Capital Securities that holders of the Outstanding Capital Securities who do not accept the Exchange Offer will receive on the Outstanding Capital Securities. 3 The Company has, through the Exchange Guarantee, the Trust Agreement, the Exchange Junior Subordinated Debentures, the Junior Subordinated Indenture and the Expense Agreement (each as defined herein), taken together, fully, irrevocably and unconditionally guaranteed all of the Series B Issuer's obligations under the Exchange Capital Securities. See "Relationship Among the Capital Securities, the Junior Subordinated Debentures, the Guarantee and the Expense Agreement--Full and Unconditional Guarantee." The Exchange Guarantee guarantees the payment of Distributions and payments on liquidation or redemption of the Exchange Capital Securities, but only in each case to the extent of funds held by the Series B Issuer, as described herein. See "Description of Guarantee." If the Company fails to make interest payments on the Exchange Junior Subordinated Debentures held by the Series B Issuer, the Series B Issuer will have insufficient funds to pay Distributions on the Exchange Capital Securities. The Exchange Guarantee does not cover payment of Distributions when the Series B Issuer does not have sufficient funds to pay such distributions. In such event, a holder of Exchange Capital Securities may institute a legal proceeding directly against the Company to enforce payment of such Distributions to such holders. See "Description of Junior Subordinated Debentures--Enforcement of Certain Rights by Holders of Capital Securities." The obligations of the Company under the Exchange Guarantee are subordinate and junior in right of payment to all Senior Indebtedness (as defined herein) of the Company. The Exchange Capital Securities are subject to mandatory redemption, in whole or in part, upon repayment of the Exchange Junior Subordinated Debentures at the Stated Maturity or their earlier redemption. The Exchange Junior Subordinated Debentures are redeemable prior to the Stated Maturity at the option of the Company (i) on or after February 15, 2007, in whole at any time or in part from time to time, or (ii) at any time in certain circumstances as described under "Description of Capital Securities-- Conditional Right to Shorten Maturity or Redeem upon a Tax Event," in whole (but not in part), within 90 days following the occurrence of a Tax Event. See "Description of Junior Subordinated Debentures--Redemption" and "--Conditional Right to Shorten Maturity upon a Tax Event." Each holder of Exchange Capital Securities will have the right, upon a Change of Control (as defined herein), to cause a repurchase of the Exchange Capital Securities held by such holder at a repurchase price of 101% of the aggregate Liquidation Amount of such Exchange Capital Securities. See "Description of Capital Securities--Change of Control Repurchase." The Exchange Junior Subordinated Debentures are unsecured and rank junior and are subordinated to all Senior Indebtedness of the Company. See "Description of Junior Subordinated Debentures--Subordination." The Company, as the holder of the outstanding Common Securities, has the right at any time to terminate the Series B Issuer. In the event of the termination of the Series B Issuer, after satisfaction of obligations to creditors of the Series B issuer as required by applicable law, the holders of Exchange Capital Securities will be entitled to receive a Liquidation Amount of $1,000 per Exchange Capital Security plus accumulated and unpaid Distributions thereon to the date of payment, which may be in the form of a distribution of such amount in Exchange Junior Subordinated Debentures, subject to certain exceptions. See "Description of Capital Securities-- Liquidation Distribution Upon Termination." Holders tendering Outstanding Capital Securities in the Exchange Offer must carefully consider the restrictions set forth in "ERISA Considerations." The Company does not intend to apply for listing of the Exchange Capital Securities on any securities exchange or for inclusion of the Exchange Capital Securities on any automated quotation system. THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OUTSTANDING CAPITAL SECURITIES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION. 4 THE EXCHANGE SECURITIES WILL BE ISSUED, AND MAY BE HELD OR TRANSFERRED, ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OR A PRINCIPAL AMOUNT OF NOT LESS THAN $100,000. ANY TRANSFER, SALE OR OTHER DISPOSITION OF EXCHANGE SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OR A PRINCIPAL AMOUNT OF LESS THAN $100,000, OR RESULTING IN A HOLDER'S HOLDING EXCHANGE SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OR A PRINCIPAL AMOUNT OF LESS THAN $100,000, SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER, ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH EXCHANGE SECURITIES FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO THE RECEIPT OF DISTRIBUTIONS ON SUCH EXCHANGE SECURITIES, AND SUCH TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH EXCHANGE SECURITIES. ---------------- FOR NORTH CAROLINA RESIDENTS ONLY THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE NORTH CAROLINA COMMISSIONER RULED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. 5 AVAILABLE INFORMATION The Company is subject to the information requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Commission. Reports, proxy and information statements and other information filed by the Company may be inspected and copied at the public reference facilities maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located at Seven World Trade Center, 7th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials may be obtained upon written request from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the Commission maintains a site on the World Wide Web at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. Such material may also be inspected and copied at the offices of the New York Stock Exchange, Inc. (the "New York Stock Exchange"), 20 Broad Street, New York, New York 10005, on which certain of the Company's securities are listed. No separate financial statements of the Series B Issuer are included herein. The Company considers that such financial statements would not be material to holders of the Exchange Capital Securities because (i) all of the Common Securities of the Series B Issuer are owned by the Company, a reporting company under the Exchange Act; (ii) the Series B Issuer has no independent operations, but exists for the sole purpose of issuing securities representing trust interests (including the Exchange Capital Securities) in the Series B Issuer and investing the proceeds thereof in the Outstanding Junior Subordinated Debentures; and (iii) the obligations of the Series B Issuer under the Exchange Capital Securities, to the extent funds are available therefor, are fully and unconditionally guaranteed to the extent set forth herein by the Company. This Prospectus constitutes a part of a registration statement on Form S-4 (the "Registration Statement") filed by the Company and the Series B Issuer with the Commission under the Securities Act. This Prospectus does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission, and reference is hereby made to the Registration Statement and to the exhibits relating thereto for further information with respect to the Company, the Series B Issuer and the Exchange Securities. Any statements contained herein concerning the provisions of any document are not necessarily complete, and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the Commission. Each such statement is qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company hereby incorporates by reference in this Prospectus the following documents and reports or information filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act: (a) The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996; (b) The Company's Current Reports on Forms 8-K dated January 28, 1997 and January 31, 1997, on Form 8-A dated January 31, 1997, and on Forms 8-A/A dated February 6, 1997 and February 20, 1997; and (c) All documents and reports or information filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the date of this Prospectus and prior to the termination of the offering of securities made by this Prospectus. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other document subsequently filed with the Commission which also is or is deemed to 6 be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom this Prospectus is delivered, upon the written or oral request of such person, a copy of any and all of the documents incorporated by reference herein (not including the exhibits to such documents, unless such exhibits are specifically incorporated by reference in such documents). Requests for such copies should be directed to: John B. Yorke at 500 West Fifth Street, Winston- Salem, North Carolina 27152, telephone number (910) 770-2000. In order to ensure timely delivery of the documents, any request should be made by , 1997. 7 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. See "Glossary of Selected Insurance Terms" for definitions of certain terms used in this Prospectus. As used in this Prospectus, unless the context otherwise requires, the term "Company" or "Integon" includes Integon Corporation and its subsidiaries. This Prospectus contains forward-looking statements that inherently involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "The Company--Recent History; Strategy" and "Risk Factors." THE COMPANY The Company, through its wholly owned property and casualty insurance subsidiaries, specializes in the marketing and underwriting of nonstandard automobile insurance to individuals. To a lesser extent, the Company also writes specialty automobile insurance and, in North Carolina, preferred risk automobile insurance. The Company has been writing insurance for more than 25 years and currently markets its products in 30 states through approximately 13,000 independent agencies located principally in the eastern United States. The Company's nonstandard automobile insurance products are designed for drivers who are unable to obtain coverage from standard market carriers due to prior driving records, other underwriting criteria or market conditions. These drivers are normally charged higher premium rates than the rates charged for preferred or standard risk drivers and generally obtain lower liability limits than preferred or standard risk policyholders. The Company's specialty automobile insurance products include business vehicle insurance designed primarily for tradespeople and artisans who have small fleets or lightweight single vehicles, as well as motorcycle insurance. THE SERIES B ISSUER Integon Capital I (the "Series B Issuer") is a statutory business trust created under the laws of the State of Delaware. The Series B Issuer exists for the purposes of (i) issuing the Capital Securities and Common Securities representing trust interests in the assets of the Series B Issuer, (ii) purchasing the Junior Subordinated Debentures with the proceeds from the sale of the Capital Securities and the Common Securities, (iii) effecting the Exchange Offer and (iv) engaging in only those other activities necessary or incidental thereto. All of the Common Securities are owned by the Company. The Company will pay all fees and expenses related to the Series B Issuer and the offering of the Exchange Capital Securities. THE EXCHANGE OFFER The Exchange Offer.......... Exchange Capital Securities are being offered in exchange for a like aggregate Liquidation Amount of Outstanding Capital Securities. Outstanding Capital Securities may be tendered for exchange in whole or in part in a Liquidation Amount of $100,000 (100 Outstanding Capital Securities) or any integral multiple of $1,000 in excess thereof; provided that if any Outstanding Capital Securities are tendered for exchange in part, the untendered aggregate Liquidation Amount thereof must be $100,000 or any integral multiple of $1,000 in excess thereof. As of March 5, 1997, 100,000 Outstanding Capital Securities with an aggregate Liquidation Amount of $100,000,000 were issued and outstanding. The Company and the Series B Issuer have agreed to make the Exchange Offer in order to satisfy their obligations under the Registration Rights Agreement. For a description of the procedures for tendering Outstanding Capital Securities, see "Exchange Offer--Procedures for Tendering Outstanding Capital Securities." 8 Expiration Date; Withdrawal................. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1997, or such later date and time to which it may be extended in the sole discretion of the Company and the Series B Issuer (the "Expiration Date"). Outstanding Capital Securities tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the close of business, New York City time, on the Expiration Date. Any Outstanding Capital Security not accepted for exchange for any reason will be returned without expense to the tendering holders thereof as promptly as practicable after the expiration or termination of the Exchange Offer. See "Exchange Offer--Expiration Date; Extensions; Termination; Amendments" and "Exchange Offer-- Withdrawal Rights." Conditions to Exchange Offer...................... The Exchange Offer is subject to certain conditions. See "Exchange Offer--Certain Conditions to the Exchange Offer." The Exchange Offer is not conditioned upon any minimum number of Outstanding Capital Securities being tendered for exchange. Certain Federal Income Tax Considerations............. The exchange of Exchange Capital Securities for Outstanding Capital Securities should not be a taxable event to the holder for federal income tax purposes, and the holder should not recognize any taxable gain or loss as a result of such exchange. See "Certain Federal Income Tax Considerations." Procedures for Tendering Outstanding Capital Securities................. Tendering holders of Outstanding Capital Securities must complete and sign a Letter of Transmittal in accordance with the instructions contained therein and forward the same by mail, facsimile or hand delivery, together with any other required documents, to the Exchange Agent, either with the Outstanding Capital Securities to be tendered or in compliance with the specified procedures for guaranteed delivery of Outstanding Capital Securities. Certain brokers, dealers, commercial banks, trust companies and other nominees may also effect tenders by book-entry transfer. Holders of Outstanding Capital Securities registered in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such person promptly if they wish to tender Outstanding Capital Securities pursuant to the Exchange Offer. See "Exchange Offer--Procedures for Tendering Outstanding Capital Securities." Letters of Transmittal and certificates representing Outstanding Capital Securities should not be sent to the Company or the Series B Issuer. Such documents should only be sent to the Exchange Agent. Questions regarding how to tender and requests for information should be directed to the Exchange Agent. See "Exchange Offer-- Exchange Agent." Resale of Exchange Capital Securities................. Based on no-action letters issued by the staff of the Commission to third parties, the Series B Issuer and the Company believe that the 9 Exchange Capital Securities to be issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than (i) a broker-dealer who purchases such Exchange Capital Securities directly from the Series B Issuer or the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is an "affiliate" of the Series B Issuer or the Company within the meaning of rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Capital Securities are acquired in the ordinary course of such holders' business and such holders have no arrangements with any person to participate in the distribution of such Exchange Capital Securities. Eligible holders wishing to accept the Exchange Offer must represent to the Series B Issuer and the Company that such conditions have been met. Each broker-dealer that receives Exchange Capital Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of Exchange Capital Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The Company and the Series B Issuer believe that this Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Capital Securities received in exchange for Outstanding Capital Securities where such Outstanding Capital Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Series B Issuer and the Company have agreed to use their best efforts to make this Prospectus available for a period of 180 days following the consummation of the Exchange Offer to broker-dealers who have identified themselves as such for use in connection with resales by such broker-dealers of Exchange Capital Securities received in exchange for Outstanding Capital Securities acquired by such broker-dealers for their own accounts as a result of market-making or other trading activities. In that regard, each broker-dealer who surrenders Outstanding Capital Securities pursuant to the Exchange Offer will be deemed to have agreed, by execution of the Letter of Transmittal, that, upon receipt of notice from the Company or the Series B Issuer of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in this Prospectus untrue in any material respect or which causes this Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference herein, in the light of the circumstances under which they were made, not misleading, or of the occurrence of certain other events specified in the Registration Rights Agreement, such broker- dealer will suspend the sale of Exchange Capital Securities pursuant to this Prospectus 10 until the Company or the Series B Issuer has amended or supplemented this Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to such broker-dealer, or the Company or the Series B Issuer has given notice that the sale of the Exchange Capital Securities may be resumed, as the case may be. See "Plan of Distribution." Exchange Agent.............. The Exchange Agent is First Union National Bank of North Carolina. The address and telephone and facsimile numbers of the Exchange Agent are set forth under "Exchange Offer--Exchange Agent" and in the Letter of Transmittal. Untendered Outstanding Capital Securities......... Upon consummation of the Exchange Offer, the holders of Outstanding Capital Securities, if any, will have no further registration or other rights under the Registration Rights Agreement, except as provided herein. Holders of Outstanding Capital Securities who do not tender their Outstanding Capital Securities in the Exchange Offer or whose Outstanding Capital Securities are not accepted for exchange will continue to hold such Outstanding Capital Securities and will be entitled to all the rights and preferences thereof and will be subject to all the limitations applicable thereto, except for any such rights or limitations which, by their terms, terminate or cease to be effective as a result of this Exchange Offer. All untendered and tendered but unaccepted Outstanding Capital Securities will continue to be subject to the restrictions on transfer provided therein. To the extent that Outstanding Capital Securities are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Outstanding Capital Securities could be adversely affected. TERMS OF THE EXCHANGE CAPITAL SECURITIES The terms of the Exchange Capital Securities are substantially identical to the terms of the Outstanding Capital Securities. Securities Offered.......... $100,000,000 aggregate Liquidation Amount of 10 3/4% Capital Securities, Series B (Liquidation Amount $1,000 per Capital Security). The Exchange Capital Securities will be issued, and the Outstanding Capital Securities were issued, under the Trust Agreement. The Exchange Capital Securities and any Outstanding Capital Securities which remain outstanding after consummation of the Exchange Offer will constitute a single series of Capital Securities under the Trust Agreement, and, accordingly, will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding Liquidation Amount thereof have taken certain actions or exercised certain rights under the Trust Agreement. See "Description of Capital 11 Securities." The terms of the Exchange Capital Securities are identical in all material respects to the terms of the Outstanding Capital Securities except that (i) the Exchange Capital Securities will have been registered under the Securities Act and will not contain terms restricting the transfer of such securities, (ii) the Exchange Capital Securities will be entitled, to the extent applicable, to the benefits of the qualification of the Trust Agreement under the Trust Indenture Act, and (iii) the Exchange Capital Securities will not provide for liquidated damages in certain circumstances under the Registration Rights Agreement. See "Description of Capital Securities." Distribution Dates.......... February 15 and August 15 of each year, commencing August 15, 1997. Extension Periods........... Distributions on the Exchange Capital Securities may be deferred for the duration of any Extension Period selected by the Company with respect to the payment of interest on the Exchange Junior Subordinated Debentures. No Extension Period will exceed 10 consecutive semi-annual periods or extend beyond the Stated Maturity. See "Description of Junior Subordinated Debentures-- Option to Defer Interest Payments" and "Certain Federal Income Tax Considerations--Original Issue Discount." The Company paid $10.75 million of the net proceeds from the sale of the Outstanding Junior Subordinated Debentures into a Reserve Account established and maintained by the Debenture Trustee, the funds in which will be applied to pay interest on the Junior Subordinated Debentures on the first two Interest Payment Dates for the Junior Subordinated Debentures. See "Description of Junior Subordinated Debentures--Reserve Account." Ranking..................... The Exchange Capital Securities will rank pari passu, and payments thereon will be made pro rata, with the Common Securities except as described under "Description of Capital Securities--Subordination of Common Securities." The Exchange Junior Subordinated Debentures will rank pari passu with all other subordinated debentures to be issued by the Company with substantially similar subordination terms and which may be issued and sold (if at all) to other trusts to be established by the Company (if any) or otherwise, and will be unsecured and subordinate and junior in right of payment to the extent and in the manner set forth in the Junior Subordinated Indenture to all Senior Indebtedness. See "Description of Junior Subordinated Debentures." The Exchange Guarantee will rank subordinate and junior in right of payment to the extent and in the manner set forth in the Guarantee Agreement to all Senior Indebtedness. See "Description of Guarantee." Redemption or Repurchase.... The Trust Securities are subject to mandatory redemption (i) in whole but not in part at the Stated Maturity upon repayment of the 12 Junior Subordinated Debentures at the Redemption Price and (ii) prior to the Stated Maturity and contemporaneously with the optional redemption by the Company of the Junior Subordinated Debentures in whole or in part on or after February 15, 2007, or in whole but not in part within 90 days following the occurrence and during the continuation of a Tax Event. See "Description of Capital Securities--Redemption" and "-- Conditional Right to Shorten Maturity or Redeem upon a Tax Event." Each holder of Exchange Capital Securities will have the right, upon a Change of Control, to cause a repurchase of the Exchange Capital Securities held by such holder at a repurchase price of 101% of the aggregate Liquidation Amount of such Exchange Capital Securities. See "Description of Capital Securities--Change of Control Repurchase." In addition, subject to certain conditions, the Company will have the right at any time to terminate the Series B Issuer and cause the Exchange Junior Subordinated Debentures to be distributed to the holders of the Common Securities and Exchange Capital Securities. See "Description of Capital Securities--Liquidation Distribution Upon Termination." The Stated Maturity of the Exchange Junior Subordinated Debentures is February 15, 2027. Shorten Maturity............ Under certain circumstances upon the occurrence of a Tax Event, the Company has the right to shorten the maturity of the Exchange Junior Subordinated Debentures. See "Description of Capital Securities--Conditional Right to Shorten Maturity or Redeem upon a Tax Event" and "Description of Junior Subordinated Debentures-- Conditional Right to Shorten Maturity upon a Tax Event." Transfer Restrictions....... The Exchange Capital Securities will be issued, and may be transferred, only in blocks having a Liquidation Amount of not less than $100,000 (100 Exchange Capital Securities). Any transfer, sale or other disposition of Exchange Capital Securities in a block having a Liquidation Amount of less than $100,000 shall be deemed to be void and of no legal effect whatsoever. See "Description of Capital Securities--Restrictions on Transfer." ERISA Considerations........ Holders tendering Outstanding Capital Securities in the Exchange Offer must carefully consider the restrictions set forth under "ERISA Considerations." Absence of Market for the Exchange Capital Securities................. The Exchange Capital Securities will be a new issue of securities for which there currently is no market. Although the Initial Purchasers have informed the Series B Issuer and the Company that they each currently intend to make a market in the Exchange Capital Securities, the Initial Purchasers are not obligated to do so, and any such market making may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development of liquidity of any market for the Exchange Capital Securities. 13 For additional information regarding the Exchange Capital Securities, the Exchange Junior Subordinated Debentures and the Exchange Guarantee, see "Description of Capital Securities," "Description of Junior Subordinated Debentures," "Description of Guarantee," "Relationship Among the Capital Securities, the Junior Subordinated Debentures, the Guarantee and the Expense Agreement" and "Certain Federal Income Tax Considerations." RISK FACTORS Holders tendering Outstanding Capital Securities in the Exchange Offer should carefully consider the matters set forth under "Risk Factors." 14 THE COMPANY OVERVIEW The Company, through its wholly owned property and casualty insurance subsidiaries, specializes in the marketing and underwriting of nonstandard automobile insurance to individuals. To a lesser extent, the Company also writes specialty automobile insurance and, in North Carolina, preferred risk automobile insurance. The Company has been writing insurance for more than 25 years and currently markets its products in 30 states through approximately 13,000 independent agencies located principally in the eastern United States. The Company's nonstandard automobile insurance products are designed for drivers who are unable to obtain coverage from standard market carriers due to prior driving records, other underwriting criteria or market conditions. These drivers are normally charged higher premium rates than the rates charged for preferred or standard risk drivers and generally obtain lower liability limits than preferred or standard risk policyholders. The Company's specialty automobile insurance products include business vehicle insurance designed primarily for tradespeople and artisans who have small fleets or lightweight single vehicles, as well as motorcycle insurance. NONSTANDARD AUTOMOBILE INSURANCE INDUSTRY The nonstandard automobile insurance market is a fast-growing portion of the overall automobile insurance industry. Nonstandard automobile industry premiums written have grown at a compound rate of 11.9% per year from 1990 to 1995, according to an industry source. Total premiums written for this market in 1995 are estimated to have been $17 billion. The size of the nonstandard automobile insurance market changes with the automobile insurance environment generally, but grows when standard coverage becomes more restrictive. The industry is expected to continue to grow as a result of stricter enforcement of driving laws, especially those related to blood alcohol limits, and because of the demographics relating to potential youthful drivers (ages 16-24). The size of the nonstandard market is also affected by increases in rates adopted by state administered involuntary plans, allowing the voluntary nonstandard market to be more price competitive. The predominant form of distribution in the nonstandard automobile market is through independent agencies, although the largest company in the industry markets its products primarily through its captive agencies. The Company believes that marketing through an independent agency system provides nonstandard automobile companies with lower fixed costs and a greater ability to react promptly to changes in the marketplace. However, use of this system generally results in higher variable costs. According to an industry source, 43.6% of the premiums written in 1995 for nonstandard policies were written by four companies, including the Company (which represented approximately 4.2% of premiums written in 1995). Most of the rest of the business was written by local and regional companies. This concentration is attributable, in part, to previous and on-going consolidation in the industry. RECENT HISTORY; STRATEGY In October 1994, the Company acquired Bankers and Shippers Insurance Company (which changed its name to Integon National Insurance Company in 1996) ("Bankers and Shippers"), for a purchase price of $153.2 million. The acquisition of Bankers and Shippers, which was also engaged in the nonstandard automobile insurance business, increased to 19 the number of states in which the Company then marketed its products and provided significant geographic diversity. Since the acquisition, the Company has continued to expand into additional states in its effort to become a national provider of nonstandard automobile insurance. Currently, the Company is writing business in 30 states. For the year ended 1995, the Company reported net income of $34.0 million and net income available to common stockholders of $28.4 million. Net premiums written grew 70.7% over 1994 to $620.4 million as a result 15 of the Bankers and Shippers acquisition and increased market penetration in most of the Company's existing states, as well as in new markets. The GAAP combined ratio for 1995 was 95.0%. For the year ended 1996, the Company reported net income of $170,000 and a loss to common stockholders of $5.4 million. While net premiums written increased 28.6% to $798.0 million in 1996 over 1995, the Company's GAAP combined ratio increased to 102.4% from 95.0% in 1995, attributable primarily to a significant increase in the loss ratio from 73.4% to 80.0%. The Company's results for the fourth quarter of 1996 were significantly below those for the 1996 third quarter and those for the fourth quarter of 1995. The Company recorded a net loss of $16.4 million and net loss to common stockholders of $17.8 million for the three months ended December 31, 1996, compared to net income of $10.5 million and net income available to common stockholders of $9.2 million for the comparable 1995 period, and net income of $4.9 million and net income available to common stockholders of $3.5 million for the three months ended September 30, 1996. The Company's loss, expense and combined ratios were 89.1%, 25.6% and 114.7% for the fourth quarter of 1996, compared to 76.8%, 21.9% and 98.7% for the third quarter of 1996 and 74.2%, 20.5% and 94.7% for the fourth quarter of 1995. At December 31, 1996 the Company's statutory premium to surplus ratio increased to 3.248x, compared to 3.03x at September 30, 1996 and 2.74x at December 31, 1995. The deterioration in fourth quarter results was due to a number of factors, including increased frequency, an increase in the Company's expense ratio, deferred acquisition cost writeoffs, an increase in bad debt reserves, a $2.0 million write-down of bonds in its investment portfolio and an increase in the Company's loss and loss adjustment expense ("LAE") reserves of $12.5 million. Increased fourth quarter frequency trends were experienced by the Company in most states, including several of its larger core markets. The loss reserve increase related primarily to less than adequate reserves being set in earlier periods in the 1996 accident year, as the Company was writing business at prices that were inadequate and that attracted segments of business with higher loss frequencies. In addition, the need for increased use of outside adjusters following Hurricane Fran in September 1996 adversely affected the Company's loss and LAE experience in October and November. The Company's expense ratio was adversely impacted in the fourth quarter by increased expenses for beginning the modifications necessary to accommodate the Year 2000. In November 1996, John C Head III, Chairman of the Board, was appointed Chief Executive Officer of the Company, and will continue to serve as Chief Executive Officer until the Company appoints a replacement pursuant to an on- going executive search. The Company has announced that its focus in 1997 will be on restoring underwriting profits. Growth in net premiums written has slowed, and will continue to be slowed, as the Company seeks to achieve an acceptable combined ratio. During the period of October 1996 through March 1997, the Company has increased or is planning to increase rates in states representing approximately 95% of 1996 net premiums written. These increases vary by state and are expected to range from 3% to 20%. Where rates could not be increased within 30 days because of regulatory constraints, underwriting restrictions were put into place. These restrictions include requiring higher down payments, reducing the number of payments permitted, restricting reinstatement provisions and requiring shorter term policies. Such pricing and underwriting actions may impact the Company's competitive position, insofar as its competitors may be able to offer more attractive policy rates and terms. Management is also continuing to pursue its strategy of the Company being a low-cost provider of nonstandard automobile insurance while maintaining a commitment to provide excellent service to both agents and insureds. The Company is continuing to invest in technology and information systems personnel, which will enhance its current ability to automate certain marketing, underwriting, claims and administrative functions to ensure that the Company will be able to continue to provide excellent service to its agents and insureds. This new automated technology will reduce the manual effort of agents to initiate new business, process payments 16 and endorsements, and communicate with the Company. While such increased investment in technology has resulted, and may in the future result, in an increase in the Company's expense ratio, management believes that such continuing investment is essential for the Company to maintain a competitive position in the industry. CORPORATE STRUCTURE The Company is a Delaware corporation whose principal executive offices are located at 500 West Fifth Street, Winston-Salem, North Carolina 27152, telephone number (910) 770-2000. The Company's principal insurance subsidiaries are Integon Preferred Insurance Company, Integon National Insurance Company, Integon Casualty Insurance Company, Integon Indemnity Corporation, Integon General Insurance Corporation, New South Insurance Company, Integon Specialty Insurance Company (collectively, the "Domestic Insurance Subsidiaries") and Carolina National, Ltd. (together with the Domestic Insurance Subsidiaries, the "P&C Subsidiaries"). In addition, through Salem Underwriters, Inc. ("Salem"), the Company offers premium financing for the Company's insureds in North Carolina. INTEGON CAPITAL I Integon Capital I (the "Series B Issuer") is a statutory business trust formed under Delaware law. The Series B Issuer's business and affairs are conducted by two Issuer Trustees and three Administrators: First Union National Bank of North Carolina, as Property Trustee (the "Property Trustee") and First Union Bank of Delaware, an affiliate of the Property Trustee, as Delaware Trustee (collectively, the "Issuer Trustees"), and three individual administrative trustees who are employees or officers of or affiliated with the Company (collectively, the "Administrators"). The Series B Issuer was formed pursuant to (i) a trust agreement (the "Original Trust Agreement") executed by the Company, as sponsor for the Series B Issuer and as Depositor, an Administrator and the Delaware Trustee and (ii) the filing of a certificate of trust with the Delaware Secretary of State on January 27, 1997. Such Original Trust Agreement was amended and restated in its entirety by an Amended and Restated Trust Agreement executed on February 10, 1997 by the Company, the Administrators and the Issuer Trustees (as so amended and restated, the "Trust Agreement"). The Series B Issuer exists for the exclusive purposes of (i) issuing the Capital Securities and Common Securities representing trust interests in the assets of the Series B Issuer, (ii) purchasing the Junior Subordinated Debentures with the proceeds from the sale of the Outstanding Capital Securities and the Common Securities, (iii) effecting the Exchange Offer and (iv) engaging in only those other activities necessary or incidental thereto. All of the Common Securities are owned by the Company. The Common Securities rank pari passu, and payments will be made thereon pro rata, with the Exchange Capital Securities, except that upon the occurrence and continuance of an Event of Default (as defined herein) under the Trust Agreement, the rights of the holders of the Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Exchange Capital Securities. The Company has acquired Common Securities having an aggregate liquidation amount equal to 3% of the total capital of the Series B Issuer. The Series B Issuer has a term of approximately 31 years, but may terminate earlier as provided in the Trust Agreement. The Series B Issuer's business and affairs are conducted by the Property Trustee and the Administrators. Unless a Debenture Event of Default has occurred and is continuing, the holder of the Common Securities will be entitled to appoint, remove or replace any Issuer Trustee at any time. If a Debenture Event of Default (as defined herein) has occurred and is continuing, the holders of at least a majority in Liquidation Amount of the then outstanding Capital Securities will be entitled to appoint, remove or replace the Property Trustee or the Delaware Trustee or both of them. The duties and obligations of the Issuer Trustees are governed by the Trust Agreement. The Company will pay all fees and expenses related to the Series B Issuer and the offering of the Exchange Capital Securities. The principal executive office of the Series B Issuer is 500 West Fifth Street, Winston-Salem, North Carolina 27512, Attention: General Counsel, telephone number (910) 770-2000. 17 RISK FACTORS This Prospectus contains forward-looking statements that inherently involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below and under "The Company-- Recent History; Strategy." Holders tendering Outstanding Capital Securities in the Exchange Offer should carefully review the information contained elsewhere in this Prospectus and should particularly consider the following matters: Certain Factors Relating to the Company RESULTS FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 1996 The Company recorded a net loss of $16.4 million and net loss to common stockholders of $17.8 million for the fourth quarter of 1996, compared to net income of $10.5 million and net income available to common stockholders of $9.2 million for the fourth quarter of 1995. For the year ended December 31, 1996, the Company recorded net income of $170,000 and a net loss to common stockholders of $5.4 million, compared to net income of $34.0 million and net income available to common stockholders of $28.4 million in 1995. While the Company is implementing a plan to improve profitability, which includes introducing premium rate increases, increasing minimum policy down payments and implementing underwriting restrictions, there can be no assurances as to the effect of such measures on the Company's results in future quarterly and annual periods. LIMITED DIVIDENDS AVAILABLE FROM DOMESTIC INSURANCE SUBSIDIARIES The Company, a holding company whose principal asset is the capital stock of the P&C Subsidiaries and Salem, relies primarily on dividends from the Domestic Insurance Subsidiaries to meet its obligations for payment of interest and principal on outstanding debt obligations, including its obligations under the Junior Subordinated Debentures and the Guarantee, dividends to stockholders and corporate expenses. The ability of the Domestic Insurance Subsidiaries to pay dividends to the Company is restricted by the insurance laws of North Carolina, under which the maximum amount of ordinary dividends that a Domestic Insurance Subsidiary may pay to the Company at any point in time without regulatory approval is the lesser of (a) 10% of the policyholders' statutory surplus of such Domestic Insurance Subsidiary as of the preceding December 31 or (b) the statutory net income of such Domestic Insurance Subsidiary for the preceding calendar year, less the amount of dividends paid during the preceding 12 months. In 1996, the maximum amount of ordinary dividends payable by the Company's Domestic Insurance Subsidiaries was approximately $22.3 million. The Company's Domestic Insurance Subsidiaries paid approximately $4.8 million of ordinary dividends in 1996. After taking into account dividends paid in 1996 and the statutory net income of the P&C Subsidiaries for 1996, an aggregate of only $7.9 million is available for the payment of dividends by the Company's Domestic Insurance Subsidiaries in 1997 without regulatory approval. However, the Company's existing revolving line of credit (the "Credit Facility") also restricts the ability of the P&C Subsidiaries to pay dividends to the Company and restricts the ability of the Company to incur additional indebtedness, and no dividends may currently be paid under the terms thereof. Commencing in 1997, and taking into account the issuance of the Junior Subordinated Debentures, annual debt service and preferred stock dividend requirements of the Company are estimated to be approximately $30.15 million, including the interest payments on the Junior Subordinated Debentures of $10.75 million. In addition, corporate expenses in 1996 were $5.5 million and common stock dividends were $5.7 million. Accordingly, unless the Domestic Insurance Subsidiaries receive approval for the payment of extraordinary dividends from the North Carolina Insurance Commissioner, additional borrowings (including borrowings under the Credit Facility), the issuance of additional securities or obtaining other funds, including from Salem, will be necessary to pay debt service, including interest on the Junior Subordinated Debentures, as well as dividends on the Company's outstanding preferred stock and common stock and other expenses of the Company. 18 No assurance can be given that there will be no further or additional regulatory actions or developments restricting the ability of the Company and the Domestic Insurance Subsidiaries to pay dividends or otherwise advance funds to the Company. HIGH LEVERAGE The Company has substantial indebtedness and is highly leveraged. At December 31, 1996, the Company had total indebtedness of $194.8 million (including $44.0 million of short-term debt under the Credit Facility) and stockholders' equity of $215.4 million. Additionally, because the Company may not receive dividends from the Domestic Insurance Subsidiaries in the near future without approval from the North Carolina Insurance Commissioner, the Company may be required, to the extent permitted under the Company's debt instruments, to incur additional indebtedness to fund its interest payments, stockholder dividends and operating expenses. The Company's Credit Facility currently restricts the Company's ability to borrow thereunder if its premiums written to statutory surplus ratio exceeds 3.25x or its debt to total capitalization ratio exceeds 55%. The Company's premiums written to statutory surplus ratio for the year ended December 31, 1996 was approximately 3.248x and its debt to total capitalization ratio was 47.5%. In addition, the terms of the Junior Subordinated Debentures restrict the Company's ability to incur indebtedness. Accordingly, additional indebtedness to fund operating expenses may not be available. IMPORTANCE OF MAINTAINING STATUTORY SURPLUS AND RATINGS The capacity for the Company's growth in premiums, like that of other insurance companies, is in part a function of its statutory surplus. Maintaining appropriate levels of statutory surplus is considered important by the Company's management, state insurance regulatory authorities, and the agencies that rate insurers' financial strength. Failure to maintain certain levels of statutory capital and surplus could result in increased scrutiny or, in some cases, action taken by state regulatory authorities and/or downgrades in an insurer's ratings. See "-- High Leverage" and "--A.M. Best Rating." The Company's Domestic Insurance Subsidiaries' financial strength is rated "A-" (Excellent) by A.M. Best based on a number of factors, including their 1996 results of operations, subject to a "stable outlook." There can be no assurance that the Domestic Insurance Subsidiaries, even after consummation of the Offering, will be able to maintain their current A.M. Best ratings. In early December 1996, Standard & Poor's Ratings Services ("Standard & Poor's") placed the Company's senior debt and preferred stock ratings on CreditWatch with negative implications, and on December 31, 1996 lowered such ratings to BB+ and BB- from BBB- and BB+, respectively. In taking such action, Standard & Poor's stated that the downgrades reflected greater-than-anticipated deterioration in the Company's operating performance and the resultant weaker cash flow available to the Company to service its debt. Standard & Poor's also stated its view that the Company's combined ratio is not expected to rebound to or remain at historic levels because of continued strong competition in the nonstandard auto marketplace. Standard & Poor's current ratings outlook is stable. The Company's senior debt and preferred stock are currently rated "Ba2" and "ba3," respectively, by Moody's Investors Service ("Moody's"). Any further downgrade in ratings could materially adversely affect the Company's business and the value of the Company's securities. In addition, increased public and regulatory concerns regarding the financial stability of participants in the insurance industry have resulted in greater emphasis being placed by policyholders and independent agents upon insurance company ratings and has created some measure of competitive advantage for insurance carriers with higher ratings. LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES The amounts established and to be established by the Company for loss and LAE reserves are estimates of future costs based on many variables, including historical and statistical information, inflation, legal developments, economic conditions and estimates of future trends in claims severity and frequency. The 19 Company has in the past experienced and may in the future experience cumulative deficiencies in reserving for losses and LAE. In December 1996, the Company increased its loss and LAE reserves by $12.5 million, primarily with respect to the 1996 accident year, with $1.9 million attributable to prior accident years. In each case, such reserve increases reflected the Company's determination that prior reserve levels for such years were not adequate. The establishment of appropriate reserves is an inherently uncertain process, and although, following the recent reserve increases, the Company believes adequate provision has been made for the Company's loss and LAE reserves, there can be no assurance that future adjustments to loss and LAE reserves will not be required. Shortfalls in the Company's reserve estimates could materially adversely affect the Company. COMPETITION The Company competes with both large national writers and smaller regional companies in each state in which it operates. Certain of these competitors are larger and have greater financial resources, higher ratings, superior technological resources and greater access to sources of capital than the Company. In addition, certain of such competitors have from time to time decreased prices in order to gain market share. The Company's recent losses and resulting efforts to improve profitability through reduced growth, significant rate increases and implementation of more restrictive policy terms and underwriting criteria may adversely impact the Company's competitive position, insofar as its competitors may be able to offer more attractive policy rates and terms. REGULATION AND LEGAL PROCEEDINGS The Company is subject to extensive regulation and supervision in the jurisdictions in which it does business. This regulatory oversight includes, by way of example, matters relating to licensing and examination, rate setting, trade practices, policy forms, limitations on the nature and amount of certain investments, claims practices, mandated participation in shared markets and guaranty funds, reserve adequacy, insurer solvency, transactions between affiliates, the amount of dividends that may be paid, and restrictions on underwriting standards. Such regulation and supervision are primarily for the benefit and protection of policyholders and not for the benefit of investors. In recent years, the automobile insurance industry has been under pressure from certain state regulators, legislators and special interest groups to reduce, freeze or set rates at levels that may not correspond with underlying costs, including initiatives to roll back automobile and other personal lines rates. This activity has adversely affected, and may in the future adversely affect, the profitability of the Company's business in various states because increasing costs of litigation, combined with rising automobile repair costs, continue to increase the costs of providing automobile insurance coverage. Adverse legislative and regulatory activity constraining the Company's ability to adequately price automobile insurance coverage may occur in the future. The impact of the automobile insurance regulatory environment on the Company's results of operations in the future is not predictable. In recent years the state insurance regulatory framework has come under increased federal scrutiny, and certain state legislatures have considered or enacted laws that alter and, in many cases, increase state authority to regulate insurance companies and insurance holding company systems. Further, the National Association of Insurance Commissioners and state insurance regulators are re-examining existing laws and regulations, specifically focusing on insurance company investments, issues relating to the solvency of insurance companies, risk-based capital guidelines, interpretations of existing laws, the development of new laws, and the definition of extraordinary dividends. It is presently not possible to predict the outcome of any of the above matters, or their potential effect on the Company. Various regulatory, governmental and other legal actions are currently pending involving or affecting the Company and its subsidiaries and specific aspects of the conduct of their businesses. Additionally, the Company and certain of its subsidiaries are defendants in numerous legal actions and proceedings of a character normally incident to their businesses and certain of these complainants seek damages of unspecified amounts. 20 VOLATILITY OF UNDERWRITING RESULTS Nonstandard automobile insurers such as the Company are subject to volatility in their underwriting results, primarily as a result of the frequency and severity of claims, as well as due to expense ratio fluctuations. The Company has experienced, and can be expected in the future to experience, losses from weather-related events, including hurricanes, wind and hail, and severe winter weather, and the frequency and severity of such events are inherently unpredictable. The Company's loss experience is also affected by such factors as changes in automobile repair costs, medical costs, driving habits and macroeconomic conditions, all of which are largely beyond the Company's control. To the extent geographically concentrated in the eastern United States, an area from which the Company drew approximately 75% of its business in 1995 and 1996, based on nonstandard net premiums written, the effect of any one of these factors on the Company may be accordingly exacerbated. The Company's expense levels have also been significantly affected in recent periods by the need for additional technology investments, including those for beginning the modifications necessary to accommodate the Year 2000, and may in the future be affected by additional such expenditures. POLICYHOLDER RENEWALS Nonstandard automobile insurance is highly price sensitive. Due to the nature of the Company's policyholders (for example, insureds seeking the least expensive insurance which satisfies the requirements of state laws), the renewal rate of the Company's policyholders is lower than that typically experienced by preferred and standard risk insurance companies. The success of the Company's business, therefore, depends on its ability to replace non- renewing insureds with new policyholders. The Company monitors rates of retention and the cancellation of its policies and attempts to refine its products in response to loss experience and rates of retention in particular markets. Although a majority of the Company's insureds will likely remain nonstandard risks because of, among other things, their desire for minimum policy limits, many of the Company's insureds may seek to obtain standard or preferred policies in order to reduce their cost of insurance. In addition, the recent actions taken by the Company to improve profitability, including the implementation of significant rate increases and more restrictive policy and payment terms, may have the effect of reducing the Company's renewal rates and decreasing premium volumes in certain states or lines of business. There can be no assurance that the Company will be successful in its efforts to improve its renewal rates or to replace non-renewing policyholders. DEPENDENCE ON KEY PERSONNEL The success of the Company is dependent on the efforts and abilities of its management, including its Chairman, Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, and the ability of the Company to attract and retain qualified personnel. There can be no assurance as to the effect upon the Company's performance of future changes in senior management, including the choice of a successor chief executive officer, the timing of which is not certain. The Company is presently seeking a successor chief executive officer. INVESTMENTS Because a significant portion of the Company's revenues are generated from its invested assets, the performance of its investment portfolio may materially affect the Company's results of operations and financial condition. Total pre-tax net realized investment gains were $2.7 million and $9.7 million in 1996 and 1995, respectively. All of the Company's fixed income securities have been designated as "available for sale" pursuant to GAAP. Fixed income securities designated as "available for sale" are carried in the consolidated financial statements of the Company at estimated market value, as determined in the aggregate. As of December 31, 1996, the aggregate market value of fixed income securities "available for sale" was less than amortized cost by $1.1 million. Future declines in the market value of such securities could have a material adverse impact on the Company's financial condition. 21 HOLDING COMPANY STRUCTURE The operations of the Company are conducted through the P&C Subsidiaries. Except to the extent that the Company may itself be a creditor with recognized claims against the P&C Subsidiaries, claims of creditors of such subsidiaries will have priority with respect to the assets and earnings of such subsidiaries over the claims of creditors of the Company, including claims under the Junior Subordinated Debentures and the Guarantee, even though such subsidiary obligations do not constitute Senior Indebtedness. Statutory liabilities of the P&C Subsidiaries, including loss reserves and unearned premium reserves, aggregated $687.4 million at December 31, 1996 and assets of such subsidiaries totaled $933.3 million at such date. In addition, in the event of a default on the Company's debt or an insolvency, liquidation or other reorganization of the Company, creditors of the Company will have no right to proceed against the assets of the P&C Subsidiaries or to cause their liquidation under Federal and state bankruptcy laws. If any of the Company's Domestic Insurance Subsidiaries were to be liquidated, such liquidation would be conducted under the insurance laws of North Carolina by the North Carolina Insurance Commissioner as the receiver with respect to such subsidiary's property and business. Certain Factors Relating to the Securities TRADING CHARACTERISTICS OF CAPITAL SECURITIES The Capital Securities may trade at prices that do not fully reflect the value of accrued and unpaid interest with respect to the underlying Junior Subordinated Debentures. However, interest on the Junior Subordinated Debentures will be included in the gross income of U.S. holders of Capital Securities as it accrues, rather than when it is paid. See "Certain Federal Income Tax Considerations--Original Issue Discount" and "--Sale or Redemption of Capital Securities." RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR SUBORDINATED DEBENTURES The obligations of the Company under the Guarantee issued by the Company for the benefit of the holders of the Capital Securities and under the Junior Subordinated Debentures are unsecured and rank subordinate and junior in right of payment to all Senior Indebtedness of the Company. As of December 31, 1996, the Senior Indebtedness of the Company aggregated approximately $194.8 million. In addition, as of such date, the P&C Subsidiaries had total liabilities of approximately $687.4 million (including estimated liabilities for insurance claims) to which the Junior Subordinated Debentures will be effectively subordinated. Accordingly, the Junior Subordinated Debentures and Guarantee will be effectively subordinated to all existing and future liabilities of the Company's subsidiaries, and holders of Junior Subordinated Debentures and the Guarantee should look only to the assets of the Company for payments on the Junior Subordinated Debentures and the Guarantee. See "Description of Guarantee--Status of the Guarantee" and "Description of Junior Subordinated Debentures--Subordination." The Junior Subordinated Debentures contain certain limitations on the Company's ability to incur additional indebtedness, including indebtedness that ranks senior to the Junior Subordinated Debentures and the Guarantee. See "Description of Junior Subordinated Debentures--Certain Covenants." The ability of the Series B Issuer to pay amounts due on the Capital Securities is entirely dependent upon the Company making payments on the Junior Subordinated Debentures as and when required. OPTION TO DEFER INTEREST PAYMENTS; TAX CONSEQUENCES So long as no Event of Default under the Junior Subordinated Indenture has occurred or is continuing, the Company has the right under the Junior Subordinated Indenture at any time during the term of the Junior Subordinated Debentures to defer the payment of interest on the Junior Subordinated Debentures at any time or from time to time for a period not exceeding 10 consecutive semi-annual periods with respect to each Extension Period, provided that no Extension Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. As a consequence of any such deferral, semi- annual Distributions on the Capital Securities will be 22 deferred by the Series B Issuer during any such Extension Period. During any such Extension Period, the Company may not, and may not permit any subsidiary of the Company 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 capital stock, (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu in all respects with or junior in interest to the Junior Subordinated Debentures or (iii) make any guarantee payments with respect to any guarantee by the Company of debt securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the Junior Subordinated Debentures (other than (a) dividends or distributions in Capital Stock of the Company, (b) any declaration of a dividend in connection with the implementation of a shareholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) payments under the Guarantee, (d) purchases of common stock related to the issuance of common stock or rights or options under any of the Company's benefit plans for its directors, officers, employees or other persons within the definition of "employee" for purposes of registration of shares of an employee benefit plan of the Company, related to the issuance of common stock or rights under a dividend reinvestment plan or stock purchase plan, or related to the issuance of common stock of the Company (or securities convertible into or exchangeable for such common stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, and (e) payments of accrued dividends (and cash in lieu of fractional shares) upon conversion into common stock of any convertible preferred stock of the Company of any series now or hereinafter outstanding, in accordance with the terms of such stock). Prior to the termination of any such Extension Period, the Company may further defer the payment of interest, provided that no Extension Period may exceed 10 consecutive semi-annual periods or extend beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the termination of any such Extension Period and the payment of all amounts then due, the Company may elect to begin a new Extension Period subject to the above requirements. See "Description of Capital Securities--Option to Defer Interest Payments" and "Description of Junior Subordinated Debentures--Option to Defer Interest Payments." Should an Extension Period occur, a holder of Capital Securities will continue to accrue income (in the form of original issue discount) in respect of its pro rata share of the Junior Subordinated Debentures held by the Series B Issuer for United States federal income tax purposes. As a result, a holder of Capital Securities will include such income in gross income for United States federal income tax purposes in advance of the receipt of cash, and will not receive from the Series B Issuer cash related to such income if the holder disposes of the Capital Securities prior to the record date for the payment of Distributions. See "Certain Federal Income Tax Considerations--Original Issue Discount" and "--Sale or Redemption of Capital Securities." The Company has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Junior Subordinated Debentures. However, should the Company elect to exercise such right in the future, the market price of the Capital Securities is likely to be affected. A holder that disposes of its Capital Securities during an Extension Period, therefore, might not receive the same return on its investment as a holder that continues to hold its Capital Securities. In addition, as a result of the existence of the Company's right to defer interest payments, the market price of the Capital Securities (which represent an undivided beneficial interest in the Series B Issuer) may be more volatile than the market prices of other securities on which original issue discount accrues that are not subject to such deferrals. The Company paid $10.75 million of the net proceeds from the sale of the Junior Subordinated Debentures into a Reserve Account established and maintained by the Debenture Trustee, the funds in which will be applied to pay interest on the Junior Subordinated Debentures on the first two Interest Payment Dates for the Junior Subordinated Debentures. See "Description of Junior Subordinated Debentures-- Reserve Account." TAX EVENT--SHORTENING OF MATURITY OR REDEMPTION Upon the occurrence and during the continuation of a Tax Event, the Company has the right, if certain conditions are met, (i) to shorten the maturity of the Junior Subordinated Debentures to a date not earlier than August 15, 2016 or (ii) to redeem the Junior Subordinated Debentures in whole (but not in part) within 90 days following the occurrence and during the continuation of such Tax Event and thereby cause a mandatory 23 redemption of the Capital Securities before the Stated Maturity. Any such redemption shall be at a price equal to the Redemption Price (as defined in "Description of Capital Securities--Redemption"). A "Tax Event" means, with respect to Junior Subordinated Debentures held by the Series B Issuer, the receipt by the Series B Issuer of an opinion of counsel to the Company 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 or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or pronouncement or decision is announced on or after the date of original issuance of the Capital Securities under the Trust Agreement, there is more than an insubstantial risk that (i) the Series B Issuer is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income accrued or received on the Junior Subordinated Debentures, (ii) interest payable by the Company on the Junior Subordinated 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 Series B Issuer is, or within 90 days of the date of such opinion, will be, subject to more than a de minimis amount of other taxes, duties or other governmental charges. With respect to Junior Subordinated Debentures which are no longer held by the Series B Issuer, "Tax Event" means the receipt by the Company 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 or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which prospective change, pronouncement or decision is announced on or after the date of issuance of the Junior Subordinated Debentures under the Junior Subordinated Indenture, there is more than an insubstantial risk that interest payable by the Company on the Junior Subordinated 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 (each of the circumstances referred to in clauses (i), (ii) and (iii) of the preceding sentence and the circumstances referred to in this sentence being referred to herein as an "Adverse Tax Consequence"). See "--Possible Tax Law Changes Affecting Capital Securities" for a discussion of certain proposals that, if adopted by Congress, could give rise to a Tax Event, which may permit the Company to shorten the maturity of the Junior Subordinated Debentures, which would result in the shortening of the Stated Maturity of the Capital Securities, or to cause a redemption of the Capital Securities prior to February 15, 2007. EXCHANGES OF CAPITAL SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES The holders of all of the outstanding Common Securities have the right at any time to terminate the Series B Issuer and, after satisfaction of the liabilities and amounts owed to creditors (which are payable by the Company) of the Series B Issuer as provided by applicable law, cause the Junior Subordinated Debentures to be distributed to the holders of the Trust Securities in liquidation of the Series B Issuer. Under current United States federal income tax law and interpretations, a distribution of the Junior Subordinated Debentures upon a liquidation of the Series B Issuer will not be a taxable event to holders of the Capital Securities. However, if a Tax Event were to occur which would cause the Series B Issuer to be subject to United States federal income tax with respect to income received or accrued on the Junior Subordinated Debentures, a distribution of the Junior Subordinated Debentures by the Series B Issuer could be a taxable event to the Series B Issuer and the holders of the Capital Securities. See "Certain Federal Income Tax Considerations--Distribution of Junior Subordinated Debentures to Holders of Capital Securities." MARKET PRICES There can be no assurance as to the market prices for Capital Securities or Junior Subordinated Debentures that may be distributed in exchange for Capital Securities if a liquidation of the Series B Issuer occurs. 24 Accordingly, the Capital Securities or the Junior Subordinated Debentures that a holder of Capital Securities may receive on liquidation of the Series B Issuer may trade at a discount to the price that the investor paid to purchase the Capital Securities offered hereby. Because holders of Capital Securities may receive Junior Subordinated Debentures upon a termination of the Series B Issuer, holders tendering Outstanding Capital Securities in the Exchange Offer are also making an investment decision with regard to the Junior Subordinated Debentures and should carefully review all the information regarding the Junior Subordinated Debentures contained herein. See "Description of Junior Subordinated Debentures." RIGHTS UNDER THE GUARANTEE First Union National Bank of North Carolina will act as the guarantee trustee under the Guarantee (the "Guarantee Trustee") and will hold the Guarantee for the benefit of the holders of the Capital Securities. The Guarantee guarantees on a subordinated basis to the holders of the Capital Securities the following payments, to the extent not paid by the Series B Issuer: (i) any accumulated and unpaid Distributions required to be paid on the Trust Securities, to the extent the Series B Issuer has funds on hand available therefor at such time, (ii) the Redemption Price with respect to the Trust Securities called for redemption or the Repurchase Price with respect to Capital Securities subject to an election to repurchase, as applicable, in either case, to the extent the Series B Issuer has funds on hand available therefor at such time, and (iii) upon a voluntary or involuntary termination, winding-up or liquidation of the Series B Issuer (unless the Junior Subordinated Debentures are distributed to holders of the Capital Securities), the lesser of (a) the aggregate of the Liquidation Amount and all accumulated and unpaid Distributions to the date of payment, to the extent the Series B Issuer has funds on hand available therefor at such time, and (b) the amount of assets of the Series B Issuer remaining available for distribution to holders of the Trust Securities on liquidation of the Series B Issuer after satisfaction of liabilities to creditors of such Series B Issuer, as required by applicable law. The Guarantee is subordinate as described under "--Ranking of Subordinated Obligations under the Guarantee and the Junior Subordinated Debentures." The holders of not less than a majority in aggregate Liquidation Amount of the Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of the Guarantee or to direct the exercise of any trust power conferred upon the Guarantee Trustee under the Guarantee. Any holder of the Capital Securities may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a legal proceeding against the Series B Issuer, the Guarantee Trustee or any other person or entity. If the Company were to default on its obligations under the Junior Subordinated Debentures, the Series B Issuer would lack available funds for the payment of Distributions or amounts payable on redemption or repurchase of the Capital Securities or otherwise, and in such event, holders of the Capital Securities would not be able to rely upon the Guarantee for payment of such amounts. Instead, in the event a Debenture Event of Default shall have occurred and be continuing and such event is attributable to the failure of the Company to pay interest on or principal (and premium, if any) of the Junior Subordinated Debentures on the date on which such interest or principal (or premium, if any) is due and payable, then a holder of Capital Securities may institute a legal proceeding directly against the Company (without first instituting a legal proceeding directly against any other person or entity) for enforcement of payment to such holder of the principal of (and premium, if any) or interest on such Junior Subordinated Debentures having a principal amount equal to the Liquidation Amount of the related Capital Securities of such holder (a "Direct Action"). In connection with such Direct Action, the Company will have a right of set- off under the Junior Subordinated Indenture to the extent of any payment made by the Company to such holder of Capital Securities in the Direct Action. Except as provided herein, holders of Capital Securities will not be able to exercise directly any other remedy available to the holders of the Junior Subordinated Debentures or assert directly any other rights in respect of the Junior Subordinated Debentures. See "Description of Junior Subordinated Debentures--Debenture Events of Default" and "--Enforcement of Certain Rights by Holders of Capital Securities," and "Description of Guarantee." The Trust Agreement provides that each holder of Capital Securities by acceptance thereof agrees to the provisions of the Guarantee and the Junior Subordinated Indenture. 25 LIMITED VOTING RIGHTS Holders of Capital Securities will generally have limited voting rights relating only to the modification of the Capital Securities and the exercise of the Series B Issuer's rights as holder of Junior Subordinated Debentures and the Guarantee. Holders of Capital Securities will not be entitled to appoint, remove or replace the Property Trustee or the Delaware Trustee except upon the occurrence of certain events described herein. The Property Trustee, the Administrators and the holders of all of the Common Securities may amend the Trust Agreement without the consent of holders of Capital Securities to ensure that the Series B Issuer will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation or to ensure that the Series B Issuer will not be required to register as an "investment company" under the Investment Company Act (as defined herein). See "Description of Capital Securities--Voting Rights; Amendment of Trust Agreement" and "--Removal of Issuer Trustees; Appointment of Successors." ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER The Capital Securities are subject to a prohibition on transfers resulting in blocks having a Liquidation Amount of less than $100,000 (100 Capital Securities). See "Description of Capital Securities--Restrictions on Transfer." There can be no assurance as to the liquidity of any markets that may develop for the Capital Securities, the ability of the holders to sell their Capital Securities or at what price holders of the Capital Securities will be able to sell their Capital Securities. Future trading prices of the Capital Securities will depend on many factors including, among other things, prevailing interest rates, the Company's operating results and the market for similar securities. The Initial Purchasers have informed the Series B Issuer and the Company that the Initial Purchasers intend to make a market in the Capital Securities offered hereby; however, the Initial Purchasers are not obligated to do so and any such market making activity will be subject to the limits of the Securities Act. The liquidity of, and trading market for, the Capital Securities also may be adversely affected by general declines in the market for similar securities. Such a decline may adversely affect such liquidity and trading markets independent of the financial performance of, and prospects for, the Company. POSSIBLE TAX LAW CHANGES AFFECTING CAPITAL SECURITIES On February 6, 1997, President Clinton submitted the fiscal 1998 budget to Congress, which, among other things, would generally deny interest deductions for interest on an instrument issued by a corporation that has a maximum term of more than 15 years and is not shown as indebtedness on the separate balance sheet of the issuer, or where such instrument is issued to a related party (other than a corporation) where the holder or some other related party issues a related instrument that is not shown as indebtedness on the issuer's consolidated balance sheet. The proposal would be effective generally for instruments issued on or after the date of appropriate Congressional action. If such provision were to apply to the Junior Subordinated Debentures, the Company would be unable to deduct interest on the Junior Subordinated Debentures. Under current law, the Company will be able to deduct interest on the Junior Subordinated Debentures. There can be no assurance that current or future legislative proposals or final legislation will not affect the ability of the Company to deduct interest on the Junior Subordinated Debentures. Such a change could give rise to a Tax Event, which may permit the Company to shorten the maturity of the Junior Subordinated Debentures or to cause a redemption of the Capital Securities, as described more fully under "Description of Junior Subordinated Debentures--Redemption" and "Description of Capital Securities-- Redemption." EXCHANGE OFFER PROCEDURES; CONSEQUENCES OF FAILURE TO EXCHANGE OUTSTANDING CAPITAL SECURITIES Issuance of Exchange Capital Securities in exchange for Outstanding Capital Securities pursuant to the Exchange Offer will be made only after a timely receipt by the Exchange Agent of such Outstanding Capital Securities, a properly completed and duly executed Letter of Transmittal and all other required documents. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of Outstanding Capital 26 Securities tendered for exchange will be determined by the Company and the Series B Issuer in their sole discretion, which determination will be final and binding on all parties. Holders of Outstanding Capital Securities desiring to tender such Outstanding Capital Securities in exchange for Exchange Capital Securities should allow sufficient time to ensure timely delivery. Neither the Company nor the Series B Issuer is under any duty to give notification of defects or irregularities with respect to the tenders of Outstanding Capital Securities for exchange. Outstanding Capital Securities that are not tendered or are tendered but not accepted will, following the consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof and therefore may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the Securities Act and any other applicable securities laws, or pursuant to an exemption therefrom or in a transaction not subject thereto, and in each case in compliance with certain conditions and restrictions. In addition, upon consummation of the Exchange Offer, the Company and the Series B Issuer will have no further obligations to provide for the registration under the Securities Act of such Outstanding Capital Securities. To the extent that Outstanding Capital Securities are tendered and accepted in the Exchange Offer the trading market for untendered and tendered but unaccepted Outstanding Capital Securities could be adversely affected. See "Exchange Offer." The Exchange Capital Securities and any Outstanding Capital Securities which remain outstanding after consummation of the Exchange Offer will constitute a single series of Capital Securities under the Trust Agreement and, accordingly, will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding Liquidation Amount thereof have taken certain actions or exercised certain rights under the Trust Agreement. See "Description of Capital Securities." The Registration Rights Agreement provides that, if, among other things, the Exchange Offer is not consummated within 30 days after the date hereof, the Series B Issuer will pay liquidated damages on the Outstanding Capital Securities at the rate of 0.25% per annum commencing on the 31st day after the date hereof, until the Exchange Offer is consummated. See "Exchange Offer-- Terms of the Exchange Offer." Following consummation of the Exchange Offer, the Outstanding Capital Securities will not be entitled to any liquidated damages thereon. The Exchange Capital Securities will not be entitled to any such liquidated damages. 27 USE OF PROCEEDS No proceeds will be received by the Company and the Series B Issuer from the Exchange Offer. In consideration for issuing the Exchange Capital Securities in exchange for the Outstanding Capital Securities as described in this Prospectus, the Series B Issuer will receive Outstanding Capital Securities in like aggregate Liquidation Amount. The Outstanding Capital Securities surrendered in exchange for Exchange Capital Securities will be canceled. Proceeds to the Series B Issuer from the issuance and sale of the Outstanding Capital Securities and the Common Securities were used to purchase the Outstanding Junior Subordinated Debentures. Proceeds to the Company from the issuance and sale of the Outstanding Junior Subordinated Debentures were used by the Company (i) to contribute $50,000,000 to the Domestic Insurance Subsidiaries, (ii) to fund the Reserve Account with $10,750,000, (iii) to reduce the amount outstanding under the Company's Credit Facility in the amount of $32,000,000, (iv) to pay $2,250,000 to the Initial Purchasers, and (v) for general corporate purposes. RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS The Company's consolidated ratios of earnings to fixed charges and consolidated ratios of earnings to combined fixed charges and preferred stock dividend requirements for each of the periods indicated are set forth below:
YEAR ENDED DECEMBER 31, ------------------------------ 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- Earnings to Fixed Charges.................... --(1) 4.33x 4.27x 9.93x 6.32x Earnings to Combined Fixed Charges and Pre- ferred Stock Dividend Requirements(2)....... --(1) 2.88x 3.78x 9.93x 5.98x
- -------- (1) Fixed charges for the year ended December 31, 1996 were $16.0 million and earnings for such year prior to these fixed charges were $14.1 million, resulting in a deficiency of $1.9 million. Combined fixed charges and preferred stock dividends for such year were $24.6 million and earnings prior to these fixed charges were $14.1 million, resulting in a deficiency of $10.5 million. (2) The tax rate for preferred stock dividend requirements for 1996 was the incremental Federal tax rate, and for 1992-95 was the effective tax rate on continuing operations. For purposes of computing the ratios of both earnings to fixed charges and earnings to combined fixed charges and preferred stock dividend requirements, earnings represent net income plus applicable income taxes and fixed charges. Fixed charges represent all interest expense, capitalized interest, and the interest factor included in rents. Combined fixed charges and preferred stock dividend requirements represent all interest expense, capitalized interest, an amount equal to the pre-tax earnings required to meet applicable preferred stock dividend requirements, and the interest factor included in rents. ACCOUNTING TREATMENT For financial reporting purposes, the Series B Issuer will be treated as a subsidiary of the Company and, accordingly, the accounts of the Series B Issuer will be included in the consolidated financial statements of the Company. The Capital Securities will be presented in the consolidated balance sheet of the Company as a separate line item directly above stockholders' equity under the caption "Guaranteed Preferred Beneficial Interests in the Company's Junior Subordinated Deferrable Interest Debentures" and appropriate disclosures about the Capital Securities, the Guarantee and the Junior Subordinated Debentures will be included in the notes to the consolidated financial statements of the Company for financial reporting purposes. The Company will record distributions payable on the Capital Securities as a minority interest expense in the consolidated statements of income. 28 CAPITALIZATION The following table sets forth the consolidated capitalization of the Company as of December 31, 1996 and as adjusted to give effect to the issuance and sale of the Capital Securities.
DECEMBER 31, 1996 --------------------- ACTUAL AS ADJUSTED -------- ----------- (IN THOUSANDS) Short-Term Debt under Credit Facility................... $ 44,000 $ 12,000(1) ======== ======== Notes Payable: Promissory Note....................................... 878 878 8% Senior Notes due 1999.............................. 74,912 74,912 9 1/2% Senior Notes due 2001.......................... 74,970 74,970 -------- -------- Total Notes Payable..................................... 150,760 150,760 -------- -------- Minority interest: Guaranteed Preferred Beneficial Interests in the Company's Junior Subordinated Deferrable Interest Debentures(2)........................................ -- 100,000 -------- -------- Stockholders' Equity: Convertible Preferred Stock, $.01 par value, 1,437,500 shares authorized, issued and outstanding............ 14 14 Preferred Stock--$0.01 par value per share, 562,500 shares authorized, issued and outstanding--none...... -- -- Common Stock, $.01 par value per share, 35,000,000 shares authorized, 17,303,321 shares issued and outstanding.......................................... 173 173 Class A Non-Voting Common Stock, $.01 par value per share, 20,000,000 shares authorized, issued and outstanding--None.................................... -- -- Additional paid-in capital............................ 147,891 147,891 Net unrealized depreciation of securities............. (700) (700) Retained earnings..................................... 105,834 105,834 Treasury stock, at cost 1,567,200 shares.............. (37,821) (37,821) -------- -------- Total Stockholders' Equity.............................. 215,391 215,391 -------- -------- Total Capitalization................................ $366,151 $466,151 ======== ========
- -------- (1) Reflects the application of a portion of the net proceeds from the sale of the Junior Subordinated Debentures to reduce the amount outstanding under the Credit Facility. See "Use of Proceeds." (2) The sole assets of the Series B Issuer will be the Junior Subordinated Debentures. The Junior Subordinated Debentures held by the Series B Issuer will mature on February 15, 2027. The Company initially will own all of the Common Securities of the Series B Issuer. It is anticipated that the Series B Issuer will not be subject to the reporting requirements of the Exchange Act. See "Accounting Treatment." 29 SELECTED FINANCIAL INFORMATION
YEARS ENDED DECEMBER 31, ------------------------------------------------------------------ 1996 1995 1994 1993 1992 ----------- ----------- ----------- ---------- ---------- (IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS) OPERATING RESULTS Direct premiums written.............. $ 935,011 $ 797,373 $ 545,483 $ 395,767 $ 341,957 Net premiums written.. 797,989 620,447 363,467 246,393 193,459 Total revenues........ 783,411 627,458 369,587 267,510 215,287 Income from continuing operations........... 170 36,619 22,538 43,286 31,324 Net income............ 170 33,995 23,188 44,196 30,110 Net income (loss) available to common stockholders......... (5,400) 28,425 22,306 44,196 29,772 Operating earnings (loss)............... (1,592) 30,315 23,259 37,008 28,734 PER SHARE Income from continuing operations........... $ (.34) $ 1.86 $ 1.38 $ 2.53 $ 1.94 Net income............ (.34) 1.73 1.42 2.58 1.87 Weighted average shares outstanding... 15,850 19,635 15,750 17,119 15,918 Dividends paid........ .36 .36 .36 .32 .16 Operating earnings.... (.45) 1.54 1.42 2.16 1.78 FINANCIAL POSITION Cash and invested assets............... $ 567,892 $ 505,104 $ 420,919 $ 244,588 $ 242,249 Total Assets.......... 1,356,799 1,241,679 1,152,123 656,721 584,070 Short-term debt....... 44,000 16,000 21,000 16,049 -- Notes payable......... 150,760 150,807 150,812 75,826 74,808 Stockholders' equity.. 215,391 234,847 195,259 127,462 115,820 GAAP COMBINED RATIO(1) Loss ratio............ 80.0% 73.4% 70.4% 62.1% 57.0% Expense ratio......... 22.4 21.6 22.0 21.9 24.1 ----------- ----------- ----------- --------- --------- Combined ratio........ 102.4% 95.0% 92.4% 84.0% 81.1% ----------- ----------- ----------- --------- --------- SELECTED INSURANCE COMPANY STATUTORY DATA(2) Loss ratio............ 79.4% 73.2% 70.8% 63.0% 57.0% Expense ratio......... 22.1 21.5 21.7 22.0 20.9 ----------- ----------- ----------- --------- --------- Combined ratio........ 101.5% 94.7% 92.5% 85.0% 77.9% ----------- ----------- ----------- --------- --------- Statutory net income.. $ 6,882 $ 41,814 $ 37,883(3) $ 35,097 $ 39,267 Statutory surplus..... 245,919 226,832 198,589 103,033 105,395 Net premiums written to statutory surplus. 3.248x(3) 2.7x 2.6x(4) 2.4x 1.8x
- -------- (1) Ratios for 1993 exclude the effect of non-recurring items relating to the settlement of a premium rate dispute. (2) Combined ratio for 1994 is computed including the results of Bankers and Shippers for the period after the acquisition date of October 18, 1994. (3) After giving effect to the application of the proceeds of the sale of the Junior Subordinated Debentures, the pro forma ratio would have been 2.7x. (4) Includes results of Bankers and Shippers and Integon Preferred Insurance Company for the full year 1994. 30 EXCHANGE OFFER GENERAL The Company and the Series B Issuer hereby offer, upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the Exchange Offer), to exchange Exchange Capital Securities for a like aggregate Liquidation Amount of Outstanding Capital Securities properly tendered on or prior to the Expiration Date and not withdrawn as permitted pursuant to the procedures described below. PURPOSE OF THE EXCHANGE OFFER The Company issued 103,093 Outstanding Junior Subordinated Debentures and the Series B Issuer issued 100,000 Outstanding Capital Securities on February 10, 1997. The issuance of the Outstanding Capital Securities was not registered under the Securities Act in reliance upon the exemption provided in Section 4(2) of the Securities Act. In connection with the issuance and sale of the Outstanding Capital Securities, the Company and the Series B Issuer entered into the Registration Rights Agreement, which requires the Company and the Series B Issuer to (i) use their best efforts to cause to be filed with the Commission within 90 days after the date of the original issuance of the Outstanding Capital Securities (February 10, 1997) (such date being referred to herein as the "Closing Date"), a registration statement (the "Exchange Offer Registration Statement") relating to a registered Exchange Offer for the Outstanding Capital Securities under the Securities Act, (ii) use their best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act within 120 days after the Closing Date and (iii) keep the Exchange Offer open for a period of not less than 30 days (or longer, if required by applicable law) after the date notice of the Exchange Offer is mailed to the holders of the Outstanding Capital Securities. The form and terms of the Exchange Capital Securities are substantially the same as the form and terms of the Outstanding Capital Securities except that the Exchange Capital Securities (i) will have been registered under the Securities Act and will not contain terms restricting the transfer of such securities, (ii) will be entitled, to the extent applicable, to the benefits of qualification of the Trust Agreement under the Trust Indenture Act, and (iii) will not provide for liquidated damages in certain circumstances under the Registration Rights Agreement. See "--Terms of the Exchange Offer." The Company and the Series B Issuer will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Pursuant to the Exchange Offer, the Company will exchange as soon as practicable after the date hereof, the Exchange Guarantee for the Outstanding Guarantee and the Exchange Junior Subordinated Debentures for a like aggregate principal amount of Outstanding Junior Subordinated Debentures. TERMS OF THE EXCHANGE OFFER Promptly after the effectiveness of the Exchange Offer Registration Statement, the Company and the Series B Issuer will offer to the holders of the Outstanding Capital Securities who are not prohibited by any law or policy of the Commission from participating in the Exchange Offer the opportunity to exchange their Outstanding Capital Securities for a like aggregate Liquidation Amount of Exchange Capital Securities. The Company and the Series B Issuer will keep the Exchange Offer open for not less than 30 days (or longer, if 31 required by applicable law) after the date notice of the Exchange Offer is mailed to the holders of the Outstanding Capital Securities. In the event that (i) the Company and the Series B Issuer are not required to file the Exchange Offer Registration Statement or permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, (ii) for any reason the Exchange Offer Registration Statement is not declared effective within 120 calendar days after the Closing Date, (iii) the Company has received an opinion of counsel, rendered by a law firm having a recognized national tax practice, to the effect that, as a result of the consummation of the Exchange Offer, there is more than an insubstantial risk that (x) the Series B Issuer 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 Junior Subordinated Debentures, (y) interest payable by the Company on such Junior Subordinated 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 (z) the Series B Issuer is, or will be within 90 days of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges, or (iv) any holder of Transfer Restricted Securities (as defined below) notifies the Company or the Series B Issuer on or by the 20th business day following the consummation of the Exchange Offer that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer, (B) it may not resell the Exchange Capital Securities, the Exchange Guarantee and the Exchange Junior Subordinated Debentures acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) it is a broker-dealer and owns Outstanding Capital Securities acquired directly from the Series B Issuer or an affiliate of the Series B Issuer, or (v) if the Company so elects, then the Company and the Series B Issuer will use their best efforts as promptly as practicable to file with the Commission and thereafter will use their best efforts to cause to be declared effective a "shelf" registration statement on an appropriate form under the Securities Act providing for the registration of, and the sale on a continuous or delayed basis by the holders of, all of the Transfer Restricted Securities, pursuant to Rule 415 or any similar rule that may be adopted by the Commission (hereafter, a "Shelf Registration Statement" and, together with any Exchange Offer Registration Statement, a "Registration Statement"). If (i) the applicable Registration Statement is not filed with the Commission on or prior to 90 calendar days after the Closing Date, (ii) the Exchange Offer Registration Statement or, as the case may be, the Shelf Registration Statement, is not declared effective within 120 calendar days after the Closing Date, (iii) the Exchange Offer is not consummated on or prior to 30 business days after the date on which the Exchange Offer Registration Statement was declared effective by the Commission, or (iv) the Shelf Registration Statement is filed and declared effective within 120 calendar days after the Closing Date but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 30 calendar days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company and the Series B Issuer will pay to holders of Transfer Restricted Securities as liquidated damages, additional interest in respect of the Junior Subordinated Debentures, and corresponding Distributions shall accumulate on the Liquidation Amount of Capital Securities, at a rate of 0.25% per annum until (i) the applicable Registration Statement is filed, (ii) the Exchange Offer Registration Statement is declared effective and the Exchange Offer is consummated, (iii) the Shelf Registration Statement is declared effective or (iv) the Shelf Registration Statement again becomes effective, as the case may be. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. "Transfer Restricted Securities" means each Outstanding Capital Security, Outstanding Guarantee and Outstanding Junior Subordinated Debenture until (i) the date on which such securities have been exchanged for a freely transferable Exchange Capital Security, Exchange Guarantee and Exchange Junior Subordinated Debenture in the Exchange Offer, (ii) the date on which such securities have been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such securities are distributed to the public pursuant to Rule 144 under the Securities Act or are salable pursuant to Rule 144(k) under the Securities Act. The Company and the Series B Issuer will not be required to pay liquidated damages to the holder of Transfer Restricted Securities if such holder failed to comply with its obligations to make certain representations set forth in the Registration Rights Agreement or failed to provide the information required to be provided by it, if any, under the Registration Rights Agreement. 32 Based on no-action letters issued by the staff of the Commission to third parties, the Company and the Series B Issuer believe that the Exchange Capital Securities issued pursuant to the Exchange Offer in exchange for Outstanding Capital Securities may be offered for resale, resold and otherwise transferred by holders thereof (other than (i) a broker-dealer who purchases such Exchange Capital Securities directly from the Series B Issuer to resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other available exemption under the Securities Act or (ii) a person that is an affiliate of the Company or the Series B Issuer within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such Exchange Capital Securities are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such Exchange Capital Securities. Any holder of Outstanding Capital Securities who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Capital Securities could not rely on such interpretation by the staff of the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Thus, any Exchange Capital Securities acquired by such holders will not be freely transferable except in compliance with the Securities Act. Each broker-dealer that receives Exchange Capital Securities for its own account in exchange for Outstanding Capital Securities where such Outstanding Capital Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Capital Securities. See "Plan of Distribution." The Registration Rights Agreement requires the Company and the Series B Issuer to keep the Exchange Offer Registration Statement effective for a period beginning when the Exchange Capital Securities are first issued in the Exchange Offer and ending upon the earlier of (i) either (a) the expiration of the 180th day after the Exchange Offer has been completed or (b) in the event the Company and the Series B Issuer have at any time suspended the use of the prospectus contained in the Exchange Offer Registration Statement, the day beyond the 180th day after the Exchange Offer has been completed that reflects an additional period of days equal to the number of days during all of the periods from and including the dates the Company and the Series B Issuer give notice to and including the date when broker-dealers receive an amended or supplemented prospectus necessary to permit resales of Exchange Capital Securities or to and including the date on which the Company and the Series B Issuer give a Resumption Notice (as defined herein) or (ii) such time as such broker-dealers no longer own any Exchange Capital Securities whose resales by them are subject to the prospectus delivery requirements under the Securities Act. "Resumption Notice" means the written notice by the Company to the holders of Outstanding Capital Securities that the use of the applicable prospectus may be resumed. Holders may tender their Outstanding Capital Securities for exchange in whole or in part having a Liquidation Amount of not less than $100,000 (100 Outstanding Capital Securities) or any integral multiple of $1,000 (1 Outstanding Capital Security) in excess thereof; provided that if any Outstanding Capital Securities are tendered for exchange in part, the untendered aggregate Liquidation Amount thereof must be $100,000 or any integral multiple of $1,000 in excess thereof. NONE OF THE BOARD OF DIRECTORS OF THE COMPANY, THE ISSUER TRUSTEES OR THE ADMINISTRATORS OF THE SERIES B ISSUER MAKE ANY RECOMMENDATION TO HOLDERS OF OUTSTANDING CAPITAL SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OUTSTANDING CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OUTSTANDING CAPITAL SECURITIES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE LIQUIDATION AMOUNT OF OUTSTANDING CAPITAL SECURITIES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS. 33 EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS The Exchange Offer will expire at 5:00 P.M., New York City time, on , 1997, unless the Company and the Series B Issuer, in their sole discretion, have extended the period of time (as described below) for which the Exchange Offer is open (such date, as it may be extended, is referred to herein as the "Expiration Date"). The Expiration Date will be at least 20 business days after the commencement of the Exchange Offer in accordance with Rule 14e-1(a) under the Exchange Act. The Company and the Series B Issuer expressly reserve the right, at any time or from time to time, to extend the period of time during which the Exchange Offer is open, and thereby delay acceptance for exchange of any Outstanding Capital Securities by giving oral notice (confirmed in writing) or written notice to the Exchange Agent and by giving written notice of such extension to the holders thereof or by timely public announcement communicated, unless otherwise required by applicable law or regulation, by making a release through the Dow Jones News Service, in each case, no later than 9:00 A.M. New York City time, on the next business day after the previously scheduled Expiration Date. Such announcement may state that the Company and the Series B Issuer are extending the Exchange Offer for a specified period of time. During any such extension, all Outstanding Capital Securities previously tendered will remain subject to the Exchange Offer. In addition, the Company and the Series B Issuer expressly reserve the right to terminate or amend the Exchange Offer and not to accept for exchange any Outstanding Capital Securities not theretofore accepted for exchange upon the occurrence of any of the events specified below under "--Certain Conditions to the Exchange Offer." If any such termination or amendment occurs, the Company and the Series B Issuer will notify the Exchange Agent and will either issue a press release or give oral or written notice to the holders of the Outstanding Capital Securities as promptly as practicable. For purposes of the Exchange Offer, a "business day" means any day other than Saturday, Sunday or a federal holiday, and consists of the time period from 12:01 A.M. through 12:00 midnight, New York City time. PROCEDURES FOR TENDERING OUTSTANDING CAPITAL SECURITIES The tender to the Company or the Series B Issuer of Outstanding Capital Securities by a holder thereof as set forth below and the acceptance thereof by the Company and the Series B Issuer will constitute a binding agreement between the tendering holder and the Company or the Series B Issuer upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal. A holder of Outstanding Capital Securities may tender the same by (i) properly completing and signing the Letter of Transmittal or a facsimile thereof (all references in this Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates representing the Outstanding Capital Securities being tendered and any required signature guarantees, to the Exchange Agent at its address set forth below on or prior to 5:00 p.m., New York City time, on the Expiration Date (or complying with the procedure for book-entry transfer described below) or (ii) complying with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF OUTSTANDING CAPITAL SECURITIES, LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, OR AN OVERNIGHT OR HAND DELIVERY SERVICE, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY. NO OUTSTANDING CAPITAL SECURITIES OR LETTER OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY OR THE SERIES B ISSUER. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the Outstanding Capital Securities surrendered for exchange pursuant thereto are tendered (i) by a registered holder of Outstanding Capital Securities who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution (as defined herein). In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by a firm which is a member of a 34 registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company having an office or correspondent in the United States (each an "Eligible Institution"). If Outstanding Capital Securities are registered in the name of a person other than a signer of the Letter of Transmittal, the Outstanding Capital Securities surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Company or the Series B Issuer in their sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Institution. The Exchange Agent will make a request promptly after the date of this Prospectus to establish accounts with respect to the Outstanding Capital Securities at the book-entry transfer facility, The Depository Trust Company, for the purpose of facilitating the Exchange Offer, and subject to the establishment thereof, any financial institution that is a participant in the book-entry transfer facility's system may make book-entry delivery of Outstanding Capital Securities by causing such book-entry transfer facility to transfer such Outstanding Capital Securities into the Exchange Agent's account with respect to the Outstanding Capital Securities in accordance with the book-entry transfer facility's procedures for such transfer. Although delivery of Outstanding Capital Securities may be effected through book-entry transfer in the Exchange Agent's account at the book-entry transfer facility, an appropriate Letter of Transmittal with any required signature guarantee and other required documents must in each case be transmitted to and received or confirmed by the Exchange Agent at its address set forth below on or prior to the Expiration Date, or, if the guaranteed delivery procedures described below are complied with, within the time period provided under such procedures. If a holder desires to accept the Exchange Offer and time will not permit a Letter of Transmittal or Outstanding Capital Securities to reach the Exchange Agent before the Expiration Date or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if the Exchange Agent has received at its address or facsimile number set forth below on or prior to the Expiration Date a letter, telegram or facsimile from an Eligible Institution setting forth the name and address of the tendering holder, the name in which the Outstanding Capital Securities are registered and, if possible, the certificate number or numbers of the certificate or certificates representing the Outstanding Capital Securities to be tendered, and stating that the tender is being made thereby and guaranteeing that within three business days after the Expiration Date the Outstanding Capital Securities in proper form for transfer (or a confirmation of book-entry transfer of such Outstanding Capital Securities into the Exchange Agent's account at the book-entry transfer facility), will be delivered by such Eligible Institution together with a properly completed and duly executed Letter of Transmittal (and any other required documents). Unless Outstanding Capital Securities being tendered by the above-described method are deposited with the Exchange Agent within the time period set forth above (accompanied or preceded by a properly completed Letter of Transmittal and any other required documents), the Company and the Series B Issuer may, at their option, reject the tender. Copies of a Notice of Guaranteed Delivery which may be used by an Eligible Institution for the purposes described in this paragraph are available from the Exchange Agent. A tender will be deemed to have been received as of the date when (i) the tendering holder's properly completed and duly signed Letter of Transmittal accompanied by the Outstanding Capital Securities (or a confirmation of book- entry transfer of such Outstanding Capital Securities into the Exchange Agent's account at the book-entry transfer facility) is received by the Exchange Agent, or (ii) a Notice of Guaranteed Delivery or letter, telegram or facsimile to similar effect (as provided above) from an Eligible Institution is received by the Exchange Agent. Issuances of Exchange Capital Securities in exchange for Outstanding Capital Securities tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or facsimile to similar effect (as provided above) by an Eligible Institution will be made only against deposit of the Letter of Transmittal (and any other required documents) and the tendered Outstanding Capital Securities. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of Outstanding Capital Securities tendered for exchange will be determined by the Company and the Series B Issuer in their sole discretion, which determination will be final and binding on all parties. The Company and the Series B Issuer reserve the right to reject any and all tenders of any particular Outstanding Capital Securities not properly 35 tendered or reject any particular Outstanding Capital Securities the acceptance of which might, in the judgment of the Company and the Series B Issuer or their counsel, be unlawful. The Company and the Series B Issuer also reserve the absolute right to waive any defects or irregularities or condition of the Exchange Offer as to any particular Outstanding Capital Securities either before or after the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Outstanding Capital Securities in the Exchange Offer). The interpretation of the terms and conditions of the Exchange Offer (including the Letter of Transmittal and the instructions thereto) by the Company and the Series B Issuer shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Outstanding Capital Securities for exchange must be cured within such time as the Company and the Series B Issuer shall determine. None of the Company, the Series B Issuer, nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Outstanding Capital Securities for exchange, nor shall any of them incur any liability for failure to give such notification. If the Letter of Transmittal or any Outstanding Capital Securities or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Company or the Series B Issuer, proper evidence satisfactory to the Company or the Series B Issuer of their authority to so act must be submitted. By tendering, each holder that is not a broker-dealer or is a broker-dealer but is not receiving Exchange Capital Securities for its own account will represent to the Company and the Series B Issuer that, among other things, the Exchange Capital Securities acquired pursuant to the Exchange Offer are being obtained in the ordinary course of such holder's business, that such holder has no arrangement or understanding with any person to participate in the distribution of the Outstanding Capital Securities or Exchange Capital Securities within the meaning of the Securities Act and that such holder is not an "affiliate" of the Company or the Series B Issuer within the meaning of the Securities Act or, if it is an affiliate, such holder will comply with the registration and prospectus delivery requirements of the Securities Act, to the extent applicable. Each broker-dealer that receives Exchange Capital Securities for its own account in exchange for Outstanding Capital Securities where such Outstanding Capital Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Capital Securities. See "Plan of Distribution." In addition, the Company and the Series B Issuer reserve the right in their sole discretion to (a) purchase or make offers for any Outstanding Capital Securities that remain outstanding subsequent to Expiration Date, or, as set forth under "--Certain Conditions to the Exchange Offer," to terminate the Exchange Offer and (b) to the extent permitted by applicable law, purchase Outstanding Capital Securities in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers may differ from the terms of the Exchange Offer. WITHDRAWAL RIGHTS Tenders of Outstanding Capital Securities may be withdrawn at any time prior to the close of business, New York City time, on the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal sent by letter, telegram or facsimile must be received by the Exchange Agent prior to the close of business, New York City time, on the Expiration Date at its address or facsimile number set forth below. Any such notice of withdrawal must (i) specify the name of the person having tendered the Outstanding Capital Securities to be withdrawn (the "Depositor"), (ii) identify the Outstanding Capital Securities to be withdrawn (including the certificate number or numbers of the certificate or certificates representing such Outstanding Capital Securities and number of such Outstanding Capital Securities), (iii) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Outstanding Capital Securities were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to permit the Transfer Agent with respect to the Outstanding Capital Securities to register the transfer of such Outstanding Capital Securities into the name of the person withdrawing the tender and (iv) specify the name in which any 36 such Outstanding Capital Securities are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company and the Series B Issuer in their sole discretion, which determination will be final and binding on all parties. Any Outstanding Capital Securities so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Capital Securities will be issued with respect thereto unless the Outstanding Capital Securities so withdrawn are validly retendered. Any Outstanding Capital Securities which have been tendered but which are withdrawn will be returned to the holder thereof without cost to such holder as soon as practicable after such withdrawal. Properly withdrawn Outstanding Capital Securities may be retendered by following one of the procedures described above under "-- Procedures for Tendering Outstanding Capital Securities" at any time prior to the Expiration Date. ACCEPTANCE OF OUTSTANDING CAPITAL SECURITIES FOR EXCHANGE; DELIVERY OF EXCHANGE CAPITAL SECURITIES Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company and the Series B Issuer will accept, promptly after the Expiration Date, all Outstanding Capital Securities properly tendered and will issue the Exchange Capital Securities promptly after acceptance of the Exchange Offer. See "--Certain Conditions to the Exchange Offer" below. For purposes of the Exchange Offer, the Company and the Series B Issuer will be deemed to have accepted properly tendered Outstanding Capital Securities for exchange when the Company and the Series B Issuer have given oral or written notice thereof to the Exchange Agent. In all cases, issuance of the Exchange Capital Securities in exchange for Outstanding Capital Securities pursuant to the Exchange Offer will be made only after timely receipt by the Company or the Series B Issuer of such Outstanding Capital Securities, a properly completed and duly executed Letter of Transmittal and all other required documents. If any tendered Outstanding Capital Securities are not accepted for exchange for any reason set forth in the terms and conditions of the Exchange Offer, such unaccepted Outstanding Capital Securities will be returned without expense to the tendering holder thereof as promptly as practicable after the rejection of such tender or the expiration or termination of the Exchange Offer. UNTENDERED OUTSTANDING CAPITAL SECURITIES Holders of Outstanding Capital Securities whose Outstanding Capital Securities are not tendered or are tendered but not accepted in the Exchange Offer will continue to hold such Outstanding Capital Securities and will be entitled to all the rights and preferences and subject to the limitations applicable thereto. Following consummation of the Exchange Offer, the holders of Outstanding Capital Securities will continue to be subject to the existing restrictions upon transfer thereof and the Company and the Series B Issuer will have no further obligation to such holders to provide for the registration under the Securities Act of the Outstanding Capital Securities held by them. To the extent that Outstanding Capital Securities are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Outstanding Capital Securities could be adversely affected. CERTAIN CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other term of the Exchange Offer, the Company and the Series B Issuer will not be required to accept for exchange, or issue Exchange Capital Securities in exchange for, any Outstanding Capital Securities, and may terminate or amend the Exchange Offer, if at any time before the acceptance of such Outstanding Capital Securities for exchange, any of the following events shall occur: (A) an action or proceeding shall have been instituted or threatened in any court or before any governmental agency or body with respect to the Exchange Offer which, in the Company's and the Series B Issuer's judgment, would reasonably be expected to prohibit, prevent or otherwise impair the ability of the Company or the Series B Issuer to proceed with the Exchange Offer; (B) there shall occur a change in the current interpretation of the staff of the Commission which current interpretation permits the Exchange Capital Securities issued pursuant to the Exchange Offer in 37 exchange for the Outstanding Capital Securities to be offered for resale, resold and otherwise transferred by holders thereof (other than (i) a broker-dealer who purchases such Exchange Capital Securities directly from the Company or the Series B Issuer to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is an affiliate of the Company or the Series B Issuer within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Capital Securities are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of Exchange Capital Securities; (C) a law, statute, rule or regulation shall have been adopted or enacted which, in the Company's and the Series B Issuer's judgment, would reasonably be expected to impair the ability of the Company or the Series B Issuer to proceed with the Exchange Offer; (D) trading on the New York Stock Exchange or generally in the United States over-the-counter market shall have been suspended by order of the Commission or any other governmental authority which, in the Company's and the Series B Issuer's judgment, would reasonably be expected to impair the ability of the Company or the Series B Issuer to proceed with the Exchange Offer; (E) a stop order shall have been issued by the Commission or any state securities authority suspending the effectiveness of the Registration Statement or proceedings shall have been initiated or, to the knowledge of the Company or the Series B Issuer, threatened for that purpose, or any governmental approval has not been obtained, which approval the Company and the Series B Issuer shall, in their sole discretion, deem necessary for the consummation of the Exchange Offer as contemplated hereby; or (F) any change, or any development involving a prospective change, in the business or financial affairs of the Company or any of its subsidiaries has occurred which, in the sole judgment of the Company and the Series B Issuer, might materially impair the ability of the Company or the Series B Issuer to proceed with the Exchange Offer. The foregoing conditions are for the sole benefit of the Company and the Series B Issuer and may be asserted by the Company and the Series B Issuer regardless of the circumstances giving rise to any such condition or may be waived by the Company and the Series B Issuer in whole or in part at any time and from time to time in their sole discretion. The failure by the Company and the Series B Issuer at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. If the Company and the Series B Issuer determine that they may terminate the Exchange Offer, as set forth above, the Company and the Series B Issuer may (i) refuse to accept any Outstanding Capital Securities and return any Outstanding Capital Securities that have been tendered to the holders thereof, (ii) extend the Exchange Offer and retain all Outstanding Capital Securities tendered prior to the Expiration Date, subject to the rights of such holders of tendered Outstanding Capital Securities to withdraw their tendered Outstanding Capital Securities, or (iii) waive such termination event with respect to the Exchange Offer and accept all properly tendered Outstanding Capital Securities that have not been withdrawn. If such waiver constitutes a material change in the Exchange Offer, the Company and the Series B Issuer will disclose such change by means of a supplement to this Prospectus that will be distributed to each registered holder of Outstanding Capital Securities, and the Company and the Series B Issuer will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the registered holders of the Outstanding Capital Securities, if the Exchange Offer would otherwise expire during such period. In addition, the Company and the Series B Issuer will not accept for exchange any Outstanding Capital Securities tendered, and no Exchange Capital Securities will be issued in exchange for any such Outstanding Capital Securities, if at any time any stop order shall be threatened by the Commission or in effect with respect to the Registration Statement. The Exchange Offer is not conditioned on any minimum number of shares of Outstanding Capital Securities being tendered for exchange. 38 EXCHANGE AGENT First Union National Bank of North Carolina has been appointed as Exchange Agent for the Exchange Offer. Questions regarding Exchange Offer procedures and requests for additional copies of this Prospectus or the Letter of Transmittal should be directed to the Exchange Agent addressed as follows: By Mail: By Hand or Overnight Delivery: First Union National Bank of North First Union National Bank of North Carolina Carolina 230 South Tryon Street, 9th 230 South Tryon Street, 9th Floor Floor Charlotte, NC 28288-1179 Charlotte, NC 28288-1179 Attention: Mike Klotz Attention: Mike Klotz By Facsimile: (704) 383-7199 Confirm by Telephone: (704) 383-4105 First Union National Bank of North Carolina is also the Transfer Agent for the Capital Securities. SOLICITATION OF TENDERS; FEES AND EXPENSES The Company and the Series B Issuer have not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers or other persons soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse the Exchange Agent for its reasonable out- of-pocket expenses in connection therewith. The cash expenses to be incurred by the Company in connection with the Exchange Offer will be paid by the Company. TRANSFER TAXES The Company will pay all transfer taxes, if any, applicable to the exchange of Outstanding Capital Securities pursuant to the Exchange Offer. If, however, certificates representing Exchange Capital Securities or Outstanding Capital Securities not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Outstanding Capital Securities tendered, or if tendered Outstanding Capital Securities are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Outstanding Capital Securities pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. ACCOUNTING TREATMENT No gain or loss for accounting purposes will be recognized by the Company and the Series B Issuer upon the consummation of the Exchange Offer. Expenses incurred in connection with the issuance of the Exchange Capital Securities will be amortized by the Company over the term of the Exchange Capital Securities under generally accepted accounting principles. 39 DESCRIPTION OF CAPITAL SECURITIES The Property Trustee and the Administrators on behalf of the Series B Issuer have issued the Outstanding Capital Securities and the Common Securities and will issue the Exchange Capital Securities under the Trust Agreement. The Capital Securities will represent preferred undivided beneficial interests in the assets of the Series B Issuer and the holders thereof will be entitled to a preference in certain circumstances with respect to Distributions and amounts payable on redemption, repurchase or liquidation over the Common Securities of the Series B Issuer, as well as other benefits as described in the Trust Agreement. This summary of certain provisions of the Capital Securities and the Trust Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Trust Agreement (a copy of which has been filed as an exhibit to the Registration Statement of which this Prospectus is a part), including the definitions therein of certain terms and the Trust Indenture Act. Wherever particular defined terms of the Trust Agreement (as amended or supplemented from time to time) are referred to herein, such defined terms are incorporated herein by reference. The Trust Agreement will be qualified under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), upon effectiveness of this Registration Statement and consummation of the Exchange Offer. GENERAL The form and terms of the Exchange Capital Securities are substantially the same as the form and terms of the Outstanding Capital Securities, except that (i) the Outstanding Capital Securities have not been registered under the Securities Act and are subject to certain restrictions on transfer, (ii) the Outstanding Capital Securities are entitled to certain rights under the Registration Rights Agreement (which rights will terminate upon consummation of the Exchange Offer), and (iii) the Registration Rights Agreement provides for the distribution of liquidated damages to the holders of Outstanding Capital Securities under circumstances set forth thereunder. See "Exchange Offer--Terms of the Exchange Offer." Accordingly, holders tendering Outstanding Capital Securities in the Exchange Offer should review the information set forth under "Risk Factors--Exchange Offer Procedures; Certain Consequences of a Failure to Exchange Outstanding Capital Securities" and "Exchange Offer--Terms of the Exchange Offer." The Capital Securities will be limited to $100,000,000 aggregate Liquidation Amount outstanding. The Capital Securities will rank pari passu, and payments will be made thereon pro rata, with the Common Securities except as described under "--Subordination of Common Securities." Legal title to the Junior Subordinated Debentures will be held by the Property Trustee in trust for the benefit of the holders of the Capital Securities and Common Securities. The Guarantee Agreement executed by the Company for the benefit of the holders of the Capital Securities will be a guarantee on a subordinated basis with respect to the Capital Securities but will not guarantee payment of Distributions or amounts payable on redemption, repurchase or liquidation of such Capital Securities when the Series B Issuer does not have funds on hand available to make such payments. See "Description of Guarantee." DISTRIBUTIONS The Capital Securities represent preferred undivided beneficial interests in the assets of the Series B Issuer, and Distributions on each Capital Security will be payable at the annual rate of 10 3/4% of the stated Liquidation Amount of $1,000, payable semi-annually in arrears on February 15 and August 15 of each year (each a "Distribution Date"), to the holders of the Capital Securities at the close of business on the relevant record dates. The record dates for Capital Securities will be, for so long as the Capital Securities remain in book-entry form, one Business Day (as defined below) prior to the relevant Distribution Dates and, in the event any Capital Securities are not held in book-entry form, the date which is fifteen days next preceding the relevant Distribution Date. Distributions on the Capital Securities will be cumulative. Distributions will accumulate from the date of original issuance. The first Distribution Date for the Capital Securities will be August 15, 1997. The amount of Distributions payable for any period less than a full Distribution period will be computed on the basis of a 360-day year of twelve 30-day months and the actual days elapsed in a partial month in a period. Distributions payable for each full Distribution period will be computed by dividing the rate per annum by two. In the event 40 that any date on which Distributions are payable on the Capital Securities is not a Business Day, then payment on the Distributions payable on such date will be made on the next succeeding day that is a Business Day (and without any additional Distributions 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 originally was payable. Business Day means a day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in the City of New York are authorized or required by law or executive order to remain closed or (iii) a day on which First Union National Bank of North Carolina's Corporate Trust Office or the Corporate Trust Office of the Debenture Trustee is closed for business. OPTION TO DEFER INTEREST PAYMENTS So long as no Event of Default under the Junior Subordinated Indenture has occurred and is continuing, the Company has the right under the Junior Subordinated Indenture to defer the payment of interest on the Junior Subordinated Debentures at any time or from time to time for a period not exceeding 10 consecutive semi-annual periods with respect to each Extension Period, provided that no Extension Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. As a consequence of any such deferral, semi-annual Distributions on the Capital Securities will be deferred by the Series B Issuer during any such Extension Period. Distributions to which holders of the Capital Securities are entitled will accumulate additional Distributions thereon at the rate per annum of 10 3/4% thereof, compounded semi-annually from the relevant payment date for such Distributions, computed on the basis of a 360-day year of twelve 30-day months and the actual days elapsed in a partial month in a period. Additional Distributions payable for each full Distribution period will be computed by dividing the rate per annum by two. The term "Distributions" as used herein shall include any such additional Distributions. During any such Extension Period, the Company may not, and may not permit any subsidiary of the Company 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 capital stock, (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu in all respects with or junior in interest to the Junior Subordinated Debentures or (iii) make any guarantee payments with respect to any guarantee by the Company of debt securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the Junior Subordinated Debentures (other than (a) dividends or distributions in capital stock of the Company, (b) any declaration of a dividend in connection with the implementation of a shareholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) payments under the Guarantee, (d) purchases of common stock related to the issuance of common stock or rights or option under any of the Company's benefit plans for its directors, officers, employees or other persons within the definition of "employee" for purposes of registration of shares of an employee benefit plan of the Company, related to the issuance of common stock or rights under a dividend reinvestment plan or stock purchase plan, or related to the issuance of common stock of the Company (or securities convertible into or exchangeable for such common stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, and (e) payments of accrued dividends (and cash in lieu of fractional shares) upon conversion into common stock of any convertible preferred stock of the Company of any series now or hereinafter outstanding in accordance with the terms of such stock). Prior to the termination of any such Extension period, the Company may further defer the payment of interest, provided that no Extension Period may exceed 10 consecutive semi-annual periods or extend beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the termination of any such Extension Period and the payment of all amounts then due, the Company may elect to begin a new Extension Period. There is no limitation on the number of times that the Company may elect to begin a new Extension Period, subject to the above requirements. See "Description of Junior Subordinated Debentures--Option To Defer Interest Payments" and "Certain Federal Income Tax Considerations-- Original Issue Discount." The Company has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Junior Subordinated Debentures. The Company paid $10.75 million of the net proceeds from the sale of the Outstanding Junior Subordinated Debentures into a Reserve Account established 41 and maintained by the Debenture Trustee, the funds in which will be applied to pay interest on the Junior Subordinated Debentures on the first two Interest Payment Dates for the Junior Subordinated Debentures. See "Description of Junior Subordinated Debentures--Reserve Account." The revenue of the Series B Issuer available for distribution to holders of the Capital Securities will be limited to payments under the Junior Subordinated Debentures. See "Description of Junior Subordinated Debentures-- General." If the Company does not make interest payments on the Junior Subordinated Debentures, the Series B Issuer will not have funds available to pay Distributions on the Capital Securities. The payment of Distributions and other amounts payable on the Capital Securities (if and to the extent the Series B Issuer has funds legally available for the payment of such Distributions and cash sufficient to make such payments) is guaranteed by the Company on a limited basis as set forth herein under "Description of Guarantee." REDEMPTION Upon the repayment or redemption, in whole or in part, of the Junior Subordinated Debentures, whether at maturity or upon earlier redemption as provided in the Junior Subordinated Indenture, the proceeds from such repayment or redemption shall be applied by the Property Trustee to redeem a Like Amount (as defined below) of the Trust Securities, upon not less than 30 nor more than 60 days' notice, at a redemption price (the "Redemption Price") equal to the aggregate Liquidation Amount of such Trust Securities plus accumulated but unpaid Distributions thereon to the date of redemption (the "Redemption Date") and related amount of premium, if any, paid by the Company upon the concurrent redemption of such Junior Subordinated Debentures. See "Description of Junior Subordinated Debentures--Redemption." If less than all of the Junior Subordinated Debentures are to be repaid or redeemed on a Redemption Date, then the proceeds from such repayment or redemption, including any premium paid by the Company, shall be allocated to the redemption pro rata of the Capital Securities and the Common Securities. The Company has the right to redeem the Junior Subordinated Debentures prior to the Stated Maturity, (i) on or after February 15, 2007 in whole at any time or in part from time to time or (ii) in whole (but not in part), at any time, in certain circumstances described under "--Conditional Right to Shorten Maturity or Redeem upon a Tax Event" within 90 days following the occurrence and during the continuation of a Tax Event. A redemption of the Junior Subordinated Debentures would cause a mandatory redemption of a Like Amount of the Capital Securities and Common Securities. The Redemption Price, in the case of a redemption under (i) above, shall equal the following prices expressed in percentages of the Liquidation Amount (as defined below), together with accumulated Distributions to but excluding the Redemption Date. If redeemed during the 12-month period beginning February 15 of the years indicated below:
REDEMPTION YEAR PRICE ---- ---------- 2007.............................................................. 105.375% 2008.............................................................. 104.838 2009.............................................................. 104.300 2010.............................................................. 103.763 2011.............................................................. 103.225 2012.............................................................. 102.688 2013.............................................................. 102.150 2014.............................................................. 101.613 2015.............................................................. 101.075 2016.............................................................. 100.538
and at 100% on or after February 15, 2017. 42 The Redemption Price, in the case of a redemption following a Tax Event (as described under (ii) above) shall be equal to the aggregate Liquidation Amount of such Capital Securities plus accumulated and unpaid Distributions thereon to the Redemption Date. "Like Amount" means (i) with respect to a redemption of Trust Securities, Trust Securities having an aggregate Liquidation Amount equal to that portion of the aggregate principal amount of Junior Subordinated Debentures to be contemporaneously redeemed in accordance with the Junior Subordinated Indenture, allocated to the Common Securities and to the Capital Securities pro rata based upon the relative Liquidation Amounts of such classes and the proceeds of which will be used to pay the Redemption Price of the Trust Securities, (ii) with respect to a distribution of Junior Subordinated Debentures to holders of Trust Securities in connection with a dissolution or liquidation of the Series B Issuer, Junior Subordinated Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Trust Securities of the holder to whom such Junior Subordinated Debentures are distributed and (iii) with respect to a repurchase of Junior Subordinated Debentures following a Change of Control, Junior Subordinated Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Capital Securities of Electing Holders (as defined herein). "Liquidation Amount" means the stated amount of $1,000 per Trust Security. "Tax Event" means, with respect to Junior Subordinated Debentures held by the Series B Issuer, the receipt by the Series B Issuer of an opinion of counsel to the Company 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 or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of original issuance of the Capital Securities under the Trust Agreement, there is more than an insubstantial risk that (i) the Series B Issuer 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 Junior Subordinated Debentures, (ii) interest payable by the Company on the Junior Subordinated 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 Series B Issuer 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. With respect to Junior Subordinated Debentures which are no longer held by the Series B Issuer, "Tax Event" means the receipt by the Company 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 or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of original issuance of the Junior Subordinated Debentures under the Junior Subordinated Indenture, there is more than an insubstantial risk that interest payable by the Company on the Junior Subordinated 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 (each of the circumstances referred to in clauses (i), (ii) and (iii) of the preceding sentence and the circumstances referred to in this sentence being referred to herein as an "Adverse Tax Consequence"). Possible Tax Law Changes Affecting Capital Securities. On February 6, 1997, President Clinton submitted the fiscal 1998 budget to Congress, which, among other things, would generally deny interest deductions for interest on an instrument issued by a corporation that has a maximum term of more than 15 years and is not shown as indebtedness on the separate balance sheet of the issuer, or where such instrument is issued to a related party (other than a corporation) where the holder or some other related party issues a related instrument that is not shown as indebtedness on the issuer's consolidated balance sheet. The proposal would be effective generally for instruments issued on or after the date of appropriate Congressional action. If such provision were to apply to the Junior Subordinated Debentures, the Company would be unable to deduct interest on the Junior Subordinated Debentures. 43 Under current law, the Company will be able to deduct interest on the Junior Subordinated Debentures. There can be no assurance that current or future legislative proposals or final legislation will not affect the ability of the Company to deduct interest on the Junior Subordinated Debentures. Such a change could give rise to a Tax Event, which may permit the Company to shorten the maturity of the Junior Subordinated Debentures or to cause a redemption of the Capital Securities, as described more fully under "Description of Junior Subordinated Debentures--Redemption" and "Description of Capital Securities-- Redemption." See also "Certain Federal Income Tax Considerations--Possible Tax Law Changes." Payment of Additional Sums. In the event a Tax Event has occurred and is continuing and the Series B Issuer is the holder of all of the Junior Subordinated Debentures, the Company will pay Additional Sums, if any (as defined below), on the Junior Subordinated Debentures. "Additional Sums" means the additional amounts as may be necessary in order that the amount of Distributions then due and payable by the Series B Issuer on the outstanding Capital Securities and Common Securities of the Series B Issuer shall not be reduced as a result of any additional taxes, duties and other governmental charges to which the Series B Issuer has become subject as a result of a Tax Event. REDEMPTION PROCEDURES Capital Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the applicable proceeds from the contemporaneous redemption of the Junior Subordinated Debentures. Redemptions of the Capital Securities shall be made and the Redemption Price shall be payable on the Redemption Date only to the extent that the Series B Issuer has funds on hand available for the payment of such Redemption Price. See also "--Subordination of Common Securities." Notice of any redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each registered holder of Capital Securities to be redeemed at its registered address. If the Series B Issuer gives a notice of redemption in respect of the Capital Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to the extent funds are available, in the case of Capital Securities held in book-entry form, the Property Trustee will deposit irrevocably with DTC funds sufficient to pay the applicable Redemption Price and will give DTC irrevocable instructions and authority to pay the Redemption Price to the holders of the Capital Securities. With respect to Capital Securities not held in book-entry form, the Property Trustee, to the extent funds are available, will irrevocably deposit with the Paying Agent (as defined herein) funds sufficient to pay the applicable Redemption Price and will give such Paying Agent irrevocable instructions and authority to pay the Redemption Price to the holders thereof upon surrender of their certificates evidencing the Capital Securities. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Capital Securities called for redemption shall be payable to the holders of the Capital Securities on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of the holders of such Capital Securities so called for redemption will cease, except the right of the holders of such Capital Securities to receive the Redemption Price, but without interest on such Redemption Price and such Capital Securities will cease to be outstanding. In the event that any date fixed for redemption of Capital Securities is not a Business Day, then payment of the Redemption Price 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 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. In the event that payment of the Redemption Price in respect of Capital Securities called for redemption is improperly withheld or refused and not paid either by the Series B Issuer or by the Company pursuant to the Guarantee as described under "Description of Guarantee," Distributions on such Capital Securities will continue to accumulate at the then applicable rate, from the Redemption Date originally established by the Series B Issuer for such Capital Securities to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price. 44 Subject to applicable law (including, without limitation, United States federal securities laws), the Company or its subsidiaries may at any time and from time to time purchase outstanding Capital Securities by tender, in the open market or by private agreement. If less than all of the outstanding Capital Securities and Common Securities are to be redeemed on the Redemption Date, then the aggregate Liquidation Amount of such Capital Securities and Common Securities to be redeemed shall be allocated pro rata to the Capital Securities and the Common Securities based upon the relative Liquidation Amounts of such classes. The particular Capital Securities to be redeemed shall be selected on a pro rata basis not more than 60 days prior to the Redemption Date by the Property Trustee from the outstanding Capital Securities not previously called for redemption, by such method as the Property Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $1,000 or an integral multiple of $1,000 in excess thereof) of the Liquidation Amount of Capital Securities of a denomination larger than $1,000, or, if the Capital Securities are then held in the form of a Global Capital Security (as defined below), in accordance with DTC's customary procedures, provided in each case that any holder of the Capital Securities after the redemption has at least 100 Capital Securities remaining after the redemption. The Property Trustee shall promptly notify the securities registrar in writing of the Capital Securities selected for redemption and, in the case of any Capital Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed. For all purposes of the Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Capital Securities shall relate, in the case of any Capital Securities redeemed or to be redeemed only in part, to the portion of the aggregate Liquidation Amount of Capital Securities which has been or is to be redeemed. Unless the Company defaults in payment of the Redemption Price on the Junior Subordinated Debentures, on and after the Redemption Date interest will cease to accrue on the Junior Subordinated Debentures or portions thereof (and, unless payment of the Redemption Price in respect of the Capital Securities is withheld or refused and not paid either by the Series B Issuer or the Company pursuant to the Guarantee, Distributions will cease to accumulate on the Capital Securities or portions thereof) called for redemption. Payment of the Redemption Price on the Capital Securities and any distribution of Junior Subordinated Debentures to holders of Capital Securities shall be made to the applicable recordholders thereof as they appear on the register for such Capital Securities on the relevant record date, which shall be one Business Day prior to the relevant Redemption Date or liquidation date, as applicable; provided, however, that in the event that any Capital Securities are not in book-entry form, the relevant record date for such Capital Securities shall be 15 days prior to the Redemption Date or liquidation date, as applicable. CHANGE OF CONTROL REPURCHASE Upon the occurrence of a Change of Control, each holder of Capital Securities will have the right, at such holder's option, to require the Property Trustee to cause the Company to repurchase a Like Amount of Junior Subordinated Debentures corresponding to the Liquidation Amount of Capital Securities which such holder seeks to have repurchased, which Liquidation Amount may represent all or any portion of the Liquidation Amount of the Capital Securities held by such holder that is equal to $1,000 or integral multiples of $1,000 in excess thereof, provided that in the case of any partial repurchase by a holder, such holder after the repurchase has at least 100 Capital Securities remaining. Such repurchase will be at a price (the "Repurchase Price") equal to 101% of the aggregate Liquidation Amount of such Capital Securities plus accumulated and unpaid Distributions thereon to the repurchase date (the "Repurchase Date"). Within 10 business days following a Change of Control, notice (a "Change of Control Notice") will be sent to each holder of Capital Securities stating, among other things: (i) that a Change of Control has occurred and that such holder has the right to cause the repurchase of its Capital Securities at the Repurchase Price; (ii) the circumstances and relevant facts regarding such Change of Control (including any relevant information with respect to the transaction giving rise to such Change of Control); (iii) the instructions that a holder must follow 45 in order to have its Capital Securities accepted for repurchase; and (iv) the Repurchase Date (which shall not be less than 30 days nor more than 60 days from the date of such notice). "Change of Control" means the occurrence of one or more of the following events (whether or not approved by the Board of Directors of the Company): (a) an event or series of events by which any Person or group of Persons within the meaning of Section 13(d) of the Exchange Act shall, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases, merger, consolidation, issuances of securities by the Company or otherwise, be or become, directly or indirectly, the beneficial owner (within the meaning of Rule 13d-3 and Rule 13d-5 under the Exchange Act, whether or not applicable, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time) of 50% or more of the combined voting power of the then outstanding voting stock of the Company, (b) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors (as defined herein), (c) the stockholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company or (d) the direct or indirect sale, assignment, lease, exchange, disposition or other transfer, in one transaction or a series of related transactions, of all or substantially all of the property or assets of the Company to any Person. "Continuing Director" means any member of the Board of Directors of the Company who was a member of such Board of Directors on the date of original issuance of the Capital Securities, and, as of any determination date thereafter, shall include any member of the Board of Directors of the Company who was nominated for election or appointed to such Board of Directors with the affirmative vote of a majority of the Continuing Directors who were members of such Board at the time of such nomination or appointment. Clause (d) of the definition of Change of Control set forth in the preceding paragraph includes a sale, assignment, lease, exchange, disposition or other transfer of all or substantially all of the Company's assets. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of Capital Securities to require the repurchase of such Capital Securities as a result of a sale, assignment, lease, exchange, disposition or other transfer of the Company's assets to another Person may be uncertain. The Company's ability to repurchase a Like Amount of Junior Subordinated Debentures upon a Change of Control in order to permit the repurchase of Capital Securities may be limited by, among other things, the Company's financial resources at the time of repurchase and the terms of the Junior Subordinated Indenture which prevent any payments in respect of the Junior Subordinated Debentures if the Company is in default in the payment of any amount due on any Senior Indebtedness. See "Description of Junior Subordinated Debentures--Subordination." There can be no assurance that the Company will have the financial resources or be able to arrange financing on acceptable terms to pay the Repurchase Price for all of the Capital Securities as to which the repurchase right is exercised. Both the Company's Credit Facility and the Junior Subordinated Debentures restrict the Company's ability to incur additional indebtedness, and the ability of the Domestic Insurance Subsidiaries to pay dividends to the Company is restricted by the insurance laws of North Carolina. See "Risk Factors--Limited Dividends Available from Domestic Insurance Subsidiaries" and "--High Leverage." REPURCHASE PROCEDURES Capital Securities repurchased on a Repurchase Date shall be repurchased at the Repurchase Price with the applicable proceeds from the contemporaneous repurchase of the Junior Subordinated Debentures. Repurchases of Capital Securities shall be made and the Repurchase Price shall be payable on the Repurchase Date only to the extent that the Series B Issuer has funds on hand available for the payment of such Repurchase Price. Holders ("Electing Holders") wishing to exercise their right to cause a repurchase of Capital Securities shall notify the Property Trustee within 30 days of the receipt of the Change of Control Notice of their irrevocable election (a "Repurchase Election") to do so. If the Electing Holders make a Repurchase Election, then, by 12:00 noon, New York City time, on the Repurchase Date, to the extent funds are available, in the case 46 of Capital Securities held in book-entry form, the Property Trustee will deposit irrevocably with DTC funds sufficient to pay the applicable Repurchase Price and will give DTC irrevocable instructions and authority to pay the Repurchase Price to the Electing Holders. With respect to Capital Securities not held in book-entry form, the Property Trustee, to the extent funds are available, will irrevocably deposit with the Paying Agent funds sufficient to pay the applicable Repurchase Price and will give such Paying Agent irrevocable instructions and authority to pay the Repurchase Price to the Electing Holders thereof upon surrender of their certificates evidencing the Capital Securities. Notwithstanding the foregoing, Distributions payable on or prior to the Repurchase Date for any Capital Securities of Electing Holders shall be payable to such Electing Holders on the relevant record dates for the related Distribution. If Repurchase Elections shall have been given and funds deposited as required, then upon the date of such deposit, all rights of the Electing Holders in respect of the Capital Securities subject to Repurchase Elections will cease, except the right of the Electing Holders to receive the Repurchase Price, but without interest on such Repurchase Price, and the Capital Securities of the Electing Holders subject to such Repurchase Elections will cease to be outstanding. In the event that any date fixed for repurchase of Capital Securities is not a Business Day, then payment of the Repurchase Price 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 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. In the event that payment of the Repurchase Price in respect of Capital Securities of any Electing Holders is improperly withheld or refused and not paid either by the Series B Issuer or by the Company pursuant to the Guarantee as described under "Description of Guarantee," Distributions on Capital Securities of such Electing Holders will continue to accumulate at the then applicable rate, from the Repurchase Date originally established by the Series B Issuer for such Capital Securities to the date such Repurchase Price is actually paid, in which case the actual payment date will be the date fixed for repurchase for purposes of calculating the Repurchase Price. The Property Trustee shall promptly notify the securities registrar in writing of the Capital Securities subject to Repurchase Elections. For all purposes of the Trust Agreement, unless the context otherwise requires, all provisions relating to the repurchase of Capital Securities shall relate, in the case of any Capital Securities repurchased or to be repurchased only in part, to the portion of the aggregate Liquidation Amount of Capital Securities which has been or is to be repurchased. Repurchase of Capital Securities will result in a repurchase of a pro rata Liquidation Amount of Common Securities. Unless the Company defaults in payment of the Repurchase Price on the Junior Subordinated Debentures, on and after the Repurchase Date interest will cease to accrue on the Junior Subordinated Debentures or portions thereof (and, unless payment of the Repurchase Price in respect of the Capital Securities subject to repurchase is withheld or refused and not paid by the Series B Issuer or the Company pursuant to the Guarantee, Distributions will cease to accumulate on the Capital Securities or portions thereof) subject to repurchase. Payment of the Repurchase Price on the Capital Securities subject to Repurchase Elections shall be made to the applicable recordholders thereof as they appear on the register for such Capital Securities on the relevant record date, which shall be one Business Day prior to the relevant Repurchase Date; provided, however, that in the event that any Capital Securities are not held in book-entry form, the relevant record date for such Capital Securities shall be 15 days prior to the Repurchase Date. Rule 13e-4 under the Exchange Act requires the dissemination of certain information to securityholders in the event of an issuer tender offer and may apply in the event the repurchase option becomes available to holders of the Capital Securities. The Company will comply with the provisions of Rule 13e-4 and any other tender offer rules under the Exchange Act which may then be applicable. CONDITIONAL RIGHT TO SHORTEN MATURITY OR REDEEM UPON A TAX EVENT If a Tax Event occurs and either (i) in the opinion of counsel to the Company experienced in such matters, there would in all cases, after effecting the termination of the Series B Issuer and the distribution of the Junior 47 Subordinated Debentures to the holders of the Capital Securities in exchange therefor, be more than an insubstantial risk that an Adverse Tax Consequence (as defined in "Risk Factors--Tax Event--Shortening of Maturity or Redemption") would continue to exist or (ii) the Junior Subordinated Debentures are not held by the Series B Issuer, then the Company shall have the right (a) to shorten the Stated Maturity of the Junior Subordinated Debentures to the minimum extent required, but in any event to a date not earlier than August 15, 2016 (the action referred to in this clause (a) being referred to herein as a "Maturity Advancement"), such that, in the opinion of counsel to the Company experienced in such matters, after advancing the Stated Maturity, interest paid on the Junior Subordinated Debentures will be deductible for federal income tax purposes, or (b) if in the opinion of counsel to the Company experienced in such matters, there would in all cases, after effecting a Maturity Advancement, be more than an insubstantial risk that an Adverse Tax Consequence would continue to exist, to redeem the Junior Subordinated Debentures, in whole but not in part, at any time within 90 days following the occurrence of the Tax Event at a Redemption Price equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon to the Redemption Date. See "Description of Capital Securities--Redemption" and "Description of Junior Subordinated Debentures--General" and "--Redemption". Holders of Capital Securities should consult their own tax advisors regarding the tax consequences to them of a Maturity Advancement. See "Certain Federal Tax Law Considerations--Possible Tax Law Changes" for a discussion of certain proposals that, if adopted by Congress, could give rise to a Tax Event, which may permit the Company to shorten the Stated Maturity of the Junior Subordinated Debentures or cause a redemption of the Capital Securities prior to February 15, 2007. SUBORDINATION OF COMMON SECURITIES Payment of Distributions on, and the Redemption Price or Repurchase Price of, the Capital Securities and Common Securities, as applicable, shall be made pro rata based on the Liquidation Amount of such Capital Securities and Common Securities; provided, however, that if on any Distribution Date, Redemption Date or Repurchase Date a Debenture Event of Default shall have occurred and be continuing as a result of any failure by the Company to pay any amount in respect of the Junior Subordinated Debentures when due, no payment of any Distribution on, or Redemption Price or Repurchase Price of, any of the Common Securities, and no other payment on account of the redemption, liquidation or other acquisition of such Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all of the outstanding Capital Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price, the full amount of such Redemption Price on all of the outstanding Capital Securities then called for redemption, or in the case of payment of the Repurchase Price, the full amount of such Repurchase Price on all Capital Securities subject to Repurchase Elections, shall have been made or provided for, and all funds available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions on, or Redemption Price of, the Capital Securities then due and payable. In the case of any Event of Default resulting from a Debenture Event of Default, the Company as holder of the Common Securities will be deemed to have waived any right to act with respect to any such Event of Default under the Trust Agreement until the effect of all such Events of Default with respect to such Capital Securities have been cured, waived or otherwise eliminated. Until any such Events of Default under the Trust Agreement with respect to the Capital Securities have been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the holders of such Capital Securities and not on behalf of the Company as holder of the Common Securities, and only the holders of such Capital Securities will have the right to direct the Property Trustee to act on their behalf. LIQUIDATION DISTRIBUTION UPON TERMINATION The amount payable on the Capital Securities in the event of any liquidation of the Series B Issuer is $1,000 per Capital Security plus accumulated and unpaid Distributions, subject to certain exceptions, which may be in the form of a distribution of such amount in Junior Subordinated Debentures. 48 The holders of all of the outstanding Common Securities have the right at any time to terminate the Series B Issuer and, after satisfaction of the liabilities and amounts owed to creditors of the Series B Issuer as provided by applicable law, cause the Junior Subordinated Debentures to be distributed to the holders of the Capital Securities and Common Securities in liquidation of the Series B Issuer. Pursuant to the Trust Agreement, the Series B Issuer shall automatically terminate upon expiration of its term and shall terminate on the first to occur of: (i) certain events of bankruptcy, dissolution or liquidation of the Company; (ii) the distribution of a Like Amount of the Junior Subordinated Debentures to the holders of its Trust Securities, if the holders of Common Securities have given written direction to the Property Trustee to terminate the Series B Issuer (which direction, subject to the foregoing restrictions, is optional and wholly within the discretion of the holders of Common Securities); (iii) redemption of all of the Capital Securities in connection with the redemption or maturity of all of the Junior Subordinated Debentures as described under "Description of Capital Securities--Redemption"; (iv) repurchase of all the Capital Securities in connection with a Change of Control as described under "Description of Capital Securities--Change of Control Repurchase" and (v) the entry of an order for the dissolution of the Series B Issuer by a court of competent jurisdiction. If an early termination occurs as described in clause (i), (ii) or (v) above, the Series B Issuer shall be liquidated by the Property Trustee and the Administrators as expeditiously as the Property Trustee and the Administrators determine to be possible by distributing, after satisfaction of liabilities to creditors of the Series B Issuer as provided by applicable law, to the holders of such Trust Securities a Like Amount of the Junior Subordinated Debentures, 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 Series B Issuer available for distribution to holders, after satisfaction of liabilities to creditors of the Series B Issuer as provided by applicable law, an amount equal to, in the case of holders of Capital Securities, the aggregate of the Liquidation Amount plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If such Liquidation Distribution can be paid only in part because the Series B Issuer has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Series B Issuer on its Capital Securities shall be paid on a pro rata basis. The holder(s) of the Common Securities will be entitled to receive distributions upon any such liquidation pro rata with the holders of the Capital Securities, except that if a Debenture Event of Default has occurred and is continuing as a result of any failure by the Company to pay any amount in respect of the Junior Subordinated Debentures when due, the Capital Securities shall have a priority over the Common Securities. After the liquidation date fixed for any distribution of Junior Subordinated Debentures (i) the Capital Securities will no longer be deemed to be outstanding, (ii) DTC or its nominee, as the registered holder of the Capital Securities, will receive a registered global certificate or certificates representing the Junior Subordinated Debentures to be delivered upon such distribution with respect to Capital Securities held by DTC or its nominee and (iii) any certificates representing the Capital Securities not held by DTC or its nominee will be deemed to represent the Junior Subordinated Debentures having a principal amount equal to the stated Liquidation Amount of the Capital Securities and bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid Distributions on the Capital Securities until such certificates are presented to the security registrar for the Trust Securities for transfer or reissuance. If the Company does not redeem the Junior Subordinated Debentures prior to maturity and the Series B Issuer is not liquidated and the Junior Subordinated Debentures are not distributed to holders of the Capital Securities, the Capital Securities will remain outstanding until the repayment of the Junior Subordinated Debentures and the distribution of the Liquidation Distribution to the holders of the Capital Securities. There can be no assurance as to the market prices for the Capital Securities or the Junior Subordinated Debentures that may be distributed in exchange for Capital Securities if a dissolution and liquidation of the Series B Issuer were to occur. Accordingly, the Capital Securities that an investor may purchase, or the Junior Subordinated Debentures that the investor may receive on dissolution and liquidation of the Series B Issuer, may trade at a discount to the price that the investor paid to purchase the Capital Securities offered hereby. 49 EVENTS OF DEFAULT; NOTICE Any one of the following events constitutes an "Event of Default" under the Trust Agreement (an "Event of Default") with respect to the Capital Securities (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); (i) the occurrence of a Debenture Event of Default under the Junior Subordinated Indenture (see "Description of Junior Subordinated Debentures--Debenture Events of Default"); or (ii) default by the Property Trustee in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of 30 days; or (iii) default by the Property Trustee in the payment of any Redemption Price or Repurchase Price of any Trust Security when such price becomes due and payable; or (iv) default in the performance, or breach, in any material respect, of any covenant or warranty of the Issuer Trustees and the Administrators in the Trust Agreement (other than a covenant or warranty a default in the performance of which or the breach of which is dealt with in clause (ii) or (iii) above), and continuation of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the defaulting Issuer Trustees or Administrators by the holders of at least 25% in aggregate Liquidation Amount of the outstanding Capital 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" under the Trust Agreement; or (v) the occurrence of certain events of bankruptcy or insolvency with respect to the Property Trustee and the failure by the Company to appoint a successor Property Trustee within 90 days thereof. Within 10 Business Days after the occurrence of any Event of Default actually known to the Property Trustee, the Property Trustee shall transmit notice of such Event of Default to the holders of Trust Securities, the Administrators and the Company as Depositor, unless such Event of Default shall have been cured or waived. The Company, as Depositor, and the Administrators are required to file annually with the Property Trustee a certificate as to whether or not they are in compliance with all of the conditions and covenants applicable to them under the Trust Agreement. If a Debenture Event of Default has occurred and is continuing as a result of any failure by the Company to pay any amount in respect of the Junior Subordinated Debentures when due, the Capital Securities shall have a preference over the Common Securities upon termination of the Series B Issuer as described above. See "--Liquidation Distribution Upon Termination." The existence of an Event of Default does not entitle the holders of Capital Securities to accelerate the maturity thereof. REMOVAL OF ISSUER TRUSTEES; APPOINTMENT OF SUCCESSORS Unless a Debenture Event of Default shall have occurred and be continuing, any Issuer Trustee or Administrator may be removed at any time by the holder(s) of the Common Securities. If a Debenture Event of Default has occurred and is continuing, the Property Trustee or the Delaware Trustee or both of them may be removed at such time by the holders of a majority in Liquidation Amount of the outstanding Capital Securities. In no event will the holders of Capital Securities have the right to vote to appoint, remove or replace the Administrators, which voting rights are vested exclusively in the Company as the holder of the Common Securities. If an Issuer Trustee resigns or is removed by the holders of Capital Securities, the successor will be appointed by the holders of a majority in Liquidation Amount of Capital Securities. If a successor has not been appointed by the holders, any holder of Capital Securities or Common Securities may petition a court in the State of Delaware to appoint a successor. Any Delaware Trustee must meet the applicable requirements of Delaware Law. No resignation or removal of an Issuer Trustee and no appointment of a successor trustee shall be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the Trust Agreement. 50 MERGER OR CONSOLIDATION OF ISSUER TRUSTEES Any entity into which the Property Trustee or the Delaware Trustee may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, conversion or consolidation to which such Trustee shall be a party, or any entity succeeding to all or substantially all the corporate trust business of such Trustee, shall be the successor of such Trustee under the Trust Agreement, provided such entity shall be otherwise qualified and eligible. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE SERIES B ISSUER The Series B Issuer may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety, to any entity, except as described below or as otherwise set forth in the Trust Agreement. The Series B Issuer may, at the request of the holders of the Common Securities and with the consent of the holders of at least a majority in aggregate Liquidation Amount of the outstanding Capital Securities, merge with or into, consolidate, amalgamate, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any State; provided, that (i) such successor entity either (a) expressly assumes all of the obligations of the Series B Issuer with respect to the Capital Securities or (b) substitutes for the Capital Securities other securities having substantially the same terms as the Capital Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Capital Securities rank in priority with respect to distributions and payments upon liquidation, redemption and otherwise, (ii) a trustee of such successor entity is appointed by the Company as Depositor possessing the same powers and duties as the Property Trustee as the holder of the Junior Subordinated Debentures, (iii) the Successor Securities are listed or traded, or any Successor Securities will be listed upon notification of such issuance, on any national securities exchange or other organization on which the Capital Securities are then listed or traded, if any, (iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Capital Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Capital Securities (including any Successor Securities) in any material respect, (vi) such successor entity has a purpose substantially identical to that of the Series B Issuer, (vii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Company has received an opinion from independent counsel experienced in such matters to the effect that (a) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Capital Securities (including any Successor Securities) in any material respect and (b) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Series B Issuer nor such successor entity will be required to register as an investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and (viii) the Company or any permitted successor or assignee owns all of the common securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee. Notwithstanding the foregoing, the Series B Issuer shall not, except with the consent of holders of 100% in aggregate Liquidation Amount of the Capital Securities, 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 other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Series B Issuer or the successor entity to be taxable as a corporation or to be classified as other than a grantor trust for United States federal income tax purposes. VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT Except as provided below and under "Description of Guarantee--Amendments and Assignment" and as otherwise required by law and the Trust Agreement, the holders of the Capital Securities will have no voting rights. 51 The Trust Agreement may be amended from time to time by holders of a majority of the Common Securities, the Administrators and the Property Trustee, without the consent of the holders of the Capital Securities (i) to cure any ambiguity, correct or supplement any provisions in the Trust Agreement that may be inconsistent with any other provision, or to make any other provisions with respect to matters or questions arising under the Trust Agreement, which shall not be inconsistent with the other provisions of the Trust Agreement, or (ii) to modify, eliminate or add to any provisions of the Trust Agreement to such extent as shall be necessary to ensure that the Series B Issuer will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation at all times that any Trust Securities are outstanding or to ensure that the Series B Issuer will not be required to register as an "investment company" under the Investment Company Act; provided, however, that such action shall not adversely affect in any material respect the interests of any holder of Capital Securities, and any amendments of the Trust Agreement shall become effective when notice thereof is given to the holders of Trust Securities. The Trust Agreement may be amended by holders of a majority of the Common Securities, the Administrators and the Issuer Trustees with (i) the consent of holders representing not less than a majority (in aggregate Liquidation Amount) of the outstanding Capital Securities and (ii) receipt by the Issuer Trustees and the Administrators of an opinion of counsel to the effect that such amendment or the exercise of any power granted to the Issuer Trustees and the Administrators in accordance with such amendment will not affect the Series B Issuer's status as a grantor trust for United States federal income tax purposes or the Series B Issuer's exemption from status as an "investment company" under the Investment Company Act, provided that without the consent of each holder of Trust Securities, the Trust Agreement may not be amended to (i) change the amount or timing of any Distribution on the Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date or (ii) restrict the right of a holder of Trust Securities to institute suit for the enforcement of any such payment on or after such date. Notwithstanding the above, no amendment to the Trust Agreement may be made if, as a result of such amendment, the Series B Issuer would fail to be classified as a grantor trust for United States federal income tax purposes, would be taxable as a corporation or would fail to qualify for the exemption form status of an investment company under the Investment Company Act. So long as any Junior Subordinated Debentures are held by the Property Trustee, the Property Trustee and the Administrators shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or execute any trust or power conferred on the Debenture Trustee with respect to the Junior Subordinated Debentures, (ii) waive any past default that is waivable under Section 5.13 of the Junior Subordinated Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Junior Subordinated Debentures shall be due and payable or (iv) consent to any amendment, modification or termination of the Junior Subordinated Indenture or the Junior Subordinated Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the holders of at least a majority in aggregate Liquidation Amount of all outstanding Capital Securities; provided, however, that where a consent under the Junior Subordinated Indenture would require the consent of each holder of Junior Subordinated Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior consent of each holder of the Capital Securities. The Property Trustee and the Administrators shall not revoke any action previously authorized or approved by a vote of the holders of the Capital Securities except by subsequent vote of the holders of the Capital Securities. The Property Trustee shall notify each holder of Capital Securities of any notice of default with respect to the Junior Subordinated Debentures. In addition to obtaining the foregoing approvals of the holders of the Capital Securities, prior to taking any of the foregoing actions, the Property Trustee shall obtain an opinion of counsel experienced in such matters to the effect that the Series B Issuer will not fail to be classified as a grantor trust and will not be classified as an association taxable as a corporation for United States federal income tax purposes on account of such action. Any required approval of holders of Capital Securities may be given at a meeting of holders of Capital Securities convened for such purpose or pursuant to written consent. The Property Trustee will cause a notice of any meeting at which holders of Capital Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be given to each holder of record of Capital Securities in the manner set forth in the Trust Agreement. 52 No vote or consent of the holders of Capital Securities will be required to redeem and cancel Capital Securities in accordance with the Trust Agreement. Notwithstanding that holders of Capital Securities are entitled to vote or consent under any of the circumstances described above, any of the Capital Securities that are owned by the Company, the Administrators, the Issuer Trustees or any affiliate of the Company, the Administrators or any Issuer Trustees, shall, for purposes of such vote or consent, be treated as if they were not outstanding. BOOK-ENTRY, DELIVERY AND FORM The Capital Securities will be issued in fully registered form, in minimum blocks of at least 100 (representing a minimum of $100,000 Liquidation Amount) and the Capital Securities must at all times be held in blocks of at least 100. Global Capital Security, Book-Entry Form. Capital Securities initially sold to qualified institutional buyers ("QIB") will be evidenced by a global Capital Security (the "Global Capital Security") which will be deposited with, or on behalf of, DTC and registered in the name of Cede & Co. ("Cede") as DTC's nominee. Except as set forth below, record ownership of the Global Capital Security may be transferred, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee and only in amounts that would not cause a holder to own less than 100 Capital Securities. A QIB may hold its interest in the Global Capital Security directly through DTC if such QIB is a participant in DTC, or indirectly through organizations which are participants in DTC ("Participants"). Transfers between Participants will be effected in the ordinary way in accordance with DTC rules and will be settled in same-day funds. The laws of some states require that certain persons take physical delivery of securities in definitive form. Consequently, the ability to transfer beneficial interests in the Global Capital Security to such persons may be limited. QIBs who are not Participants may beneficially own interests in the Global Capital Security held by DTC only through Participants or certain banks, brokers, dealers, trust companies and other parties that clear through or maintain a custodial relationship with a Participant, either directly or indirectly ("Indirect Participants"). So long as Cede, as the nominee of DTC, is the registered owner of the Global Capital Security, Cede for all purposes will be considered the sole holder of the Global Capital Security. Except as provided below, owners of beneficial interests in the Global Capital Security will not be entitled to have certificates registered in their names, will not receive or be entitled to receive physical delivery of certificates in definitive form and will not be considered holders thereof. Payment of Distributions on, the Redemption Price and the Repurchase Price of, the Global Capital Security will be made to Cede, the nominee for DTC, as the registered owner of the Global Capital Security, by wire transfer of immediately available funds on each Distribution Date, Redemption Date or Repurchase Date. None of the Company, the Issuer Trustees, or the Administrators (or any registrar, paying agent or distribution agent under the Trust Agreement) will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Capital Security, for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for the performance by DTC or its Participants or Indirect Participants of their respective obligations under the rules and procedures governing their operations. The Company and the Series B Issuer have been informed by DTC that, with respect to any payment of Distributions on, the Redemption Price or the Repurchase Price of, the Global Capital Security, DTC's practice is to credit Participants' accounts on the payment date therefor with payments in amounts proportionate to their respective beneficial interests in the Capital Securities represented by the Global Capital Security, as shown on the records of DTC (adjusted as necessary so that such payments are made with respect to whole Capital Securities only), unless DTC has reason to believe that it will not receive payment on such payment date. Payments by Participants to owners of beneficial interests in Capital Securities represented by the Global Capital 53 Security held through such Participants will be the responsibility of such Participants, as is now the case with securities held for the accounts of customers registered in "street name." Because DTC can only act on behalf of Participants, who in turn act on behalf of Indirect Participants and certain banks, the ability of a person having a beneficial interest in Capital Securities represented by the Global Capital Security to pledge such interest to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate evidencing such interest. DTC has advised the Company and the Series B Issuer that it will take any action permitted to be taken by a holder of Capital Securities (including, without limitation, the presentation of Capital Securities for exchange as described below) only at the direction of one or more Participants to whose account with DTC interests in the Global Capital Security are credited and only in respect of the Liquidation Amount of the Capital Securities represented by the Global Capital Security as to which such Participants has or have given such direction. DTC has advised the Company and the Series B Issuer as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its Participants and to facilitate the clearance and settlement of securities transactions between Participants through electronic book entry changes to accounts of its Participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations such as the Initial Purchasers. Certain of such Participants (or their representatives), together with other entities, own DTC. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through, or maintain a custodial relationship with, a Participant, either directly or indirectly. Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Capital Security among Participants of DTC, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. The Global Capital Security is exchangeable for definitive Capital Securities in registered certificated form if (i) DTC advises the Company and the Property Trustee that it is no longer willing or able to properly discharge its responsibilities with respect to the Global Capital Security, and the Property Trustee is unable to locate a qualified successor, (ii) the Series B Issuer at its option advises DTC in writing that it elects to terminate the book-entry system through DTC or (iii) after the occurrence of a Debenture Event of Default. In addition, beneficial interests in a Global Capital Security may be exchanged for certificated Capital Securities upon request but only upon at least 20 days' prior written notice given to the Property Trustee by or on behalf of DTC in accordance with its customary procedures. In all cases, certificated Capital Securities delivered in exchange for any Global Capital Security or beneficial interests therein will be registered in the names, and issued in any approved denominations, requested by or on behalf of DTC (in accordance with its customary procedures) and will bear the restrictive legend referenced to in "Notice to Investors," unless the Property Trustee (based upon an opinion of counsel) determines otherwise in compliance with applicable law. So long as DTC or its nominee is the registered owner of the Global Capital Security, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Capital Securities represented by the Global Capital Security for all purposes under the Trust Agreement governing the Capital Securities. Except as provided above, owners of beneficial interests in the Global Capital Security will not be entitled to have any of the individual Capital Securities represented by the Global Capital Security registered in their names, will not receive or be entitled to receive physical delivery of any such Capital Securities in definitive form and will not be considered the owners or holders thereof under the Trust Agreement. Certificated Capital Securities. Capital Securities sold to investors other than QIBs will be issued in definitive registered form, and may not be represented by the Global Capital Security. Certificated Capital 54 Securities may be issued in exchange for Capital Securities represented by the Global Capital Security under the circumstances set forth above under "-- Global Capital Security, Book-Entry Form." Capital Securities held by investors other than QIBs may not be exchanged for beneficial interests in the Global Capital Security unless such exchange occurs in connection with a transfer to a QIB of such Capital Securities that complies with Rule 144A. In addition, in connection with any such exchange and transfer, the Property Trustee must have received on behalf of the transferor a certificate (in the form provided in the Trust Agreement) to the effect that the transfer is being made to a person who the transferor reasonably believes is a QIB acquiring for its own account or the account of a QIB in a transaction complying with Rule 144A and any applicable securities laws of the United States and other jurisdictions. Capital Securities sold to investors other than QIBs may only be transferred to a person who takes delivery in the form of a certificated Capital Security upon presentation by the transferor of a certificate (in the form provided in the Trust Agreement) as to compliance of such transfer with the transfer restrictions applicable to Capital Securities. PAYMENT AND PAYING AGENCY Payments in respect of the Capital Securities shall be made to DTC, which shall credit the relevant accounts at DTC on the applicable Distribution Dates or, if the Capital Securities are not held by DTC, such payments shall be made by wire transfer, direct deposit or check mailed to the address of the holder entitled thereto as such address shall appear on the Register. The paying agent (the "Paying Agent") shall initially be the Property Trustee and any co- paying agent chosen by the Property Trustee and acceptable to the Administrators. The Administrators may remove the Paying Agent if they determine in their sole discretion that the Paying Agent has failed to perform its obligations under the Trust Agreement in any material respect. The Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Property Trustee, the Administrators and the Company. In the event that the Property Trustee shall no longer be the Paying Agent, the Administrators shall appoint a successor (which shall be a bank or trust company reasonably acceptable to the Property Trustee) to act as Paying Agent. RESTRICTIONS ON TRANSFER The Capital Securities will be issued, and any may be transferred only, in blocks having a Liquidation Amount of not less than $100,000 (100 Capital Securities). Any attempted transfer, sale or other disposition of Capital Securities in a block having a Liquidation Amount of less than $100,000 shall be deemed to be void and of no legal effect whatsoever. Any such transferee shall be deemed not to be the holder of such Capital Securities for any purpose, including but not limited to the receipt of Distributions on such Capital Securities, and such transferee shall be deemed to have no interest whatsoever in such Capital Securities. REGISTRAR AND TRANSFER AGENT The Property Trustee will act as registrar and transfer agent for the Capital Securities. Registration of transfers of Capital Securities will be effected without charge by or on behalf of the Series B Issuer, but upon payment of any tax or other governmental charges that may be imposed in connection with any transfer or exchange. The Series B Issuer will not be required to register or cause to be registered the transfer of its Capital Securities after such Capital Securities have been called for redemption or are the subject of a Repurchase Election. INFORMATION CONCERNING THE PROPERTY TRUSTEE Any Property Trustee must be a national or state chartered bank and at the time of appointment have securities rated in one of the three highest rating categories by a nationally recognized statistical rating organization and have combined capital and surplus of at least $50,000,000. 55 The Property Trustee, other than during the occurrence and continuance of an Event of Default, undertakes to perform only such duties as are specifically set forth in the Trust Agreement and, after such Event of Default, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the Property Trustee is under no obligation to exercise any of the powers vested in it by the Trust Agreement at the request of any holder of Capital Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. If no Event of Default has occurred and is continuing and the Property Trustee is required to decide between alternative courses of action, construe ambiguous provisions in the Trust Agreement or is unsure of the application of any provision of the Trust Agreement, and the matter is not one on which holders of Capital Securities are entitled under the Trust Agreement to vote, then the Property Trustee shall request written instructions from the Company as Depositor as to the course of action to be taken and, if the Property Trustee does not receive such instructions as provided under the Trust Agreement, it shall take such action as it deems advisable and in the best interests of the holders of the Trust Securities and will have no liability except for its own bad faith, negligence or willful misconduct. MISCELLANEOUS The Administrators and the Property Trustee are authorized and directed to conduct the affairs of and to operate the Series B Issuer in such a way that the Series B Issuer will not be deemed to be an "investment company" required to be registered under the Investment Company Act or classified as an association taxable as a corporation for United States federal income tax purposes and so that the Junior Subordinated Debentures will be treated as indebtedness of the Company for United States federal income tax purposes. In this connection, the Property Trustee and the holders of Common Securities are authorized to take any action, not inconsistent with applicable law, the certificate of trust of the Series B Issuer or the Trust Agreement, that the Property Trustee and the holders of Common Securities determine in their discretion to be necessary or desirable for such purposes, as long as such action does not materially adversely affect the interests of the holders of the Capital Securities. Holders of the Capital Securities have no preemptive or similar rights. The Series B Issuer may not borrow money or issue debt or mortgage or pledge any of its assets. 56 DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES The Outstanding Junior Subordinated Debentures were issued, and the Exchange Junior Subordinated Debentures will be issued, under the Junior Subordinated Indenture, dated as of February 10, 1997, as supplemented from time to time (as so supplemented, the "Junior Subordinated Indenture"), between the Company and First Union National Bank of North Carolina, as trustee (the "Debenture Trustee"). This summary of certain terms and provisions of the Junior Subordinated Debentures and the Junior Subordinated Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Junior Subordinated Indenture (a copy of which has been filed as an exhibit to the Registration Statement of which this Prospectus is a part), including the definitions therein of certain terms and the Trust Indenture Act. Whenever particular defined terms of the Junior Subordinated Indenture (as supplemented or amended from time to time) are referred to herein, such defined terms are incorporated herein by reference. The Junior Subordinated Indenture will be qualified under the Trust Indenture Act upon effectiveness of this Registration Statement and consummation of the Exchange Offer. GENERAL The Junior Subordinated Debentures will bear interest, accruing from February 10, 1997, at the annual rate of 10 3/4% of the principal amount thereof, payable semi-annually in arrears on February 15 and August 15 of each year (each, an "Interest Payment Date"), commencing August 15, 1997, to the person in whose name such Junior Subordinated Debenture is registered at the close of business on the relevant record dates. The record dates for Junior Subordinated Debentures will be, for so long as the Junior Subordinated Debentures remain in book-entry form, one Business Day prior to the relevant Interest Payment Dates and, in the event the Junior Subordinated Debentures are not in book-entry form, the date which is fifteen days next preceding such Interest Payment Date. It is anticipated that, until the liquidation, if any, of the Series B Issuer, each Junior Subordinated Debenture will be held in the name of the Property Trustee in trust for the benefit of the holders of the Capital Securities. The amount of interest payable for any period less than a full interest period will be computed on the basis of a 360-day year of twelve 30-day months and the actual days elapsed in a partial month in a period. In the event that any date on which interest is payable on the Junior Subordinated Debentures is not a Business Day, then payment of the interest 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) with the same force and effect as if made on the date such payment was originally payable. Accrued interest that is not paid on the applicable Interest Payment Date will bear additional interest on the amount thereof (to the extent permitted by law) at the rate per annum of 10 3/4% thereof, compounded semi-annually and computed on the basis of a 360-day year of twelve 30-day months and the actual days elapsed in a partial month in a period. The term "interest" as used herein shall include semi-annual interest payments, interest on semi-annual interest payments not paid on the applicable Interest Payment Date and Additional Sums (as defined below), as applicable. The Junior Subordinated Debentures will mature on February 15, 2027. The Junior Subordinated Debentures will be unsecured and will rank junior and be subordinate in right of payment to all Senior Indebtedness of the Company. Because the Company is a holding company, the right of the Company to participate in any distribution of assets of any subsidiary upon such subsidiary's liquidation or reorganization or otherwise (and thus the ability of holders of the Capital Securities to benefit indirectly from such distribution), is subject to the prior claims of creditors of that subsidiary, except to the extent that the Company may itself be recognized as a creditor of that subsidiary. In addition, there are also various regulatory and contractual limitations on the extent to which the Company's insurance subsidiaries may pay dividends or otherwise supply funds to the Company or various of its affiliates. Accordingly, the Junior Subordinated Debentures will be effectively subordinated to all existing and future liabilities of the Company's subsidiaries, including liabilities and obligations relating to insurance claims, and holders of Junior Subordinated Debentures should look only to the assets of the Company for payments on the Junior Subordinated Debentures. The Junior Subordinated Indenture contains certain limitations on the incurrence or issuance of other secured or unsecured debt of the Company, including Senior Indebtedness, whether under the Junior Subordinated Indenture or any existing or other indenture that the Company may enter into in the future or otherwise. See "--Certain Covenants--Limitation on Indebtedness" and "--Subordination." 57 OPTION TO DEFER INTEREST PAYMENTS So long as no Event of Default under the Junior Subordinated Indenture has occurred and is continuing, the Company has the right under the Junior Subordinated Indenture at any time during the term of the Junior Subordinated Debentures to defer the payment of interest on the Junior Subordinated Debentures at any time or from time to time for a period not exceeding 10 consecutive semi-annual periods with respect to each Extension Period, provided that no Extension Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures; provided, however, that during such Extension Periods, the Company shall have the right to make partial payments of interest on any Interest Payment Date. At the end of any such Extension Period, the Company must pay all interest then accrued and unpaid. During an Extension Period, interest will continue to accrue and holders of Junior Subordinated Debentures (or holders of Capital Securities while outstanding) will be required to accrue interest income for United States federal income tax purposes. See "Certain Federal Income Tax Considerations--Original Issue Discount." During any such Extension Period, the Company may not, and may not permit any subsidiary of the Company 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 capital stock, (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu in all respects with or junior in interest to the Junior Subordinated Debentures, or (iii) make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the Junior Subordinated Debentures (other than (a) dividends or distributions in capital stock of the Company, (b) any declaration of a dividend in connection with implementation of a shareholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) payments under the Guarantee, (d) purchases of common stock related to the issuance of common stock or rights or options under any of the Company's benefit plans for its directors, officers, employees or other persons within the definition of "employee" for purposes of registration of shares of an employee benefit plan of the Company, related to the issuance of common stock or rights under a dividend reinvestment plan or stock purchase plan, or related to the issuance of common stock of the Company (or securities convertible into or exchangeable for such common stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period and (e) payments of accrued dividends (and cash in lieu of fractional shares) upon conversion into common stock of any convertible preferred stock of the Company of any series now or hereinafter outstanding, in accordance with the terms of such stock). Prior to the termination of any such Extension Period, the Company may further defer the payment of interest, provided that no Extension Period may exceed 10 consecutive semi-annual periods or extend beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the termination of any such Extension Period and the payment of all amounts then due, the Company may elect to begin a new Extension Period subject to the above requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. The Company must give the holders of Junior Subordinated Debentures and the Debenture Trustee notice of its election of such Extension Period at least one Business Day prior to the earlier of (i) the next succeeding date on which the Distributions on the Capital Securities would have been payable except for the election to begin such Extension Period or (ii) the date the Administrators or the Debenture Trustee are required to give notice to any securities exchange or other applicable self-regulatory organization or to holders of the Capital Securities of the record date or the date such Distributions are payable, but in any event not less than one Business Day prior to such record date. The Debenture Trustee shall give notice of the Company's election to begin a new Extension Period to the holders of the Capital Securities. There is no limitation on the number of times that the Company may elect to begin an Extension Period. RESERVE ACCOUNT The Company paid $10.75 million of the net proceeds from the sale of the Outstanding Junior Subordinated Debentures into an escrow account established and maintained by the Debenture Trustee (the "Reserve Account"), the funds in which will be applied by the Debenture Trustee to pay interest on the Junior Subordinated Debentures on the first two Interest Payment Dates for the Junior Subordinated Debentures. No 58 further amounts will be required to be paid into the Reserve Account. In the event the Junior Subordinated Debentures are redeemed, any amounts then remaining in the Reserve Account shall be remitted to the Company. Funds on deposit in the Reserve Account may be invested at the direction of the Company in (a) obligations issued or guaranteed by the United States or any agency or instrumentality thereof, (b) certificates of deposit of or accounts with national banks or corporations endowed with trust powers having capital and surplus in excess of $100,000,000; (c) commercial paper of the highest rating available from Standard & Poor's or Moody's or (d) fixed-income securities of the three highest ratings available from Standard & Poor's or Moody's or of comparable quality, having a maturity of five years or less. REDEMPTION The Junior Subordinated Debentures are redeemable prior to the Stated Maturity at the option of the Company (i) on or after February 15, 2007 in whole at any time or in part from time to time or (ii) in whole (but not in part), at any time, in certain circumstances described under "Description of Capital Securities--Conditional Right to Shorten Maturity or Redeem upon a Tax Event" within 90 days following the occurrence and during the continuation of a Tax Event (as defined under "Description of Capital Securities-- Redemption"), in each case at the redemption price described below. The proceeds of any such redemption will be used by the Series B Issuer to redeem the Capital Securities. The Redemption Price, in the case of a redemption under (i) above, shall equal the following prices expressed in percentages of the principal amount together with accrued and unpaid interest up to but excluding the Redemption Date. If redeemed during the 12-month period beginning February 15 of the years indicated below:
REDEMPTION YEAR PRICE ---- ---------- 2007.............................................................. 105.375% 2008.............................................................. 104.838 2009.............................................................. 104.300 2010.............................................................. 103.763 2011.............................................................. 103.225 2012.............................................................. 102.688 2013.............................................................. 102.150 2014.............................................................. 101.613 2015.............................................................. 101.075 2016.............................................................. 100.538
and at 100% on or after February 15, 2017. The Redemption Price, in the case of a redemption following a Tax Event as described under (ii) above, shall be equal to 100% of the principal amount of such Junior Subordinated Debentures plus accrued and unpaid interest thereon to but excluding the Redemption Date. CONDITIONAL RIGHT TO SHORTEN MATURITY UPON A TAX EVENT The maturity of the Junior Subordinated Debentures may be shortened at the option of the Company under the circumstances described under "Description of Capital Securities--Conditional Right to Shorten Maturity or Redeem upon a Tax Event." Upon the exercise of the right to shorten the maturity of the Junior Subordinated Debentures, the Company will no longer have the right to redeem the Junior Subordinated Debentures prior to the new Stated Maturity upon the occurrence of a Tax Event or to further shorten the maturity of the Junior Subordinated Debentures. See "Description of Capital Securities--Redemption--Possible Tax Law Changes Affecting Capital Securities" for a discussion of certain legislative proposals that, if adopted, could give rise to a Tax Event, which may permit the Company to shorten the maturity of the Junior Subordinated Debentures. 59 ADDITIONAL SUMS The Company has covenanted in the Junior Subordinated Indenture that so long as no Debenture Event of Default has occurred and is continuing, if (i) the Series B Issuer is the holder of all outstanding Junior Subordinated Debentures and (ii) a Tax Event has occurred and is continuing in respect of such outstanding Junior Subordinated Debentures, the Company will pay to the Series B Issuer together with any payment of principal of (or premium, if any) or interest on such Junior Subordinated Debentures such Additional Sums (as defined under "Description of Capital Securities--Redemption--Payment of Additional Sums") as may be necessary. CHANGE OF CONTROL REPURCHASE Upon the occurrence of a Change of Control, the holders of the Junior Subordinated Debentures (initially the Series B Issuer) will have the right to cause the Company to repurchase a Like Amount of Junior Subordinated Debentures corresponding to the Liquidation Amount of Capital Securities that are the subject of Repurchase Elections, or in the event the Junior Subordinated Debentures are distributed to holders of Capital Securities, such holders will have the right to cause the Company to repurchase all or any portion of the aggregate principal amount of the Junior Subordinated Debentures held by such holders at a repurchase price equal to 101% of the aggregate principal amount of such Junior Subordinated Debentures plus accrued and unpaid interest thereon to the repurchase date. See "Description of Capital Securities--Change of Control Repurchase." REGISTRATION, DENOMINATION AND TRANSFER The Junior Subordinated Debentures will be registered in the name of the Series B Issuer. In the event that the Junior Subordinated Debentures are distributed to holders of Capital Securities, it is anticipated that the depositary arrangements for the Junior Subordinated Debentures will be substantially identical to those in effect for the Capital Securities. See "Description of Capital Securities--Book-Entry, Delivery and Form." Although DTC has agreed to the foregoing procedures, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. If DTC is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by the Company within 90 days, the Company will cause the Junior Subordinated Debentures to be issued in definitive form. Payments on Junior Subordinated Debentures represented by a global security will be made to DTC, as the depositary for the Junior Subordinated Debentures. In the event Junior Subordinated Debentures are issued in definitive form, principal and interest will be payable, the transfer of the Junior Subordinated Debentures will be registrable, and Junior Subordinated Debentures will be exchangeable for Junior Subordinated Debentures of other authorized denominations of a like aggregate principal amount, at the corporate trust office of the Debenture Trustee in New York, New York, or at the offices of any paying agent or transfer agent appointed by the Company, provided that payment of interest may be made at the option of the Company by check mailed to the address of the persons entitled thereto or by wire transfer. The Junior Subordinated Debentures will be issuable only in registered form without coupons in denominations of $1,000 and integral multiples of $1,000 in excess thereof. Junior Subordinated Debentures will be exchangeable for other Junior Subordinated Debentures, of any authorized denominations, of a like aggregate principal amount. Junior Subordinated Debentures may be presented for exchange as provided above, and may be presented for registration of transfer (with the form of transfer endorsed thereon, or a satisfactory written instrument of transfer, duly executed), at the office of the Securities Registrar (as defined below) or at the office of any transfer agent designated by the Company for such purpose without service charge and upon payment of any taxes and other governmental charges as described in the Junior Subordinated Indenture. The Company will appoint the Debenture Trustee as Securities Registrar (the "Securities Registrar") under the Junior Subordinated Indenture. The Company may at any time designate additional transfer agents with respect to the Junior Subordinated Debentures. 60 In the event of any redemption, neither the Company nor the Debenture Trustee shall be required to (i) issue, register the transfer of or exchange Junior Subordinated Debentures during a period beginning at the opening of business 15 days before the day of selection for redemption of Junior Subordinated Debentures and ending at the close of business on the day of mailing of the relevant notice of redemption or (ii) transfer or exchange any Junior Subordinated Debentures so selected for redemption, except, in the case of any Junior Subordinated Debentures being redeemed in part, any portion thereof not to be redeemed. Any moneys deposited with the Debenture Trustee or any paying agent, or then held by the Company in trust, for the payment of the principal of (and premium, if any) or interest on any Junior Subordinated Debenture and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall, at the request of the Company, be repaid to the Company (or if then held by the Company shall be discharged from such trust) and the holder of such Junior Subordinated Debenture shall thereafter look, as a general unsecured creditor, only to the Company for payment thereof. CERTAIN COVENANTS Limitation on Indebtedness The Company and its subsidiaries will not be permitted to incur any Debt unless, immediately after giving effect to the incurrence of such Debt and the receipt and application of the proceeds thereof, the Consolidated Cash Flow Ratio for the four full fiscal quarters for which quarterly or annual financial statements are available next preceding the incurrence of such Debt, calculated on a pro forma basis as if such Debt had been incurred at the beginning of such four full fiscal quarters, would be greater than 1.5 to 1 for the period ending on the first anniversary of the date of issuance of the Junior Subordinated Debentures; 1.75 to 1 for the period from the first anniversary of the date of issuance of the Junior Subordinated Debentures and ending on the second anniversary of the date of issuance of the Junior Subordinated Debentures, and 2.0 to 1 thereafter; provided, however, that notwithstanding the foregoing limitations, the Company may incur Debt (x) of up to $75,000,000 under its Credit Facility or any renewal, extension, refinancing or refunding thereof and (y) of up to an amount equal to the aggregate principal amount of the Company's 9 1/2% Senior Notes due October 15, 2001 (the "9 1/2% Senior Notes") and 8% Senior Notes due August 15, 1999 (the "8% Senior Notes") to the extent incurred in connection with the refunding or refinancing thereof, plus the amount of any premium required to be paid in connection therewith and the reasonable expenses incurred in connection therewith. For purposes of the foregoing, the Consolidated Cash Flow Ratio for any period from January 1, 1997 to December 31, 1997, shall be calculated on an annualized basis as follows: (i) at any time prior to the Company's financial statements for the second fiscal quarter of 1997 being available, by annualizing the Company's first 1997 fiscal quarter; (ii) at any time after the Company's financial statements for the second fiscal quarter of 1997 are available and prior to the Company's financial statements for the third fiscal quarter of 1997 being available, by annualizing the Company's first and second 1997 fiscal quarters; (iii) at any time thereafter and prior to the Company's 1997 results being available, by annualizing the Company's first three 1997 fiscal quarters, and (iv) with respect to any Person acquired by the Company or a Subsidiary of the Company during such period, the Consolidated Cash Flow Ratio shall be calculated utilizing financial information with respect to such Person for the four full fiscal quarters for which quarterly or annual financial statements are available next preceding the incurrence of such Debt. The Junior Subordinated Indenture will provide that the foregoing covenant will be applicable to the Company unless and until the Company reaches Investment Grade Status. Upon reaching Investment Grade Status, the Company will be released from its obligation to comply with such covenant. The Company will continue to remain obligated to comply with the covenant described below upon reaching Investment Grade Status. Reports to Holders of Capital Securities The Company will file with the Commission all information, documents and reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act, whether or not the Company is subject to such filing requirements, so long as the Commission will accept such filings. The Company will file 61 with the Property Trustee, within 15 days after it files them with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may be rules and regulations prescribe) which the Company files with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. Regardless of whether the Company is required to furnish such reports to its stockholders pursuant to the Exchange Act, the Company will cause its consolidated financial statements, comparable to that which would have been required to appear in annual or quarterly reports filed with the Commission, to be delivered to the Property Trustee, and the Property Trustee will deliver the same to holders of the Capital Securities. Certain Definitions "Capital Lease Obligation" of any Person means the obligation to pay rent or other payment amounts under a lease of (or other Debt arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability on the face of a balance sheet of such Person in accordance with generally accepted accounting principles. The stated maturity of such obligation shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, participations or other equivalents (however designated) of corporate stock of such Person. "Consolidated Cash Flow Available for Fixed Charges" of any Person means for any period the Consolidated Net Income for such period increased by the sum of (i) Consolidated Interest Expense of such Person for such period, plus (ii) Consolidated Income Tax Expense of such Person for such period, plus (iii) the consolidated depreciation and amortization expense included in the income statement of such Person for such period, plus (iv) other non-cash charges of such Person for such period deducted from consolidated revenues in determining Consolidated Net Income for such period, minus (v) non-cash items of such Person for such period increasing consolidated revenues in determining Consolidated Net Income for such period (other than unearned premiums). "Consolidated Cash Flow Ratio" of any Person means for any period the ratio of (i) Consolidated Cash Flow Available For Fixed Charges of such Person for such period to (ii) the sum of (A) Consolidated Interest Expense of such Person for such period plus (B) the annual interest expense (including the amortization of debt discount) with respect to any Debt proposed to be incurred by such Person or its Subsidiaries plus (C) the annual interest expense (including the amortization of debt discount) with respect to any other Debt incurred by such Person or its Subsidiaries since the end of such period to the extent not included in Clause (ii)(A) minus (D) Consolidated Interest Expense of such Person to the extent included in Clause (ii)(A) with respect to any Debt that will no longer be outstanding as a result of the incurrence of the Debt proposed to be incurred; provided, however, that in making such computation, the Consolidated Interest Expense of such Person attributable to interest on any Debt bearing a floating interest rate shall be computed on a pro forma basis as if the rate in effect on the date of computation had been the applicable rate for the entire period; provided further that, in the event such Person or its Subsidiaries has made asset dispositions or acquisitions of assets not in the ordinary course of business (including acquisitions of other Persons by merger, consolidation or purchase of Capital Stock) during or after such period, such computation shall be made on a pro forma basis as if the asset dispositions or acquisitions had taken place on the first day of such period. "Consolidated Income Tax Expense" of any Person means for any period the consolidated provision for income taxes of such Person for such period calculated on a consolidated basis in accordance with generally accepted accounting principles. "Consolidated Interest Expense" for any Person means for any period the consolidated interest expense included in a consolidated income statement (without deduction of interest income) of such Person for such period calculated on a consolidated basis in accordance with generally accepted accounting principles, including 62 without limitation or duplication (or, to the extent not so included, with the addition of), (i) the amortization of Debt discounts; (ii) any payments or fees with respect to letters of credit, bankers acceptances or similar facilities; (iii) fees with respect to interest rate swap or similar agreements or foreign currency hedge, exchange or similar agreements; (iv) Preferred Stock dividends declared and payable in cash; and (v) the portion of any rental obligation allocable to interest expense. "Consolidated Net Income" of any Person means for any period the consolidated net income (or loss) of such Person for such period determined on a consolidated basis in accordance with generally accepted accounting principles; provided that there shall be excluded therefrom (a) the net income (or loss) of any Person acquired by such Person or a Subsidiary of such Person in a pooling-of-interests transaction for any period prior to the date of such transaction, (b) the net income (or loss) of any Person that is not a Subsidiary of such Person except to the extent of the amount of dividends or other distributions actually paid to such Person by such other Person during such period, (c) the cumulative effect of changes in accounting principles and (d) all extraordinary gains and extraordinary losses. "Debt" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed, (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations Incurred in connection with the acquisition of property, assets or businesses, (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business), (v) every Capital Lease Obligation of such Person, (vi) the maximum fixed redemption or repurchase price of Redeemable Stock of such Person at the time of determination, (vii) every obligation to pay rent or other payment amounts of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party and (viii) every obligation of the type referred to in Clauses (i) through (vii) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise. "Investment Grade Status", with respect to the Company, shall occur when the 9 1/2% Senior Notes and the 8% Senior Notes (and any other unsecured senior indebtedness) receive a rating of "BBB-" or higher from Standard & Poor's or a rating of "Baa3" or higher from Moody's. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of such Person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person. "Redeemable Stock" of any Person means any equity security of such Person that by its terms or otherwise is required to be redeemed prior to the final stated maturity of the Junior Subordinated Debentures or is redeemable at the option of the holder thereof at any time prior to the final stated maturity of the Junior Subordinated Debentures. "Sale and Leaseback Transaction" of any Person means an arrangement with any lender or investor or to which such lender or investor is a party providing for the leasing by such Person of any property or asset of such Person which has been or is being sold or transferred by such Person more than 270 days after the acquisition thereof or the completion of construction or commencement of operation thereof to such lender or investor or to any person to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset. The stated maturity of such arrangement shall be the date of the last payment of rent or any other amount due under such arrangement prior to the first date on which such arrangement may be terminated by the lessee without payment of a penalty. 63 RESTRICTIONS ON CERTAIN PAYMENTS; CERTAIN OTHER COVENANTS OF THE COMPANY The Company has covenanted that it will not, and will not permit any subsidiary of the Company 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 capital stock, (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 that rank pari passu in all respects with or junior in interest to the Junior Subordinated Debentures, or (iii) make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the Junior Subordinated Debentures (other than (a) payments on dividends or distributions in capital stock of the Company, (b) any declaration of a dividend in connection with the implementation of a shareholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) payments under the Guarantee, (d) purchases of common stock related to the issuance of common stock or rights or options under any of the Company's benefit plans for its directors, officers, employees or other persons within the definition of "employee" for purposes of registration of shares of an employee benefit plan of the Company, related to the issuance of common stock or rights under a dividend reinvestment plan or stock purchase plan, or related to the issuance of common stock (or securities convertible into or exchangeable for common stock) as consideration in an acquisition transaction, and (e) payments of accrued dividends (and cash in lieu of fractional shares) upon conversion into Common Stock of any convertible preferred stock of the Company of any series now or hereinafter outstanding in accordance with the terms of such stock), if at such time (i) there shall have occurred any event of which the Company has actual knowledge that (a) with the giving of notice or the lapse of time, or both, would constitute an "Event of Default" under the Junior Subordinated Indenture with respect to the Junior Subordinated Debentures and (b) in respect of which the Company shall not have taken reasonable steps to cure, (ii) if such Junior Subordinated Debentures are held by the Series B Issuer, the Company shall be in default with respect to its payment of any obligations under the Guarantee relating to the Capital Securities or (iii) the Company shall have given notice of its selection of an Extension Period as provided in the Junior Subordinated Indenture with respect to the Junior Subordinated Debentures and shall not have rescinded such notice, or such Extension Period, or any extension thereof, shall be continuing. The Company also covenants with each holder of Junior Subordinated Debentures (i) to maintain directly or indirectly 100% ownership of the Common Securities of the Series B Issuer; provided, however, that any permitted successor of the Company may succeed to the Company's ownership of such Common Securities, (ii) not to voluntarily terminate, wind-up or liquidate such Series B Issuer, except (a) in connection with a distribution of the Junior Subordinated Debentures to the holders of the Trust Securities of such Series B Issuer in liquidation of such Series B Issuer or (b) in connection with certain mergers, consolidations or amalgamations permitted by the Trust Agreement and (iii) to use its reasonable efforts, consistent with the terms and provisions of such Trust Agreement, to cause the Series B Issuer to remain classified as a grantor trust and not be taxable as a corporation for United States federal income tax purposes. MODIFICATION OF JUNIOR SUBORDINATED INDENTURE From time to time the Company and the Debenture Trustee may, without the consent of the holders of the Junior Subordinated Debentures, amend, waive or supplement the Junior Subordinated Indenture for specified purposes, including, among other things, curing ambiguities, defects or inconsistencies (provided that any such action does not materially adversely affect the interest of the holders of the Junior Subordinated Debentures or the holders of the Capital Securities so long as they remain outstanding) and following the Exchange Offer qualifying, or maintaining the qualification of, the indenture under the Trust Indenture Act. The Junior Subordinated Indenture contains provisions permitting the Company and the Debenture Trustee, with the consent of the holders of not less than a majority in principal amount of the Junior Subordinated Debentures, to modify the Junior Subordinated Indenture in a manner adversely affecting the rights of the holders of the Junior Subordinated Debentures in any material respect; provided, that no such modification may, without the consent of the holder of each outstanding Junior Subordinated Debenture so affected, (i) change the Stated Maturity of the Junior Subordinated Debentures, or reduce the principal amount thereof, the rate of interest thereon or any 64 premium payable upon the redemption thereof, or change the place of payment where, or the currency in which, any such amount is payable or impair the right to institute suit for the enforcement of any Junior Subordinated Debenture or (ii) reduce the percentage of principal amount of Junior Subordinated Debentures, the holders of which are required to consent to any such modification of the Junior Subordinated Indenture, provided that, so long as any of the Capital Securities remain outstanding, no such modification may be made that adversely affects the holders of such Capital Securities in any material respect, and no termination of the Junior Subordinated Indenture may occur, and no waiver of any Debenture Event of Default or compliance with any covenant under the Junior Subordinated Indenture may be effective, without the prior consent of the holders of at least a majority of the aggregate Liquidation Amount of such Capital Securities unless and until the principal of the Junior Subordinated Debentures and all accrued and unpaid interest thereon have been paid in full and certain other conditions are satisfied and, where a consent under the Junior Subordinated Indenture would require the consent of each holder of Junior Subordinated Debentures, no such consent shall be given by the Property Trustee without the prior consent of each holder of Capital Securities. In addition, the Company and the Debenture Trustee may execute, without the consent of any holder of Junior Subordinated Debentures, any supplemental Indenture for any purpose set forth under the Junior Subordinated Debentures. DEBENTURE EVENTS OF DEFAULT The Junior Subordinated Indenture provides that any one or more of the following described events with respect to the Junior Subordinated Debentures that has occurred and is continuing constitutes a "Debenture Event of Default" with respect to the Junior Subordinated Debentures, whether voluntary or involuntary or effected by operation of law or pursuant to any judgment or decree of any court or regulation of any administrative or governmental body: (i) failure for 30 days to pay any interest on the Junior Subordinated Debentures, when due (subject to the deferral of any due date in the case of an Extension Period); or (ii) failure to pay any principal or premium, if any, on the Junior Subordinated Debentures when due whether at maturity, upon redemption, by declaration of acceleration or otherwise; or (iii) failure to observe or perform in any material respect certain other covenants contained in the Junior Subordinated Indenture for 90 days after written notice to the Company from the Debenture Trustee or the holders of at least 25% in aggregate principal amount of the outstanding Junior Subordinated Debentures; or (iv) certain events in bankruptcy, insolvency or reorganization of the Company. The holders of at least a majority in aggregate outstanding principal amount of Junior Subordinated Debentures have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee as provided under the Junior Subordinated Indenture. Upon certain events of bankruptcy, insolvency or reorganization of the Company constituting a Debenture Event of Default, the principal amount of all outstanding Junior Subordinated Debentures shall automatically become immediately due and payable. Except as set forth above, the Debenture Trustee or the holders of not less than 25% in aggregate outstanding principal amount of Junior Subordinated Debentures may declare the principal amount due and payable immediately upon a Debenture Event of Default, and, should the Debenture Trustee or such holders of Junior Subordinated Debentures fail to make such declaration, the holders of at least 25% in aggregate Liquidation Amount of the Capital Securities shall have such right. The holders of a majority in aggregate outstanding principal amount of Junior Subordinated Debentures may annul such declaration and waive the default if all defaults (other than the non- payment of the principal of Junior Subordinated Debentures which has become due solely by such acceleration) have 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. Should the holders of Junior Subordinated Debentures fail to annul such declaration and waive such default, the holders of a majority in aggregate Liquidation Amount of the Capital Securities shall have such right. 65 The holders of a majority in aggregate outstanding principal amount of the Junior Subordinated Debentures affected thereby may, on behalf of the holders of all the Junior Subordinated Debentures, waive any past default, except a default in the payment of principal (or premium, if any) or interest (unless such 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 in respect of a covenant or provision which under the Junior Subordinated Indenture cannot be modified or amended without the consent of the holder of each outstanding Junior Subordinated Debenture. The Company is required to file annually with the Debenture Trustee a certificate as to whether or not the Company is in compliance with all of the conditions and covenants applicable to it under the Junior Subordinated Indenture. In case a Debenture Event of Default shall occur and be continuing, the Property Trustee will have the right to declare the principal of and the interest on the Junior Subordinated Debentures, and any other amounts payable under the Junior Subordinated Indenture, to be forthwith due and payable and to enforce its other rights as a creditor with respect to the Junior Subordinated Debentures. ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES If a Debenture Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay any amounts payable in respect of the Junior Subordinated Debentures on the date on which such amounts are otherwise payable, a holder of Capital Securities may institute a legal proceeding directly against the Company for enforcement of payment to such holder of the principal of (and premium, if any) or interest on such Junior Subordinated Debentures having a principal amount equal to the aggregate Liquidation Amount of the related Capital Securities of such holder (a "Direct Action"). The Company may not amend the Junior Subordinated Indenture to remove the foregoing right to bring a Direct Action without the prior written consent of the holders of all of the Capital Securities outstanding. The Company shall have the right under the Junior Subordinated Indenture to set-off any payment made to such holder of Capital Securities by the Company in connection with a Direct Action. The holders of the Capital Securities would not be able to exercise directly any remedies other than those set forth in the preceding paragraph available to the holders of the Junior Subordinated Debentures unless there shall have been an Event of Default under the Trust Agreement, see "Description of Capital Securities--Events of Default; Notice," or unless there shall have been a continuing Debenture Event of Default and the Debenture Trustee shall have failed to act upon written request of holders of at least 25% in Liquidation Amount of the outstanding Capital Securities. CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS The Junior Subordinated Indenture provides that the Company shall not consolidate with or merge into any other entity or convey, transfer or lease its properties and assets substantially as an entirety to any entity, and no entity shall consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless (i) in case the Company consolidates with, or merges into another entity or conveys, transfers or leases its properties and assets substantially as an entirety to any entity, the successor entity is organized under the laws of the United States or any state or the District of Columbia, and such successor entity expressly assumes the Company's obligations on the Junior Subordinated Debentures issued under the Junior Subordinated Indenture; (ii) immediately after giving effect thereto, no Debenture Event of Default, and no event which, after notice or lapse of time or both, would become a Debenture Event of Default, shall have happened and be continuing; (iii) such transaction is permitted under the Trust Agreement and Guarantee and does not give rise to any breach or violation of the Trust Agreement or Guarantee; and (iv) certain other conditions as prescribed in the Junior Subordinated Indenture are met. The general provisions of the Junior Subordinated Indenture do not afford holders of the Junior Subordinated Debentures protection in the event of a highly leveraged or other transaction involving the Company that may adversely affect holders of the Junior Subordinated Debentures, unless such transaction results in a Change of Control. See "--Change of Control Repurchase." 66 SATISFACTION AND DISCHARGE The Junior Subordinated Indenture provides that when, among other things, all Junior Subordinated Debentures not previously delivered to the Debenture Trustee for cancellation (i) have become due and payable or (ii) will become due and payable at their Stated Maturity within one year or are to be called for redemption within one year under arrangements satisfactory to the Debenture Trustee, and the Company deposits or causes to be deposited with the Debenture Trustee as trust funds, in trust, for the purpose and in an amount sufficient to pay and discharge the entire indebtedness on the Junior Subordinated Debentures not previously delivered to the Debenture Trustee for cancellation, for the principal (and premium, if any) and interest and Additional Sums to the date of the deposit or to the Stated Maturity or Redemption Date, as the case may be, then the Subordinated Indenture will cease to be of further effect (except as to the Company's obligations to pay all other sums due pursuant to the Junior Subordinated Indenture and to provide the officers' certificates and opinions of counsel described therein), and the Company will be deemed to have satisfied and discharged the Junior Subordinated Indenture. SUBORDINATION The Junior Subordinated Debentures shall be subordinate and junior in right of payment, to the extent set forth in the Junior Subordinated Indenture, to all Senior Indebtedness (as defined below) of the Company. In the event that the Company shall default in the payment of any principal, premium, if any, or interest, if any, or any other amount on any Senior Indebtedness when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration of acceleration or otherwise, then and until such default shall have been cured or waived or shall have ceased to exist or all Senior Indebtedness shall have been paid, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made for principal, premium, if any, or interest, if any, on the Junior Subordinated Debentures, or in respect of any redemption, repayment, retirement, purchase or other acquisition of any of the Junior Subordinated Debentures. As used herein, "Senior Indebtedness" means any indebtedness of the Company to its creditors (other than trade creditors), whether now outstanding or subsequently incurred, other than any indebtedness as to which, in the instrument creating or evidencing the indebtedness or pursuant to which the indebtedness is outstanding, it is provided that such indebtedness is not Senior Indebtedness. Indebtedness means with respect to any person (i) every obligation of such person for money borrowed, (ii) every obligation of such person evidenced by bonds, debentures, notes or other similar instruments, (iii) every reimbursement obligation of such person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such person, (iv) every obligation of such person issued or assumed as the deferred purchase price of property or services, (v) every capital lease obligation of such person, (vi) every hedging obligation, (vii) every obligation of others secured by a lien on any asset of such person, (viii) every obligation of the type referred to in clauses (i) through (vii) of another person the payment of which such person has guaranteed or is responsible or liable and (ix) any and all deferrals, renewals, extensions and refundings of or amendments or supplements to any liability of the kind described in any of the preceding clauses (i) through (viii). Senior Indebtedness does not include the Junior Subordinated Debentures, but does include the 8% Senior Notes and 9 1/2% Senior Notes and intercompany indebtedness. As of December 31, 1996, the Company had approximately $194,760,000 of Senior Indebtedness outstanding. In the event of (i) any insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition or other similar proceedings relating to the Company, its creditors or its assets, (ii) liquidation, dissolution or other winding up of the Company, voluntary or involuntary, whether or not involving insolvency or bankruptcy proceedings or (iii) any assignment for the benefit of creditors or any other marshaling of the assets of the Company, all amounts due or to become due on or in respect of all Senior Indebtedness (including any interest thereon accruing after the commencement of any such proceedings) shall first be paid in full before any payment or distribution, whether in cash, securities or other property, shall be made on account of the principal of or premium, if any, or interest, if any, on the Junior Subordinated Debentures. In such event, any payment or distribution on account of the principal of or premium, if any, or interest, if any, on the Junior Subordinated 67 Debentures (other than securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in the subordination provisions with respect to the Junior Subordinated Debentures, to the payment of all Senior Indebtedness at the time outstanding, and to any securities issued in respect thereof under any such plan of reorganization or readjustment), which would otherwise (but for the subordination provisions) be payable or deliverable in respect of the Junior Subordinated Debentures shall be paid or delivered directly to the holders of Senior Indebtedness in accordance with the priorities then existing among such holders until all Senior Indebtedness (including any interest thereon accruing after the commencement of any such proceedings) shall have been paid in full. In the event of any such proceeding, after payment in full of all sums owing with respect to Senior Indebtedness, the holders of Junior Subordinated Debentures, together with the holders of any obligations of the Company ranking on a parity with the Junior Subordinated Debentures, shall be entitled to be paid from the remaining assets of the Company the amounts at the time due and owing on account of unpaid principal of and premium, if any, and interest, if any, on the Junior Subordinated Debentures and such other obligations before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any capital stock or obligations of the Company ranking junior to the Junior Subordinated Debentures and such other obligations. If any payment or distribution on account of the principal of or interest on the Junior Subordinated Debentures of any character or any security, whether in cash, securities or other property (other than securities of the Company or any other corporation provided for by a plan or reorganization or readjustment the payment of which is subordinate, at least to the extent provided in the subordination provisions with respect to the Junior Subordinated Debentures, to the payment of all Senior Indebtedness at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment) shall be received by any holder of any Junior Subordinated Debentures in contravention of any of the terms hereof and before all the Senior Indebtedness shall have been paid in full, such payment or distribution or security shall be received in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of the Senior Indebtedness at the time outstanding in accordance with the priorities then existing among such holders for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all such Senior Indebtedness in full. By reason of such subordination, in the event of the insolvency of the Company, holders of Senior Indebtedness may receive more, ratably, and holders of the Junior Subordinated Debentures having a claim pursuant to such securities may receive less, ratably, than the other creditors of the Company. Such subordination will not prevent the occurrence of any Event of Default in respect of the Junior Subordinated Debentures. The Junior Subordinated Indenture places certain limitations on the amount of additional Senior Indebtedness that may be incurred by the Company. See "-- Certain Covenants--Limitation on Indebtedness." The Company expects from time to time to incur additional indebtedness constituting Senior Indebtedness. GOVERNING LAW The Junior Subordinated Indenture and the Junior Subordinated Debentures will be governed by and construed in accordance with the laws of the State of New York. INFORMATION CONCERNING THE DEBENTURE TRUSTEE Any Debenture Trustee must be authorized to exercise corporate trust powers and have a combined capital and surplus of at least $50,000,000. The Debenture Trustee, other than during the occurrence and continuance of a default by the Company in the performance of the obligations under the Junior Subordinated Debentures, is under no obligation to exercise any of the powers vested in it by the Junior Subordinated Indenture at the request or direction of any holder of Junior Subordinated Debentures, unless offered reasonable security or indemnity by such holder against the costs, expenses and liabilities which might be accrued thereby. The Debenture Trustee is not required to expend or risk its own funds or otherwise incur financial liability in the performance of its duties if the Debenture Trustee reasonably believes that repayment or adequate indemnity against such risk or liability is not reasonably assured to it. After a Debenture Event of Default, the Debenture Trustee must use the same 68 degree of care and skill in the exercise of its rights and powers as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. The Debenture Trustee may resign at any time and may be removed at any time by the holders of a majority in principal amount of outstanding Junior Subordinated Debentures or by the Company as set forth under the Junior Subordinated Indenture. 69 DESCRIPTION OF GUARANTEE The Exchange Guarantee will be delivered by the Company concurrently with the issuance by the Series B Issuer of its Exchange Capital Securities for the benefit of the holders from time to time of such Exchange Capital Securities. First Union National Bank of North Carolina will act as trustee ("Guarantee Trustee") under the Guarantee. This summary of certain provisions of the Guarantee does not purport to be complete and is subject to, and qualified in its entirety by reference to, all of the provisions of such Guarantee Agreement (a copy of which has been filed as an exhibit to the Registration Statement of which this Prospectus is a part), including the definitions therein of certain terms. The Guarantee Trustee will hold the Guarantee for the benefit of the holders of the Capital Securities. GENERAL The Company will irrevocably and unconditionally agree to pay in full on a subordinated basis, to the extent set forth herein, the Guarantee Payments (as defined below) to the holders of the Capital Securities, as and when due, regardless of any defense, right of set-off or counterclaim that the Series B Issuer may have or assert other than the defense of payment. The following payments with respect to the Capital Securities, to the extent not paid by or on behalf of the Series B Issuer (the "Guarantee Payments"), will be subject to the Guarantee: (i) any accumulated and unpaid Distributions required to be paid on the Trust Securities, to the extent that the Series B Issuer has funds on hand available therefor at such time, (ii) the Redemption Price with respect to any Trust Securities called for redemption or the Repurchase Price with respect to any Capital Securities subject to a Repurchase Election, as applicable, in either case, to the extent that the Series B Issuer has funds on hand available therefor at such time or (iii) upon a voluntary or involuntary termination, winding up or liquidation of the Series B Issuer (unless the Junior Subordinated Debentures are distributed to holders of the Capital Securities), the lesser of (a) the aggregate Liquidation Distribution, to the extent that the Series B Issuer has funds on hand available therefor at such time, and (b) the amount of assets of the Series B Issuer remaining available for distribution to holders of Trust Securities on liquidation of the Series B Issuer after satisfaction of liabilities to creditors of the Series B Issuer as required by applicable law. The Company's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of the Common Securities and Capital Securities or by causing the Series B Issuer to pay such amounts to such holders. The Guarantee will be an irrevocable and unconditional guarantee on a subordinated basis of the Series B Issuer's obligations under the Capital Securities, but will apply only to the extent that the Series B Issuer has funds sufficient to make such payments, and is not a guarantee of collection. If the Company does not make interest payments on the Junior Subordinated Debentures held by the Series B Issuer, the Series B Issuer will not be able to pay any amounts payable in respect of the Capital Securities and will not have funds legally available therefor. The Guarantee will rank subordinate and junior in right of payment to all Senior Indebtedness of the Company. See "Status of the Guarantee." Because the Company is a holding company, the right of the Company to participate in any distribution of assets of any subsidiary upon such subsidiary's liquidation or reorganization or otherwise, is subject to the prior claims of creditors of that subsidiary, except to the extent the Company may itself be recognized as a creditor of that subsidiary. Accordingly, the Company's obligation under the Guarantee will be effectively subordinated to all existing and future liabilities of the Company's subsidiaries, and claimants should look only to the assets of the Company for payments thereunder. The Guarantee does not limit the incurrence or issuance of other secured or unsecured debt of the Company, including Senior Indebtedness, whether under the Junior Subordinated Indenture or any other indenture that the Company may enter into in the future or otherwise. The Company has, through the Guarantee, the Trust Agreement, the Junior Subordinated Debentures, the Junior Subordinated Indenture and the Expense Agreement, taken together, fully, irrevocably and unconditionally guaranteed all of the Series B Issuer's obligations under the Capital Securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes such guarantee. It is only the combined operation of these documents that has the effect of providing a full, irrevocable and 70 unconditional guarantee of the Series B Issuer's obligations under the Capital Securities. See "Relationship Among the Capital Securities, the Junior Subordinated Debentures, the Guarantee and the Expense Agreement." STATUS OF THE GUARANTEE The Guarantee will constitute an unsecured obligation of the Company and will rank subordinate and junior in right of payment to all Senior Indebtedness of the Company in the same manner as Junior Subordinated Debentures, except those made pari passu or subordinate to such obligations. The Guarantee will constitute a guarantee of payment and not of collection (i.e., the guaranteed party may institute a legal proceeding directly against the Guarantor to enforce its rights under the Guarantee without first instituting a legal proceeding against any other person or entity). The Guarantee will be held for the benefit of the holders of the Capital Securities. The Guarantee will not be discharged except by payment of the Guarantee Payments in full to the extent not paid by the Series B Issuer or upon distribution to the holders of the Capital Securities of the Junior Subordinated Debentures as provided in the Trust Agreement. The Company expects from time to time to incur additional indebtedness constituting Senior Indebtedness. The Guarantee does not place a limitation on the amount of additional indebtedness that may be incurred by the Company. AMENDMENTS AND ASSIGNMENT Except with respect to any changes which do not adversely affect the rights of holders of the Capital Securities (in which case no vote will be required), the Guarantee may not be amended without the prior approval of the holders of not less than a majority of the aggregate Liquidation Amount of the outstanding Capital Securities and of the Guarantee Trustee. The manner of obtaining any such approval will be as set forth under "Description of the Capital Securities--Voting Rights; Amendment of Trust Agreement." All guarantees and agreements contained in the Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the holders of the Capital Securities then outstanding. EVENTS OF DEFAULT An event of default under the Guarantee will occur upon the failure of the Company to perform any of its payment or other obligations thereunder. The holders of not less than a majority in aggregate Liquidation Amount of the outstanding Capital 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 the Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under the Guarantee. Any registered holder of the Capital Securities may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a legal proceeding against the Series B Issuer, the Guarantee Trustee or any other person or entity. The Company, as guarantor, is required to file annually with the Guarantee Trustee a certificate as to whether or not the Company is in compliance with all the conditions and covenants applicable to it under the Guarantee. INFORMATION CONCERNING THE GUARANTEE TRUSTEE The Guarantee Trustee must be eligible to act as such under the Trust Indenture Act, must be a corporation meeting the requirements of Section 310(a) of the Trust Indenture Act and must have a combined capital and surplus of at least $50,000,000. The Guarantee Trustee, other than during the occurrence and continuance of a default by the Company in performance of any of its obligations under the Guarantee, undertakes to perform only such duties as are specifically set forth in each Guarantee and, after the occurrence of an event of default with respect to the Guarantee, must exercise the same degree of care and skill as a prudent person would exercise or use under the 71 circumstances in the conduct of his or her own affairs. Subject to this provision, the Guarantee Trustee is under no obligation to exercise any of the rights or powers vested in it by the Guarantee at the request or direction of any holder of any Capital Securities unless it is offered reasonable security and indemnity against the costs, expenses and liabilities that might be incurred thereby. The Guarantee Trustee may resign and be removed without cause at any time by the Company. For information concerning the relationship between First Union National Bank of North Carolina, the Property Trustee, and the Company, see "Description of Junior Subordinated Debentures--Information Concerning the Debenture Trustee." TERMINATION OF THE GUARANTEE The Guarantee will terminate and be of no further force and effect upon full payment of the Redemption Price of the Trust Securities or the Repurchase Price in respect of all outstanding Capital Securities, upon full payment of the amounts payable with respect to the Trust Securities upon liquidation of the Series B Issuer or upon distribution of Junior Subordinated Debentures to the holders of the Trust Securities in exchange therefor. The Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of the Capital Securities must restore payment of any sums paid under the Capital Securities or the Guarantee. GOVERNING LAW The Guarantee will be governed by and construed in accordance with the laws of the State of New York. THE EXPENSE AGREEMENT Pursuant to an Agreement as to Expenses and Liabilities entered into by the Company under the Trust Agreement (the "Expense Agreement"), the Company will irrevocably and unconditionally guarantee to each person or entity to whom the Series B Issuer becomes indebted or liable, the full payment of any costs, expenses or liabilities of the Series B Issuer, other than obligations of the Series B Issuer to pay to the holders of the Capital Securities or other similar interests in the Series B Issuer of the amounts due such holders pursuant to the terms of the Capital Securities or such other similar interests, as the case may be. The Expense Agreement will constitute an unsecured obligation of the Company and will rank subordinate and junior in right of payment to all Senior Indebtedness of the Company in the same manner as the Guarantee and the Junior Subordinated Debentures. RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE JUNIOR SUBORDINATED DEBENTURES, THE GUARANTEE AND THE EXPENSE AGREEMENT FULL AND UNCONDITIONAL GUARANTEE Payments of Distributions and other amounts due on the Capital Securities (to the extent the Series B Issuer has funds available for the payment of such Distributions) are irrevocably guaranteed by the Company as and to the extent set forth under "Description of Guarantee." Taken together, the Company's obligations under the Junior Subordinated Debentures, the Junior Subordinated Indenture, the Trust Agreement, the Expense Agreement and the Guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee of payments of distributions and other amounts due on the Capital Securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes such guarantee. It is only the combined operation of these documents that has the effect of providing a full, irrevocable and unconditional guarantee of the Series B Issuer's obligations in respect of the Capital Securities. If and to the extent that the Company does not make payments on the Junior Subordinated Debentures, the Series B Issuer will not have 72 sufficient funds to pay Distributions or other amounts due on the Capital Securities. The Guarantee does not cover payment of amounts payable with respect to the Capital Securities when the Series B Issuer does not have sufficient funds to pay such amounts. In such event, the remedy of a holder of the Capital Securities is to institute a legal proceeding directly against the Company for enforcement of payment of such Distributions to such holder. The obligations of the Company under the Guarantee are subordinate and junior in right of payment to all Senior Indebtedness. SUFFICIENCY OF PAYMENTS As long as payments are made when due on the Junior Subordinated Debentures, such payments will be sufficient to cover Distributions and other payments due on the Capital Securities, primarily because (i) the aggregate principal amount of the Junior Subordinated Debentures will be equal to the sum of the aggregate Liquidation Amount of the Capital Securities and Common Securities; (ii) the interest rate and interest and other payment dates on the Junior Subordinated Debentures will match the Distribution rate, Distribution Dates and other payment dates for the Capital Securities; (iii) the Company shall pay for all and any costs, expenses and liabilities of the Series B Issuer except the Series B Issuer's obligations to holders of its Capital Securities; and (iv) the Trust Agreement further provides that the Series B Issuer will not engage in any activity that is not consistent with the limited purposes of the Series B Issuer. Notwithstanding anything to the contrary in the Junior Subordinated Indenture, the Company has the right to set-off any payment it is otherwise required to make thereunder with, and to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Guarantee. ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES A holder of any Capital Security may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a legal proceeding against the Guarantee Trustee, the Series B Issuer or any other person or entity. A default or event of default under any Senior Indebtedness of the Company would not constitute a default or Event of Default. However, in the event of payment defaults under, or acceleration of, Senior Indebtedness of the Company, the subordination provisions of the Junior Subordinated Indenture provide that no payments may be made in respect of the Junior Subordinated Debentures until such Senior Indebtedness has been paid in full or any payment default thereunder has been cured and waived. LIMITED PURPOSE OF SERIES B ISSUER The Capital Securities represent preferred undivided beneficial interests in the assets of the Series B Issuer, and the Series B Issuer exists for the sole purpose of issuing its Capital Securities and Common Securities and investing the proceeds thereof in Junior Subordinated Debentures. A principal difference between the rights of a holder of a Capital Security and a holder of a Junior Subordinated Debenture is that a holder of a Junior Subordinated Debenture is entitled to receive from the Company the principal amount of and interest accrued on Junior Subordinated Debentures held, while a holder of Capital Securities is entitled to receive Distributions from the Series B Issuer (or from the Company under the Guarantee) only if and to the extent the Series B Issuer has funds available for the payment of such Distributions. RIGHTS UPON TERMINATION Upon any voluntary or involuntary termination, winding-up or liquidation of the Series B Issuer, other than any such termination, winding-up or liquidation involving the distribution of the Junior Subordinated Debentures, after satisfaction of the liabilities to creditors of the Series B Issuer as required by applicable law, the holders of the Capital Securities will be entitled to receive, out of assets held by the Series B Issuer, the Liquidation Distribution in cash. See "Description of Capital Securities-- Liquidation Distribution Upon Termination." Upon any voluntary or involuntary liquidation or bankruptcy of the Company, the Property Trustee, as holder of 73 the Junior Subordinated Debentures, would be a subordinated creditor of the Company, subordinated and junior in right of payment to all Senior Indebtedness as set forth in the Junior Subordinated Indenture, but entitled to receive payment in full of all amounts payable with respect to the Junior Subordinated Debentures, before any stockholders of the Company receive payments or distributions. Since the Company is the guarantor under the Guarantee and has agreed to pay for all costs, expenses and liabilities of the Series B Issuer (other than the Series B Issuer's obligations to the holders of its Capital Securities), the positions of a holder of the Capital Securities and a holder of Junior Subordinated Debentures relative to other creditors and to stockholders of the Company in the event of liquidation or bankruptcy of the Company are expected to be substantially the same. 74 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following is a summary of the principal United States federal income tax consequences of the purchase, ownership and disposition of the Capital Securities. This summary addresses only the tax consequences to a person that acquires Capital Securities on their original issue at their original offering price and does not address the tax consequences to persons that may be subject to special treatment under United States federal income tax law, such as banks, insurance companies, thrift institutions, regulated investment companies, real estate investment trusts, tax- exempt organizations, dealers in securities or currencies, persons that will hold Capital Securities as part of a position in a "straddle" or as part of a "hedging," "conversion" or other integrated investment transaction for federal income tax purposes, persons that do not hold Capital Securities as capital assets or, except with respect to the discussion under the caption "United States Alien Holders," persons whose functional currency is not the United States dollar. The statements of law or legal conclusions set forth in this summary constitute the opinion of Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the Company and the Series B Issuer. This summary is based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue Service rulings and pronouncements and judicial decisions now in effect, all of which are subject to change at any time. Such changes may be applied retroactively in a manner that could cause the tax consequences to vary substantially from the consequences described below, possibly adversely affecting a beneficial owner of Capital Securities. In particular, legislation has been proposed that could adversely affect the Company's ability to deduct interest on the Junior Subordinated Debentures, which may in turn permit the Company to cause a redemption of the Capital Securities. See "--Possible Tax Law Changes." The authorities on which this summary is based are subject to various interpretations, and it is therefore possible that the federal income tax treatment of the purchase, ownership and disposition of Capital Securities may differ from the treatment described below. PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF CAPITAL SECURITIES AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS. EXCHANGE OF CAPITAL SECURITIES The exchange of Exchange Capital Securities for the Outstanding Capital Securities should not be a taxable event to a holder of such securities for United States federal income tax purposes. Accordingly, a holder will have the same adjusted basis and holding period in the Exchange Capital Securities as such holder had in the Outstanding Capital Securities immediately prior to the exchange. CLASSIFICATION OF THE SERIES B ISSUER Under current law and assuming compliance with the terms of the Trust Agreement, the Series B Issuer will be classified as a grantor trust and not as an association taxable as a corporation for United States federal income tax purposes. As a result, each beneficial owner of Capital Securities (a "Securityholder") will be treated as owning an undivided beneficial interest in the Junior Subordinated Debentures and accordingly will be required to include in its gross income its pro rata share of the original issue discount accrued with respect to the Junior Subordinated Debentures whether or not cash is actually distributed to the Securityholders. See "--Original Issue Discount." No amount included in income with respect to the Capital Securities will be eligible for the dividends-received deduction. ORIGINAL ISSUE DISCOUNT Under the Junior Subordinated Indenture, the Company has the right to defer the payment of interest on the Junior Subordinated Debentures at any time or from time to time for a period not exceeding 10 consecutive semi- annual periods with respect to each Extension Period, provided that no Extension Period may extend beyond the 75 Stated Maturity of the Junior Subordinated Debentures. Because of this option, all interest payable on the Junior Subordinated Debentures will be treated as "original issue discount" ("OID") for federal income tax purposes. Accordingly, a Securityholder will recognize income (in the form of OID) on a daily basis under a constant yield method over the term of the Junior Subordinated Debentures (including during any Extension Period), regardless of the receipt of cash with respect to the period to which such income is attributable. (Subsequent uses of the term "interest" in this summary shall include income in the form of OID.) The possible payment of additional interest upon a Registration Default should not be taken into account in computing the amount of OID required to be accrued by Securityholder. The amount of OID that accrues in any semi-annual period (other than during an Extension Period) will equal approximately the amount of the interest that accrues on the Junior Subordinated Debentures in that semi-annual period at the stated interest rate. In the event that the interest payment period is extended, each Securityholder will include interest in gross income in advance of the receipt of cash, and any Securityholder who disposes of the Capital Securities prior to the record date for the payment of Distributions following such Extension Period will include interest in gross income but will not receive any cash related thereto from the Series B Issuer. Any amount of OID included in a Securityholder's gross income (whether or not during the Extension Period) will increase such Securityholder's tax basis in its Capital Securities, and the amount of Distributions received by a Securityholder will reduce such Securityholder's tax basis in its Capital Securities. DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF CAPITAL SECURITIES Under current law, a distribution by the Series B Issuer of the Junior Subordinated Debentures as described under the caption "Description of Capital Securities--Liquidation Distribution Upon Termination" will be non- taxable and will result in the Securityholder receiving directly its pro rata share of the Junior Subordinated Debentures previously held indirectly through the Series B Issuer, with a holding period and aggregate tax basis equal to the holding period and aggregate tax basis such Securityholder had in its Capital Securities before such distribution. A Securityholder will accrue interest in respect of the Junior Subordinated Debentures received from the Series B Issuer in the manner described above under "--Original Issue Discount." SALES OR REDEMPTION OF CAPITAL SECURITIES Gain or loss will be recognized by a Securityholder on a sale of the Capital Securities (including a redemption for cash) in an amount equal to the difference between the amount realized and such Securityholder's adjusted tax basis in the Capital Securities sold or redeemed. Gain or loss recognized by a Securityholder on the Capital Securities held for more than one year will generally be taxable as long-term capital gain or loss. The Capital Securities may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the underlying Junior Subordinated Debentures. A Securityholder that disposes of its Capital Securities between record dates for payments of Distributions (and consequently does not receive a Distribution from the Series B Issuer for the period prior to such disposition) will nevertheless be required to include in income as ordinary income accrued but unpaid interest on the Junior Subordinated Debentures through the date of disposition and add such amount to its adjusted tax basis in its Capital Securities disposed of. Such Securityholder will recognize a capital loss on the disposition of its Capital Securities to the extent the selling price (which may not fully reflect the value of accrued but unpaid interest) is less than the Securityholder's adjusted tax basis in the Capital Securities (which will include accrued but unpaid interest). Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for federal income tax purposes. POSSIBLE TAX LAW CHANGES On February 6, 1997, President Clinton submitted the fiscal 1998 budget to Congress, which, among other things, would generally deny interest deductions for interest on an instrument issued by a corporation that has a maximum term of more than 15 years and is not shown as indebtedness on the separate balance sheet of the issuer, or where such instrument is issued to a related party (other than a corporation) where the holder or some 76 other related party issues a related instrument that is not shown as indebtedness on the issuer's consolidated balance sheet. The proposal would be effective generally for instruments issued on or after the date of appropriate Congressional action. If such provision were to apply to the Junior Subordinated Debentures, the Company would be unable to deduct interest on the Junior Subordinated Debentures. Under current law, the Company will be able to deduct interest on the Junior Subordinated Debentures. There can be no assurance that current or future legislative proposals or final legislation will not affect the ability of the Company to deduct interest on the Junior Subordinated Debentures. Such a change could give rise to a Tax Event, which may permit the Company to shorten the maturity of the Junior Subordinated Debentures or to cause a redemption of the Capital Securities, as described more fully under "Description of Junior Subordinated Debentures--Redemption" and "Description of Capital Securities-- Redemption." UNITED STATES ALIEN HOLDERS For purposes of this discussion, a "United States Alien Holder" is any corporation, individual, partnership, estate or trust that is, as to the United States, a foreign corporation, a non-resident alien individual, a foreign partnership or a non-resident fiduciary of a foreign estate or trust. Under present United States federal income tax law: (i) payments by the Series B Issuer or any of its paying agents to any Securityholder who or which is a United States Alien Holder will not be subject to United States federal withholding tax, provided that (a) the Securityholder does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote, (b) the Securityholder is not a controlled foreign corporation that is related to the Company through stock ownership and (c) either (A) the Securityholder certifies to the Series B Issuer or its agent, under penalties of perjury, that it is not a United States holder and provides its name and address or (B) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "Financial Institution"), and holds the Capital Security in such capacity, certifies to the Series B Issuer or its agent, under penalties of perjury, that such statement has been received from the Securityholder by it or by a Financial Institution holding such security for the Securityholder and furnishes the Series B Issuer or its agent with a copy thereof; and (ii) a United States Alien Holder of a Capital Security will not be subject to federal withholding tax on any gain realized upon the sale or other disposition of a Capital Security. Recently proposed Internal Revenue Service Treasury regulations (the "Proposed Regulations") would provide alternative methods for satisfying the certification requirement described in clause (i)(c) above. The Proposed Regulations also would require, in the case of Capital Securities held by a foreign partnership, that (x) the certification described in clause (i)(c) above be provided by the partners rather than by the foreign partnership and (y) the partnership provide certain information, including a United States taxpayer identification number. A look-through rule would apply in the case of tiered partnerships. The Proposed Regulations are proposed to be effective for payments made after December 31, 1997. There can be no assurance that the Proposed Regulations will be adopted or as to the provisions that they will include if and when adopted in temporary or final form. INFORMATION REPORTING TO SECURITYHOLDERS Generally, income on the Capital Securities will be reported on Forms 1099, which forms should be mailed to Securityholders by January 31 following each calendar year. BACKUP WITHHOLDING Payments made on, and proceeds from the sale (including redemption) of, the Capital Securities may be subject to a "backup" withholding tax of 31% unless the Securityholder complies with certain certification requirements. Any withheld amounts will be allowed as credit against the Securityholder's United States federal income tax, provided the required information is provided to the Internal Revenue Service on a timely basis. 77 ERISA CONSIDERATIONS GENERAL A fiduciary of an employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") should consider fiduciary standards under ERISA in the context of the particular circumstances of such plan before authorizing an investment in the Exchange Capital Securities. Such fiduciary should consider whether the investment satisfies ERISA's diversification and prudence requirements, whether the investment constitutes unauthorized delegation of fiduciary authority and whether the investment is in accordance with the documents and instruments governing the plan. In addition, ERISA and the Code prohibit a wide range of transactions ("Prohibited Transactions") involving the assets of a plan subject to ERISA or the assets of an individual retirement account or plan subject to Section 4975 of the Code (hereinafter an "ERISA Plan") and persons who have certain specified relationships to the ERISA Plan ("parties in interest," within the meaning of ERISA, and "disqualified persons," within the meaning of the Code). Such transactions may require "correction" and may cause the ERISA Plan fiduciary to incur certain liabilities and the parties in interest or disqualified persons to be subject to excise taxes. The acquisition of any Exchange Capital Security by any person who is using for such acquisition the assets of an ERISA Plan shall constitute a representation by such person to the Company that (i) if the Company is a "party in interest" or a "disqualified person" with respect to such ERISA Plan, then such security is being acquired pursuant to an exemption from the Prohibited Transaction rules under ERISA and the Code (as discussed below), and (ii) the Company is not a "fiduciary," within the meaning of Section 3(21) of ERISA and the regulations thereunder, with respect to such person's interest in the Exchange Capital Securities. Governmental plans and certain church plans (each as defined under ERISA) are not subject to the Prohibited Transaction rules. Such plans may, however, be subject to federal, state or local laws or regulations which may affect their investment in the Exchange Capital Securities. Any fiduciary of such a governmental or church plan considering an investment in the Exchange Capital Securities should determine the need for, and the availability, if necessary, of any exemptive relief under such laws or regulations. THE DISCUSSION HEREIN OF ERISA IS GENERAL IN NATURE AND IS NOT INTENDED TO BE ALL INCLUSIVE. ANY FIDUCIARY OF AN ERISA PLAN, GOVERNMENTAL PLAN OR CHURCH PLAN CONSIDERING AN INVESTMENT IN THE EXCHANGE CAPITAL SECURITIES SHOULD CONSULT WITH ITS LEGAL ADVISORS REGARDING THE CONSEQUENCES OF SUCH INVESTMENT. PROHIBITED TRANSACTIONS The Company may be a party in interest or a disqualified person with respect to an ERISA Plan investing in the Exchange Capital Securities, and, therefore, such investments by an ERISA Plan may give rise to a Prohibited Transaction. Consequently, before investing in the Exchange Capital Securities, any person who is, or who in acquiring such Securities is using the assets of, an ERISA Plan should determine that an administrative exemption from the Prohibited Transaction rules discussed below or otherwise available is applicable to such person's investment in the Exchange Capital Securities, or that its investment in such securities will not result in a Prohibited Transaction. Certain administrative exemptions from the Prohibited Transaction rules under ERISA and the Code may be available to an ERISA Plan which is investing in the Exchange Capital Securities. Included in these exemptions are: Prohibited Transaction Class Exemption ("PTE") 90-1, regarding investments by insurance company pooled separate accounts; PTE 91-38, regarding investments by bank collective investment funds; PTE 84-14, regarding transactions effected by qualified professional asset managers; PTE 96-23, regarding transactions effected by in-house asset managers; or PTE 95-60, regarding investments by insurance company general accounts. 78 TRUST ASSETS AS "PLAN ASSETS" The Department of Labor has issued final regulations (the "Regulations") as to what constitutes assets of an employee benefit plan ("plan asset") under ERISA. The Regulations provide that, as a general rule, when an ERISA Plan acquires an equity interest in an entity and such interest does not represent a "publicly offered security" nor a security issued by an investment company registered under the Investment Company Act of 1940, the ERISA Plan's assets include both the equity interest and an undivided interest in each of the underlying assets of the entity, unless it is established either that the entity is an operating company or that equity participation in the entity by "benefit plan investors" (e.g., ERISA Plans, governmental plans, church plans and foreign plans) is not "significant." For purposes of the Regulations, the Series B Issuer will not be an investment company nor an operating company. As discussed below, at the time of the Exchange Offer, the Exchange Capital Securities may qualify as "publicly offered securities" for purposes of the Regulations, but such result cannot be assured. Under the Regulations, equity participation by benefit plan investors will not be considered "significant" on any date only if, immediately after the most recent acquisition of Exchange Capital Securities, the aggregate interest in the Exchange Capital Securities held by benefit plan investors will be less than 25% of the value of the Exchange Capital Securities. Although it is possible that the equity participation by benefit plan investors on any date will not be "significant" for purposes of the Regulations, such result cannot be assured. Consequently, if ERISA Plans acquire the Exchange Capital Securities, the Series B Issuer's assets could be deemed to be "plan assets" of such ERISA Plans for purposes of the fiduciary responsibility provisions of ERISA and the Code. Under ERISA, any person who exercises any authority or control respecting the management or disposition of the assets of an ERISA Plan is considered to be a fiduciary of such ERISA Plan. For example, the Property Trustee could therefore become a fiduciary of the ERISA Plans that invest in the Exchange Capital Securities and be subject to the general fiduciary requirements of ERISA in exercising its authority with respect to the management of the assets of the Series B Issuer. In addition, if the Company were considered to be a fiduciary with respect to the Series B Issuer as a result of certain powers it holds (such as the powers to remove and replace the Property Trustee and the Administrative Trustees), the optional redemption or acceleration of the Junior Subordinated Debentures to the Exchange Junior Subordinated Debentures could be considered to be Prohibited Transactions. Inasmuch as the Property Trustee or another person with authority or control respecting the management or disposition of the Series B Issuer's assets may become a fiduciary with respect to the ERISA Plans that will acquire the Exchange Capital Securities, there may be an improper delegation by such ERISA Plans of the responsibility to manage plan assets. The Exchange Capital Securities are being distributed pursuant to an effective registration statement under the Securities Act and subsequently will be registered under the Exchange Act. The Exchange Capital Securities may qualify as "publicly offered securities" under the Regulations if, in addition to such distribution and registration, at the time of the Exchange Offer they are also "widely held" and "freely transferable." Under the Regulations, a class of securities is "widely held" only if it is a class of securities that is owned by 100 or more investors independent of the issuer and of one another. Although it is possible that at the time of the Exchange Offer the Exchange Capital Securities will be "widely held," such result cannot be assured. Whether a security is "freely transferable" for purposes of the Regulations is a factual question to be determined on the basis of all relevant facts and circumstances. If at the time of the Exchange Offer the Exchange Capital Securities qualify as "publicly offered securities," the assets of the Series B Issuer should not be "plan assets" as of such time. If at the time of the Exchange Offer the Exchange Capital Securities do not qualify as "publicly offered securities," the "plan asset" considerations discussed in the immediately preceding paragraph could be applicable in connection with the investment by ERISA Plans in the Exchange Capital Securities. PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Capital Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Capital Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker- 79 dealer in connection with resales of Exchange Capital Securities received in exchange for Outstanding Capital Securities where such Outstanding Capital Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 199 , all dealers effecting transactions in the Exchange Capital Securities may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of Exchange Capital Securities by broker- dealers. Exchange Capital Securities received by broker- dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Capital Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Capital Securities. Any broker-dealer that resells Exchange Capital Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Capital Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Capital Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Each broker-dealer who surrenders Outstanding Capital Securities pursuant to the Exchange Offer will be deemed to have agreed, by execution of the Letter of Transmittal, that, upon receipt of notice from the Company or the Series B Issuer of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in this Prospectus untrue in any material respect or which causes this Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference herein, in the light of the circumstances under which they were made, not misleading, or of the occurrence of certain other events specified in the Registration Rights Agreement, such broker-dealer will suspend the sale of Exchange Securities pursuant to this Prospectus until the Company or the Series B Issuer has amended or supplemented this Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to such broker- dealer, or the Company or the Series B Issuer has given notice that the sale of the Exchange Securities may be resumed, as the case may be. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holders of the Outstanding Capital Securities) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Outstanding Capital Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. VALIDITY OF SECURITIES Certain matters of Delaware law relating to the validity of the Exchange Capital Securities will be passed upon by Richards, Layton & Finger, P.A., Wilmington, Delaware, counsel to the Company and the Series B Issuer. The validity of the Exchange Guarantee and the Exchange Junior Subordinated Debentures and certain matters relating to United States federal income tax considerations will be passed upon on behalf of the Series B Issuer and the Company by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York. Paul, Weiss, Rifkind, Wharton & Garrison may rely upon the opinion of Richards, Layton & Finger, P.A. as to matters of Delaware law. 80 EXPERTS The financial statements of the Company and its consolidated subsidiaries as of December 31, 1996 and 1995 and for the years ended December 31, 1996, 1995 and 1994 and the related financial statement schedules appearing in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 incorporated by reference in this Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report. 81 GLOSSARY OF SELECTED INSURANCE TERMS Combined ratio................. The sum of the expense ratio and the loss ratio. A combined ratio under 100% generally indicates an underwriting profit and a combined ratio over 100% generally indicates an underwriting loss. The extent by which the combined ratio deviates from 100% indicates relative underwriting profit or loss. Direct premiums written........ Total premiums written by an insurer other than premiums for reinsurance assumed by an insurer. Expense ratio.................. Under statutory accounting, the ratio of underwriting expenses to net premiums written. Under GAAP accounting, the ratio of underwriting expenses to premiums earned. GAAP........................... Generally accepted accounting principles. Loss adjustment expenses ("LAE")........................ The expenses of settling claims, including legal and other fees and expenses, and the portion of general expenses allocated to claim settlement costs. Loss ratio..................... The ratio of incurred losses and loss adjustment expenses to premium earned. Loss reserves.................. Estimated liabilities established by insurers to reflect the estimated cost of claims payments and the related expenses that the insurer will ultimately be required to pay in respect of insurance it has written. Reserves are established for losses and for loss adjustment expenses. Net premiums written........... The portion of direct premiums written retained by an insurer after deducting premiums on business ceded. Premiums earned................ The portion of net premiums written applicable to the expired period of policies. Reinsurance.................... A procedure whereby an insurer transfers ("cedes") to another insurer all or a portion of the risk insured in consideration of a premium. Reinsurance can be effected by a "treaty," where reinsurance automatically covers a portion of all risks of a defined category, amount and type, or by "facultative" reinsurance, where reinsurance is negotiated on a contract-by- contract basis. Although reinsurance does not legally discharge the ceding insurer from primary liability for the full amount of the policies ceded, the assuming reinsurer is liable to the extent of the coverage ceded. Retention...................... The amount or portion of risk which an insurer assumes for its own account. Losses in excess of the retention level are paid by the reinsurer. In proportional treaties, the retention may be a percentage of the original policy's limit. In excess of loss treaties, the retention is a dollar amount of loss, a loss ratio or a percentage. 82 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE- SENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SERIES B ISSUER. NEITHER THE DE- LIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUM- STANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THE SERIES B ISSUER SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, THE SE- CURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SO- LICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. --------------- TABLE OF CONTENTS
PAGE ---- Available Information..................................................... 6 Prospectus Summary........................................................ 8 The Company............................................................... 15 Integon Capital I......................................................... 17 Risk Factors.............................................................. 18 Use of Proceeds........................................................... 28 Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.................................... 28 Accounting Treatment...................................................... 28 Capitalization............................................................ 29 Selected Financial Information............................................ 30 Exchange Offer............................................................ 31 Description of Capital Securities......................................... 40 Description of Junior Subordinated Debentures............................. 57 Description of Guarantee.................................................. 70 The Expense Agreement..................................................... 72 Relationship Among the Capital Securities, the Junior Subordinated Debentures, the Guarantee and the Expense Agreement...................... 72 Certain Federal Income Tax Considerations................................. 75 ERISA Considerations...................................................... 78 Plan of Distribution...................................................... 79 Validity of Securities.................................................... 80 Experts................................................................... 81 Glossary of Selected Insurance Terms...................................... 82
UNTIL , 199 , ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE SECU- RITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DE- LIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UN- SOLD ALLOTMENT. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- $100,000,000 INTEGON CAPITAL I OFFER TO EXCHANGE ITS 10 3/4% CAPITAL SECURITIES, SERIES B WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR ANY AND ALL OF ITS OUTSTANDING 10 3/4% CAPITAL SECURITIES, SERIES A (LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) FULLY AND UNCONDITIONALLY GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY INTEGON CORPORATION --------------- PROSPECTUS --------------- , 1997 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law (the "DGCL") grants a Delaware corporation the power to indemnify any director, officer, employee or agent against reasonable expenses (including attorneys' fees) incurred by him in connection with any proceeding brought by or on behalf of the corporation and against judgments, fines, settlements and reasonable expenses (including attorneys' fees) incurred by him in connection with any other proceeding, if (a) he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and (b) in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful. Except as ordered by a court, however, no indemnification is to be made in connection with any proceeding brought by or in the right of the corporation where the person involved is adjudged to be liable to the corporation. Section 10 of the Company's restated certificate of incorporation and Article 8 of the Company's by-laws provide that the Company shall to the extent not prohibited by law, indemnify any person who is or was made, or threatened to be made, a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including, without limitation, an action by or in the right of the Corporation to procure a judgment in its favor, by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a director or officer of the Company, or is or was serving in any capacity at the request of the Company for any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (an "Other Entity"), against judgments, fines, penalties, excise taxes, amounts paid in settlement and costs, charges and expenses (including attorneys's fees and disbursements). Persons who are not directors or officers of the Company may be similarly indemnified in respect of service to the Company or to an Other Entity at the request of the Company to the extent the Board of Directors at any time specifies that such persons are entitled to the benefits of these provisions. Section 102 of the DGCL permits the limitation of directors' personal liability to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director except for (i) any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) breaches under section 174 of the DGCL, which relate to unlawful payments of dividends or unlawful stock repurchase or redemptions, and (iv) any transaction from which the director derived an improper personal benefit. Section 9 of the Company's restated certificate of incorporation limits the personal liability of directors of the Company to the fullest extent permitted by paragraph (7) of subsection (b) of section 102 of the DGCL. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. Pursuant to article 6 of the Registration Rights Agreement, the Company and the Series B Issuer have agreed to indemnify the holders of the securities to be included in the Registration Statement, the underwriters participating in any offering or sale of such securities and any controlling person of such persons against any losses, claims, damages, liabilities or expenses that may arise out of an untrue statement or alleged untrue statement of or omission to state a material fact, contained in the registration statement or prospectus provided to such persons by the Company or the Series B Issuer, except where such statement or omission arises from written information provided by such persons to the Company or the Series B Issuer for use in such registration statement or prospectus. The Company and the Series B Issuer may require an undertaking from the holders of the securities to be included in the Registration Statement and the underwriters participating in any offering or sale of such securities, to indemnify the Company and the Series B Issuer and their directors and controlling II-1 persons to the same extent as the foregoing indemnity from the Company and the Series B Issuer but only with reference to written information provided by such persons to the Company and the Series B Issuer for use in such registration statement and prospectus. The Company's Directors' and Officers' Liability and Reimbursement Insurance Policies are designed to reimburse the Company for any payments made by it pursuant to the foregoing indemnification. Such policies have aggregate coverage of $20 million. Section 8.6 of the Trust Agreement provides that the Company shall indemnify each Issuer Trustee and Administrator and their affiliates, officers, directors, shareholders, employees, representatives or agents, and any employee or agent of the Series B Issuer or its affiliates (each, an "Indemnified Person") from and against any and all loss, damage, liability, tax, penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person by reason of the creation, operation or termination of the Series B Issuer or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Series B Issuer, except where such loss, damage or claim was incurred by such Indemnified Person by reason of its negligence (in the case of the Property Trustee), its gross negligence (in the case of the Administrators and the Delaware Trustee), or its willful misconduct with respect to such acts or omissions. Section 6.7 of the Junior Subordinated Indenture provides that the Company shall indemnify each of the Debenture Trustee and any predecessor Debenture Trustee for, and to hold it harmless against, any and all loss, liability, damage, claim or expense (including the reasonable compensation and the expenses and disbursements of its agents and counsel) incurred without negligence or bad faith, arising out of or in connection with the acceptance or administration of the debenture trust or the performance of its duties thereunder, 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. Section 3.3 of the Guarantee Agreement provides for similar indemnification of the Guarantee Trustee. II-2 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT NO. DESCRIPTION OF EXHIBIT ----------- ---------------------- 3 Amended and Restated by-laws of the Company, effective February 18, 1997. 4.1 Junior Subordinated Indenture, dated as of February 10, 1997, between the Company and First Union National bank of North Carolina, as Trustee. 4.2 Form of Junior Subordinated Deferrable Interest Debenture. 4.3 Certificate of Trust of Integon Capital I (the "Series B Issuer") dated January 27, 1997. 4.4 Amended and Restated Trust Agreement of the Series B Issuer, dated as of February 10, 1997, among the Company, as depositor, the Administrators thereof, First Union Bank of Delaware, as Delaware Trustee, First Union National Bank of North Carolina as Property Trustee and the holders from time to time of undivided interests in the assets of the Series B Issuer. 4.5 Form of Capital Security for the Series B Issuer (included in the Amended and Restated Agreement filed as Exhibit 4.4 to this Registration Statement). 4.6 Guarantee Agreement, dated as of February 10, 1997, between the Company and First Union National Bank of North Carolina, as Guarantee Trustee. 4.7 Exchange and Registration Rights Agreement, dated February 10, 1997, among the Company, the Series B Issuer and Goldman, Sachs & Co., as Representative for the Initial Purchasers. 4.8 Expense Agreement, dated as of February 10, 1997, between the Company and the Series B Issuer. 5.1 Opinion of Richards, Layton & Finger as to validity of the Capital Securities. 5.2 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to validity of the Exchange Junior Subordinated Debentures and the Exchange Guarantee to be issued by the Company. 8 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to certain federal income tax matters. 11 Statement of Computation of Per Share Earnings (incorporated by reference to Exhibit 11.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996). 12 Statement of Computation of Ratios of Earnings to Fixed Charges. 21 Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996). 23.1 Consent of Deloitte & Touche L.L.P. 23.2 Consent of Richards, Layton & Finger (included in the opinion filed as Exhibit 5.1 to this Registration Statement). 23.3 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the opinion filed as Exhibit 5.2 to this Registration Statement). 23.4 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the opinion filed as Exhibit 8 to this Registration Statement). 24 Powers of Attorney (included on signature page of this Part II). 25.1 Form T-1 Statement of Eligibility of First Union National Bank of North Carolina to act as trustee under the Junior Subordinated Indenture. 25.2 Form T-1 Statement of Eligibility of First Union National Bank of North Carolina to act as trustee under the Amended and Restated Trust Agreement. 25.3 Form T-1 Statement of Eligibility of First Union National Bank of North Carolina under the Guarantee for the benefit of the holders of Capital Securities. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Exchange Agency Agreement.
II-3 ITEM 22. UNDERTAKINGS. Each of the undersigned registrants hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and where applicable, each filing of an employee's benefit plan's annual report pursuant to Section 15(d) of the Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The registrants hereby undertake to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under section 305(b)(2) of the Trust Indenture Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. Each of the undersigned registrants hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. Each of the undersigned registrants hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. II-4 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON MARCH 4, 1997. Integon Corporation /s/ John C Head III By __________________________________ JOHN C HEAD III CHIEF EXECUTIVE OFFICER(PRINCIPAL EXECUTIVE OFFICER) POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Donald F. McKee, John B. Yorke and Steven C. Andrews, and each of them, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in- fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED, ON MARCH 4, 1997. SIGNATURES TITLE /s/ John C Head III Chairman of the - ------------------------------------- Board, Chief JOHN C HEAD III Executive Officer (Principal Executive Officer) /s/ Donald F. McKee Senior Vice - ------------------------------------- President Finance DONALD F. MCKEE and Administration and Chief Financial Officer (Principal Financial Officer) /s/ Lester L. Coleman Director - ------------------------------------- LESTER L. COLEMAN /s/ Charles H. Jamison Director - ------------------------------------- CHARLES H. JAMISON II-5 SIGNATURES TITLE Director - ------------------------------------- JOHN B. MCKINNON /s/ Derek V. Smith Director - ------------------------------------- DEREK V. SMITH Director - ------------------------------------- FREDERICK B. WHITTEMORE /s/ Ronald N. Zebeck Director - ------------------------------------- RONALD N. ZEBECK II-6 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, INTEGON CAPITAL I HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON MARCH 4, 1997. Integon Capital I /s/ John B. Yorke By___________________________________ JOHN B. YORKE ADMINISTRATOR /s/ Donald F. McKee By___________________________________ DONALD F. MCKEE ADMINISTRATOR II-7 EX-3 2 AMENDED AND RESTATED BY-LAWS OF THE COMPANY EXHIBIT 3 BY-LAWS of INTEGON CORPORATION (A Delaware Corporation) (Effective as of February 18, 1997) ______________________________ ARTICLE 1 DEFINITIONS ----------- As used in these By-laws, unless the context otherwise requires, the term: 1.1 "Assistant Secretary" means an Assistant Secretary of the Corporation. 1.2 "Assistant Treasurer" means an Assistant Treasurer of the Corporation. 1.3 "Board" means the Board of Directors of the Corporation. 1.4 "By-laws" means the initial by-laws of the Corporation, as amended from time to time. 1.5 "Certificate of Incorporation" means the initial certificate of incorporation of the Corporation, as amended, supplemented or restated from time to time. 1.6 "Chairman" means the Chairman of the Board of Directors of the Corporation. 1.7 "Corporation" means Integon Corporation. 1.8 "Directors" means directors of the Corporation. 1.9 "Entire Board" means the total number of Directors that the Corporation would have if there were no vacancies. 1.10 "General Corporation Law" means the General Corporation Law of the State of Delaware, as amended from time to time. 1.11 "Office of the Corporation" means the executive office of the Corporation, anything in Section 131 of the General Corporation Law to the contrary notwithstanding. 1 1.12 "President" means the President of the Corporation. 1.13 "Secretary" means the Secretary of the Corporation. 1.14 "Stockholders" means stockholders of the Corporation. 1.15 "Treasurer" means the Treasurer of the Corporation. 1.16 "Vice Chairman" means the Vice Chairman of the Board of Directors of the Corporation. 1.17 "Vice President" means a Vice President of the Corporation. ARTICLE 2 STOCKHOLDERS ------------ 2.1 Place of Meetings. Every meeting of stockholders shall be held ----------------- at the Office of the Corporation or at such other place within or without the State of Delaware as shall be specified or fixed in the notice of such meeting or in the waiver of notice thereof. 2.2 Annual Meeting. A meeting of stockholders shall be held -------------- annually for the election of Directors and the transaction of other business. During 1992, the meeting shall be held in February, and commencing in 1993, such meeting shall be held in April or May at such hour and on such business day, all as may be determined by the Board and designated in the notice of meeting. 2.3 Deferred Meeting for Election of Directors, Etc. If the ------------------------------------------------ annual meeting of stockholders for the election of Directors and the transaction of other business is not held within the months specified in Section 2.2 hereof, the Board shall call a meeting of stockholders for the election of Directors and the transaction of other business as soon thereafter as convenient. 2.4 Other Special Meetings. A special meeting of stockholders ---------------------- (other than a special meeting for the election of Directors), unless otherwise prescribed by statute, may be called at any time by the Chairman, the President or the Secretary and must be called by any such officer at the written request of the Board. At any special meeting of stockholders only such business may be transacted as is related to the purpose or purposes of such meeting set forth in the notice thereof given pursuant to Section 2.6 hereof or in any waiver of notice thereof given pursuant to Section 2.7 hereof. 2.5 Fixing Record Date. For the purpose of (a) determining the ------------------ stockholders entitled (i) to notice of or to vote at any meeting of stockholders or any adjournment thereof, or (ii) to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any 2 rights in respect of any change, conversion or exchange of stock; or (b) any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date was adopted by the Board and which record date shall not be (x) in the case of clause (a)(i) above, more than 60 nor less than 30 days before the date of such meeting, and (y) in the case of clause (a)(ii) or (b) above, more than 60 days prior to such action. If no such record date is fixed: 2.5.1 the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day immediately preceding the day on which notice is given, or, if notice is waived, at the close of business on the day immediately preceding the day on which the meeting is held; 2.5.2 the record date for determining stockholders for any purpose other than those specified in Section 2.5.1 shall be at the close of business on the day on which the Board adopts the resolution relating thereto. When a determination of stockholders entitled to notice of or to vote at any meeting of stockholders has been made as provided in this Section 2.5, such determination shall apply to any adjournment thereof unless the Board fixes a new record date for the adjourned meeting. 2.6 Notice of Meetings of Stockholders. Except as otherwise ---------------------------------- provided in Sections 2.5 and 2.7 hereof, whenever under the provisions of any statute, the Certificate of Incorporation or these By-laws, stockholders are required or permitted to take any action at a meeting, written notice shall be given stating the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by any statute, the Certificate of Incorporation or these By-laws, a copy of the notice of any meeting shall be given, personally or by mail, not less than 30 nor more than 60 days before the date of the meeting, to each stockholder entitled to notice of or to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, with postage prepaid, directed to the stockholder at his or her address as it appears on the records of the Corporation. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent of the Corporation that the notice required by this Section 2.6 has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted at the meeting as originally called. If, however, the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.7 Waivers of Notice. Whenever the giving of any notice is ----------------- required by statute, the Certificate of Incorporation or these By-laws, a waiver thereof, in writing, signed by the stockholder or stockholders entitled to said notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance by a stockholder at a 3 meeting shall constitute a waiver of notice of such meeting except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by statute, the Certificate of Incorporation or these By-laws. 2.8 List of Stockholders. The Secretary shall prepare and make, or -------------------- cause to be prepared and made, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder or the stockholder's agent or attorney, at the stockholder's expense, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The Corporation shall maintain the stockholder list in written form or in another form capable of conversion into written form within a reasonable time. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. 2.9 Quorum of Stockholders; Adjournment. Except as otherwise ----------------------------------- provided by any statute, the Certificate of Incorporation or these By-laws, the holders of one-third of all outstanding shares of stock entitled to vote at any meeting of stockholders, present in person or represented by proxy, shall constitute a quorum for the transaction of any business at such meeting; provided, however, that when, under applicable rules of the New York - -------- ------- Stock Exchange, Inc., stockholder approval of a proposal or transaction (an "item of business") is a prerequisite to the listing of any additional or new securities of the Corporation proposed to be listed, the holders of shares of stock entitled to cast a majority of the votes entitled to be cast at any meeting of stockholders, present in person or represented by proxy, shall be necessary to constitute a quorum for the transaction of the item of business for which such approval is required. When a quorum is once present to organize a meeting of stockholders, it is not broken by the subsequent withdrawal of any stockholders. The holders of a majority of the shares of stock present in person or represented by proxy at any meeting of stockholders, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place. Shares of its own stock held by the Corporation or by another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing -------- ------- shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. 2.10 Voting; Proxies. Unless otherwise provided in the Certificate --------------- of Incorporation, 4 every stockholder of record shall be entitled at every meeting of stockholders to one vote for each share of capital stock standing in his or her name on the record of stockholders determined in accordance with Section 2.5 hereof. If the Certificate of Incorporation provides for more or less than one vote for any share on any matter, each reference in the By-laws or the General Corporation Law to a majority or other proportion of stock shall refer to such majority or other proportion of the votes of such stock. The provisions of Section 212 and 217 of the General Corporation Law shall apply in determining whether any shares of capital stock may be voted and the persons, if any, entitled to vote such shares; but the Corporation shall be protected in assuming that the persons in whose names shares of capital stock stand on the stock ledger of the Corporation are entitled to vote such shares. Holders of redeemable shares of stock are not entitled to vote after the notice of redemption is mailed to such holders and a sum sufficient to redeem the stock has been deposited with a bank, trust company or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the shares of stock. At any meeting of stockholders (at which a quorum was present to organize the meeting), all matters, except as otherwise provided by statute or by the Certificate of Incorporation or by these By-laws, shall be decided by a majority of the votes cast at such meeting by the holders of shares present in person or represented by proxy and entitled to vote thereon, whether or not a quorum is present when the vote is taken. All elections of Directors shall be by written ballot unless otherwise provided in the Certificate of Incorporation. In voting on any other question on which a vote by ballot is required by law or is demanded by any stockholder entitled to vote, the voting shall be by ballot. Each ballot shall be signed by the stockholder voting or the stockholder's proxy and shall state the number of shares voted. On all other questions, the voting may be viva voce. ---- ---- Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy. The validity and enforceability of any proxy shall be determined in accordance with section 212 of the General Corporation Law. A stockholder may revoke any proxy that is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by delivering a proxy in accordance with applicable law bearing a later date to the Secretary. 2.11 Voting Procedures and Inspectors of Election at Meetings of ------------------------------------------------------------ Stockholders. The Board, in advance of any meeting of stockholders, may - ------------ appoint one or more inspectors to act at the meeting or any adjournment thereof and make a written report thereof. The Board may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting or if no inspectors are so appointed, the person presiding at the meeting may, and on the request of any stockholder entitled to vote thereat shall, appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall (a) ascertain the number of shares outstanding and the voting power of each, (b) determine the shares represented at the meeting, the existence of a quorum and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in 5 the performance of their duties. Unless otherwise provided by the Board, the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be determined by the person presiding at the meeting and shall be announced at the meeting. No ballot, proxies or votes, or any revocation thereof or change thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery of the State of Delaware upon application by a stockholder shall determine otherwise. 2.12 Organization. At each meeting of stockholders, the Chairman, ------------ or in the absence of the Chairman, the Vice Chairman, or in the absence of the Vice Chairman, the President, or in the absence of the President, a Vice President, and in case more than one Vice President shall be present, that Vice President designated by the Board (or in the absence of any such designation, the most senior Vice President, based on age), shall act as chairman of the meeting. The Secretary, or in his or her absence one of the Assistant Secretaries, shall act as secretary of the meeting. In case none of the officers above designated to act as chairman or secretary of the meeting, respectively, shall be present, a chairman or a secretary of the meeting, as the case may be, shall be chosen by a majority of the votes cast at such meeting by the holders of shares of capital stock present in person or represented by proxy and entitled to vote at the meeting. 2.13 Order of Business. The order of business at all meetings of ----------------- stockholders shall be as determined by the chairman of the meeting, but the order of business to be followed at any meeting at which a quorum is present may be changed by a majority of the votes cast at such meeting by the holders of shares of capital stock present in person or represented by proxy and entitled to vote at the meeting. 2.14 Advance Notice of Stockholder Proposals and Stockholder -------------------------------------------------------- Nominations. - ----------- (A) At any annual meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (i) pursuant to the notice of meeting (or any supplement thereto) given by or at the direction of the Board, (ii) otherwise by or at the direction of the Board or (iii) by any stockholder of the Corporation who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 2.14 (A). For business to be properly brought before any annual meeting of the stockholders by a stockholder, the stockholder must have given notice thereof in writing to the Secretary not less than 60 nor more than 90 days in advance of the anniversary of the previous year's annual meeting; provided, however, that in the event the date of the annual meeting is changed by more than 30 days from such anniversary date, notice by the stockholder to be timely must be received no later than the close of business on the tenth day following the earlier of the day on which notice of the meeting was mailed or the day of the first public announcement of the date of the meeting. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting (1) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (2) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (3) the class and number of shares of the Corporation that are beneficially owned by the stockholder, and (4) any material interest of the stockholder in such business. The stockholder making such proposal shall promptly 6 provide any other information reasonably requested by the Corporation. Notwithstanding anything in these By-laws to the contrary, no business shall be conducted at any annual meeting of the stockholders except in accordance with the procedures set forth in this Section 2.14. The chairman of any such meeting shall direct that any business not properly brought before the meeting shall not be considered. Notwithstanding the foregoing provisions of this Section 2.14(A), a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, with respect of the matters set forth in this Section 2.14. (B) Nominations for the election of Directors may be made by the Board or by any stockholder entitled to vote in the election of Directors; provided, however, that a stockholder may nominate a person for ------- election as a Director at a meeting only if written notice of such stockholder's intent to make such nomination has been given to the Secretary (i) in the case of an annual meeting, not later than 60 nor more than 90 days in advance of the anniversary of the previous year's annual meeting; provided, however, that in the event the date of the annual meeting is changed by more than 30 days from such anniversary date, notice by the stockholder to be timely must be received no later than the close of business on the tenth day following the earlier of the day on which notice of the meeting was mailed or the day of the first public announcement of the date of the meeting and (ii) in the case of a special meeting at which Directors are to be elected, not later than the tenth day following the earlier of the day on which notice of the meeting was mailed or the day of the first public announcement of the date of the meeting. Each such notice shall set forth: (i) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (ii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting and nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (iv) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, by the Board; and (v) the consent of each nominee to serve as a Director of the Corporation if so elected. In addition, the stockholder making such nomination shall promptly provide any other information reasonably requested by the Corporation. No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth in this Section 2.14(B). The chairman of any meeting of stockholders shall direct that any nomination not made in accordance with these procedures be disregarded. Notwithstanding the foregoing provisions of this Section 2.14(B), a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, with respect of the matters set forth in this Section 2.14. 7 8 ARTICLE 3 Directors --------- 3.1 General Powers. Except as otherwise provided in the -------------- Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board. The Board may adopt such rules and regulations, not inconsistent with the Certificate of Incorporation or these By-laws or applicable laws, as it may deem proper for the conduct of its meetings and the management of the Corporation. In addition to the powers expressly conferred by these By-laws, the Board may exercise all powers and perform all acts that are not required, by these By-laws or the Certificate of Incorporation or by statute, to be exercised and performed by the stockholders. 3.2 Number; Qualification; Term of Office. The Board shall consist ------------------------------------- of one or more members. The number of Directors shall be fixed initially by the incorporator and may thereafter be changed from time to time by action of the stockholders or by action of the Board. Directors need not be stockholders. Each Director shall hold office until a successor is elected and qualified or until the Director's death, resignation or removal. Notwithstanding the foregoing, no person may be elected or re-elected a Director of the Corporation if at the time of his or her election or re-election, he or she shall have obtained the age of 67 years; provided, however, that the Board by resolution may waive such age limitation in any year and from year to year with respect to any Director or Directors. (Effective 5/11/95) 3.3 Classification. The Directors, other than those who may be -------------- elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, as determined by the Board of Directors, one class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1993, another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1994, and another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1995, with the directors of each class to hold office until their successors are elected and qualified. At each annual meeting of the stockholders, the successors of the class of Directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. No decrease in the number of Directors constituting the Board of Directors or change in the restrictions and qualifications for Directors shall shorten the term of any incumbent Director. 3.4 Election. Directors shall, except as otherwise required by -------- statute or by the Certificate of Incorporation, be elected by a plurality of the votes case at a meeting of stockholders by the holders of shares entitled to vote in the election. 3.5 Newly Created Directorships and Vacancies. Unless otherwise ----------------------------------------- provided in the Certificate of Incorporation, newly created Directorships resulting from an increase in the number 9 of Directors and vacancies occurring on the Board resulting from death, resignation, retirement, disqualification, removal or other cause shall be filled only by the affirmative votes of a majority of the remaining Directors then in office, although less than a quorum, or by a sole remaining Director. A Director elected to fill a vacancy shall hold office for the remainder of the full term of the class of Directors in which the new Directorship was created or the vacancy occurred and until such Director's successor shall have been elected and qualified. 3.6 Resignation. Any Director may resign at any time by written ----------- notice to the Corporation. Such resignation shall take effect at the time therein specified, and, unless otherwise specified in such resignation, the acceptance of such resignation shall not be necessary to make it effective. 3.7 Removal. Any and all of the Directors may be removed only for ------- cause by vote of the holders of 66-2/3% of the shares entitled to vote at an election of Directors. 3.8 Compensation. Each Director, in consideration of his or her ------------ service as such, shall be entitled to receive from the Corporation such amount per annum or such fees for attendance at Directors' meetings, or both, as the Board may from time to time determine, together with reimbursement for the reasonable out-of-pocket expenses, if any, incurred by such Director in connection with the performance of his or her duties. Each Director who shall serve as a member of any committee of Directors in consideration of serving as such shall be entitled to such additional amount per annum or such fees for attendance at committee meetings, or both, as the Board may from time to time determine, together with reimbursement for the reasonable out-of-pocket expenses, if any, incurred by such Director in the performance of his or her duties. Nothing contained in this Section 3.8 shall preclude any Director from serving the Corporation or its subsidiaries in any other capacity and receiving proper compensation therefor. 3.9 Times and Places of Meetings. The Board may hold meetings, ---------------------------- both regular and special, either within or without the State of Delaware. The times and places for holding meetings of the Board may be fixed from time to time by resolution of the Board or (unless contrary to a resolution of the Board) in the notice of the meeting. 3.10 Annual Meetings. On the day when and at the place where the --------------- annual meeting of stockholders for the election of Directors is held, and as soon as practicable thereafter, the Board may hold its annual meeting, without notice of such meeting, for the purposes of organization, the election of officers and the transaction of other business. The annual meeting of the Board may be held at any other time and place specified in a notice given as provided in Section 3.12 hereof for special meetings of the Board or in a waiver of notice thereof. 3.11 Regular Meetings. Regular meetings of the Board may be held ---------------- without notice at such times and at such places as shall from time to time be determined by the Board. 3.12 Special Meetings. Special meetings of the Board may be called ---------------- by the Chairman, the Vice Chairman, the President or the Secretary or by any two or more Directors then serving on 10 at least one day's notice to each Director given by one of the means specified in Section 3.15 hereof other than by mail, or on at least three days' notice if given by mail. Special meetings shall be called by the Chairman, the Vice Chairman, the President or the Secretary in like manner and on like notice on the written request of any two or more of the Directors then serving. 3.13 Telephone Meetings. Directors or members of any committee ------------------ designated by the Board may participate in a meeting of the Board or of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.13 shall constitute presence in person at such meeting. 3.14 Adjourned Meetings. A majority of the Directors present at any ------------------ meeting of the Board, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place. At least one day's notice of any adjourned meeting of the Board shall be given to each Director whether or not present at the time of the adjournment, if such notice shall be given by one of the means specified in Section 3.15 hereof other than by mail, or at least three days' notice if by mail. Any business may be transacted at an adjourned meeting that might have been transacted at the meeting as originally called. 3.15 Notice Procedure. Subject to Sections 3.12 and 3.18 hereof, ---------------- whenever, under the provisions of any statute, the Certificate of Incorporation or these By-laws, notice is required to be given to any Director, such notice shall be deemed given effectively if given in person or by telephone, by mail addressed to such Director at such Director's address as it appears on the records of the Corporation, with postage thereon prepaid, or by telegram, telex, telecopy or similar means addressed as aforesaid. 3.16 Waiver of Notice. Whenever the giving of any notice is ---------------- required by statute, the Certificate of Incorporation or these By-laws, a waiver thereof, in writing, signed by the person or persons entitled to said notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance by a person at a meeting shall constitute a waiver of notice of such meeting except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Directors or a committee of Directors need be specified in any written waiver of notice unless so required by statute, the Certificate of Incorporation or these By-laws. 3.17 Organization. At each meeting of the Board, the Chairman, or ------------ in the absence of the Chairman, the Vice Chairman, or in the absence of the Vice Chairman, the President, or in the absence of the President a chairman chosen by a majority of the Directors present, shall preside. The Secretary shall act as secretary at each meeting of the Board. In case the Secretary shall be absent from any meeting of the Board, an Assistant Secretary shall perform the duties of secretary at such meeting; and in the absence from any such meeting of the Secretary and all Assistant Secretaries, the person presiding at the meeting may appoint any person to act as secretary of the 11 meeting. 3.18 Quorum of Directors. The presence in person of a majority of ------------------- the entire Board shall be necessary and sufficient to constitute a quorum for the transaction of business at any meeting of the Board, but a majority of a smaller number may adjourn any such meeting to a later date. 3.19 Action by Majority Vote. Except as otherwise expressly ----------------------- required by statute, the Certificate of Incorporation or these By-laws, the act of a majority of the Directors present at the meeting at which a quorum is present shall be the act of the Board. 3.20 Action Without Meeting. Unless otherwise restricted by the ---------------------- Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all Directors or members of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. 3.21 Chairman. The Board, may from time to time, elect from among -------- its members a Chairman who shall preside at all meetings of the Board or the stockholders at which the Chairman is present. The Chairman shall have only such other duties and authority as may be expressly set forth in a resolution adopted by the Board. The Chairman may provide to the President and Chief Exeuctive Officer such advice and consultation concerning the affairs and business of the Corporation as the Chairman shall deem appropriate and the President and Chief Executive Officer shall take such advice and consultation into account in such manner as he or she shall deem advisable under the circumstances. The Chairman shall not be an officer of the Corporation solely by virtue of service as Chairman. The Chairman may be an officer of the Corporation if duly appointed as an officer by a resolution of the Board. ARTICLE 4 COMMITTEES OF THE BOARD ----------------------- The Board may, by resolution passed by a vote of the Entire Board, designate one or more committees, each committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any committee to replace absent or disqualified members at any meeting of such committee. If a member of a committee shall be absent from any meeting, or disqualified from voting thereat, the remaining member or members present and not disqualified from voting, whether or not such member or members constitute a quorum, may, by a unanimous vote, appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board passed as aforesaid, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the 12 Corporation, and may authorize the seal of the Corporation to be impressed on all papers that may require it, but no such committee shall have the power or authority of the Board in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation under Section 251 or 252 of the General Corporation Law, selling, leasing or exchanging all or substantially all of the Corporation's property and assets, dissolving or revoking the dissolution of the Corporation or amending the By-laws of the Corporation; and, unless the resolution designating it expressly so provides, no such committee shall have the power and authority to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. Unless otherwise specified in the resolution of the Board designating a committee, at all meetings of such committee a majority of the total number of members of the committee shall constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at any meeting at which there is a quorum shall be the act of the committee. Each committee shall keep regular minutes of its meetings. Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article 3 of these By-laws. ARTICLE 5 OFFICERS -------- 5.1 Positions. The officers of the Corporation shall be a --------- Chairman, a Vice Chairman, a President, a Secretary, a Treasurer and such other officers as the Board may appoint, including one or more Vice Presidents and one or more Assistant Secretaries and Assistant Treasurers, who shall exercise such powers and perform such duties as shall be determined from time to time by the Board. The Board may designate one or more Vice Presidents as Executive Vice Presidents and may use descriptive words or phrases to designate the standing, seniority or areas of special competence of the Vice Presidents elected or appointed by it. Any umber of offices may be held by the same person unless the Certificate of Incorporation or these By-laws otherwise provide. 5.2 Appointment. The officers of the Corporation shall be chosen ----------- by the Board annually or at such other time or times as the Board shall determine. 5.3 Compensation. The compensation of all officers of the ------------ Corporation shall be fixed by the Board. No officer shall be prevented from receiving a salary or other compensation by reason of the fact that the officer is also a Director. 5.4 Term of Office. Each officer of the Corporation shall hold -------------- office until such officer's successor is chosen and qualifies or until such officer's earlier death, resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Such 13 resignation shall take effect at the date of receipt of such notice or at such later time as is therein specified, and, unless otherwise specified, the acceptance of such resignation shall not be necessary to make it effective. The resignation of an officer shall be without prejudice to the contract rights of the Corporation, if any. Any officer elected or appointed by the Board may be removed at any time, with or without cause, by vote of a majority of the entire Board. Any vacancy occurring in any office of the Corporation shall be filled by the Board. The removal of an officer without cause shall be without prejudice to the officer's contract rights, if any. The election or appointment of an officer shall not of itself create contract rights. 5.5 Fidelity Bonds. The Corporation may secure the fidelity of any -------------- or all of its officers or agents by bond or otherwise. 5.6 Intentionally Omitted. (Effective 2/18/97) --------------------- 5.7 Intentionally Omitted. (Effective 2/18/97) --------------------- 5.8 President and Chief Executive Officer. The President and Chief ------------------------------------- Executive Officer shall be the principal executive officer of the Corporation, and subject solely to the control of the board and any authorized committee thereof acting by resolution duly adopted, shall in general supervise and control all of the business and affairs of the Corporation. The President and Chief Executive Officer may sign and execute in the name of the Corporation, deeds, mortgages, bonds, contracts and other instruments except in cases in which the signing and execution thereof shall be expressly delegated by the Board or by these By-laws to some other officer or agent of the Corporation or shall be required by statute otherwise to be signed or executed and, in general, the President and Chief Executive Officer shall perform all duties incident to the office of President and Chief Executive Officer of a corporation and such other duties as may from time to time be assigned to the President and Chief Executive Officer by the Board. (Effective 2/18/97) 5.9 Vice Presidents. At the request of the President, or, in the --------------- President's absence, at the request of the Board, the Vice Presidents shall (in such order as may be designated by the Board or, in the absence of any such designation, in order of seniority based on age) perform all of the duties of the President and, in so performing, shall have all the powers of, and be subject to all restrictions upon, the President. Any Vice President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments, except in cases in which the signing and execution thereof shall be expressly delegated by the Board or by these By-laws to some other officer or agent of the Corporation, or shall be required by statute otherwise to be signed or executed, and each Vice President shall perform such other duties as from time to time may be assigned to such Vice President by the Board or by the President. 5.10 Secretary. The Secretary shall attend all meetings of the --------- Board and of the stockholders and shall record all the proceedings of the meetings of the Board and of the stockholders in a book to be kept for that purpose, and shall perform like duties for committees of the Board, when required. The Secretary shall give, or cause to be given, notice of all special meetings of the Board and of the stockholders and shall perform such other duties as may be 14 prescribed by the Board or by the President, under whose supervision the Secretary shall be. The Secretary shall have custody of the corporate seal of the Corporation, and the Secretary, or an Assistant Secretary, shall have authority to impress the same on any instrument requiring it, and when so impressed the seal may be attested by the signature of the Secretary or by the signature of such Assistant Secretary. The Board may give general authority to any other officer to impress the seal of the Corporation and to attest the same by such officer's signature. The Secretary or an Assistant Secretary may also attest all instruments signed by the President or any Vice President. The Secretary shall have charge of all the books, records and papers of the Corporation relating to its organization and management, shall see that the reports, statements and other documents required by statute are properly kept and filed and, in general, shall perform all duties incident to the office of Secretary of a corporation and such other duties as may from time to time be assigned to the Secretary by the Board or by the President. 5.11 Treasurer. The Treasurer shall have charge and custody of, and --------- be responsible for, all funds, securities and notes of the Corporation; receive and give receipts for moneys due and payable to the Corporation from any sources whatsoever; deposit all such moneys and valuable effects in the name and to the credit of the Corporation in such depositaries as may be designated by the Board; against proper vouchers, cause such funds to be disbursed by checks or drafts on the authorized depositaries of the Corporation signed in such manner as shall be determined by the Board and be responsible for the accuracy of the amounts of all moneys so disbursed; regularly enter or cause to be entered in books or other records maintained for the purpose full and adequate account of all moneys received or paid for the account of the Corporation; have the right to require from time to time reports or statements giving such information as the Treasurer may desire with respect to any and all financial transactions of the Corporation from the officers or agents transacting the same; render to the President or the Board, whenever the President or the Board shall require the Treasurer so to do, an account of the financial condition of the Corporation and of all financial transactions of the Corporation; exhibit at all reasonable times the records and books of account to any of the Directors upon application at the office of the Corporation where such records and books are kept; disburse the funds of the Corporation as ordered by the Board; and, in general, perform all duties incident to the office of Treasurer of a corporation and such other duties as may from time to time be assigned to the Treasurer by the Board or the President. 5.12 Assistant Secretaries and Assistant Treasurers. Assistant ---------------------------------------------- Secretaries and Assistant Treasurers shall perform such duties as shall be assigned to them by the Secretary or by the Treasurer, respectively, or by the Board or by the President. ARTICLE 6 CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. ---------------------------------------------- 6.1 Execution of Contracts. The Board, except as otherwise ---------------------- provided in these By-laws, may prospectively or retroactively authorize any officer or officers, employee or employees or 15 agent or agents, in the name and on behalf of the Corporation, to enter into any contract or execute and deliver any instrument, and any such authority may be general or confined to specific instances, or otherwise limited. 6.2 Loans. The Board may prospectively or retroactively authorize ----- the President or any other officer, employee or agent of the Corporation to effect loans and advances at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual, and for such loans and advances the person so authorized may make, execute and deliver promissory notes, bonds or other certificates or evidences of indebtedness of the Corporation, and, when authorized by the Board so to do, may pledge and hypothecate or transfer any security for any such loans or advances. Such authority conferred by the Board may be general or confined to specific instances, or otherwise limited. 6.3 Checks, Drafts, Etc. All checks, drafts and other orders for -------------------- the payment of money out of the funds of the Corporation and all evidences of indebtedness of the Corporation shall be signed on behalf of the Corporation in such manner as shall from time to time be determined by resolution of the Board. 6.4 Deposits. The funds of the Corporation not otherwise employed -------- shall be deposited from time to time to the order of the Corporation with such banks, trust companies, investment banking firms, financial institutions or other depositaries as the Board may select or as may be selected by an officer, employee or agent of the Corporation to whom such power to select may from time to time be delegated by the Board. ARTICLE 7 STOCKS AND DIVIDENDS -------------------- 7.1 Certificates Representing Shares. The shares of capital stock -------------------------------- of the Corporation shall be represented by certificates in such form (consistent with the provisions of Section 158 of the General Corporation Law) as shall be approved by the Board. Such certificates shall be signed by the Chairman, the Vice Chairman, the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be impressed with the seal of the Corporation or a facsimile thereof. The signatures of the officers upon a certificate may be facsimiles, if the certificate is countersigned by a transfer agent or registrar other than the Corporation itself or its employee. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any certificate shall have ceased to be such officer transfer agent or registrar before such certificate is issued, such certificate may, unless otherwise ordered by the Board, be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. 7.2 Transfer of Shares. Transfers of shares of capital stock of ------------------ the Corporation shall be 16 made only on the books of the Corporation by the holder thereof or by the holder's duly authorized attorney appointed by a power of attorney duly executed and filed with the Secretary or a transfer agent of the Corporation, and on surrender of the certificate or certificates representing such shares of capital stock properly endorsed for transfer and upon payment of all necessary transfer taxes. Every certificate exchanged, returned or surrendered to the Corporation shall be marked "Cancelled," with the date of cancellation, by the Secretary or an Assistant Secretary or the transfer agent of the Corporation. A person in whose name shares of capital stock shall stand on the books of the Corporation shall be deemed the owner thereof to receive dividends, to vote as such owner and for all other purposes as respects the Corporation. No transfer of shares of capital stock shall be valid as against the Corporation, its stockholders and creditors for any purpose, except to render the transferee liable for the debts of the Corporation to the extent provided by law, until such transfer shall have been entered on the books of the Corporation by an entry showing from and to whom transferred. 7.3 Transfer and Registry Agents. The Corporation may from time to ---------------------------- time maintain one or more transfer offices or agents and registry offices or agents at such place or places as may be determined from time to time by the Board. 7.4 Lost, Destroyed, Stolen and Mutilated Certificates. The holder -------------------------------------------------- of any shares of capital stock of the Corporation shall immediately notify the Corporation of any loss, destruction, theft or mutilation of the certificate representing such shares, and the Corporation may issue a new certificate to replace the certificate alleged to have been lost, destroyed, stolen or mutilated. The Board may, in its discretion, as a condition to the issue of any such new certificate, require the owner of the lost, destroyed, stolen or mutilated certificate, or his or her legal representatives, to make proof satisfactory to the Board of such loss, destruction, theft or mutilation and to advertise such fact in such manner as the Board may require, and to give the Corporation and its transfer agents and registrars, or such of them as the Board may require, a bond in such form, in such sums and with such surety or sureties as the Board may direct, to indemnify the Corporation and its transfer agents and registrars against any claim that may be made against any of them on account of the continued existence of any such certificate so alleged to have been lost, destroyed, stolen or mutilated and against any expense in connection with such claim. 7.5 Rules and Regulations. The Board may make such rules and --------------------- regulations as it may deem expedient, not inconsistent with these By-laws or with the Certificate of Incorporation, concerning the issuance, transfer and registration of certificates representing shares of its capital stock. 7.6 Restriction on Transfer of Stock. A written restriction on the -------------------------------- transfer or registration of transfer of capital stock of the Corporation, if permitted by Section 202 of the General Corporation Law and noted conspicuously on the certificate representing such capital stock, may be enforced against the holder of the restricted capital stock or any successor or transferee of the holder, including an executor, administrator, trustee, guardian or other fiduciary entrusted with like responsibility for the person or estate of the holder. Unless noted conspicuously on the certificate representing such capital stock, a restriction, even though 17 permitted by Section 202 of the General Corporation Law, shall be ineffective except against a person with actual knowledge of the restriction. A restriction on the transfer or registration of transfer of capital stock of the Corporation may be imposed either by the Certificate of Incorporation or by an agreement among any number of stockholders or among such stockholders and the Corporation. No restriction so imposed shall be binding with respect to capital stock issued prior to the adoption of the restriction unless the holders of such capital stock are parties to an agreement or voted in favor of the restriction. 7.7 Dividends, Surplus, Etc. Subject to the provisions of the ------------------------ Certificate of Incorporation and of laws, the Board: 7.7.1 may declare and pay dividends or make other distributions on the outstanding shares of capital stock in such amounts and at such time or time as it, in its discretion, shall deem advisable giving due consideration to the condition of the affairs of the Corporation; 7.7.2 may use and apply, in its discretion, any of the surplus of the Corporation in purchasing or acquiring any shares of capital stock of the Corporation, or purchase warrants therefor, in accordance with law, or any of its bonds, debentures, notes, scrip or other securities or evidences of indebtedness; and 7.7.3 may set aside from time to time out of such surplus or net profits such sum or sums as, in its discretion, it may think proper, as a reserve fund to meet contingencies, or for equalizing dividends or for the purpose of maintaining or increasing the property or business of the Corporation, or for any purpose it may think conducive to the best interests of the Corporation. ARTICLE 8 INDEMNIFICATION --------------- 8.1 Indemnity Undertaking. To the extent not prohibited by law, --------------------- the Corporation shall indemnify any person who is or was made, or threatened to be made, a party to any threatened, pending or completed action, suit or proceeding (a "Proceeding"), whether civil, criminal, administrative or investigative, including, without limitation, an action by or in the right of the Corporation to procure a judgment in its favor, by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a Director or officer of the Corporation, or is or was serving in any capacity at the request of the Corporation for any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (an "Other Entity"), against judgments, fines, penalties, excise taxes, amounts paid in settlement and costs, charges and expenses (including attorneys' fees and disbursements). Persons who are not Directors or officers of the Corporation may be similarly indemnified in respect of service to the Corporation or to an 18 Other Entity at the request of the Corporation to the extent the Board at any time specifies that such persons are entitled to the benefits of this Section 8. 8.2 Advancement of Expenses. The Corporation shall, from time to ----------------------- time, reimburse or advance to any Director or officer or other person entitled to indemnification hereunder the funds necessary for payment of expenses, including attorneys' fees and disbursements, incurred in connection with any Proceeding, in advance of the final disposition of such Proceeding; provided, however, that, if required by the General Corporation Law, ------- such expenses incurred by or on behalf of any Director or officer or other person may be paid in advance of the final disposition of a Proceeding only upon receipt by the Corporation of an undertaking, by or on behalf of such Director or officer (or other person indemnified hereunder), to repay any such amount so advanced if it shall ultimately be determined by final judicial decision from which there is no further right of appeal that such Director, officer or other person is not entitled to be indemnified for such expenses. 8.3 Rights Not Exclusive. The rights to indemnification and -------------------- reimbursement or advancement of expenses provided by, or granted pursuant to, this Section 8 shall not be deemed exclusive of any other rights to which a person seeking indemnification or reimbursement or advancement of expenses may have or hereafter be entitled under any statute, the Certificate of Incorporation, these By-laws, any agreement, any vote of stockholders or disinterested Directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. 8.4 Continuation of Benefits. The rights to indemnification and ------------------------ reimbursement or advancement of expenses provided by, or granted pursuant to, this Section 8 shall continue as to a person who has ceased to be a Director or officer (or other person indemnified hereunder) and shall inure to the benefit of the executors, administrators, legatees and distributees of such person. 8.5 Insurance. The Corporation shall have power to purchase and --------- maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of any Other Entity, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Section 8, the Certificate of Incorporation or under Section 145 of the General Corporation Law or any other provision of law. 8.6 Binding Effect. The provisions of this Section 8 shall be a -------------- contract between the Corporation, on the one hand, and each Director and officer who serves in such capacity at any time while this Section 8 is in effect and any other person indemnified hereunder, on the other hand, pursuant to which the Corporation and each such Director, officer or other person intend to be legally bound. No repeal or modification of this Section 8 shall affect any rights or obligations with respect to any state of facts then or theretofore existing or thereafter arising or any proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such 19 state of facts. 8.7 Procedural Rights. The rights to indemnification and ----------------- reimbursement or advancement of expenses provided by, or granted pursuant to, this Section 8 shall be enforceable by any person entitled to such indemnification or reimbursement or advancement of expenses in any court of competent jurisdiction. The burden of proving that such indemnification or reimbursement or advancement of expenses is not appropriate shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel and its stockholders) to have made a determination prior to the commencement of such action that such indemnification or reimbursement or advancement of expenses is proper in the circumstances nor an actual determination by the Corporation (including its Board of Directors, its independent legal counsel and its stockholders) that such person is not entitled to such indemnification or reimbursement or advancement of expenses shall constitute a defense to the action or create a presumption that such person is not so entitled. Such a person shall also be indemnified for any expenses incurred in connection with successfully establishing his or her right to such indemnification or reimbursement or advancement of expenses, in whole or in part, in any such proceeding. 8.8 Service Deemed at Corporation's Request. Any Director or --------------------------------------- officer of the Corporation serving in any capacity (a) another corporation of which a majority of the shares entitled to vote in the election of its directors is held, directly or indirectly, by the Corporation or (b) any employee benefit plan of the Corporation or any corporation referred to in clause (a) shall be deemed to be doing so at the request of the Corporation. 8.9 Election of Applicable Law. Any person entitled to be -------------------------- indemnified or to reimbursement or advancement of expenses as a matter of right pursuant to this Section 8 may elect to have the right to indemnification or reimbursement or advancement of expenses interpreted on the basis of the applicable law in effect at the time of the occurrence of the event or events giving rise to the applicable Proceeding, to the extent permitted by law, or on the basis of the applicable law in effect at the time such indemnification or reimbursement or advancement of expenses is sought. Such election shall be made, by a notice in writing to the Corporation, at the time indemnification or reimbursement or advancement of expenses is sought; provided, however, ------- that if no such notice is given, the right to indemnification or reimbursement or advancement of expenses shall be determined by the law in effect at the time indemnification or reimbursement or advancement of expenses is sought. ARTICLE 9 BOOKS AND RECORDS ----------------- 9.1 Books and Records. There shall be kept at the principal office ----------------- of the Corporation correct and complete records and books of account recording the financial transactions of the Corporation and minutes of the proceedings of the stockholders, the Board and any committee of 20 the Board. The Corporation shall keep at its principal office, or at the office of the transfer agent or registrar of the Corporation, a record containing the names and addresses of all stockholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof. 9.2 Form of Records. Any records maintained by the Corporation in --------------- the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs, or any other information storage device, provided that the records so kept can be converted into clearly legible written form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. 9.3 Inspection of Books and Records. Except as otherwise provided ------------------------------- by law, the Board shall determine from time to time whether, and, if allowed, when and under what conditions and regulations, the accounts, books, minutes and other records of the Corporation, or any of them, shall be open to the stockholders for inspection. ARTICLE 10 SEAL ---- The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. ARTICLE 11 FISCAL YEAR ----------- The fiscal year of the Corporation shall be fixed, and may be changed, by resolution of the Board. ARTICLE 12 PROXIES AND CONSENTS -------------------- Unless otherwise directed by the Board, the Chairman, the Vice Chairman, the President, any Vice President, the Secretary or the Treasurer, or any one of them, may execute and deliver on behalf of the Corporation proxies respecting any and all shares or other ownership interests of any Other Entity owned by the Corporation appointing such person or persons as the officer executing the same shall deem proper to represent and vote the shares or other ownership interests so owned 21 at any and all meetings of holders of shares or other ownership interests, whether general or special, and/or to execute and deliver consents respecting such shares or other ownership interests; or any of the aforesaid officers may attend any meeting of the holders of shares or other ownership interests of such Other Entity and thereat vote or exercise any or all other powers of the Corporation as the holder of such shares or other ownership interests. ARTICLE 13 EMERGENCY BY-LAWS ----------------- Unless the Certificate of Incorporation provides otherwise, the following provisions of this Article 13 shall be effective during any emergency, which is defined as when a quorum of the Corporation's Directors cannot be readily assembled because of some catastrophic event. During such emergency: 13.1 Notice to Board Members. Any one member of the Board or any ----------------------- one of the following officers: Chairman, Vice Chairman, President, any Vice President, Secretary or Treasurer, may call a meeting of the Board. Notice of such meeting need be given only to those Directors whom it is practicable to reach, and may be given in any practical manner, including by publication and radio. Such notice shall be given at least six hours prior to commencement of the meeting. 13.2 Temporary Directors and Quorum. One or more officers of the ------------------------------ Corporation present at the emergency Board meeting, as is necessary to achieve a quorum, shall be considered to be Directors for the meeting, and shall so serve in order of rank, and within the same rank, in order of seniority. In the event that less than a quorum of the Directors are present (including any officers who are to serve as Directors for the meeting), those Directors present (including the officers serving as Directors) shall constitute a quorum. 13.3 Actions Permitted To Be Taken. The Board as constituted in ----------------------------- Section 13.2, and after notice as set forth in Section 13.1 may: 13.3.1 prescribe emergency powers to any officer of the Corporation; 13.3.2 delegate to any officer or Director, any of the powers of the Board; 13.3.3 designate lines of succession of officers and agents, in the event that any of them are unable to discharge their duties; 13.3.4 relocate the principal place of business, or designate successive or simultaneous principal places of business; and 13.3.5 take any other convenient, helpful or necessary action to carry on the 22 business of the Corporation. ARTICLE 14 AMENDMENTS ---------- These By-laws may be altered, amended, or repealed and new By-laws may be adopted by a vote of the holders of shares entitled to vote in the election of Directors or by a vote of two-thirds of the entire Board. Notwithstanding the preceding sentence, none of the provisions of this Article 14 shall be altered, amended or repealed by the Board. Any By-laws adopted, altered or amended by the Board may be altered, amended or repealed by the stockholders entitled to vote thereon only to the extent and in the manner provided in the Certificate of Incorporation and these By-laws. 23 EX-4.1 3 JUNIOR SUBORDINATE INDENTURE EXHIBIT 4.1 EXECUTION COPY - -------------------------------------------------------------------------------- INTEGON CORPORATION TO FIRST UNION NATIONAL BANK OF NORTH CAROLINA TRUSTEE ------------------------------------- JUNIOR SUBORDINATED INDENTURE DATED AS OF FEBRUARY 10, 1997 ------------------------------------- - -------------------------------------------------------------------------------- EXHIBIT 4.1 INTEGON CORPORATION Reconciliation and tie between the Trust Indenture Act of 1939 (including cross-references to provisions of Sections 310 to and including 317 which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by the Trust Reform Act of 1990, are a part of and govern the Indenture whether or not physically contained therein) and the Junior Subordinated Indenture, dated as of December 30, 1996. TRUST INDENTURE ACT SECTION INDENTURE SECTION - -------------------------------- -------------------- (S) 310 (a) (1), (2) and (5). 6.9 (a) (3).............. Not Applicable (a) (4).............. Not Applicable (b).................. 6.8 ..................... 6.10 (c).................. Not Applicable (S) 311 (a).................. 6.13(a) (b).................. 6.13(b) (b) (2).............. 7.3(a) (2) ..................... 7.3(a) (2) (S) 312 (a).................. 7.1 ..................... 7.2(a) (b).................. 7.2(b) (c).................. 7.2(c) (S) 313 (a).................. 7.3(a) (b).................. 7.3(b) (c).................. 7.3(a), 7.3(b) (d).................. 7.3(c) (S) 314 (a) (1), (2) and (3). 7.4 (a) (4).............. 10.5 (b).................. Not Applicable (c) (1).............. 1.2 (c) (2).............. 1.2 (c) (3).............. Not Applicable (d).................. Not Applicable (e).................. 1.2 (f).................. Not Applicable TRUST INDENTURE ACT SECTION INDENTURE SECTION - -------------------------------- -------------------- (S) 315 (a).................. 6.1(a) (b).................. 6.2 ..................... 7.3(a) (6) (c).................. 6.1(b) (d).................. 6.1(c) (d) (1).............. 6.1(a) (1) (d) (2).............. 6.1(c) (2) (d) (3).............. 6.1(c) (3) (e).................. 5.14 (S) 316 (a).................. 1.1 (a) (1) (A).......... 5.12 (a) (1) (B).......... 5.13 (a) (2).............. Not Applicable (b).................. 5.8 (c).................. 1.4(f) (S) 317 (a) (1).............. 5.3 (a) (2).............. 5.4 (b).................. 10.3 (S) 318 (a).................. 1.7 - -------------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Junior Subordinated Indenture. TABLE OF CONTENTS -----------------
Page ---- ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.......................................... 1 Section 1.1. Definitions.......................................... 1 Section 1.2. Compliance Certificate and Opinions.................. 15 Section 1.3. Forms of Documents Delivered to Trustee.............. 16 Section 1.4. Acts of Holders...................................... 16 Section 1.5. Notices, Etc. to Trustee and Company................. 19 Section 1.6. Notice to Holders; Waiver............................ 19 Section 1.7. Conflict with Trust Indenture Act.................... 19 Section 1.8. Effect of Headings and Table of Contents............. 20 Section 1.9. Successors and Assigns............................... 20 Section 1.10. Separability Clause.................................. 20 Section 1.11. Benefits of Indenture................................ 20 Section 1.12. Governing Law........................................ 20 Section 1.13. Non-Business Days.................................... 20 ARTICLE II SECURITY FORMS....................................... 21 Section 2.1. Forms Generally...................................... 21 Section 2.2A Form of Face of Initial Security..................... 21 Section 2.2B Form of Face of Exchange Security and Registered Security............................................. 25 Section 2.3. Form of Reverse of Security.......................... 28 Section 2.4. Additional Provisions Required in Global Security.... 32 Section 2.5. Form of Trustee's Certificate of Authentication...... 32 ARTICLE III THE SECURITIES....................................... 33 Section 3.1. Title and Terms...................................... 33 Section 3.2. Denominations........................................ 35 Section 3.3. Execution, Authentication, Delivery and Dating....... 35 Section 3.4. Temporary Securities................................. 38 Section 3.5. Registration, Transfer and Exchange.................. 38 Section 3.6. Mutilated, Destroyed, Lost and Stolen Securities..... 43 Section 3.7. Payment of Interest; Interest Rights Preserved....... 44 Section 3.8. Persons Deemed Owners................................ 46 Section 3.9. Cancellation......................................... 46 Section 3.10. Computation of Interest.............................. 46 Section 3.11. Deferrals of Interest Payment Dates.................. 46 Section 3.12. Right of Set-Off..................................... 48 Section 3.13. Agreed Tax Treatment................................. 48 Section 3.14. Shortening of Stated Maturity........................ 48 Section 3.15. CUSIP Numbers........................................ 48
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Page ---- ARTICLE IV SATISFACTION AND DISCHARGE........................... 49 Section 4.1. Satisfaction and Discharge of Indenture.............. 49 Section 4.2. Application of Trust Money........................... 50 ARTICLE V REMEDIES............................................. 50 Section 5.1. Events of Default.................................... 50 Section 5.2. Acceleration of Maturity; Rescission and Annulment... 51 Section 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee........................................... 52 Section 5.4. Trustee May File Proofs of Claim..................... 53 Section 5.5. Trustee May Enforce Claims Without Possession of Securities........................................... 54 Section 5.6. Application of Money Collected....................... 54 Section 5.7. Limitation on Suits.................................. 55 Section 5.8. Unconditional Right of Holders to Receive Principal, Premium and Interest; Direct Action by Holders of Preferred Securities................................. 55 Section 5.9. Restoration of Rights and Remedies................... 56 Section 5.10. Rights and Remedies Cumulative....................... 56 Section 5.11. Delay or Omission Not Waiver......................... 56 Section 5.12. Control by Holders................................... 57 Section 5.13. Waiver of Past Defaults.............................. 57 Section 5.14. Undertaking for Costs................................ 58 Section 5.15. Waiver of Usury, Stay or Extension Laws.............. 58 ARTICLE VI THE TRUSTEE.......................................... 59 Section 6.1. Certain Duties and Responsibilities.................. 59 Section 6.2. Notice of Defaults................................... 60 Section 6.3. Certain Rights of Trustee............................ 60 Section 6.4. Not Responsible for Recitals or Issuance of Securities........................................... 61 Section 6.5. May Hold Securities.................................. 61 Section 6.6. Money Held in Trust.................................. 62 Section 6.7. Compensation and Reimbursement....................... 62 Section 6.8. Disqualification; Conflicting Interests.............. 63 Section 6.9. Corporate Trustee Required; Eligibility.............. 63 Section 6.10. Resignation and Removal; Appointment of Successor.... 63 Section 6.11. Acceptance of Appointment by Successor............... 65 Section 6.12. Merger, Conversion, Consolidation or Succession to Business............................................. 66 Section 6.13. Preferential Collection of Claims Against Company.... 66 Section 6.14. Appointment of Authenticating Agent.................. 66 Section 6.15. Officers' Certificates as Evidence................... 68 ARTICLE VII HOLDER'S LISTS AND REPORTS BY TRUSTEE AND COMPANY.... 69 Section 7.1. Company to Furnish Trustee Names and Addresses of Holders.............................................. 69 Section 7.2. Preservation of Information, Communications to Holders.............................................. 69 Section 7.3. Reports by Trustee................................... 69 Section 7.4. Reports by Company................................... 70
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Page ---- ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE................................................ 70 Section 8.1. Company May Consolidate, Etc., Only on Certain Terms. 70 Section 8.2. Successor Corporation Substituted.................... 71 ARTICLE IX SUPPLEMENTAL INDENTURES.............................. 72 Section 9.1. Supplemental Indentures without Consent of Holders... 72 Section 9.2. Supplemental Indentures with Consent of Holders...... 73 Section 9.3. Execution of Supplemental Indentures................. 74 Section 9.4. Effect of Supplemental Indentures.................... 75 Section 9.5. Conformity with Trust Indenture Act.................. 75 Section 9.6. Reference in Securities to Supplemental Indentures... 75 ARTICLE X COVENANTS............................................ 75 Section 10.1. Payment of Principal, Premium and Interest........... 75 Section 10.2. Maintenance of Office or Agency...................... 75 Section 10.3. Money for Security Payments to be Held in Trust...... 76 Section 10.4. Statement as to Compliance........................... 77 Section 10.5. Waiver of Certain Covenants.......................... 78 Section 10.6. Additional Sums...................................... 78 Section 10.7. Additional Covenants................................. 78 Section 10.8. Limitation on Indebtedness........................... 79 Section 10.10. Change of Control.................................... 80 ARTICLE XI RESERVE ACCOUNT...................................... 83 Section 11.1. Establishment of the Reserve Account................. 83 Section 11.2. Investment of Funds in the Reserve Account........... 83 ARTICLE XII REDEMPTION OF SECURITIES............................. 84 Section 12.1. Applicability of This Article........................ 84 Section 12.2. Election to Redeem; Notice to Trustee................ 84 Section 12.3. Selection of Securities to be Redeemed............... 84 Section 12.4. Notice of Redemption................................. 85 Section 12.5. Deposit of Redemption Price.......................... 85 Section 12.6. Payment of Securities Called for Redemption.......... 86 Section 12.7. Right of Redemption of Securities.................... 86 ARTICLE XIII SUBORDINATION OF SECURITIES.......................... 87 Section 13.1. Securities Subordinate to Senior Indebtedness........ 87 Section 13.2. No Payment When Senior Indebtedness in Default; Payment Over of Proceeds Upon Dissolution, Etc....... 87 Section 13.3. Payment Permitted If No Default...................... 89 Section 13.4. Subrogation to Rights of Holders of Senior Indebtedness......................................... 89 Section 13.5. Provisions Solely to Define Relative Rights............................................... 89 Section 13.6. Trustee to Effectuate Subordination.................. 90 Section 13.7. No Waiver of Subordination Provisions............... 90 Section 13.8. Notice to Trustee................................... 90 Section 13.9. Reliance on Judicial Order or Certificate of Liquidating Agent................................... 91 Section 13.10. Trustee Not Fiduciary for Holders of Senior Indebtedness........................................ 91 Section 13.11. Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights. 92 Section 13.12. Article Applicable to Paying Agents................. 92
Annex A - Form of Trust Agreement Annex B - Form of Amended and Restated Trust Agreement Annex C - Form of Initial Guarantee Agreement -iii- EXHIBIT 4.1 JUNIOR SUBORDINATED INDENTURE (hereinafter called the "Indenture"), dated as of February 10, 1997, between INTEGON CORPORATION, a Delaware corporation (hereinafter called the "Company") having its principal office at 500 West Fifth Street, Winston-Salem, North Carolina 27152, and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association organized and existing under the laws of the United States of America, as Trustee (hereinafter called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured junior subordinated debt securities in one or more series (hereinafter called the "Securities") of substantially the tenor hereinafter provided, including, without limitation, Securities issued to evidence loans made to the Company of the proceeds from the issuance from time to time by one or more business trusts (each a "Trust," and, collectively, the "Trusts") of preferred interests in such Trusts and common interests in such Trusts, and to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered. All things necessary to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Indenture a valid agreement of the Company, in accordance with their and its terms, have been done. NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of any series thereof, as follows: ARTICLE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (2) All other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; 2 (3) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles which are generally accepted at the date or time of such computation; provided, that when two or more principles are so generally accepted, it shall mean that set of principles consistent with those in use by the Company; and (4) 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. "Act" when used with respect to any Holder has the meaning specified in Section 1.4. "Additional Interest" means the interest that shall accrue on any interest on the Securities of any series the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the rate per annum specified or determined as specified in such Security from the applicable Interest Payment Date. "Additional Sums" has the meaning specified in Section 10.6. "Additional Taxes" means the sum of any additional taxes, duties and other governmental charges to which a Trust has become subject from time to time as a result of a Tax Event. "Administrative Trustee" means, in respect of any Trust, each Person identified as an "Administrative Trustee" in the related Trust Agreement, solely in such Person's capacity as Administrative Trustee of such Trust under such Trust Agreement and not in such Person's individual capacity, or any successor administrative trustee appointed as therein provided. "Adverse Tax Consequence" means each of the circumstances referred to in clauses (i), (ii) and (iii) of the first sentence of the definition of Tax Event and the circumstances referred to in the second sentence of the definition of Tax Event. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person; provided, however, no Trust to which Securities have been issued shall be deemed to be an Affiliate of the Company. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Members" has the meaning specified in Section 3.3. "Allocable Amounts", when used with respect to any Senior Subordinated Debt, means the amount necessary to pay all principal of (and premium, if any) and interest, if any, on such Senior 3 Subordinated Debt in full less, if applicable, any portion of such amount which would have been paid to, and retained by, the holders of such Senior Subordinated Debt (whether as a result of the receipt of payments by the holders of such Senior Subordinated Debt from the Company or any other obligor thereon or from any holders of, or trustee in respect of, other indebtedness that is subordinate and junior in right of payment to such Senior Subordinated Debt pursuant to any provision of such indebtedness for the payment over of amounts received on account of such indebtedness to the holders of such Senior Subordinated Debt) but for the fact that such Senior Subordinated Debt is subordinate or junior in right of payment to trade accounts payable or accrued liabilities arising in the ordinary course of business. "Asset Disposition" by any Person means any transfer, conveyance, sale, lease or other disposition by such Person or any of its Subsidiaries (including a consolidation or merger or other sale of any such Subsidiary with, into or to another Person in a transaction in which such Subsidiary ceases to be a Subsidiary, but excluding a disposition by a Subsidiary of such Person to such Person or a Wholly Owned Subsidiary of such Person or by such Person to a Wholly Owned Subsidiary of such Person) of (i) shares of Capital Stock (other than directors' qualifying shares) or other ownership interests of a Subsidiary of such Person, (ii) substantially all of the assets of such Person or any of its Subsidiaries representing a division or line of business or (iii) other assets or rights of such Person or any of its Subsidiaries outside the ordinary course of business. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 6.14 to act on behalf of the Trustee to authenticate Securities of one or more series. "Board of Directors" means either the board of directors of the Company or any committee of that board duly authorized to act hereunder. "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, or such committee of the Board of Directors or officers of the Company to which authority to act on behalf of the Board of Directors has been delegated, 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 (i) a Saturday or Sunday, (ii) a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee, or, with respect to the Securities of a series initially issued to the Trust, the principal office of the Property Trustee under the related Trust Agreement, is closed for business. "Capital Lease Obligation" of any Person means the obligation to pay rent or other payment amounts under a lease of (or other Debt arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability on the face of a balance sheet of such Person in accordance with generally accepted accounting principles. The stated maturity of such obligation shall be the date of the last payment 4 of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, participations or other equivalents (however designated) of corporate stock of such Person. "Change of Control" means the occurrence of one or more of the following events (whether or not approved by the Board of Directors): (a) an event or series of events by which any Person or group of Persons within the meaning of Section 13(d) of the Exchange Act shall, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases, merger, consolidation, issuances of securities by the Company or otherwise, be or become, directly or indirectly, the beneficial owner (within the meaning of Rule 13d-3 and Rule 13d-5 under the Exchange Act, whether or not applicable, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time) of 50% or more of the combined voting power of the then outstanding voting stock of the Company, (b) the first day on which a majority of the members of the Board of Directors are not Continuing Directors, (c) the stockholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company or (d) the direct or indirect sale, assignment, lease, exchange, disposition or other transfer, in one transaction or a series of related transactions, of all or substantially all of the property or assets of the Company to any Person. "Change of Control Notice" has the meaning specified in Section 10.10. "Commission" means the Securities and Exchange Commission, as from time to time constituted, or if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Securities", as applied to any Trust, means an undivided beneficial interest in the assets of a Trust having the rights provided therefor in the related Trust Agreement, including the right to receive Distributions and a Liquidation Distribution (each, as defined in the related Trust Agreement) as provided therein. "Common Stock" means the common stock, par value $.01 per share, of the Company. "Company" means the Person named as the "Company" in the first paragraph of this Indenture until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" and "Company Order" mean, respectively, the written request or order signed in the name of the Company by the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, the President or a Vice President of the Company, and by the Treasurer, 5 an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. "Consolidated Cash Flow Available for Fixed Charges" of any Person means for any period the Consolidated Net Income for such period increased by the sum of (i) Consolidated Interest Expense of such Person for such period, plus (ii) Consolidated Income Tax Expense of such Person for such period, plus (iii) the consolidated depreciation and amortization expense included in the income statement of such Person for such period, plus (iv) other non-cash charges of such Person for such period deducted from consolidated revenues in determining Consolidated Net Income for such period, minus (v) non-cash items of such Person for such period increasing consolidated revenues in determining Consolidated Net Income for such period. "Consolidated Cash Flow Ratio" of any Person means for any period the ratio of (i) Consolidated Cash Flow Available For Fixed Charges of such Person for such period to (ii) the sum of (A) Consolidated Interest Expense of such Person for such period plus (B) the annual interest expense (including the amortization of debt discount) with respect to any Debt proposed to be Incurred by such Person or its Subsidiaries plus (C) the annual interest expense (including the amortization of debt discount) with respect to any other Debt Incurred by such Person or its Subsidiaries since the end of such period to the extent not included in Clause (ii)(A) minus (D) Consolidated Interest Expense of such Person to the extent included in Clause (ii)(A) with respect to any Debt that will no longer be outstanding as a result of the Incurrence of the Debt proposed to be Incurred; provided, however, that in making such computation, the -------- ------- Consolidated Interest Expense of such Person attributable to interest on any Debt bearing a floating interest rate shall be computed on a pro forma basis as if the rate in effect on the date of computation had been the applicable rate for the entire period; provided further that, in the event such Person or its -------- ------- Subsidiaries has made Asset Dispositions or acquisitions of assets not in the ordinary course of business (including acquisitions of other Persons by merger, consolidation or purchase of Capital Stock) during or after such period, such computation shall be made on a pro forma basis as if the Asset Dispositions or acquisitions had taken place on the first day of such period. "Consolidated Income Tax Expense" of any Person means for any period the consolidated provision for income taxes of such Person for such period calculated on a consolidated basis in accordance with generally accepted accounting principles. "Consolidated Interest Expense" for any Person means for any period the consolidated interest expense included in a consolidated income statement (without deduction of interest income) of such Person for such period calculated on a consolidated basis in accordance with generally accepted accounting principles, including without limitation or duplication (or, to the extent not so included, with the addition of), (i) the amortization of Debt discounts; (ii) any payments or fees with respect to letters of credit, bankers acceptances or similar facilities; (iii) fees with respect to interest rate swap or similar agreements or foreign currency hedge, exchange or similar agreements; (iv) Preferred Stock dividends declared and payable in cash; and (v) the portion of any rental obligation allocable to interest expense. 6 "Consolidated Net Income" of any Person means for any period the consolidated net income (or loss) of such Person for such period determined on a consolidated basis in accordance with generally accepted accounting principles; provided that there shall be excluded therefrom (a) the net income (or loss) of - -------- any Person acquired by such Person or a Subsidiary of such Person in a pooling- of-interests transaction for any period prior to the date of such transaction, (b) the net income (or loss) of any Person that is not a Subsidiary of such Person except to the extent of the amount of dividends or other distributions actually paid to such Person by such other Person during such period, (c) the cumulative effect of changes in accounting principles and (d) all extraordinary gains and extraordinary losses. "Continuing Director" means, as to any series of Securities, any member of the Board of Directors who was a member of such Board of Directors on the Original Issue Date of such series of Securities, and, as of any determination date thereafter, shall include any member of the Board of Directors who was nominated for election or appointed to such Board of Directors with the affirmative vote of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or appointment. "Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which at the date hereof is 230 South Tryon Street, 9th Floor, Charlotte, North Carolina 28288-1179. "corporation" includes a corporation, association, company, joint-stock company or business trust. "Credit Facility" means the Amended and Restated Credit Agreement, dated July 25, 1996, entered into between the Company and Chase Manhattan Bank N.A., as the same may be amended from time to time. "Debt" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed, (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations Incurred in connection with the acquisition of property, assets or businesses, (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business), (v) every Capital Lease Obligation of such Person, (vi) the maximum fixed redemption or repurchase price of Redeemable Stock of such Person at the time of determination, (vii) every obligation to pay rent or other payment amounts of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party, and (viii) every obligation of the type referred to in clauses (i) through (vii) of another Person and all dividends of another Person the payment of which, in either case, such Person has Guaranteed or is responsible or liable, directly or indirectly, as obligor, Guarantor or otherwise. 7 "Defaulted Interest" has the meaning specified in Section 3.7. "Definitive Security" means a Security that does not contain the legend set forth in Section 2.4. "Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del.C. (S)3801, et seq., as it may be amended from time to time. "Depository" means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more Global Securities, the Person designated as Depository by the Company pursuant to Section 3.1 with respect to such series (or any successor thereto). "Distributions," with respect to the Trust Securities issued by a Trust, means amounts payable in respect of such Trust Securities as provided in the related Trust Agreement and referred to therein as "Distributions." "Dollar" means the currency of the United States of America that, as at the time of payment, is legal tender for the payment of public and private debts. "Electing Holders" has the meaning specified in Section 10.10. "Event of Default" unless otherwise specified in the supplemental indenture creating a series of Securities has the meaning specified in Section 5.1. "Exchange Act" means the Securities Exchange Act of 1934 and any statute successor thereto, in each case as amended from time to time, and the rules and regulations promulgated thereunder. "Exchange and Registration Rights Agreement" means an Exchange and Registration Rights Agreement by and among the Company, a Trust and one or more initial purchasers, as such agreement may be amended, modified or supplemented from time to time in accordance with the terms thereof, relating to an exchange offer and registration rights for Preferred Securities issued by such Trust. "Exchange Securities" means any unsecured junior subordinated debt securities or debt security, as the case may be, to be authenticated and delivered under this Indenture in connection with the offer to exchange Initial Securities for a new series of unsecured junior subordinated debt securities of the Company pursuant to an Exchange and Registration Rights Agreement. "Expiration Date" has the meaning specified in Section 1.4(f). 8 "Extension Period" has the meaning specified in Section 3.11. "Global Security" means a Security in the form prescribed in Section 2.4 evidencing all or part of a series of Securities, issued to the Depository or its nominee for such series, and registered in the name of such Depository or its nominee. "Guarantee Agreement" means a Guarantee Agreement by and between the Company and a trustee for the benefit of holders of Trust Securities and any guarantee agreement that may be issued in exchange therefor as contemplated by an Exchange and Registration Rights Agreement. "Guaranty" by any Person means any obligation, contingent or otherwise, of such Person guaranteeing any Debt of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Debt, (ii) to purchase property, securities or services for the purpose of assuring the holder of such Debt of the payment of such Debt, or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Debt (and "Guaranteed," "Guaranteeing" and Guarantor" shall have meanings correlative to the foregoing); provided, however, that the Guaranty by any -------- ------- Person shall not include endorsements by such Person for collection or deposit, in either case, in the ordinary course of business. "Holder" means a Person in whose name a Security is registered in the Securities Register. "Incur" means, with respect to any Debt of other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, Guarantee or otherwise become liable in respect of such Debt or other obligation or the recording, as required pursuant to generally accepted accounting principles or otherwise, of any such Debt or other obligation on the balance sheet of such Person (and "Incurrence," "Incurred," Incurrable" and "Incurring" shall have the meanings correlative to the foregoing); provided, however, that a -------- ------- change in generally accepted accounting principles that results in an obligation of such Person that exists at such time becoming Debt shall not be deemed an Incurrence of such Debt. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of each particular series of Securities established as contemplated by Section 3.1. "Initial Securities" means any unsecured junior subordinated debt securities or debt security, as the case may be, authenticated and delivered under this Indenture, and not registered under the Securities Act. 9 "Interest Payment Date" means as to each series of Securities the Stated Maturity of an installment of interest on such Securities. "Investment Grade Status", with respect to the Company, shall occur when the Senior Notes (and any other unsecured Senior Indebtedness) receive a rating of "BBB-" or higher from S&P or a rating of "Baa3" or higher from Moody's. "Junior Subordinated Debt" means any Debt of the Company to its creditors, whether now outstanding or subsequently incurred, where the instrument creating or evidencing the Debt or pursuant to which the Debt is outstanding provides that it is subordinated and junior in right of payment to Senior Indebtedness pursuant to subordination provisions substantially similar to those set forth in this Indenture. Junior Subordinated Debt includes the Securities. "Maturity" when used with respect to any Security means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption, submission for repurchase or otherwise. "Moody's" means Moody's Investors Service, Inc. "Notice of Default" means a written notice of the kind specified in Section 5.1(3). "Officers' Certificate" means a certificate signed by the Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, the Chief Executive Officer, the President or any Vice President, and by the Treasurer, an Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for, or an employee of, the Company, any Trust or the Trustee, and who shall be acceptable to the Trustee. "Original Issue Date" means the date of issuance specified as such in each Security. "Outstanding" means, when used in reference to any Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or repurchase price or redemption price money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Securities; provided that, if such Securities are to be redeemed or caused to be repurchased, notice of such redemption or election to cause a repurchase has been duly given pursuant to this Indenture, and until such notice shall have been given, such Securities shall be deemed Outstanding; and 10 (iii) Securities in substitution for or in lieu of which other Securities have been authenticated and delivered or which have been paid pursuant to Section 3.6, unless proof satisfactory to the Trustee is presented that any such Securities are held by Holders in whose hands such Securities are valid, binding and legal obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, (a) in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee actually knows to be so owned shall be so disregarded and (b) the foregoing shall not apply at any time when all of the outstanding Securities are owned by the Company, any other obligor upon the Securities or any Affiliate of the Company or such obligor. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor. Upon the written request of the Trustee, the Company shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Securities, if any, known by the Company to be owned or held by or for the account of the Company or any other obligor on the Securities or any Affiliate of the Company or such obligor, and, subject to the provisions of Section 6.1, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination. "Paying Agent" means the Trustee or any Person authorized by the Company to pay the principal of (or premium, if any) or interest on, Additional Interest, if any, the Redemption Price or the Repurchase Price of any Securities on behalf of the Company. "Person" means any individual, corporation, association, limited liability company, partnership, joint venture, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment" means, with respect to the Securities of any series, the place or places where the principal of (and premium, if any) and interest on, Additional Interest, if any, or the Redemption Price and the Repurchase Price, if any, of the Securities of such series are payable pursuant to Sections 3.1, 3.11, 10.10 and 12. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.6 in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Security. 11 "Preferred Security", as applied to any Trust, means an undivided beneficial interest in the assets of such Trust having the rights provided therefor in the related Trust Agreement, including the right to receive Distributions and a Liquidation Distribution (each, as defined in the related Trust Agreement) as provided therein. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of such Person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person. "Proceeding" has the meaning specified in Section 13.2. "Property Trustee" means, in respect of any Trust, the Person identified as the "Property Trustee" in the related Trust Agreement, solely in its capacity as Property Trustee of such Trust under such Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as therein provided. "QIB" means a "qualified institutional buyer" as defined in Rule 144A under the Securities Act. "Redeemable Stock" of any Person means any equity security of such Person that by its terms or otherwise is required to be redeemed prior to the final Stated Maturity of the Securities or is redeemable at the option of the holder thereof at any time prior to the final Stated Maturity of the Securities. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Registered Exchange Offer," with respect to Securities of a series, shall have the meaning set forth in the Exchange and Registration Rights Agreement which relates to the Securities of such series. "Registered Securities" means any unsecured junior subordinated debt securities or debt security, as the case may be, authenticated and delivered under this Indenture and registered under the Securities Act at the time of issuance. "Regular Record Date" for the interest payable on any Interest Payment Date with respect to the Securities of a series means, unless otherwise provided pursuant to Section 3.1 with respect to Securities of a series, (i) in the case where all of the Securities of a series are held by the Trust or represented by one or more Global Securities, the Business Day next preceding such Interest 12 Payment Date and (ii) in the case where some of the Securities of a series are not held by the Trust or represented by one or more Global Securities, the date which is 15 days next preceding such Interest Payment Date (whether or not a Business Day) for all Securities of such series. "Repurchase Date," when used with respect to any Security to be repurchased pursuant to Section 10.10, means the date fixed for such repurchase by or pursuant to Section 10.10. "Repurchase Election" has the meaning specified in Section 10.10(c). "Repurchase Price," when used with respect to any Security to be repurchased pursuant to Section 10.10, means the price at which such Security is to be repurchased pursuant to Section 10.10. "Responsible Officer" when used with respect to the Trustee means any officer of the Trustee assigned by the Trustee from time to time to administer its corporate trust matters. "Reserve Account" has the meaning specified in Section 11.1. "Restricted Certificated Securities" has the meaning specified in Section 3.3. "Rights Plan" means a plan of the Company providing for the issuance by the Company to all holders of its Common Stock of rights entitling the holders thereof to subscribe for or purchase shares of Common Stock or any class or series of Preferred Stock of the Company, which rights (i) are deemed to be transferred with such shares of Common Stock, (ii) are not exercisable and (iii) are also issued in respect of future issuances of Common Stock, in each case until the occurrence of a specified event or events. "Sale and Leaseback Transaction" of any Person means an arrangement with any lender or investor or to which such lender or investor is a party providing for the leasing by such Person of any property or asset of such Person which has been or is being sold or transferred by such Person more than 270 days after the acquisition thereof or the completion of construction or commencement of operation thereof to such lender or investor or to any person to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset. The stated maturity of such arrangement shall be the date of the last payment of rent or any other amount due under such arrangement prior to the first date on which such arrangement may be terminated by the lessee without payment of a penalty. "S&P" means Standard & Poor's Ratings Services. "Securities" or "Security" means any (a) Initial Securities or Security and, when and if issued as contemplated by the related Exchange and Registration Rights Agreement, any Exchange Securities or Security or (b) any Registered Securities or Security. 13 "Securities Act" means the Securities Act of 1933 and any statute successor thereto, in each case as amended from time to time, and the rules and regulations promulgated thereunder. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 3.5. "Senior Debt" means any Debt of the Company to its creditors, whether now outstanding or subsequently incurred, other than any Debt as to which, in the instrument creating or evidencing the obligation or pursuant to which the Debt is outstanding, it is provided that such Debt is not Senior Debt. Senior Debt does not include Senior Subordinated Debt or Junior Subordinated Debt. "Senior Indebtedness" means (i) Senior Debt (but excluding trade accounts payable and accrued liabilities arising in the ordinary course of business) and (ii) the Allocable Amounts of Senior Subordinated Debt. "Senior Notes" collectively means (i) the 9-1/2% Senior Notes due 2001 issued by the Company pursuant to the Indenture, dated as of October 15, 1994, between the Company and The First National Bank of Chicago, and (ii) the 8% Senior Notes due 1999 issued by the Company pursuant to the Indenture, dated as of August 15, 1992, between the Company and The First National Bank of Chicago. "Senior Subordinated Debt" means any Debt of the Company to its creditors, whether now outstanding or subsequently incurred, where the instrument creating or evidencing the Debt or pursuant to which the Debt is outstanding provides that it is subordinate and junior in right of payment to Senior Debt pursuant to subordination provisions substantially similar to those applicable to the Company's outstanding Senior Subordinated Debt. Senior Subordinated Debt includes the Company's outstanding subordinated debt securities and any subordinated debt securities issued in the future with substantially similar subordination terms and does not include Junior Subordinated Debt. "Shelf Registration Statement" has the meaning set forth in an Exchange and Registration Rights Agreement. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.7. "Stated Maturity" when used with respect to any Security or any installment of principal thereof means the date specified pursuant to the terms of such Security as the fixed date on which the principal of such Security is due and payable, as such date may be shortened as provided pursuant to the terms of such Security and this Indenture. When used with respect to any installment of interest on any Security, "Stated Maturity" means the date specified pursuant to the terms of such Security as the date on which such installment of interest is due and payable. 14 "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. "Tax Event", with respect to Securities held by a Trust, means the receipt by such Trust of an Opinion of Counsel (as defined in the relevant Trust Agreement) 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 or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which prospective change, pronouncement or decision is announced on or after the date of original issuance of the Preferred Securities of such Trust, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date of such Opinion of Counsel, subject to United States federal income tax with respect to income received or accrued on the corresponding series of Securities issued by the Company to such Trust, (ii) interest payable by the Company on such corresponding series of Securities is not, or within 90 days of the date of such Opinion of Counsel, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes or (iii) such Trust is, or will be within 90 days of the date of such Opinion of Counsel, subject to more than a de minimis amount of other taxes, duties or other governmental charges. With respect to securities not held by the Trust, "Tax Event" means the receipt by the Company 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 or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which prospective change, pronouncement or decision is announced on or after the date of issuance of the applicable series of Securities under this Indenture, there is more than an insubstantial risk that interest payable by the Company on such series of Securities 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. "Transfer Restricted Security," with respect to the Securities of a series, has the meaning set forth in the Exchange and Registration Rights Agreement which relates to the Securities of such series. "Trust" has the meaning specified in the first recital of this Indenture. "Trust Agreement", with respect to any Trust, means the Trust Agreement substantially in the form attached hereto as Annex A, as amended by the form of Amended and Restated Trust Agreement substantially in the form attached hereto as Annex B, or substantially in such form as 15 may be specified as contemplated by Section 3.1 with respect to the Securities of any series, in each case as amended from time to time. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder and, if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C. (S) 77aaa-77bbb), as amended and as in effect on the date as of this Indenture, except as provided in Section 9.5. "Trust Securities", as applied to any Trust, means any of the Common Securities or the Preferred Securities of the Trust. "Vice President", when used with respect to the Company means any duly appointed vice president, whether or not designated by a number or a word or words added before or after the title "vice president." "Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person. Section 1.2. Compliance Certificate and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent (including covenants, compliance with which constitutes a condition 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 (including covenants compliance with which constitute a condition precedent), if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than the certificates provided pursuant to Section 10.4) shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; 16 (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 each such individual, he has made or caused to be 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, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.3. Forms of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer or counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate or opinion is based are erroneous. Any Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel rendering such Opinion of Counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions, or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 1.4. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given to or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments is or are delivered to the Trustee, and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a 17 writing appointing any such agent or proxy shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a Person acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. (c) The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient and in accordance with such rules as the Trustee may determine. (d) The ownership of Securities shall be proved by the Securities Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (f) The Company may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities of such series, provided that the Company may not set a record date for, and the provisions of this paragraph shall not apply with respect to, the giving or making of any notice, declaration, request or direction referred to in the next paragraph. If any record date is set pursuant to this paragraph, the Holders of the relevant Outstanding Securities on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date, provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of the relevant Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Company from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of the relevant Outstanding Securities on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Company, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of the relevant Securities in the manner set forth in Section 1.6. 18 The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to join in the giving or making of (i) any Notice of Default, (ii) any declaration of acceleration referred to in Section 5.2, (iii) any request to institute proceedings referred to in Section 5.7(2) or (iv) any direction referred to in Section 5.12, in each case with respect to the relevant Securities. If any record date is set pursuant to this paragraph, the Holders of the relevant Outstanding Securities on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date, provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of the relevant Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of the relevant Outstanding Securities on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Company's expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of the relevant Securities in the manner set forth in Section 1.6. With respect to any record date set pursuant to this Section, the party hereto which sets such record date may designate any day as the "Expiration Date" and from time to time may change the Expiration Date to any earlier or later day, provided that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other party hereto in writing, and to each Holder of the relevant Outstanding Securities in the manner set forth in Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section, the party hereto which set such record date shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date. (g) Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. 19 Section 1.5. Notices, Etc. to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder, any holder of Preferred Securities or the Company shall be sufficient for every purpose hereunder if actually made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, or (2) the Company by the Trustee, any Holder or any holder of Preferred Securities shall be sufficient for every purpose (except as otherwise provided in Section 5.1) hereunder if in writing and mailed, first class, postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. Section 1.6. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, to each Holder as of the applicable record date (if any) affected by such event, at the address of such Holder as it appears in the Securities Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Section 1.7. Conflict with Trust Indenture Act. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by any of Sections 310 to 317, inclusive, of the Trust Indenture Act through operation of Section 318(c) thereof, such imposed duties shall control. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part and govern this Indenture, the provisions of the Trust Indenture Act shall control. Any provision of this Indenture may modify or exclude any provision of the Trust Indenture Act that may be so modified or excluded. 20 Section 1.8. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 1.9. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. Section 1.10. Separability Clause. In case any provision of this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 1.11. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors and assigns, the holders of Senior Indebtedness, the Holders of the Securities and, to the extent expressly provided in Sections 5.2, 5.8, 5.9, 5.11, 5.13, 9.1 and 9.2, the holders of Preferred Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 1.12. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF. Section 1.13. Non-Business Days. In any case where any Interest Payment Date, Redemption Date, Repurchase Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Securities) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day (and no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date, Repurchase Date or Stated Maturity, as the case may be, until such 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 Interest Payment Date, Redemption Date or Repurchase Date or at the Stated Maturity). 21 ARTICLE II SECURITY FORMS Section 2.1. Forms Generally. The Initial Securities, the Exchange Securities and the Registered Securities of each series and the Trustee's certificate of authentication shall be in substantially the forms set forth in this Article, or in such other form or forms as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with applicable tax laws or the rules of any securities exchange or automated quotation system on which the Securities may be listed or traded or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If the form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company, and the record of such action and the form of Securities so established shall be delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 3.3 with respect to the authentication and delivery of such Securities. The definitive Securities shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods, if required by any securities exchange or automated quotation system on which the Securities may be listed or traded, on a steel engraved border or steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange or automated quotation system on which the Securities may be listed or traded, all as determined by the officers executing such Securities, as evidenced by their execution of such securities. Section 2.2A Form of Face of Initial Security. THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY THE INITIAL INVESTOR, (I) TO A PERSON WHO THE TRANSFEROR BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES 22 ACT, OR (B) BY SUBSEQUENT INVESTORS, AS SET FORTH IN (A) ABOVE AND, IN ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER JURISDICTIONS OF THE UNITED STATES. THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. INTEGON CORPORATION [CUSIP ____] __% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES No. $ INTEGON CORPORATION, a corporation organized and existing under the laws of the State of Delaware (hereinafter called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to , or registered assigns, the principal sum of Dollars on __________ __, ____[; provided that the Company may, subject to certain conditions set forth in Section 3.14 of the Indenture, shorten the Stated Maturity of the principal of this Security to a date not earlier than __________]. The Company further promises to pay interest on said principal sum from , or from the most recent interest payment date (each such date, an "Interest Payment Date") on which interest has been paid or duly provided for,[monthly] [quarterly] [semi-annually] [if applicable, insert -(subject to deferral as set forth herein)] in arrears on [insert applicable Interest Payment Dates] of each year, commencing , , at the rate of % per annum, until the principal hereof shall have become due and payable, plus Additional Interest, if any, until the principal hereof is paid or duly provided for or made available for payment [if applicable, insert -and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the rate of % per annum, compounded [monthly] [quarterly] [semi-annually]]. The amount of interest [and Additional Interest, if any] payable for any period shall be computed on the basis of twelve 30-day months and a 360-day year. The amount of interest payable for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Security 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. A "Business Day" shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee [if applicable, insert - or the principal office of the Property Trustee under the Trust Agreement] is closed for business. 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 Security (or one or more Predecessor Securities) is registered at the close of business on 23 the Regular Record Date for such interest installment, which shall be the [insert definition of Regular Record Dates]. 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 either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Securities of this series may be listed or traded, and upon such notice as may be required by such exchange or self-regulatory organization, all as more fully provided in said Indenture. [If applicable, insert - So long as no Event of Default has occurred and is continuing, the Company shall have the right at any time during the term of this Security to defer payment of interest on this Security, at any time or from time to time, for up to consecutive [monthly] [quarterly] [semi-annual] interest payment periods with respect to each deferral period (each an "Extension Period"), during which Extension Periods the Company shall have the right to make partial payments of interest on any Interest Payment Date, and at the end of which the Company shall pay all interest then accrued and unpaid (together with Additional Interest thereon to the extent permitted by applicable law); provided, however, that no Extension Period shall extend beyond the Stated Maturity of the principal of this Security; provided, further, that during any such Extension Period, the Company shall not, and shall not permit any Subsidiary of the Company 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 capital stock 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 that rank pari passu in all respects with or junior in interest to this Security or (iii) make any guarantee payments with respect to any guarantee by the Company of the debt securities of any Subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to this Security (other than (a) dividends or distributions in the Company's capital stock, (b) any declaration of a dividend in connection with the implementation of a Rights Plan or the issuance of stock under any such Rights Plan in the future, or the redemption or repurchase of any rights distributed pursuant to a Rights Plan, (c) payments under the Guarantee with respect to this Security, (d) purchases of Common Stock related to the issuance of Common Stock or rights or options under any of the Company's benefit plans for its directors, officers, employees or other persons within the definition of "employee" for purposes of a registration of shares for an employee benefit plan of the Company, related to the issuance of Common Stock or rights under a dividend reinvestment or stock purchase plan, or related to the issuance of Common Stock (or securities convertible into or exchangeable for Common Stock) as consideration in an acquisition transaction that was entered into prior to the commencement of such Extension Period and (e) payments of accrued dividends (and cash in lieu of fractional shares) upon conversion into Common Stock of any convertible preferred stock of the Company of any series now or hereinafter outstanding, in accordance with the terms of such stock). Prior to the termination of any such Extension Period, the Company may further defer the payment of interest, provided that no Extension Period shall exceed consecutive [monthly] [quarterly] [semi-annual] periods or extend beyond the Stated Maturity of the principal of this Security. Upon 24 the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due, the Company may elect to begin a new Extension Period, subject to the above requirements. No interest shall be due and payable during an Extension Period except at the end thereof. The Company shall give the Holder of this Security and the Trustee notice of its election to begin any Extension Period at least one Business Day prior to the next succeeding Interest Payment Date on which interest on this Security would be payable but for such deferral [if applicable, insert - or, with respect to the Securities issued to a Trust, so long as such Securities are held by such Trust, prior to the earlier of (i) the next succeeding date on which Distributions on the Preferred Securities would be payable but for such deferral or (ii) the date the Administrative Trustees are required to give notice to any securities exchange or other applicable self-regulatory organization or to holders of such Preferred Securities of the record date or the date such Distributions are payable, but in any event not less than one Business Day prior to such record date.]] Payment of principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in the United States, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; [if applicable, insert -; provided, however, that at the option of the Company] payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register or (ii) by wire transfer or direct deposit in immediately available funds at such place and to such account as may be designated in writing by the relevant Regular Record Date by the Person entitled thereto as specified in the Securities Register. ] The indebtedness evidenced by this Security 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 Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, 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. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 25 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. INTEGON CORPORATION By: --------------------------------- [President or Vice President] Attest: - ------------------------------------- [Secretary or Assistant Secretary] Section 2.2B Form of Face of Exchange Security and Registered Security. INTEGON CORPORATION [CUSIP ____] __% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES No. $ INTEGON CORPORATION, a corporation organized and existing under the laws of the State of Delaware (hereinafter called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to , or registered assigns, the principal sum of Dollars on __________ __, ____[; provided that the Company may, subject to certain conditions set forth in Section 3.14 of the Indenture, shorten the Stated Maturity of the principal of this Security to a date not earlier than __________]. The Company further promises to pay interest on said principal sum from , or from the most recent interest payment date (each such date, an "Interest Payment Date") on which interest has been paid or duly provided for, [monthly] [quarterly] [semi-annually] [if applicable, insert - (subject to deferral as set forth herein)] in arrears on [insert applicable Interest Payment Dates] of each year, commencing , , at the rate of % per annum, until the principal hereof shall have become due and payable [if applicable, insert - , plus Additional Interest, if any,] until the principal hereof is paid or duly provided for or made available for payment [if applicable, insert - and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the rate of % per annum, compounded [monthly] [quarterly] [semi-annually]]. The amount of interest [plus Additional Interest, if any] payable for any period shall be computed on the basis of twelve 30-day months and a 360-day year. The amount of interest payable for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Security 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 26 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. A "Business Day" shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee [if applicable, insert - or the principal office of the Property Trustee under the Trust Agreement] is closed for business. 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 Security (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 the [insert definition of Regular Record Dates]. 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 either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Securities of this series may be listed or traded, and upon such notice as may be required by such exchange or self-regulatory organization, all as more fully provided in said Indenture. [If applicable, insert - So long as no Event of Default has occurred and is continuing, the Company shall have the right at any time during the term of this Security to defer payment of interest on this Security, at any time or from time to time, for up to consecutive [monthly] [quarterly] [semi-annual] interest payment periods with respect to each deferral period (each an "Extension Period"), during which Extension Periods the Company shall have the right to make partial payments of interest on any Interest Payment Date, and at the end of which the Company shall pay all interest then accrued and unpaid (together with Additional Interest thereon to the extent permitted by applicable law); provided, however, that no Extension Period shall extend beyond the Stated Maturity of the principal of this Security; provided, further, that during any such Extension Period, the Company shall not, and shall not permit any Subsidiary of the Company 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 capital stock 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 that rank pari passu in all respects with or junior in interest to this Security or (iii) make any guarantee payments with respect to any guarantee by the Company of the debt securities of any Subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to this Security (other than (a) dividends or distributions in the Company's capital stock, (b) any declaration of a dividend in connection with the implementation of a Rights Plan or the issuance of stock under any such Rights Plan in the future, or the redemption or repurchase of any rights distributed pursuant to a Rights Plan, (c) payments under the Guarantee with respect to this Security, (d) purchases of Common Stock related to the issuance of Common Stock or rights or options under any of the Company's benefit plans for its directors, officers, employees or other persons within the definition of "employee" for purposes of a registration of shares for an employee benefit plan of the Company, 27 related to the issuance of Common Stock or rights under a dividend reinvestment and stock purchase plan, or related to the issuance of Common Stock (or securities convertible into or exchangeable for Common Stock) as consideration in an acquisition transaction that was entered into prior to the commencement of such Extension Period and (e) payments of accrued dividends (and in cash in lieu of fractional shares) upon conversion into Common Stock of any convertible preferred stock of the Company of any series now or hereinafter outstanding, in accordance with the terms of such stock). Prior to the termination of any such Extension Period, the Company may further defer the payment of interest, provided that no Extension Period shall exceed consecutive [months] [quarters] [semi-annual periods] or extend beyond the Stated Maturity of the principal of this Security. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due, the Company may elect to begin a new Extension Period, subject to the above requirements. No interest shall be due and payable during an Extension Period except at the end thereof. The Company shall give the Holder of this Security and the Trustee notice of its election to begin any Extension Period at least one Business Day prior to the next succeeding Interest Payment Date on which interest on this Security would be payable but for such deferral [if applicable, insert - or, with respect to the Securities issued to a Trust, so long as such Securities are held by such Trust, prior to the earlier of (i) the next succeeding date on which Distributions on the Preferred Securities would be payable but for such deferral or (ii) the date the Administrative Trustees are required to give notice to any securities exchange or other applicable self- regulatory organization or to holders of such Preferred Securities of the record date or the date such Distributions are payable, but in any event not less than one Business Day prior to such record date]]. Payment of principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in the United States, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; [if applicable, insert - provided, however, that at the option of the Company payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register or (ii) by wire transfer or direct deposit in immediately available funds at such place and to such account as may be designated in writing by the relevant Regular Record Date by the Person entitled thereto as specified in the Securities Register.] The indebtedness evidenced by this Security 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 Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, 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. 28 Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. INTEGON CORPORATION By: ------------------------------- [President or Vice President] Attest: - ------------------------------------- [Secretary or Assistant Secretary] Section 2.3. Form of Reverse of Security. This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under a Junior Subordinated Indenture, dated as of February 10, 1997 (herein called the "Indenture"), between the Company and First Union National Bank of North Carolina, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Company and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof [, limited in aggregate principal amount to $ ]. All terms used in this Security that are defined in the Indenture [if applicable, insert -or in the Amended and Restated Trust Agreement, dated as of ___________, as amended (the "Trust Agreement") among Integon Corporation, as Depositor, and the Trustees named therein,] shall have the meanings assigned to them in the Indenture [if applicable, insert -or the Trust Agreement, as the case may be]. 29 [If applicable, insert - The Company may at any time, at its option, and subject to the terms and conditions of Article XII of the Indenture, redeem this Security in whole at any time or in part from time to time [if applicable, insert - on or after ______ at the following redemption prices (expressed in percentages of principal amount thereof), together with accrued and unpaid interest, including Additional Interest, if any, up to but excluding the Redemption Date, if the redemption occurs during the relevant 12-month period beginning ________ of the years indicated: Year Redemption Price Year Redemption Price - ---- ---------- ----- ---- ---------------- and thereafter at a redemption price equal to 100% of the principal amount thereof] [if applicable, insert - on or after ______ in any year commencing at a redemption price equal to ____% of the principal amount thereof] [if applicable, insert - including Additional Interest, if any] to but excluding the Redemption Date. ] [If applicable, insert - Upon the occurrence and during the continuation of a Tax Event [if applicable, insert description of other conditions], the Company may, at its option, at any time within 90 days of the occurrence of such Tax Event, redeem this Security, in whole but not in part, subject to the provisions of Section 12.7 and the other provisions of Article XII of the Indenture, at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest, including Additional Interest, if any, to but excluding the Redemption Date. [If applicable, insert - So long as no Event of Default has occurred and is continuing, if (i) the Trust is the Holder of all of the outstanding Securities of this series, and (ii) a Tax Event has occurred and is continuing in respect of such Securities, the Company shall pay to the Trust (or its permitted successor under the Trust Agreement) for so long as the Trust (or its permitted successor) is the registered holder of all of the Outstanding Securities of such series, together with any payment of principal of (or premium, if any) or interest (including any Additional Interest) on such Securities, such additional sums as may be necessary in order that the amount of Distributions (including any Additional Amounts (as defined in the Trust Agreement)) then payable by the Trust in respect of the Preferred Securities and Common Securities in accordance with the terms thereof shall not be reduced as a result of any Additional Taxes arising from such Tax Events.] [If applicable, insert - Upon the occurrence of a Change of Control, the Holder of this Security will have the right, subject to certain conditions specified in the Indenture, to require the Company to repurchase in whole or in part this Security at a repurchase price equal to % of the aggregate principal amount of this Security, plus accrued and unpaid interest, including Additional Interest, if any, to but excluding the Repurchase Date, as provided in, and subject to the terms of, the Indenture.] 30 In the event of redemption [or repurchase] of this Security in part only, a new Security or Securities of this series for the unredeemed [or non- repurchased] portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. The Indenture contains provisions for satisfaction and discharge of the entire indebtedness of this Security upon compliance by the Company with certain conditions set forth in the Indenture. [If applicable, insert description of covenants] The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of all series to be affected by such supplemental indenture [if the Securities of this series are issued to a Trust, insert - ; provided that so long as any of the Preferred Securities issued by the Trust remain outstanding no such amendment shall be made that adversely affects the holders of such Preferred Securities in any material respect]. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities of all series at the time Outstanding, on behalf of the Holders of all Securities of such series, [if the Securities of this series are issued to a Trust, insert - and the holders of specified percentages in Liquidation Amount of Preferred Securities issued by the Trust, on behalf of all holders of Preferred Securities issued by the Trust,] to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. [If the Security is not a Discount Security, - As provided in and subject to the provisions of the Indenture, if an Event of Default with respect to the Securities of this series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of this series may declare the principal amount of all the Securities of this series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders) [if the Securities of this series are issued to a Trust, insert - provided that, if upon an Event of Default, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of this series fails to declare the principal of all the Securities of this series to be immediately due and payable, the holders of at least 25% in aggregate Liquidation Amount of the Preferred Securities then outstanding shall have such right by a notice in writing to the Company and the Trustee]; and upon any such declaration the principal amount of and the accrued interest (including any Additional Interest) on all the Securities of this series shall become immediately due and payable, provided that the payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article XIII of the Indenture.] 31 [If the Security is a Discount Security, -As provided in and subject to the provisions of the Indenture, if an Event of Default with respect to the Securities of this series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than such portion of the principal amount as may be specified in the terms of this series may declare an amount of principal of the Securities of this series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders) [if the Securities of this series issued are to a Trust, insert - provided that, if upon an Event of Default, the Trustee or the Holders of the requisite principal amount of the Outstanding Securities of this series fails to declare the principal of all the Securities of this series to be immediately due and payable, the holders of at least 25% in aggregate Liquidation Amount of the Preferred Securities then outstanding shall have such right by a notice in writing to the Company and the Trustee. Such amount shall be equal to - insert formula for determining the amount.] Upon any such declaration, such amount of the principal of and the accrued interest (including any Additional Interest) on all the Securities of this series shall become immediately due and payable, provided that the payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article XIII of the Indenture. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal and overdue interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company's obligations in respect of the payment of the principal of and interest, if any, on this Security shall terminate.] No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained under Section 10.2 of the Indenture duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject 32 to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of such series of a different authorized denomination, as requested by the Holder surrendering the same. The Company and, by its acceptance of this Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that for United States federal, state and local tax purposes it is intended that this Security constitute indebtedness. THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. [If applicable, insert certification for transfers of Transfer Restricted Securities] Section 2.4. Additional Provisions Required in Global Security. Any Global Security issued hereunder shall, in addition to the provisions contained in Sections 2.2A, 2.2B and 2.3, bear a legend in substantially the following form: "This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depository or a nominee of a Depository. This Security is exchangeable for Securities registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Indenture and may not otherwise be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository, which shall be treated by the Company and any agent thereof as the owner and holder of the Securities for all purposes." Section 2.5. Form of Trustee's Certificate of Authentication. "This is one of the Securities referred to in the within mentioned Indenture. Dated: First Union National Bank of North Carolina as Trustee By: -------------------------- Authorized Signatory" 33 ARTICLE III THE SECURITIES Section 3.1. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued from time to time in one or more series. The following matters shall be established in or pursuant to a Board Resolution, and set forth in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of a series: (a) the title of the Securities of such series, which shall distinguish the Securities of the series from all other Securities; (b) the limit, if any, upon the aggregate principal amount of the Securities of such series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 12.6 and except for any Securities which, pursuant to the last paragraph of Section 3.3, are deemed never to have been authenticated and delivered hereunder); provided, however, that the authorized aggregate principal amount of such series may be increased above such amount by a Board Resolution to such effect; (c) the Stated Maturity or Maturities on which the principal of the Securities of such series is payable or the method of determination thereof and the right, pursuant to Section 3.14 or as otherwise set forth therein, of the Company to shorten the Stated Maturity or Maturities of the principal of the Securities of such series; (d) the rate or rates, if any, at which the Securities of such series shall bear interest, if any, the rate or rates and extent to which Additional Interest, if any, shall be payable in respect of any Securities of such series, the Interest Payment Dates on which such interest shall be payable, the right, pursuant to Section 3.11 or as otherwise set forth therein, of the Company to defer or extend an Interest Payment Date, and the Regular Record Date for the interest payable on any Interest Payment Date or the method by which any of the foregoing shall be determined; (e) the place or places where the principal of (and premium, if any) and interest on the Securities of such series shall be payable, the place or places where the Securities of such series may be presented for registration of transfer or exchange, and the place or places where notices and demands to or upon the Company in respect of the Securities of such series may be made; 34 (f) the period or periods within which, or the date or dates on which, if any, the price or prices at which and the terms and conditions upon which the Securities of such series may be redeemed, in whole or in part, at the option of the Company; (g) the obligation or the right, if any, of the Company to redeem, repay or purchase the Securities of such series pursuant to any sinking fund, amortization or analogous provisions or upon the happening of a specified event, or at the option of a Holder thereof, and the period or periods within which, the price or prices at which, the currency or currencies (including currency unit or units) in which and the other terms and conditions upon which Securities of the series shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation; (h) the denominations in which any Securities of such series shall be issuable, if other than denominations of $1,000 and any integral multiple of $1,000 in excess thereof; (i) if other than Dollars, the currency or currencies (including currency unit or units) in which the principal of (and premium, if any) and interest, if any, on the Securities of the series shall be payable, or in which the Securities of the series shall be denominated; (j) the additions, modifications or deletions, if any, in the Events of Default or covenants of the Company set forth herein with respect to the Securities of such series; (k) if other than the principal amount thereof, the portion of the principal amount of Securities of such series that shall be payable upon declaration of acceleration of the Maturity thereof; (l) the additions or changes, if any, to this Indenture with respect to the Securities of such series as shall be necessary to permit or facilitate the issuance of the Securities of such series in bearer form, registrable or not registrable as to principal, and with or without interest coupons; (m) any index or indices used to determine the amount of payments of principal of and premium, if any, on the Securities of such series or the manner in which such amounts will be determined; (n) whether the Securities of the series, or any portion thereof, shall initially be issuable in the form of a temporary Global Security representing all or such portion of the Securities of such series and provisions for the exchange of such temporary Global Security for Definitive Securities of such series; (o) if applicable, that any Securities of the series shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the respective Depositories for such Global Securities, the form of any legend or legends which shall be borne by any such Global Security in addition to or in lieu of that set forth in Section 2.4 and any circumstances in addition to or in lieu of those set forth in Sections 3.3 and 3.5 in which any such Global Security may be 35 exchanged in whole or in part for Securities registered, and any transfer of such Global Security in whole or in part may be registered, in the name or names of Persons other than the Depository for such Global Security or a nominee thereof; (p) the appointment of any Paying Agent or Agents for the Securities of such series; (q) the terms of any right to convert or exchange Securities of such series into any other securities or property of the Company, and the additions or changes, if any, to this Indenture with respect to the Securities of such series to permit or facilitate such conversion or exchange; (r) the form or forms of the Trust Agreement, Amended and Restated Trust Agreement and Guarantee Agreement, if different from the forms attached hereto as Annexes A, B and C, respectively; (s) the relative degree, if any, to which the Securities of the series shall be senior to or be subordinated to other series of Securities in right of payment, whether such other series of Securities are Outstanding or not; and (t) any other terms of the Securities of such series (which terms shall not be inconsistent with the provisions of this Indenture). All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided herein or in or pursuant to such Board Resolution and set forth in such Officers' Certificate or in any such indenture supplemental hereto. If any of the terms of the Securities of any series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the series. The Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article XIII. Section 3.2. Denominations. The Securities of each series shall be in registered form without coupons and shall be issuable in denominations of $1,000 and any integral multiples of $1,000 in excess thereof, unless otherwise specified as contemplated by Section 3.1. Section 3.3. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its President or one of its Vice Presidents under its corporate seal reproduced or impressed thereon and attested by its Secretary or 36 one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver (i) Initial Securities or Registered Securities of any series for original issue, executed by the Company to the Trustee for authentication, and (ii) Exchange Securities for issue only in a Registered Exchange Offer pursuant to an Exchange and Registration Rights Agreement in exchange for a like aggregate principal amount of Initial Securities exchanged pursuant thereto, provided, in each such case, such Securities are accompanied by a Company Order for the authentication and delivery of such Securities, whereupon the Trustee in accordance with the Company Order shall authenticate and make such Securities available for delivery as in the Indenture provided and not otherwise. If the form or terms of the Securities of the series have been established by or pursuant to one or more Board Resolutions as permitted by Sections 2.1 and 3.1, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Opinion of Counsel stating, (1) if the form of such Securities has been established by or pursuant to Board Resolution as permitted by Section 2.1, that such form has been established in conformity with the provisions of this Indenture; (2) if the terms of such Securities have been established by or pursuant to Board Resolution as permitted by Section 3.1, that such terms have been established in conformity with the provisions of this Indenture; (3) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; and (4) that all requirements of New York and Federal law, the Delaware General Corporation Law and the Delaware Business Trust Act in respect of the execution and delivery by the Company of such Securities, and all covenants and conditions set forth in this Indenture which are conditions precedent hereto, have been complied with. If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own 37 rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Notwithstanding the provisions of Section 3.1 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate otherwise required pursuant to Section 3.1 or the Company Order and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the authentication of each Security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for can cellation as provided in Section 3.9, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall not be entitled to the benefits of this Indenture. The following clauses (1), (2) and (3) shall apply only to Global Securities deposited with or on behalf of the Depository. (1) The Company shall execute and the Trustee shall authenticate and deliver initially one or more Global Securities that (i) shall be registered in the name of the Depository for such Global Security or Global Securities or the registered nominee of such Depository and (ii) shall be held by the Trustee as Securities Custodian for the Depository. (2) Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository or by the Trustee as the Securities Custodian of the Depository under such Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or shall impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security. 38 (3) Except as otherwise provided herein, owners of beneficial interests in Global Securities shall not be entitled to receive physical delivery of certificated Securities. Purchasers of Initial Securities who are not QIBs shall receive certificated Initial Securities ("Restricted Certificated Securities"); provided, however, that upon transfer of such Restricted Certificated Securities to a QIB, such Restricted Certificated Securities shall, unless the relevant Global Security has previously been exchanged, be exchanged for an interest in a Global Security pursuant to the provisions of Section 3.5 hereof. Section 3.4. Temporary Securities. Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and make available for delivery, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities of such series in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities of any series are issued, the Company will cause definitive Securities of such series to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for that purpose without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor one or more definitive Securities of the same series, of any authorized denominations, of like aggregate principal amount, having the same Original Issue Date and Stated Maturity and having the same terms as such temporary Securities. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series. Section 3.5. Registration, Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. Such register is herein sometimes referred to as the "Securities Register." The Trustee is hereby appointed "Securities Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. (a) Transfer and Exchange of Definitive Securities. When Definitive ---------------------------------------------- Securities are presented to the Securities Registrar with a request: (i) to register the transfer of such Definitive Securities; or 39 (ii) to exchange such Definitive Securities for Definitive Securities in an equal aggregate principal amount of Definitive Securities of other authorized denominations, the Securities Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Securities surrendered for transfer or exchange: (A) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Trustee and the Securities Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (B) in the case of Transfer Restricted Securities that are Definitive Securities, are being transferred or exchanged either pursuant to an effective registration statement under the Securities Act, or pursuant to clause (1), (2), or (3) below and are accompanied by the following additional information and documents, as applicable: (1) if such Transfer Restricted Securities are being delivered to the Securities Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in substantially the form set forth on the reverse of the Security); or (2) if such Transfer Restricted Securities are being transferred to the Company or to a QIB in accordance with Rule 144A under the Securities Act, a certification to that effect (in substantially the form set forth on the reverse of the Security); or (3) if such Transfer Restricted Securities are being transferred (w) pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or (x) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is acquiring the security for its own account, or for the account of such an institutional accredited investor, in each case in a minimum principal amount of the Securities of $100,000 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 (y) in reliance on another exemption from the registration requirements of the Securities Act: (I) a certification to that effect and (II) if the Company or the Securities Registrar so requests, an Opinion of Counsel reasonably acceptable to the Company and to the Securities Registrar to the effect that such transfer is in compliance with the Securities Act. (b) Restrictions of Transfer of a Definitive Security For a ------------------------------------------------------- Beneficial Interest in a Global Security. A Definitive Security may not be - ---------------------------------------- exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a 40 Definitive Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with: (i) if such Definitive Security is a Transfer Restricted Security, certification that such Definitive Security is being transferred to a QIB in accordance with Rule 144A under the Securities Act; and (ii) whether or not such Definitive Security is a Transfer Restricted Security, written instructions directing the Trustee to make, or to direct the Securities Custodian to make, an adjustment on its books and records with respect to such Global Security to reflect an increase in the aggregate principal amount of the Securities represented by the Global Security, then the Trustee shall cancel such Definitive Security and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing between the Depository and the Securities Custodian, the aggregate principal amount of Securities represented by the Global Security to be increased accordingly. If no Global Securities are then outstanding, the Company shall issue and the Trustee shall authenticate, upon written order of the Company in the form of an Officers' Certificate, a new Global Security in the appropriate principal amount. Neither the Trustee nor the Securities Registrar has duties to obtain certificates or other documentation with respect to the transfer or exchange between or among any Depository participants, members or beneficial owners in any global security and shall have no liability or responsibility with respect to the legality thereof. (c) Transfer and Exchange of Global Securities. The transfer and ------------------------------------------ exchange of Global Securities or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. (d) Transfer of a Beneficial Interest in a Global Security For a Definitive Security. - -------------------------------------------------------------------------- (i) Any person having a beneficial interest in a Global Security that is being transferred or exchanged either pursuant to an effective registration statement under the Securities Act or pursuant to clause (A), (B) or (C) below may upon request, and if accompanied by the information specified below, exchange such beneficial interest for a Definitive Security of the same aggregate principal amount. Upon receipt by the Trustee of written instructions or such other form of instructions as is customary for the Depository from the Depository or its nominee on behalf of any Person having a beneficial interest in a Global Security and upon receipt by the Trustee of a written order or such other form of instructions as is customary for the Depository or the Person designated by the Depository as having such a beneficial interest in a Transfer Restricted Security only, the following additional information and documents (all of which may be submitted by facsimile): 41 (A) if such beneficial interest is being transferred to the Person designated by the Depository as being the owner of a beneficial interest in a Global Security, a certification from such Person to that effect (in substantially the form set forth on the reverse of the Security); or (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certification to that effect (in substantially the form set forth on the reverse of the Security); or (C) if such beneficial interest is being transferred (w) pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act, or (x) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is acquiring the security for its own account, or for the account of such an institutional accredited investor, in each case in a minimum principal amount of the Securities of $100,000, 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 (y) in reliance on another exemption from the registration requirements of the Securities Act: (I) a certification to that effect from the transferee or transferor and (II) if the Trustee or the Securities Registrar so requests, an Opinion of Counsel from the transferee or transferor reasonably acceptable to the Company and to the Securities Registrar to the effect that such transfer is in compliance with the Securities Act, then the Trustee or the Securities Custodian, at the direction of the Trustee, shall cause, in accordance with the standing instructions and procedures existing between the Depository and the Securities Custodian, the aggregate principal amount of the Global Security to be reduced on its books and records and, following such reduction, the Company shall execute and the Trustee shall authenticate and deliver to the transferee a Definitive Security. (ii) Definitive Securities issued in exchange for a beneficial interest in a Global Security pursuant to this Section 3.5(d) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Definitive Securities to the Persons in whose names such Securities are so registered in accordance with the written instructions of the Depository. (e) Restrictions on Transfer and Exchange of Global Securities. ---------------------------------------------------------- Notwithstanding any other provisions of this Indenture, a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. 42 (f) Legend. ------ (i) Except as permitted by the following paragraph (ii), each certificate evidencing the Global Securities and the Definitive Securities (and all Securities issued in exchange therefor or substitution thereof) shall bear a legend in substantially the form contemplated by Sections 2.2A, 2.2B and 2.4, if applicable. (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act or an effective registration statement under the Securities Act: (A) in the case of any Transfer Restricted Security that is a Definitive Security, the Securities Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Security that does not bear the legend set forth in Section 2.4 and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) any such Transfer Restricted Security represented by a Global Security shall not be subject to the provisions set forth in clause (i) of this Section 3.5(f) (such sales or transfers being subject only to the provisions of Section 3.5(c) hereof); provided, however, that with respect to any request for an exchange of a Transfer Restricted Security that is represented by a Global Security for a Definitive Security that does not bear the legend set forth in Section 2.4, which request is made in reliance upon Rule 144, the Holder thereof shall certify in writing to the Securities Registrar that such request is being made pursuant to Rule 144. (g) Cancellation and/or Adjustment of Global Security. At such time ------------------------------------------------- as all beneficial interests in a Global Security have either been exchanged for Definitive Securities, redeemed, repurchased or canceled, such Global Security shall be returned to the Depository for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for Definitive Securities, redeemed, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction. (h) Obligations With Respect to Transfers and Exchanges of Securities. ----------------------------------------------------------------- (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Definitive Securities and Global Securities at the Securities Registrar's written request. 43 (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith. (iii) The Securities Registrar shall not be required to register the transfer of or exchange of any Security called for redemption during a period beginning 15 days before the day of selection for such redemption. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent or the Securities Registrar may deem and treat the person in whose name a Security is registered in the Securities Register of such series as the absolute owner of such Security for the purpose of receiving payment of principal and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent or the Securities Registrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same Securities and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (i) Termination of Certain Restrictions on Transfer and Provisions As ----------------------------------------------------------------- to Legends and Global Form. After a transfer of any Initial Securities during - -------------------------- the period of the effectiveness of, and pursuant to, a Shelf Registration Statement with respect to the Initial Securities, all requirements pertaining to legends on such Initial Securities shall cease to apply, the requirements requiring that any such Initial Securities issued to certain Holders be issued in global form shall cease to apply, and certificated Initial Securities without legends shall be made available to the Holders of such Initial Securities. Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which Holders of Initial Securities are offered Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form shall cease to apply and certificated Initial Securities shall be available to Holders of such Initial Securities that do not exchange their Initial Securities, and Exchange Securities in certificated form shall be available to Holders that exchange such Initial Securities in such Registered Exchange Offer. Section 3.6. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee together with such security or indemnity as may be required by the Company or the Trustee to hold each of them harmless, the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a new Security of the same issue and series of like tenor and principal amount, having the same Original Issue Date and Stated Maturity and bearing the same interest rate as such mutilated Security, and bearing a number not contemporaneously outstanding. 44 If there shall be delivered to the Company and to the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security, and (ii) such security or indemnity as may be required by them to hold each of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and make available for delivery, in lieu of any such destroyed, lost or stolen Security, a new Security of the same issue and series of like tenor and principal amount, having the same Original Issue Date and Stated Maturity and bearing the same interest rate as such destroyed, lost or stolen Security, and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 3.7. Payment of Interest; Interest Rights Preserved. Interest on any Security of any series which is payable, and is punctually paid or duly provided for, on any Interest Payment Date, shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest in respect of Securities of such series, except that, unless otherwise provided in the Securities of such series, interest payable on the Stated Maturity of the principal of a Security shall be paid to the Person to whom principal is paid. The initial payment of interest on any Security of any series which is issued between a Regular Record Date and the related Interest Payment Date shall be payable as provided in such Security or in the Board Resolution pursuant to Section 3.1 with respect to the related series of Securities. At the option of the Company, interest on any series of Securities may be paid (i) by check mailed to the address of the Person entitled thereto as it shall appear on the Securities Register of such series or (ii) by wire transfer or direct deposit in immediately available funds at such place and to such account as designated by the Person entitled 45 thereto as specified in the Securities Register of such series, provided that proper transfer instructions have been received prior to the relevant Regular Record Date. Any interest on any Security which is payable, but is not timely paid or duly provided for, on any Interest Payment Date for Securities of such series (herein called "Defaulted Interest"), shall forthwith cease to be payable to the registered Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series in respect of which interest is in default (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 of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment (which shall allow sufficient time to the Trustee to comply with the notice requirement thereof), 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 be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first class, postage prepaid, to each Holder of a Security of such series at the address of such Holder as it appears in the Securities Register not less than 10 days prior to such Special Record Date. The Trustee may, in its discretion, in the name and at the expense of the Company, cause a similar notice to be published at least once in a newspaper, customarily published in the English language on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, but such publication shall not be a condition precedent to the establishment of 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 the Securities of such series (or their respective Predecessor Securities) are registered on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Securities of the series in respect of which interest is in default may be listed or traded and, upon such notice as may be required by such exchange (or by the Trustee if the Securities are not listed), if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such payment shall be deemed practicable by the Trustee. 46 Any interest on any Security which is deferred or extended pursuant to Section 3.11 shall not be Defaulted Interest for the purposes of this Section 3.7. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 3.8. Persons Deemed Owners. The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name any Security is registered in the Securities Register of such series as the owner of such Security for the purpose of receiving payment of principal of and (subject to Section 3.7) any interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Section 3.9. Cancellation. All Securities surrendered for payment, redemption, repurchase, transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and Securities surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities shall be returned by the Trustee to the Company and destroyed by the Company. Section 3.10. Computation of Interest. Except as otherwise specified as contemplated by Section 3.1 for Securities of any series, interest on the Securities of each series for any period shall be computed on the basis of a 360-day year of twelve 30-day months and interest on the Securities of each series for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. Section 3.11. Deferrals of Interest Payment Dates. If specified as contemplated by Section 2.1 or Section 3.1 with respect to the Securities of a particular series, so long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time during the term of such series, from time to time to defer the payment of interest on such Securities for such period or periods as may be specified as contemplated by Section 3.1 (each, an "Extension Period") during which Extension Periods the Company shall have the right to make partial payments of interest on any Interest Payment Date. No Extension Period shall end 47 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 Securities (together with Additional Interest thereon, if any, at the rate specified for the Securities of such series to the extent permitted by applicable law) to the Persons in whose names that Securities are registered at the close of business on the Regular Record Date with respect to the Interest Payment Date at the end of such Extension Period; provided, however, that no Extension Period shall extend beyond the Stated Maturity of the principal of the Securities of such series; provided, further, that during any such Extension Period, the Company shall not, and shall not permit any Subsidiary 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 capital stock, (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 that rank pari passu in all respects with or junior in interest to the Securities of such series or (iii) make any guarantee payments with respect to any guarantee by the Company of the debt securities of any Subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the securities of such series (other than (a) dividends or distributions in the Company's capital stock, (b) any declaration of a dividend in connection with the implementation of a Rights Plan or the issuance of stock under any such Rights Plan in the future, or the redemption or repurchase of any rights distributed pursuant to a Rights Plan, (c) payments under the Guarantee with respect to such Security, (d) purchases of Common Stock related to the issuance of Common Stock or rights or options under any of the Company's benefit plans for its directors, officers, employees or other persons within the definition of "employee" for purposes of a registration of shares for an employee benefit plan of the Company, related to the issuance of Common Stock or rights under a dividend reinvestment or stock purchase plan, or related to the issuance of Common Stock (or securities convertible into or exchangeable for Common Stock) as consideration in an acquisition transaction that was entered into prior to the commencement of such Extension Period and (e) payments of accrued dividends (and cash in lieu of fractional shares) upon conversion into Common Stock of any convertible preferred stock of the Company of any series now or hereinafter outstanding, in accordance with the terms of such stock). Prior to the termination of any such Extension Period, the Company may further defer the payment of interest, provided that no Extension Period shall exceed the period or periods specified in such Securities or extend beyond the Stated Maturity of the principal of such Securities. Upon termination of any Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due, the Company may elect to begin a new Extension Period, subject to the above requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. The Company shall give the Holders of the Securities of such series and the Trustee written notice of its election to begin any such Extension Period at least one Business Day prior to the next succeeding Interest Payment Date on which interest on Securities of such series would be payable but for such deferral or, with respect to the Securities of a series issued to a Trust, so long as such Securities are held by such Trust, prior to the earlier of (i) the next succeeding date on which Distributions on the Preferred Securities of such Trust would be payable but for such deferral or (ii) the date the Administrative Trustees of such Trust are required to give notice to any securities exchange or other applicable self-regulatory organization or to holders of such Preferred Securities of the record date or the date such Distributions are payable, but in any event not less than one Business Day prior to such record date. 48 The Trustee shall promptly give notice, in the name and at the expense of the Company, of the Company's election to begin any such Extension Period to the holders of the Outstanding Preferred Securities. Section 3.12. Right of Set-Off. With respect to the Securities of a series issued to a Trust, notwithstanding anything to the contrary in the Indenture, the Company shall have the right to set-off any payment it is otherwise required to make thereunder in respect of any such Security to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the related Guarantee Agreement for Securities of such series or under Section 5.8 of the Indenture. Section 3.13. Agreed Tax Treatment. Each Security issued hereunder shall provide that the Company and, by its acceptance of a Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, such Security intend that such Security constitutes indebtedness and agree to treat such Security as indebtedness for United States federal, local and state tax purposes. Section 3.14. Shortening of Stated Maturity. If specified as contemplated by Section 2.1 or 3.1 with respect to the Securities of a particular series, the Company shall have the right to shorten the Stated Maturity of the principal of the Securities of such series at any time to any date not earlier than the first date on which the Company has the right to redeem the Securities of such series. In the event the Company elects to shorten the Stated Maturity of any Securities, it shall give written notice to the Trustee (which shall allow sufficient time to the Trustee to comply with the notice requirement thereof), and the Trustee shall give notice of such shortening to the Holders, no less than 30 and no more than 60 days prior to the effectiveness thereof. Section 3.15. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption or other notices and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers. 49 ARTICLE IV SATISFACTION AND DISCHARGE Section 4.1. Satisfaction and Discharge of Indenture. This Indenture shall, upon Company Request, cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for and as otherwise provided in this Section 4.1) and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.6 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 10.3) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year of the date of deposit, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of Clause (B) (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose an amount in the currency or currencies in which the Securities of such series are payable sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, including principal (and premium, if any) and interest (including any Additional Interest) to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and 50 (3) the Company has delivered to the Trustee 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. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.7, the obligations of the Company to any Authenticating Agent under Section 6.14 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 4.2 and the last paragraph of Section 10.3 shall survive. Section 4.2. Application of Trust Money. Subject to the provisions of the last paragraph of Section 10.3, all money deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for the payment of which such money or obligations have been deposited with or received by the Trustee. ARTICLE V REMEDIES Section 5.1. Events of Default. "Event of Default", wherever used herein with respect to the Securities of any series, 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): (1) default in the payment of any interest upon any Security of that series, including any Additional Interest in respect thereof, when it becomes due and payable, and continuance of such default for a period of 30 days (subject to the deferral of any interest payment date in the case of an Extension Period); or (2) default in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity; or (3) default in the performance, or breach, in any material respect, of any covenant or warranty of the Company in this Indenture with respect to that series (other than a covenant or warranty a default in the performance of which or the breach of which is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 90 days after there 51 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 principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied; or (4) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Company bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (5) the institution by the Company of proceedings to be adjudicated bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit for creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt, or the taking of corporate action by the Company in furtherance of any such action; or (6) any other Event of Default provided with respect to Securities of that series. Section 5.2. Acceleration of Maturity; Rescission and Annulment. If an Event of Default (other than an Event of Default specified in Section 5.1(4) or 5.1(5)) with respect to Securities of any series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal amount of all the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), provided that, in the case of the Securities of a series issued to a Trust, if, upon an Event of Default, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series fail to declare the principal amount of all the Securities of that series to be immediately due and payable, the holders of at least 25% in aggregate liquidation amount of the corresponding series of Preferred Securities then outstanding shall have such right by a notice in writing to the Company and the Trustee; and upon any such declaration such principal amount (or specified portion thereof) of and the accrued interest (including any Additional Interest) on all the Securities of such series shall become immediately due and payable. Payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article XIII notwithstanding that such amount shall become immediately due and payable as herein provided. If an Event of Default specified in Section 5.1(4) or 5.1(5) with respect 52 to Securities of any series at the time Outstanding occurs, the principal amount of all the Securities of that series shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable. At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (1) the Company has paid or deposited with the Trustee a sum sufficient to pay: (A) all overdue installments of interest (including any Additional Interest) on all Securities of that series, (B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, and (C) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which has become due solely by such acceleration, have been cured or waived as provided in Section 5.13; provided that, in the case of Securities of a series held by a Trust, if the Holders of at least a majority in principal amount of the Outstanding Securities of that series fail to rescind and annul such declaration and its consequences, the holders of a majority in aggregate Liquidation Amount (as defined in the Trust Agreement under which such Trust is formed) of the related series of Preferred Securities then outstanding shall have such right by written notice to the Company and the Trustee, subject to the satisfaction of the conditions set forth in Clauses (1) and (2) above of this Section 5.2. No such rescission shall affect any subsequent default or impair any right consequent thereon. Section 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if: (1) default is made in the payment of any installment of interest (including any Additional Interest) on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or 53 (2) default is made in the payment of the principal of (and premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest (including any Additional Interest); and, in addition thereto, all amounts owing the Trustee under Section 6.7. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 5.4. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, (a) the Trustee (irrespective of whether the principal of the Securities of any series 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 on the Company for the payment of overdue principal (and premium, if any) or interest (including any Additional Interest)) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (or, if the Securities of that series are Discount Securities, such portion of the principal amount as may be due and payable pursuant to a declaration in accordance with Section 5.2) (and premium, if any) and interest (including any Additional Interest) owing and unpaid in respect to the Securities and to file such other papers or documents as may be necessary or advisable and to take any and all actions as are authorized under the Trust Indenture Act in order to have the claims of the Holders and any predecessor to the Trustee under Section 6.7 allowed in any such judicial proceedings; and 54 (ii) in particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same in accordance with Section 5.6; and (b) any custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee for distribution in accordance with Section 5.6, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it and any predecessor Trustee under Section 6.7. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. Section 5.5. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of all the amounts owing the Trustee and any predecessor Trustee under Section 6.7, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 5.6. Application of Money Collected. Any money or property collected or to be applied by the Trustee with respect to a series of Securities pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money or property on account of principal (or premium, if any) or interest (including any Additional Interest), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee and any predecessor Trustee under Section 6.7; SECOND: Subject to Article XIII, to the payment of the amounts then due and unpaid upon such series of Securities for principal (and premium, if any), interest (including any Additional Interest) and Additional Taxes, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and 55 payable on such series of Securities for principal (and premium, if any) and interest (including any Additional Interest), respectively; and THIRD: The balance, if any, to the Person or Persons entitled thereto. Section 5.7. Limitation on Suits. No Holder of any Securities of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a receiver, assignee, trustee, liquidator, sequestrator (or other similar official) or for any other remedy hereunder, unless: (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of security or indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing itself of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Securities, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. Section 5.8. Unconditional Right of Holders to Receive Principal, Premium and Interest; Direct Action by Holders of Preferred Securities. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right which is absolute and unconditional to receive payment of the principal of (and premium, if any) and (subject to Section 3.7) interest (including any Additional Interest) on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption or repurchase, on the Redemption Date or the Repurchase Date, as the case may be), to cause the Company to repurchase such Security in accordance with Section 10.10 (if applicable to such series 56 of Securities), and to institute suit for the enforcement of any such payment and of the right to cause such repurchase (if applicable to such series of Securities), and such rights shall not be impaired without the consent of such Holder. In the case of Securities of a series held by a Trust, any holder of the corresponding series of Preferred Securities issued by such Trust shall have the right, upon the occurrence of an Event of Default described in Section 5.1(1) or 5.1(2), to institute a suit directly against the Company for enforcement of payment to such holder of principal of (premium, if any) and (subject to Section 3.7) interest (including any Additional Interest) on the Securities having an aggregate principal amount equal to the aggregate Liquidation Amount (as defined in the Trust Agreement under which such Trust is formed) of such Preferred Securities of the corresponding series held by such holder. Section 5.9. Restoration of Rights and Remedies. If the Trustee, any Holder or any holder of Preferred Securities has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee, such Holder or such holder of Preferred Securities, then and in every such case, the Trustee, the Holders and such holder of Preferred Securities 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 Trustee, the Holders and the holders of Preferred Securities shall continue as though no such proceeding had been instituted. Section 5.10. Rights and Remedies Cumulative. Except as otherwise provided in the last paragraph of Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 5.11. Delay or Omission Not Waiver. No delay or omission of the Trustee, any Holder of any Security or any holder of any Preferred Security 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 the Holders and the right and remedy given to the holders of Preferred Securities by Section 5.8 may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Holders or the holders of Preferred Securities, as the case may be. 57 Section 5.12. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that: (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (3) subject to the provisions of Section 6.1, the Trustee shall have the right to decline to follow such direction if a Responsible Officer or Officers of the Trustee shall, in good faith, determine that the proceeding so directed would be unjustly prejudicial to the Holders not joining in any such direction or would involve the Trustee in liability. Section 5.13. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities of any series and, in the case of any Securities of a series issued to a Trust, the holders of a majority in Liquidation Amount (as defined in the relevant Trust Agreement) of Preferred Securities issued by such Trust may waive any past default hereunder and its consequences with respect to such series except a default: (1) in the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security of such series (unless all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which has become due solely by acceleration, have been cured or annulled as provided in Section 5.3 and the Company has paid or deposited with the Trustee a sum sufficient to pay all overdue installments of interest (including any Additional Interest) on all Securities of that series, the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, and all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel), or (2) in respect of a covenant or provision hereof which under Article IX cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Any such waiver shall be deemed to be on behalf of the Holders of all the Securities of such series or, in the case of a waiver by holders of Preferred Securities issued by such Trust, by all holders of Preferred Securities issued by such Trust. 58 Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 5.14. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security 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 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; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security on or after the respective Stated Maturities expressed in such Security or for the enforcement of the right to require the Company to repurchase any Security in accordance with Section 10.10 (if applicable to such series of Securities). Section 5.15. Waiver of Usury, Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 59 ARTICLE VI THE TRUSTEE Section 6.1. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provisions 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 but not to verify the accuracy of the contents thereof. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct except that (1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of Holders pursuant to Section 5.12 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities of such series. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there shall be reasonable grounds for believing that 60 repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 6.2. Notice of Defaults. Within 90 days after actual knowledge by a Responsible Officer of the Trustee of the occurrence of any default hereunder with respect to the Securities of any series, the Trustee shall transmit by mail to all Holders of Securities of such series, as their names and addresses appear in the Securities Register for such series, notice of such default, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of Securities of such series; and provided, further, that, in the case of any default of the character specified in Section 5.1(3), no such notice to Holders of Securities of such series shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. Section 6.3. Certain Rights of Trustee. Subject to the provisions of Section 6.1: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, Security 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 or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; 61 (d) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) unless an Event of Default shall have occurred and be continuing, the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (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, direction, consent, order, bond, indenture, Security or other paper or document, but the Trustee in its discretion may make such inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (h) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. Section 6.4. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of the Securities or the proceeds thereof. Section 6.5. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Securities Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 6.8 and 6.13, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Securities Registrar or such other agent. 62 Section 6.6. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except for any funds deposited in the Reserve Account pursuant to Article XI, and except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. Section 6.7. Compensation and Reimbursement. The Company, as borrower, agrees (1) to pay to the Trustee from time to time such compensation as shall be agreed in writing between the Company and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify each of the Trustee and any predecessor Trustee for, and to hold it harmless against, any and all loss, liability, damage, claim or expense (including the reasonable compensation and the expenses and disbursements of its agents and counsel) incurred without negligence or bad faith, arising out of or in connection with the acceptance or administration of this trust or the performance of its duties hereunder, 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. This indemnification shall survive the defeasance or termination of this Indenture or the earlier resignation or removal of the Trustee. To secure the Company's payment obligations in this Section, the Company and the Holders agree that the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee. Such lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 5.1(4) or (5) occurs (including the reasonable charges and expenses of its counsel), the expenses and the compensation for the services are intended to constitute expenses of administration under the Bankruptcy Reform Act of 1978 or any successor statute. 63 Section 6.8. Disqualification; Conflicting Interests The Trustee for the Securities of any series issued hereunder shall be subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing herein shall prevent the Trustee from filing with the Commission the application referred to in the second to last paragraph of said Section 310(b). Section 6.9. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be (a) a corporation organized and doing business under the laws of the United States of America or of any state or territory or the District of Columbia, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal, state, territorial or District of Columbia authority, or (b) a corporation or other Person organized and doing business under the laws of a foreign government that is permitted to act as Trustee pursuant to a rule, regulation or order of the Commission, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees, in either case having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then, for the purposes of this Section, 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 the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Neither the Company nor any Person directly or indirectly controlling, controlled by or under common control with the Company shall serve as Trustee for the Securities of any series issued hereunder. Section 6.10. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice 64 of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after such removal, the Trustee being removed may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (d) If at any time: (1) the Trustee shall fail to comply with Section 6.8 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by the Company or by any such Holder, 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, then, in any such case, (i) the Company, acting pursuant to the authority of a Board Resolution, may remove the Trustee with respect to all Securities, or (ii) subject to Section 5.14, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee with respect to the Securities of that or those series. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee with respect to the Securities of such series and supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, subject to Section 5.14, on behalf of himself and all others similarly situated, petition any court of 65 competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities of such series as their names and addresses appear in the Securities Register for such series. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. Section 6.11. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, 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, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, 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 Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts, and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such 66 successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 6.12. Merger, Conversion, Consolidation or Succession to Business. 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, provided such corporation 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. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated, and in case any Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor Trustee or in the name of such successor Trustee, and in all cases the certificate of authentication shall have the full force which it is provided anywhere in the Securities or in this Indenture that the certificate of the Trustee shall have. Section 6.13. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). Section 6.14. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue and upon exchange, registration of transfer, partial redemption or partial repurchase thereof or pursuant to Section 3.6, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate 67 of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, or of any state or territory or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by federal or state authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section the combined capital and surplus of such Authenticating Agent 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, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of an Authenticating Agent shall be the successor Authenticating Agent hereunder, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give notice of such appointment in the manner provided in Section 1.6 to all Holders of Securities of the series with respect to which such Authenticating Agent will serve. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provision of this Section. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: 68 "This is one of the Securities referred to in the within mentioned Indenture. Dated: /s/FIRST UNION NATIONAL BANK OF NORTH CAROLINA ------------------------------------- As Trustee By: ---------------------------------- As Authenticating Agent By: ---------------------------------- Authorized Officer" Section 6.13. Officers' Certificates as Evidence. Except as otherwise provided in this Indenture, 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 thereunder, such matter (unless other evidence in respect thereof is herein specifically prescribed) may, in the absence of negligence or bad faith 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 bad faith 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. 69 ARTICLE VII HOLDER'S LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 7.1. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee: (a) semi-annually, not more than 15 days after January 15 and July 15 in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such January 1 and July 1, 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, excluding from any such list names and addresses received by the Trustee in its capacity as Securities Registrar. Section 7.2. Preservation of Information, Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders received by the Trustee in its capacity as Securities Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.1 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 Securities, and the corresponding rights and privileges of the Trustee, shall be as provided in the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of information as to the names and addresses of the Holders made pursuant to the Trust Indenture Act. Section 7.3. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within sixty days after each May 15 following the date of this Indenture deliver to 70 Holders a brief report, dated as of such May 15, which complies with the provisions of such Section 313(a). (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed and also with the Commission. The Company will promptly notify the Trustee when any Securities are listed on any stock exchange. Section 7.4. Reports by Company. The Company shall file with the Trustee and with the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided in the Trust Indenture Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is required to be filed with the Commission. Notwithstanding that the Company may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall continue to file with the Commission and provide the Trustee with the annual reports and the information, documents and other reports which are specified in Sections 13 and 15(d) of the Exchange Act. The Company also shall comply with the other provisions of Trust Indenture Act Section 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 8.1. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and no Person shall consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: (1) in case the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation, partnership or trust organized and existing under the laws of 71 the United States of America or any State or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest (including any Additional Interest) on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have happened and be continuing; (3) in the case of the Securities of a series held by a Trust, such consolidation, merger, conveyance, transfer or lease is permitted under the related Trust Agreement and Guarantee and does not give rise to any breach or violation of the related Trust Agreement or Guarantee; and (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and any such supplemental indenture complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with; and the Trustee, subject to Section 6.1, may rely upon such Officers' Certificate and Opinion of Counsel as conclusive evidence that such transaction complies with this Section 8.1. Section 8.2. Successor Corporation Substituted. Upon any consolidation or merger by the Company with or into any other Person, or any conveyance, transfer or lease by the Company of its properties and assets substantially as an entirety to any Person in accordance with Section 8.1, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; and in the event of any such conveyance, transfer or lease the Company shall be discharged from all obligations and covenants under the Indenture and the Securities and may be dissolved and liquidated. Such successor Person may cause to be signed, and may issue either in its own name or in the name of the Company, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the written order of such successor Person instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall make available for delivery any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication pursuant to such provisions and any Securities which such successor Person thereafter shall cause to be signed and delivered to the Trustee on its behalf for the purpose pursuant to such provisions. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in 72 accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, conveyance or lease, such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate. ARTICLE IX SUPPLEMENTAL INDENTURES Section 9.1. Supplemental Indentures without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form reasonably satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Securities contained; or (2) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee or to surrender any right or power herein conferred upon the Company; or (3) to establish the form or terms of Securities of any series as permitted by Sections 2.1 or 3.1; or (4) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or (5) to add any additional Events of Default for the benefit of the Holders of all or any series of Securities (and if such additional Events of Default are to be for the benefit of less than all series of Securities, stating that such additional Events of Default are expressly being included solely for the benefit of such series); or (6) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or 73 (7) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action pursuant to this clause (7) shall not adversely affect the interest of the Holders of Securities of any series in any material respect or, in the case of the Securities of a series issued to a Trust and for so long as any of the corresponding series of Preferred Securities issued by such Trust shall remain outstanding, the holders of such Preferred Securities; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.11(b); or (9) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act. Section 9.2. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may 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 modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) except as otherwise specified as contemplated by Section 2.1 or Section 3.1 with respect to the deferral of the payment of interest on the Securities of any series and the shortening of the Stated Maturity of the principal of the Securities of any series, change the Stated Maturity of the principal of, or any installment of interest (including any Additional Interest) on, any Security, or reduce the principal amount thereof or the rate of interest thereon or reduce any premium payable upon the redemption thereof, or change the place of payment where, or the coin or currency in which, the principal of, or interest (including any Additional Interest) on any security is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date or, in the case of repurchase, on or after the Repurchase Date, as the case may be), or adversely affect the right to cause the Company to repurchase the Securities as provided in Section 10.10 (if applicable to such series of Securities), or (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose 74 Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) modify any of the provisions of this Section, Section 5.13 or Section 10.5, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby; or (4) modify the provisions in Article XIII of this Indenture with respect to the subordination of Outstanding Securities of any series in a manner adverse to the Holders thereof; provided, further, that, in the case of the Securities of a series issued to a Trust, so long as any of the corresponding series of Preferred Securities issued by such Trust remain outstanding, (i) no such amendment shall be made that adversely affects the holders of such Preferred Securities in any material respect, and no termination of this Indenture shall occur, and no waiver of any Event of Default or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate Liquidation Amount (as defined in the Trust Agreement under which such Trust is organized) of such Preferred Securities then outstanding unless and until the principal (and premium, if any) of the Securities of such series and all accrued and (subject to Section 3.7) unpaid interest (including any Additional Interest) thereon have been paid in full and (ii) no amendment shall be made to Section 5.8 of this Indenture that would impair the rights of the holders of Preferred Securities provided therein without the prior consent of the holders of each Preferred Security then outstanding unless and until the principal (and premium, if any) of the Securities of such series and all accrued and (subject to Section 3.7) unpaid interest (including any Additional Interest) thereon have been paid in full. A supplemental indenture that changes or eliminates any covenant or other provision of this Indenture that has expressly been included solely for the benefit of one or more particular series of Securities or Preferred Securities, or which modifies the rights of the Holders of Securities or holders of Preferred Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities or holders of Preferred Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 9.3. Execution of Supplemental Indentures. In executing or accepting the additional trusts created by any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, and that all conditions precedent 75 have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 9.4. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 9.5. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 9.6. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Company, bear a notation in form approved by the Company as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. ARTICLE X COVENANTS Section 10.1. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of (and premium, if any) and interest (including Additional Interest, if any) on the Securities of that series in accordance with the terms of such Securities and this Indenture. Section 10.2. Maintenance of Office or Agency. The Company will maintain in each Place of Payment for any series of Securities, an office or agency where Securities of that series may be presented or surrendered for payment and an office or agency where Securities of that series may be surrendered for redemption, repurchase, transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of 76 that series and this Indenture may be served. The Company initially appoints the Trustee, acting through its Corporate Trust Office, as its agent for said purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain such office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation and any change in the location of any such office or agency. Section 10.3. Money for Security Payments to be Held in Trust. If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities of such series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its failure so to act. Whenever the Company shall have one or more Paying Agents, it will, prior to 10:00 a.m. New York City time on each due date of the principal of or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal and premium (if any) or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest (including Additional Interest) on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest (including Additional Interest); 77 (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and (4) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by the Company or any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest (including Additional Interest) on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be paid on Company Request to the Company, or (if then held by the Company) shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 10.4. Statement as to Compliance. The Company shall deliver to the Trustee, within 120 days after the end of each calendar year of the Company ending after the date hereof, an Officers' Certificate, one of the signatories of which shall be the principal executive, principal financial or principal accounting officer of the Company, covering the preceding calendar year, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance, observance or fulfillment of or compliance with any of the terms, provisions, covenants and conditions of this Indenture, and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. For the purpose of this Section 10.4, compliance shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture. 78 Section 10.5. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any covenant or condition provided pursuant to Section 3.1, 9.1(3) or 9.1(4) with respect to the Securities of any series, if before or after the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company in respect of any such covenant or condition shall remain in full force and effect. Section 10.6. Additional Sums. In the case of the Securities of a series initially issued to a Trust, so long as no Event of Default has occurred and is continuing and except as otherwise specified as contemplated by Section 2.1 or Section 3.1, if (i) such Trust is the Holder of all of the Outstanding Securities of such series, and (ii) a Tax Event has occurred and is continuing in respect of such Securities, the Company shall pay to such Trust (or its permitted successor under the related Trust Agreement) for so long as such Trust (or its permitted successor) is the registered holder of all of the Outstanding Securities of such series, together with any payment of principal of (or premium, if any) or interest (including any Additional Interest) on such Securities, such additional sums as may be necessary in order that the amount of Distributions (including any Additional Amounts (as defined in such Trust Agreement)) then payable by such Trust in respect of the related Preferred Securities and Common Securities in accordance with the terms thereof shall not be reduced as a result of any Additional Taxes arising from such Tax Event (the "Additional Sums"). Whenever in this Indenture or the Securities there is a reference in any context to the payment of principal of (or premium, if any) or interest (including Additional Interest) on, or Redemption Price or Repurchase Price for, the Securities, such mention shall be deemed to include mention of the 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 any express mention of the payment of Additional Sums (if applicable) in any provision 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 pursuant to Section 3.11 or the terms of the Securities shall not defer the payment of any Additional Sums that may be due and payable. Section 10.7. Additional Covenants. The Company covenants and agrees with each Holder of Securities of each series that it shall not, and it shall not permit any Subsidiary of the Company to, (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of the Company's capital stock, 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 that rank pari passu in all respects with or junior in interest to the Securities of such series or (iii) make any 79 guarantee payments with respect to any guarantee by the Company of debt securities of any Subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the Securities of such series (other than (a) dividends or distributions in the Company's capital stock, (b) any declaration of a dividend in connection with the implementation of a Rights Plan or the issuance of stock under any such Rights Plan in the future, or the redemption or repurchase of any rights distributed pursuant to a Rights Plan, (c) payments under the Guarantee with respect to the Preferred Securities relating to Securities of such Series, (d) purchases of Common Stock related to the issuance of Common Stock or rights or options under any of the Company's benefit plans for its directors, officers, employees or other persons within the definition of "employee" for purposes of a registration of shares for an employee benefit plan of the Company, related to the issuance of Common Stock or rights under a dividend reinvestment or stock purchase plan, or related to the issuance of Common Stock (or securities convertible into or exchangeable for Common Stock) as consideration in an acquisition transaction), (e) payments of accrued dividends (and cash in lieu of fractional shares) upon conversion into Common Stock of any convertible preferred stock of the Company of any series now or hereinafter outstanding in accordance with the terms of such stock), if at such time (x) there shall have occurred any event of which the Company has actual knowledge that (A) with the giving of notice or the lapse of time or both, would constitute an Event of Default with respect to the Securities of such series and (B) in respect of which the Company shall not have taken reasonable steps to cure, (y) if the Securities of such series are held by a Trust, the Company shall be in default with respect to its payment of any obligations under the Guarantee relating to the Preferred Securities issued by such Trust or (z) the Company shall have given notice of its election to begin an Extension Period with respect to the Securities of such series as provided herein and shall not have rescinded such notice, or such Extension Period, or any extension thereof, shall be continuing. The Company also covenants with each Holder of Securities of a series issued to a Trust (i) to maintain directly or indirectly 100% ownership of the Common Securities of such Trust; provided, however, that any permitted successor of the Company hereunder may succeed to the Company's ownership of such Common Securities, (ii) not to voluntarily terminate, wind-up or liquidate such Trust, except (a) in connection with a distribution of the Securities of such series to the holders of the Trust Securities of such Trust in liquidation of such Trust or (b) in connection with certain mergers, consolidations or amalgamations permitted by the related Trust Agreement and (iii) to use its reasonable efforts, consistent with the terms and provisions of the Trust Agreement, to cause such Trust to remain classified as a grantor trust and not be taxable as a corporation for United States federal income tax purposes. Section 10.8. Limitation on Indebtedness. If specified as contemplated by Section 2.1 or 3.1 with respect to the Securities of a particular series, unless and until the Company reaches Investment Grade Status, the Company and its Subsidiaries will not be permitted to Incur any Debt unless, immediately after giving effect to the Incurrence of such Debt and the receipt and application of the proceeds thereof, the Consolidated Cash Flow Ratio for the four full fiscal quarters for which quarterly or annual financial statements 80 are available next preceding the Incurrence of such Debt, calculated on a pro forma basis as if such Debt had been Incurred at the beginning of such four full fiscal quarters, would be greater than 1.5 to 1 for the period ending on the first anniversary of the date of issuance of such Securities; 1.75 to 1 for the period from the first anniversary of the date of issuance of such Securities and ending on the second anniversary of the date of issuance of such Securities, and 2.0 to 1 thereafter; provided, however, that notwithstanding the foregoing limitations, the Company may Incur Debt (x) of up to $75,000,000 under its Credit Facility or any renewal, extension, refinancing or refunding thereof and (y) of up to an amount equal to the aggregate principal amount of the Senior Notes to the extent Incurred in connection with the refunding or refinancing thereof, plus the amount of any premium required to be paid in connection therewith and the reasonable expenses incurred in connection therewith. For purposes of the foregoing, the Consolidated Cash Flow Ratio for any period from January 1, 1997 to December 31, 1997, shall be calculated on an annualized basis as follows: (i) at any time prior to the Company's financial statements for the second fiscal quarter of 1997 being available, by annualizing the Company's first 1997 fiscal quarter; (ii) at any time after the Company's financial statements for the second fiscal quarter of 1997 are available and prior to the Company's financial statements for the third fiscal quarter of 1997 being available, by annualizing the Company's first and second 1997 fiscal quarters; (iii) at any time thereafter and prior to the Company's 1997 results being available, by annualizing the Company's first three 1997 fiscal quarters, and (iv) with respect to any Person acquired by the Company or a Subsidiary of the Company during such period, the Consolidated Cash Flow Ratio shall be calculated utilizing financial information with respect to such Person for the four full fiscal quarters for which quarterly or annual financial statements are available next preceding the Incurrence of such Debt. Section 10.10. Change of Control. (a) If specified as contemplated by Section 2.1 or 3.1 with respect to the Securities of a series, upon the occurrence of a Change of Control, each Holder of Securities shall have the right, at such Holder's option, to require the Company to repurchase the Securities of such Holder, and upon the exercise of such right, the Company shall repurchase all of such Holder's Securities, or any portion of the principal amount thereof, at a cash price equal to 101% of the principal amount of the Securities subject to repurchase plus accrued and unpaid interest (including Additional Interest, if any) thereon to the Repurchase Date (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date) (the "Repurchase Price"); provided, however, that upon a repurchase in part of its Securities, such Holder shall retain ownership of Securities having a minimum principal amount of $100,000. (b) Notice of a change of control (the "Change of Control Notice") shall be given within five Business Days following the occurrence of a Change of Control by the Company by first-class mail, postage prepaid, to each Holder of Securities in the manner provided in Section 1.6, with a copy to the Trustee, which Change of Control Notice shall state: 81 (1) that a Change of Control has occurred and that such Holder has the right to require the Company to repurchase its Securities, in whole or in part, at the Repurchase Price, as set forth in Section 10.10(a); (2) the circumstances and relevant facts regarding such Change of Control (including any relevant information with respect to the transaction giving rise to such Change of Control); (3) the Repurchase Date for the Securities (which shall be no earlier than 35 days nor later than 60 days from the date such Change of Control Notice is mailed); (4) the date by which the repurchase right must be exercised; (5) a description of the procedure which a Holder must follow to exercise a repurchase right (as determined by the Company consistent with this Section 10.10), and the place or places where such Securities are to be surrendered for payment of the Repurchase Price and accrued interest, if any; and (6) that on the Repurchase Date, the Repurchase Price will become due and payable upon each such Security (or portion thereof) designated by the Holder for repurchase, and that interest thereon, if any, shall cease to accrue on and after said date. The Change of Control Notice shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. The Change of Control 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. No failure of the Company to give the foregoing notice or defects therein shall limit any Holder's right to exercise a repurchase right or affect the validity of the proceedings for the repurchase of Securities. (c) Holders wishing to exercise their right to cause a repurchase of Securities pursuant to this Section 10.10 ("Electing Holders") shall notify the Trustee in writing (a "Repurchase Election") not later than 5:00 p.m. on the 30th day after the receipt of the Change of Control Notice of their election to do so, which notice shall identify the Securities to be repurchased (including CUSIP number, if a CUSIP number has been assigned to such Securities). Any Repurchase Election shall be deemed irrevocable from the date it is made. (d) Prior to 10:00 a.m. New York City time on the Repurchase Date specified in the Change of Control Notice, the Company will deposit with the Trustee or with one or more Paying Agents (or if the Company is acting as its own Paying Agent, the Company will segregate and hold in trust as provided in Section 10.3) an amount of money sufficient to pay the Repurchase Price of all the Securities which are to be repurchased on that date and will give such Trustee or Paying Agent irrevocable instructions and authority to pay such Repurchase Price to the Electing Holders hereof. In the event that the Repurchase Date is not a Business Day, then payment of the Repurchase Price 82 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 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. Payment of the Repurchase Price on the Securities of Electing Holders shall be made to the applicable Record holders thereof as they appear on the Securities Register for such Securities on the relevant record date, which shall be one Business Day prior to the relevant Repurchase Date. (e) If any Repurchase Elections have been made, the Securities or portion of Securities subject to such Repurchase Elections shall become due and payable on the date and at the place or places stated in the Change of Control Notice at the Repurchase Price. On presentation and surrender of such Securities as set forth in (g) below, at the Place of Payment specified in said notice, such Securities or specified portions thereof shall be paid and repurchased by the Company at the Repurchase Price; provided, however, that, unless otherwise specified as contemplated by Section 3.1, installments of interest whose Stated Maturity is on or prior to the Repurchase Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 3.7. (f) Upon presentation of any Security repurchased 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 Security or Securities of the same series, of authorized denominations, in aggregate principal amount equal to the non-repurchased portion of the Security so presented and having the same Original Issue Date, Stated Maturity and terms. If a Global Security is so surrendered, such new Security will also be a new Global Security. (g) If any Security (or portion thereof) elected for repurchase shall not be so paid upon surrender thereof for repurchase, the principal of and premium, if any, on such Security (or portion thereof) shall, until paid, bear interest from the Repurchase Date at the rate borne by the Security. Holders whose Securities are being repurchased hereunder will be required to surrender the Securities, with an appropriate form duly completed, to the Company at the address specified in the Change of Control Notice at least three Business Days prior to the Repurchase Date. (h) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligation under this Section by virtue thereof. 83 ARTICLE XI RESERVE ACCOUNT Section 11.1. Establishment of the Reserve Account. If specified as contemplated by Section 2.1 or 3.1 with respect to the Securities of a series, the Company shall pay an amount equal to the interest payable on the first two Interest Payment Dates in respect of the Securities of such series from the net proceeds from the sale of the Securities of such series into an account (the "Reserve Account") to be established by the Trustee and maintained separately from the funds it holds pursuant to this Indenture, the amounts in which shall be applied by the Trustee to pay interest on the Securities on the first two Interest Payment Dates for the Securities and no other use shall be made of such Reserve Account funds except as set forth in Section 11.2. No further amounts will be required to be paid into the Reserve Account. The Trustee shall have exclusive control and sole right of withdrawal with respect to the Reserve Account funds for the purpose of making deposits in and withdrawals from the Reserve Account in accordance with this Indenture. All funds deposited in the Reserve Account shall be held by the Trustee in the Reserve Account on behalf of the Company for the benefit of the Holders and for distribution as herein provided only. The Reserve Account shall be closed by the Trustee upon the payment of the interest on the Securities on the second Interest Payment Date and any amounts then remaining in the Reserve Account after payment in full of all amounts due and payable in respect of the Securities on the first two Interest Payment Dates shall be returned to the Company. In the event of the distribution of the Securities to the holders of the Preferred Securities and Common Securities in liquidation of the Trust, any amounts then remaining in the Reserve Account shall be remitted to the Company. Section 11.2. Investment of Funds in the Reserve Account. Funds on deposit in the Reserve Account may be invested at the direction of the Company, as set forth in written instructions to the Trustee executed by the President or any Vice President of the Company whose signatures shall have been attested to by the Secretary or an Assistant Secretary of the Company, in (a) obligations issued or guaranteed by the United States or any agency or instrumentality thereof, (b) certificates of deposit of or accounts with national banks or corporations endowed with trust powers having capital and surplus in excess of $100,000,000; (c) commercial paper of the highest rating available for S&P or Moody's or (d) fixed-income securities of the three highest ratings available from S&P or Moody's or of comparable quality having a maturity of five years or less. All interest and other amounts earned upon such investments shall be for the account of the Company and the holders of the Preferred Securities, the Trust and the Trustee shall have no right or interest therein. 84 ARTICLE XII REDEMPTION OF SECURITIES Section 12.1. Applicability of This Article. Redemption of Securities of any series as permitted or required by any form of Security issued pursuant to this Indenture shall be made in accordance with such form of Security and this Article; provided, however, that if any provision of any such form of Security shall conflict with any provision of this Article, the provision of such form of Security shall govern. Except as otherwise set forth in the form of Security for such series, each Security of such series shall be subject to partial redemption only in the amount of $1,000 or, in the case of the Securities of a series issued to the Trust, $1,000 or integral multiples thereof. Section 12.2. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company of the Securities, the Company shall, not less than 45 nor more than 60 days prior to the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such date and of the principal amount of Securities of that series to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities, the Company shall furnish the Trustee with an Officers' Certificate and an Opinion of Counsel evidencing compliance with such restriction. Section 12.3. Selection of Securities to be Redeemed. If less than all the Securities of any series are to be redeemed (unless all the Securities of a specified tenor are to be redeemed or unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by lot or such other method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Security of such series, provided that the unredeemed portion of the principal amount of any Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. If less than all the Securities of such series and of a specified tenor are to be redeemed (unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series and specified tenor not previously called for redemption in accordance with the preceding sentence. The Trustee shall promptly notify the Company in writing of the Securities selected for partial redemption and the principal amount thereof to be redeemed. For all purposes of this 85 Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. If the Company shall so direct, Securities registered in the name of the Company, any Affiliate or any Subsidiary thereof shall not be included in the Securities selected for redemption. Section 12.4. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not later than the thirtieth day, and not earlier than the sixtieth day, prior to the Redemption Date, to each Holder of Securities to be redeemed, at the address of such Holder as it appears in the Securities Register. With respect to Securities of each series to be redeemed, each notice of redemption shall identify the Securities to be redeemed (including CUSIP number, if a CUSIP number has been assigned to such Securities of such Series) and shall state: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all Outstanding Securities of such particular series and having the same terms are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the particular Securities to be redeemed; (d) that on the Redemption Date, the Redemption Price will become due and payable upon each such Security or portion thereof, and that interest thereon, if any, shall cease to accrue on and after said date; and (e) the place or places where such Securities are to be surrendered for payment of the Redemption Price. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company and shall not be irrevocable. 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, a failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. Section 12.5. Deposit of Redemption Price. Prior to 10:00 a.m. New York City time on the Redemption Date specified in the notice of redemption given as provided in Section 12.4, the Company will deposit with the Trustee or with 86 one or more Paying Agents (or if the Company is acting as its own Paying Agent, the Company will segregate and hold in trust as provided in Section 10.3) an amount of money sufficient to pay the Redemption Price of, and any accrued interest (including Additional Interest) on, all the Securities which are to be redeemed on that date. Section 12.6. Payment of Securities Called for Redemption. If any notice of redemption has been given as provided in Section 12.4, the Securities or portion of Securities with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the applicable Redemption Price. On presentation and surrender of such Securities at a Place of Payment in said notice specified, the said securities or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 3.1, installments of interest whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 3.7. Upon presentation of any Security 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 Security or Securities of the same series, of authorized denominations, in aggregate principal amount equal to the unredeemed portion of the Security so presented and having the same Original Issue Date, Stated Maturity and terms. If a Global Security is so surrendered, such new Security will also be a new Global Security. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal of and premium, if any, on such Security shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. Section 12.7. Right of Redemption of Securities. Except as otherwise established pursuant to Section 3.1 for the Securities of a series, the Company, at its option, may redeem (A) the Securities of any series, in whole (but not in part), upon the occurrence and during the continuation of a Tax Event, at any time within 90 days of the occurrence of such Tax Event, at a Redemption Price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, including Additional Interest, if any, to but excluding the Redemption Date, or (B) the Securities of any series, on or after ten years after the Original Issue Date of such Securities, in whole at any time or in part from time to time at a Redemption Price as provided pursuant to Section 3.1 for the Securities of such series. 87 ARTICLE XIII SUBORDINATION OF SECURITIES Section 13.1. Securities Subordinate to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the payment of the principal of (and premium, if any) and interest (including any Additional Interest) on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness. Section 13.2. No Payment When Senior Indebtedness in Default; Payment Over of Proceeds Upon Dissolution, Etc. In the event that the Company shall default in the payment of any principal of (or premium, if any) or interest on or any amount in respect of any Senior Indebtedness when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration of acceleration or otherwise, then, upon written notice of such default to the Company by the holders of Senior Indebtedness or any trustee therefor, unless and until such default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made on account of the principal of (or premium, if any) or interest on any of the Securities, or in respect of any redemption, repayment, retirement, purchase or other acquisition of any of the Securities. In the event of (a) any insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition or other similar proceedings relating to the Company, its creditors or its property, (b) any proceeding for the liquidation, dissolution or other winding up of the Company, voluntary or involuntary, whether or not involving insolvency or bankruptcy proceedings, (c) any assignment by the Company for the benefit of creditors or (d) any other marshaling of the assets of the Company (each such event, if any, herein sometimes referred to as a "Proceeding"), all Senior Indebtedness (including any interest thereon accruing after the commencement of any such proceedings) shall first be paid in full before any payment or distribution, whether in cash, securities or other property, shall be made to any Holder of any of the Securities on account thereof. Any payment or distribution, whether in cash, securities or other property (other than securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities, to the payment of all Senior Indebtedness at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), which would otherwise (but for these subordination provisions) be payable or deliverable in respect of the Securities of any series, shall be paid or delivered directly to the holders of Senior Indebtedness in accordance with the priorities then 88 existing among such holders until all Senior Indebtedness (including any interest thereon accruing after the commencement of any Proceeding) shall have been paid in full. In the event of any Proceeding, after payment in full of all sums owing with respect to Senior Indebtedness, the Holders of the Securities, together with the holders of any obligations of the Company ranking on a parity with the Securities (which for this purpose only shall include the Allocable Amounts of Senior Subordinated Debt), shall be entitled to be paid from the remaining assets of the Company the amounts at the time due and owing on account of unpaid principal of (and premium, if any) and interest on the Securities and such other obligations before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any capital stock or any obligations of the Company ranking junior to the Securities and such other obligations. In the event that, notwithstanding the foregoing, any payment or distribution of any character or any security, whether in cash, securities or other property (other than securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities, to the payment of all Senior Indebtedness at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), shall be received by the Trustee or any Holder in contravention of any of the terms hereof and before all Senior Indebtedness shall have been paid in full, such payment or distribution or security shall be received in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of the Senior Indebtedness at the time outstanding in accordance with the priorities then existing among such holders for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all such Senior Indebtedness in full. In the event of the failure of the Trustee or any Holder to endorse or assign any such payment, distribution or security, each holder of Senior Indebtedness is hereby irrevocably authorized to endorse or assign the same. The Trustee and Holders will take such action (including, without limitation, the delivery of this Indenture to an agent for the holders of Senior Indebtedness or consent to the filing of a financing statement with respect hereto) as may, in the opinion of counsel designated by the holders of a majority in principal amount of the Senior Indebtedness at the time outstanding, be necessary or appropriate to assure the effectiveness of the subordination effected by these provisions. The provisions of this Section 13.2 shall not impair any rights, interests, remedies or powers of any secured creditor of the Company in respect of any security interest the creation of which is not prohibited by the provisions of this Indenture. The securing of any obligations of the Company, otherwise ranking on a parity with the Securities or ranking junior to the Securities, shall not be deemed to prevent such obligations from constituting, respectively, obligations ranking on a parity with the Securities or ranking junior to the Securities. 89 Section 13.3. Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Indenture, or in any of the Securities, shall prevent (a) the Company at any time, except during the conditions described in the first paragraph of Section 13.2 or the pendency of any Proceeding referred to in Section 13.2, from making payments at any time of principal of (and premium, if any) or interest (including Additional Interest) on the Securities, or (b) the application by the Trustee of any moneys deposited with it hereunder to the payment of or on account of the principal of (and premium, if any) or interest (including any Additional Interest) on the Securities or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge that such payment would have been prohibited by the provisions of this Article. Section 13.4. Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all amounts due or to become due on all Senior Indebtedness, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to Senior Indebtedness of the Company to substantially the same extent as the Securities are subordinated to the Senior Indebtedness and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Indebtedness) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. Section 13.5. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as between the Company and the Holders of the Securities, the obligations of the Company, which are absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest (including any Additional Interest) on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of 90 the Securities and creditors of the Company other than their rights in relation to the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture including, without limitation, filing and voting claims in any Proceeding, subject to the rights, if any, under this Article of the holders of Senior Indebtedness to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. Section 13.6. Trustee to Effectuate Subordination. Each Holder of a Security by his or her acceptance thereof 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 provided in this Article and appoints the Trustee his or her attorney-in-fact for any and all such purposes. Section 13.7. No Waiver of Subordination Provisions. 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 be otherwise charged with. Without in any way limiting the generality of the immediately preceding paragraph, the holders of Senior Indebtedness may, at any time and from to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of 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, Senior Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any Person liable in any manner for the collection of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. Section 13.8. Notice to Trustee. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior 91 Indebtedness or from any trustee, agent or representative therefor; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof any monies may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest (including any Additional Interest) on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date. Subject to the provisions of Section 6.1, the Trustee shall be entitled to 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 attorney-in-fact therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee or attorney-in-fact therefor). 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 Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of 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, 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 13.9. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 6.1, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the 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. Section 13.10. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other Person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Article or otherwise. With respect to the Holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are 92 specifically set forth in this Article and no implied covenants or obligations with respect to Holders of Senior Indebtedness shall be read into this Indenture against the Trustee. Section 13.11. Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be 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. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.7. Section 13.12. Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee. 93 * * * * This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and Integon Corporation has caused its corporate seal to be hereunder affixed and attested, all as of the day and year first above written. Integon Corporation By:/s/ John B. Yorke -------------------------- Name: John B. Yorke Title: Vice President, Corporate General Counsel & Secretary First Union National Bank of North Carolina as Trustee By:/s/ Shawn K. Bednasek -------------------------- Name: Shawn K. Bednasek Title: Asst. Vice President 94 STATE OF ) ): ss.: COUNTY OF ) On the ___ day of February, 1997, before me personally came John B. Yorke, to me known, who, being by me duly sworn, did depose and say that he/she is of Integon Corporation, one of the corporations described in and which executed the foregoing instrument; that he/she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he/she signed his/her name thereto by like authority. -------------------------------------- Notary Public STATE OF ) ): ss.: COUNTY OF ) On the 7th day of February, 1997, before me personally came ________________________________________________________________________________ _____________________________________, to me known, who, being by me duly sworn, did depose and say that he/she is ________________________________________________________________________________ _ of First Union National Bank of North Carolina, one of the corporations described in and which executed the foregoing instrument; that he/she signed his/her name thereto pursuant to the bylaws of said Corporation. -------------------------------------- Notary Public EX-4.2 4 FORM OF JUNIOR SUBORDINATE DEFERRABLE EXHIBIT 4.2 THIS SECURITY WILL BE ISSUED, AND MAY BE HELD OR TRANSFERRED, ONLY IN BLOCKS HAVING A PRINCIPAL AMOUNT OF NOT LESS THAN $100,000. ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS SECURITY IN A BLOCK HAVING A PRINCIPAL AMOUNT OF LESS THAN $100,000, OR RESULTING IN A HOLDER'S HOLDING SECURITIES IN A BLOCK HAVING A PRINCIPAL AMOUNT OF LESS THAN $100,000, SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER, ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO THE RECEIPT OF INTEREST ON SUCH SECURITIES, AND SUCH TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES. THIS SECURITY IS SUBJECT TO DEPARTMENT OF TREASURY REGULATIONS SECTION 1.1272- 1(d) AND IS THEREFORE ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID"). THE ISSUE PRICE OF THIS SECURITY IS $103,093,000 AND THE ISSUE DATE OF THIS SECURITY IS FEBRUARY 10, 1997. THE AMOUNT OF OID IS $332,474,925. THE YIELD TO MATURITY OF THIS SECURITY IS 10 3/4%. INTEGON CORPORATION 10 3/4% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES No. 1 $103,093,000 INTEGON CORPORATION, a corporation organized and existing under the laws of the State of Delaware (hereinafter called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to Integon Capital I, or registered assigns (the "Holder"), the principal sum of One Hundred Three Million Ninety Three Thousand Dollars ($103,093,000) on February 15, 2027; provided that the Company may, subject to certain conditions set forth in Section 3.14 of the Indenture, shorten the Stated Maturity of the principal of this Security to a date not earlier than August 15, 2016. The Company further promises to pay interest on said principal sum from February 10, 1997 or from the most recent interest payment date (each such date, an "Interest Payment Date") on which interest has been paid or duly provided for semi-annually (subject to deferral as set forth herein) in arrears on February 15 and August 15 of each year, commencing August 15, 1997, at the rate of 10 3/4% per annum, until the principal hereof shall have become due and payable, plus Additional Interest, if any, until the principal hereof is paid or duly provided for or made available for payment and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the rate of 10 3/4% per annum, compounded semi- 2 annually. The amount of interest and Additional Interest, if any, payable for any period shall be computed on the basis of twelve 30-day months and a 360-day year. The amount of interest payable for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Security 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. A "Business Day" shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee or the principal office of the Property Trustee under the Trust Agreement is closed for business. 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 Security (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 one Business Day prior to the relevant Interest Payment Date if all securities of this series are held in book-entry form, or the fifteenth day prior to the relevant Interest Payment Date if any of the securities of this series are not held in book-entry form, for all securities of this series. 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 either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Securities of this series may be listed or traded, and upon such notice as may be required by such exchange or self-regulatory organization, all as more fully provided in said Indenture. So long as no Event of Default has occurred and is continuing, the Company shall have the right at any time during the term of this Security to defer payment of interest on this Security, at any time or from time to time, for up to 10 consecutive semi-annual interest payment periods with respect to each deferral period (each an "Extension Period"), during which Extension Periods the Company shall have the right to make partial payments of interest on any Interest Payment Date, and at the end of which the Company shall pay all interest then accrued and unpaid (together with Additional Interest thereon to the extent permitted by applicable law); provided, however, that no Extension Period shall extend beyond the Stated Maturity of the principal of this Security; provided, further, that during any such Extension Period, the Company shall not, and shall not permit any Subsidiary of the Company to, (i) 3 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 (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 that rank pari passu in all respects with or junior in interest to this Security or (iii) make any guarantee payments with respect to any guarantee by the Company of the debt securities of any Subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to this Security (other than (a) dividends or distributions in the Company's capital stock, (b) any declaration of a dividend in connection with the implementation of a Rights Plan or the issuance of stock under any such Rights Plan in the future, or the redemption or repurchase of any rights distributed pursuant to a Rights Plan, (c) payments under the Guarantee with respect to this Security, (d) purchases of Common Stock related to the issuance of Common Stock or rights or options under any of the Company's benefit plans for its directors, officers, employees or other persons within the definition of "employee" for purposes of a registration of shares for an employee benefit plan of the Company, related to the issuance of Common Stock or rights under a dividend reinvestment plan or stock purchase plan, or related to the issuance of Common Stock (or securities convertible into or exchangeable for Common Stock) as consideration in an acquisition transaction that was entered into prior to the commencement of such Extension Period and (e) payments of accrued dividends (and cash in lieu of fractional shares) upon conversion into Common Stock of any convertible preferred stock of the Company of any series now or hereinafter outstanding, in accordance with the terms of such stock). Prior to the termination of any such Extension Period, the Company may further defer the payment of interest, provided that no Extension Period shall exceed 10 consecutive semi-annual periods or extend beyond the Stated Maturity of the principal of this Security. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due, the Company may elect to begin a new Extension Period, subject to the above requirements. No interest shall be due and payable during an Extension Period except at the end thereof. The Company shall give the Holder of this Security and the Trustee notice of its election to begin any Extension Period at least one Business Day prior to the next succeeding Interest Payment Date on which interest on this Security would be payable but for such deferral, or with respect to the Securities issued to a Trust, so long as such Securities are held by such Trust, prior to the earlier of (i) the next succeeding date on which Distributions on the Preferred Securities would be payable but for such deferral or (ii) the date the Administrative Trustees are required to give notice to any securities exchange or other applicable self-regulatory organization or to holders of such Preferred Securities of the record date or the date such Distributions are payable, but in any event not less than one Business Day prior to such record date. Payment of principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in the United States, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, 4 however, that at the option of the Company, payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register or (ii) by wire transfer or direct deposit in immediately available funds at such place and to such account as may be designated in writing prior to the relevant Regular Record Date by the Person entitled thereto as specified in the Securities Register. The indebtedness evidenced by this Security 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 Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, 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. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 5 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. INTEGON CORPORATION By: --------------------------- Name: Title: Vice President Attest: - --------------------------------- Name: John B. Yorke Title: Secretary 6 [reverse] This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under a Junior Subordinated Indenture, dated as of February 10, 1997 (herein called the "Indenture"), between the Company and First Union National Bank of North Carolina, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Company and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $103,093,000. All terms used in this Security that are defined in the Indenture or in the Amended and Restated Trust Agreement, dated as of February 10, 1997, as amended (the "Trust Agreement") among Integon Corporation, as Depositor, and the Trustees named therein, shall have the meanings assigned to them in the Indenture or the Trust Agreement, as the case may be. The Company may at any time, at its option, and subject to the terms and conditions of Article XII of the Indenture, redeem this Security in whole at any time or in part from time to time, on or after February 15, 2007, at the following redemption prices (expressed in percentages of principal amount thereof), together with accrued and unpaid interest, including Additional Interest, if any, up to but excluding the Redemption Date, if the redemption occurs during the relevant 12-month period beginning February 15 of the years indicated: Year Redemption Price Year Redemption Price - -------- ----------------- ---- ----------------- 2007 105.375% 2012 102.688% 2008 104.838% 2013 102.150% 2009 104.300% 2014 101.613% 2010 103.763% 2015 101.075% 2011 103.225% 2016 100.538% and thereafter at a redemption price equal to 100% of the principal amount thereof. Upon the occurrence and during the continuation of a Tax Event, if either (i) in the opinion of counsel to the Company experienced in such matters, there would in all cases, after effecting the termination of the Trust holding all of the Securities of this series and the distribution of the Securities to the holders of the Preferred Securities of the Trust in exchange therefor, be more than an insubstantial risk that an Adverse Tax Consequence would continue to exist or (ii) the Securities are not held by such Trust, then the Company (x) may shorten the Stated Maturity of this Security to the minimum extent required, but in any event to a date not earlier than August 15, 2016 (the action referred to in this clause (x) being referred to herein as a "Maturity Advancement"), such that, in the 7 opinion of counsel to the Company experienced in such matters, after advancing the Stated Maturity, interest paid on the Securities will be deductible for federal income tax purposes, or (y) if in the opinion of counsel to the Company experienced in such matters, there would in all cases, after effecting a Maturity Advancement, be more than an insubstantial risk that an Adverse Tax Consequence would continue to exist, may, at its option, at any time within 90 days of the occurrence of such Tax Event, redeem this Security, in whole but not in part, subject to Article XII of the Indenture, at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest, including Additional Interest, if any, to but excluding the Redemption Date. So long as no Event of Default has occurred and is continuing, if (i) the Trust is the Holder of all of the outstanding Securities of this series, and (ii) a Tax Event has occurred and is continuing in respect of such Securities, the Company shall pay to the Trust (or its permitted successor under the Trust Agreement) for so long as the Trust (or its permitted successor) is the registered holder of all of the Outstanding Securities of such series, together with any payment of principal of (or premium, if any) or interest (including any Additional Interest) on such Securities, such additional sums as may be necessary in order that the amount of Distributions (including any Additional Amounts (as defined in the Trust Agreement)) then payable by the Trust in respect of the Preferred Securities and Common Securities in accordance with the terms thereof shall not be reduced as a result of any Additional Taxes arising from such Tax Event. Upon the occurrence of a Change of Control, the Holder of this Security will have the right, subject to certain conditions specified in the Indenture, to require the Company to repurchase in whole or in part this Security at a repurchase price equal to 101% of the aggregate principal amount of this Security, plus accrued and unpaid interest, including Additional Interest, if any, to but excluding the Repurchase Date, as provided in, and subject to the terms of, the Indenture. In the event of redemption or repurchase of this Security in part only, a new Security or Securities of this series for the unredeemed or non-repurchased portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. The Indenture contains provisions for satisfaction and discharge of the entire indebtedness of this Security upon compliance by the Company with certain conditions set forth in the Indenture. The Indenture contains restrictions, among others, on the ability of the Company and its Subsidiaries, unless and until the Company reaches Investment Grade Status, to incur additional indebtedness unless immediately after giving effect to the incurrence of such indebtedness, and the receipt and application of the proceeds thereof, the Consolidated Cash Flow Ratio set forth in the Indenture is met; provided, however, that the Company may incur additional indebtedness under its existing Credit Facility and in connection with the refunding or refinancing of its outstanding Senior Notes (as described in the Indenture). 8 The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of all series to be affected by such supplemental indenture; provided that so long as any of the Preferred Securities issued by the Trust remain outstanding no such amendment shall be made that adversely affects the holders of such Preferred Securities in any material respect. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities of all series at the time Outstanding, on behalf of the Holders of all Securities of such series, and the holders of specified percentages in Liquidation Amount of Preferred Securities issued by the Trust, on behalf of all holders of Preferred Securities issued by the Trust, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. As provided in and subject to the provisions of the Indenture, if an Event of Default with respect to the Securities of this series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of this series may declare the principal amount of all the Securities of this series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), provided that, if upon an Event of Default, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of this series fail to declare the principal of all the Securities of this series to be immediately due and payable, the holders of at least 25% in aggregate Liquidation Amount of the Preferred Securities then outstanding shall have such right by a notice in writing to the Company and the Trustee; and upon any such declaration the principal amount of and the accrued interest (including any Additional Interest) on all the Securities of this series shall become immediately due and payable, provided that the payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article XIII of the Indenture. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained under Section 10.2 of the Indenture duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar 9 duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of such series of a different authorized denomination, as requested by the Holder surrendering the same. The Company and, by its acceptance of this Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that for United States federal, state and local tax purposes it is intended that this Security constitute indebtedness. THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. 10 This is one of the Securities referred to in the within mentioned Indenture. Dated: First Union National Bank of North Carolina as Trustee By: ------------------------- Authorized Signatory EX-4.3 5 CERTIFICATE OF TRUST EXHIBIT 4.3 CERTIFICATE OF TRUST OF INTEGON CAPITAL I This Certificate of Trust of Integon Capital I (the "Trust"), dated January 27, 1997, is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. (S) 3801 et seq.). 1. NAME. The name of the business trust being formed hereby is Integon Capital I. 2. DELAWARE TRUSTEE. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware is First Union Bank of Delaware, One Rodney Square, lst Floor, 920 King Street, Wilmington, Delaware 19801. 3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon the filing of this Certificate of Trust. IN WITNESS WHEREOF, the undersigned trustee of the Trust, has executed this Certificate of Trust as of the date first above written. FIRST UNION BANK OF DELAWARE, as Trustee By:/s/ ________________________________ Name: Title: /s/ John B. Yorke __________________________________ JOHN YORKE, as Trustee EX-4.4 6 AMENDED AND RESTATED TRUST AGREEMENT EXHIBIT 4.4 EXECUTION COPY - -------------------------------------------------------------------------------- AMENDED AND RESTATED TRUST AGREEMENT AMONG INTEGON CORPORATION, AS DEPOSITOR, FIRST UNION NATIONAL BANK OF NORTH CAROLINA AS PROPERTY TRUSTEE, FIRST UNION BANK OF DELAWARE, AS DELAWARE TRUSTEE, AND THE ADMINISTRATIVE TRUSTEES NAMED HEREIN DATED AS OF FEBRUARY 10, 1997 INTEGON CAPITAL I - -------------------------------------------------------------------------------- INTEGON CAPITAL I Certain Sections of this Trust Agreement relating to Sections 310 through 318 of the Trust Indenture Act of 1939:
Trust Indenture Trust Agreement Act Section Section - ---------------------- --------------- ((S)) 310 (a)(1)..................... 8.7 (a)(2)..................... 8.7 (a)(3)..................... 8.9 (a)(4)..................... 2.7(a)(ii) (b)........................ 8.8 ((S)) 311 (a)........................ 8.13 (b)........................ 8.13 ((S)) 312 (a)........................ 5.7 (b)........................ 5.7 (c)........................ 5.7 ((S)) 313 (a)........................ 8.14(a) (a)(4)..................... 8.14(b) (b)........................ 8.14(b) (c)........................ 11.9 (d)........................ 8.14(b) ((S)) 314 (a)........................ 8.15 (b)........................ Not Applicable (c)(1)..................... 8.16 (c)(2)..................... 8.16 (c)(3)..................... Not Applicable (d)........................ Not Applicable (e)........................ 1.1, 8.16 ((S)) 315 (a)........................ 8.1(a), 8.3(a) (b)........................ 8.2, 11.9 (c)........................ 8.1(a) (d)........................ 8.1, 8.3 (e)........................ Not Applicable ((S)) 316 (a)........................ Not Applicable (a)(1)(A).................. Not Applicable (a)(1)(B).................. Not Applicable (a)(2)..................... Not Applicable (b)........................ 5.14 (c)........................ 6.7
Trust Indenture Trust Agreement Act Section Section - ---------------------- --------------- ((S)) 317 (a)(1)..................... Not Applicable (a)(2)..................... Not Applicable (b)........................ 5.9 ((S)) 318 (a)........................ 11.11
- ------------ Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to be a part of the Trust Agreement. TABLE OF CONTENTS
ARTICLE I Defined Terms................................................................................................. 1 Section 1.1 Definitions.................................................................................................... 2 ARTICLE II Continuation of the Trust..................................................................................... 13 Section 2.1 Name........................................................................................................... 13 Section 2.2 Office of the Delaware Trustee; Principal Place of Business.................................................... 13 Section 2.3 Initial Contribution of Trust Property; Organizational Expenses................................................ 13 Section 2.4 Issuance of the Capital Securities............................................................................. 13 Section 2.5 Issuance of the Common Securities; Subscription and Purchase of Debentures................................................................................................. 14 Section 2.6 Declaration of Trust........................................................................................... 14 Section 2.7 Authorization to Enter into Certain Transactions............................................................... 15 Section 2.8 Assets of Trust................................................................................................ 19 Section 2.9 Title to Trust Property........................................................................................ 19 ARTICLE III Payment Account............................................................................................... 19 Section 3.1 Payment Account................................................................................................ 19 ARTICLE IV Distributions; Redemption..................................................................................... 19 Section 4.1 Distributions.................................................................................................. 19 Section 4.2 Redemption..................................................................................................... 21 Section 4.3 Subordination of Common Securities............................................................................. 23 Section 4.4 Payment Procedures............................................................................................. 23 Section 4.5 Tax Returns and Reports........................................................................................ 24 Section 4.6 Payment of Taxes, Duties, Etc. of the Issuer Trust............................................................. 24 Section 4.7 Payments under Indenture or Pursuant to Direct Actions......................................................... 24 ARTICLE V Trust Securities Certificates................................................................................. 25 Section 5.1 Initial Ownership.............................................................................................. 25 Section 5.2 The Trust Securities Certificates.............................................................................. 25 Section 5.3 Execution and Delivery of Trust Securities Certificates........................................................ 25 Section 5.4 Capital Securities.............................................................................................. 26 Section 5.5 Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates............................................. 27 Section 5.6 Persons Deemed Securityholders................................................................................. 27 Section 5.7 Access to List of Securityholders' Names and Addresses......................................................... 28 Section 5.8 Maintenance of Office or Agency................................................................................ 28 Section 5.9 Appointment of Paying Agent.................................................................................... 28 Section 5.10 Ownership of Common Securities by Depositor; Common Securities Certificate..................................................................................... 29 Section 5.11 Registration of Transfer and Exchange of Securities Certificates.............................................. 29 Section 5.12 Notices to Depository......................................................................................... 36 Section 5.13 Definitive Capital Securities Certificates.................................................................... 37 Section 5.14 Rights of Securityholders..................................................................................... 37
-i- Section 5.15 CUSIP Numbers 40 ARTICLE VI Acts of Securityholders; Meetings; Voting.................................................................. 40 Section 6.1 Limitations on Voting Rights................................................................................... 40 Section 6.2 Notice of Meetings............................................................................................. 41 Section 6.3 Meetings of Capital Securityholders............................................................................ 41 Section 6.4 Voting Rights.................................................................................................. 42 Section 6.5 Proxies, etc................................................................................................... 42 Section 6.6 Securityholder Action by Written Consent....................................................................... 42 Section 6.7 Record Date for Voting and Other Purposes...................................................................... 43 Section 6.8 Acts of Securityholders........................................................................................ 43 Section 6.9 Inspection of Records.......................................................................................... 44 Section 6.10 Reports to Holders of Capital Securities...................................................................... 44 ARTICLE VII Representations and Warranties............................................................................. 44 Section 7.1 Representations and Warranties of the Property Trustee and the Delaware Trustee................................................................................................. 44 Section 7.2 Representations and Warranties of Depositor.................................................................... 46 ARTICLE VIII The Trustees............................................................................................... 46 Section 8.1 Certain Duties and Responsibilities............................................................................ 46 Section 8.2 Certain Notices................................................................................................ 48 Section 8.3 Certain Rights of Property Trustee............................................................................. 48 Section 8.4 Not Responsible for Recitals or Issuance of Securities......................................................... 50 Section 8.5 May Hold Securities............................................................................................ 51 Section 8.6 Compensation; Indemnity; Fees.................................................................................. 51 Section 8.7 Corporate Property Trustee Required; Eligibility of Trustees................................................... 52 Section 8.8 Conflicting Interests.......................................................................................... 53 Section 8.9 Co-Trustees and Separate Trustee............................................................................... 53 Section 8.10 Resignation and Removal; Appointment of Successor............................................................. 54 Section 8.11 Acceptance of Appointment by Successor........................................................................ 56 Section 8.12 Merger, Conversion, Consolidation or Succession to Business................................................... 56 Section 8.13 Preferential Collection of Claims Against Depositor or Trust.................................................. 57 Section 8.14 Reports by Property Trustee................................................................................... 57 Section 8.15 Reports to the Property Trustee............................................................................... 58 Section 8.16 Evidence of Compliance with Conditions Precedent.............................................................. 58 Section 8.17 Number of Trustees............................................................................................ 58 Section 8.18 Delegation of Power........................................................................................... 59 ARTICLE IX Termination, Liquidation and Merger........................................................................ 59 Section 9.1 Termination Upon Expiration Date............................................................................... 59 Section 9.2 Early Termination.............................................................................................. 59 Section 9.3 Termination.................................................................................................... 60 Section 9.4 Liquidation.................................................................................................... 60
-ii- Section 9.5 Mergers, Consolidations, Amalgamations or Replacements of the Trust 62 ARTICLE X Repurchase Upon Change of Control........................................................................... 63 Section 10.1 Repurchase.................................................................................................... 63 Section 10.2 Repurchase Procedures......................................................................................... 64 Section 10.3 Repurchase of Common Securities............................................................................... 66 ARTICLE XI Miscellaneous Provisions.................................................................................... 66 Section 11.1 Limitation of Rights of Securityholders....................................................................... 66 Section 11.2 Liability of the Common Securityholder........................................................................ 67 Section 11.3 Amendment..................................................................................................... 67 Section 11.4 Separability.................................................................................................. 68 Section 11.5 Governing Law................................................................................................. 68 Section 11.6 Payments Due on Non-Business Day.............................................................................. 69 Section 11.7 Successors.................................................................................................... 69 Section 11.8 Headings...................................................................................................... 69 Section 11.9 Reports, Notices and Demands.................................................................................. 69 Section 11.10 Agreement Not to Petition.................................................................................... 70 Section 11.11 Trust Indenture Act; Conflict with Trust Indenture Act....................................................... 70 Section 11.12 Acceptance of Terms of Trust Agreement, Guarantee and Indenture................................................................................................ 71 Section 11.13 Counterparts................................................................................................. 71
-iii- AMENDED AND RESTATED TRUST AGREEMENT, dated as of February 10, 1997, among (i) Integon Corporation, a Delaware corporation (including any successors or assigns, the "Depositor"), (ii) First Union National Bank of North Carolina, a national banking association organized and existing under the laws of the United States of America, as property trustee (in each such capacity, the "Property Trustee" and, in its separate corporate capacity and not in its capacity as Property Trustee, the "Bank"), (iii) First Union Bank of Delaware, a banking corporation organized under the laws of the State of Delaware, as Delaware trustee (the "Delaware Trustee"), (iv) John B. Yorke, Donald F. McKee and Steven C. Andrews, each an individual whose address is c/o Integon Corporation, 500 West Fifth Street, Winston-Salem, North Carolina 27152 (each an "Administrative Trustee" and, collectively, the "Administrative Trustees") (the Property Trustee, the Delaware Trustee and the Administrative Trustees are referred to collectively herein as the "Trustees") and (v) the several Holders, as hereinafter defined. Witnesseth Whereas, the Depositor, one of the Administrative Trustees and the Delaware Trustee have heretofore duly declared and established a business trust pursuant to the Delaware Business Trust Act by the entering into that certain Trust Agreement, dated as of January 27, 1997 (the "Original Trust Agreement"), and by the execution and filing with the Secretary of State of the State of Delaware of the Certificate of Trust, filed on January 27, 1997, attached hereto as Exhibit A (the "Certificate of Trust"); and Whereas, the Depositor and the Trustees desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (i) the issuance of the Common Securities by the Trust to the Depositor, (ii) the issuance and sale of the Capital Securities by the Trust pursuant to the Purchase Agreement and (iii) the acquisition by the Trust from the Depositor of all of the right, title and interest in the Debentures; Now Therefore, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, each party, for the benefit of the other parties and for the benefit of the Securityholders, hereby amends and restates the Original Trust Agreement in its entirety and agrees as follows: 2 ARTICLE I Defined Terms Section 1.1 Definitions. For all purposes of this Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Trust Agreement; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or other subdivision. "Act" has the meaning specified in Section 6.8. "Additional Amount" means, with respect to Trust Securities of a given Liquidation Amount and/or a given period, the amount of Additional Interest paid by the Depositor on a Like Amount of Debentures for such period. "Additional Interest" has the meaning specified in Section 1.1 of the Indenture. "Additional Sums" has the meaning specified in Section 10.6 of the Indenture. "Administrative Trustees" means each individual identified as an "Administrative Trustee" in the preamble to this Trust Agreement solely in such individual's capacity as Administrative Trustee of the Trust continued hereunder and not in such individual's individual capacity, or such Administrative Trustee's successor in interest in such capacity, or any successor trustee appointed as herein provided. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or 3 indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Bank" has the meaning specified in the preamble to this Trust Agreement. "Bankruptcy Event" means, with respect to any Person: (a) the entry of a decree or order by a court having jurisdiction in the premises judging such Person a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjudication or composition of or in respect of such Person under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of such Person or of any substantial part of its property or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (b) the institution by such Person of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or similar official) of such Person or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt, or the taking of corporate action by such Person in furtherance of any such action. "Bankruptcy Laws" has the meaning specified in Section 11.10. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Depositor to have been duly adopted by the Depositor's Board of Directors, or such committee of the Board of Directors or officers of the Depositor to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the Trustees. "Business Day" means a day other than (a) a Saturday or Sunday, (b) a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed, or (c) a day on which the Property Trustee's Corporate Trust Office or the Corporate Trust Office of the Debenture Trustee is closed for business. 4 "Capital Securities Certificate" means a certificate evidencing ownership of (i) Initial Capital Securities, substantially in the form attached as Exhibit B-1 or (ii) Exchange Capital Securities, substantially in the form attached as Exhibit B-2, as the context may require. "Capital Security" means any one of the Initial Capital Securities and, when and if issued as provided in the Exchange and Registration Rights Agreement, any one of the Exchange Capital Securities. "Certificate of Depository Agreement" means the Letter of Representations among the Trust, the Depositor and The Depository Trust Company, as the initial Depository, dated the Closing Date, relating to the Capital Securities Certificates, substantially in the form attached as Exhibit C, as the same may be amended and supplemented from time to time. "Certificate of Trust" has the meaning specified in the recitals hereof, as amended from time to time. "Change of Control" means the occurrence of one or more of the following events (whether or not approved by the Board of Directors of the Depositor): (a) an event or series of events by which any Person or group of Persons within the meaning of Section 13(d) of the Exchange Act shall, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases, merger, consolidation, issuances of securities by the Depositor or otherwise, be or become, directly or indirectly, the beneficial owner (within the meaning of Rule 13d-3 and Rule 13d-5 under the Exchange Act, whether or not applicable, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time) of 50% or more of the combined voting power of the then outstanding voting stock of the Depositor, (b) the first day on which a majority of the members of the Board of Directors of the Depositor are not Continuing Directors, (c) the stockholders of the Depositor shall approve any plan or proposal for the liquidation or dissolution of the Depositor or (d) the direct or indirect sale, assignment, lease, exchange, disposition or other transfer, in one transaction or a series of related transactions, of all or substantially all of the property or assets of the Depositor to any Person. "Change of Control Notice" has the meaning specified in Section 10.1. "Closing Date" means February 10, 1997. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission, as from time to time constituted, or, if at any time after the execution of this instrument such Commission is not 5 existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit D. "Common Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Continuing Director" means any member of the Board of Directors of the Depositor who was a member of such Board of Directors on the date of original issuance of the Capital Securities, and, as of any determination date thereafter, shall include any member of the Board of Directors of the Depositor who was nominated for election or appointed to such Board of Directors with the affirmative vote of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or appointment. "Corporate Trust Office" means (i) when used with respect to the Property Trustee, the principal corporate trust office of the Property Trustee located in Charlotte, North Carolina, and (ii) when used with respect to the Debenture Trustee, the principal office of the Debenture Trustee located in Charlotte, North Carolina. "Debentures" means the Depositor's 10 3/4% Junior Subordinated Deferrable Interest Debentures, Series A, issued pursuant to the Indenture, and, when and if issued as contemplated by the Exchange and Registration Rights Agreement, the Depositor's new series of 10 3/4% Junior Subordinated Deferrable Interest Debentures, to be issued in exchange therefor. "Debenture Event of Default" means an "Event of Default" as defined in the Indenture. "Debenture Maturity Date" means the date specified pursuant to the terms of the Debentures as the date on which the principal of the Debentures is due and payable, as such date may be shortened pursuant to the terms of the Debentures. "Debenture Redemption Date" means, with respect to any Debenture to be redeemed under the Indenture, the date fixed for redemption under the Indenture. "Debenture Trustee" means First Union National Bank of North Carolina, a national banking association organized and existing under the laws of the United States of America, as trustee under the Indenture, and any successor trustee appointed as provided therein. 6 "Definitive Capital Security" means a beneficial interest in the Definitive Capital Securities Certificates. "Definitive Capital Securities Certificates" means either or both (as the context requires) of (a) Capital Securities Certificates in the form of Exhibit B-1 or B-2 hereto that do not include the information called for by footnote 1 thereof, and (b) Capital Securities Certificates issued in certificated, fully registered form as provided in Section 5.13. "Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. (S) 3801, et seq., as it may be amended from time to time. "Delaware Trustee" means the Person identified as the "Delaware Trustee" in the preamble to this Trust Agreement solely in its capacity as Delaware Trustee of the Trust continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor trustee appointed as herein provided. "Depositor" has the meaning specified in the preamble to this Trust Agreement. "Depository" means an organization registered as a "Depository" pursuant to Section 17A of the Exchange Act. The Depository Trust Company will be the initial Depository. "Depository Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Depository effects global transfers and pledges of securities deposited with the Depository. "Distribution Date" has the meaning specified in Section 4.1(a). "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 4.1. "Early Termination Event" has the meaning specified in Section 9.2. "Electing Holders" has the meaning specified in Section 10.2. "Event of Default" 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): (a) the occurrence of a Debenture Event of Default; or 7 (b) default by the Property Trustee in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of 30 days; or (c) default by the Property Trustee in the payment of any Redemption Price or Repurchase Price of any Trust Security when such price becomes due and payable; or (d) default in the performance, or breach, in any material respect, of any covenant or warranty of the Trustees in this Trust Agreement (other than a covenant or warranty a default in the performance or breach of which is dealt with in clause (b) or (c) above) and continuation of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the defaulting Trustee or Trustees by the Holders of at least 25% in aggregate Liquidation Amount of the Outstanding Capital 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 (e) the occurrence of a Bankruptcy Event with respect to the Property Trustee and the failure by the Depositor to appoint a successor Property Trustee within 90 days thereof. "Exchange Act" means the Securities Exchange Act of 1934, and any statute successor thereto, in each case, as amended from time to time, and the rules and regulations promulgated thereunder. "Exchange and Registration Rights Agreement" means the Exchange and Registration Rights Agreement dated as of February 10, 1997 among the Initial Purchasers, the Depositor and the Trust, as such agreement may be amended, modified or supplemented from time to time in accordance with the terms thereof "Exchange Capital Security" means an undivided beneficial preferred interest in the assets of the Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution, as provided herein, and to be issued hereunder in connection with the offer to exchange the Initial Capital Securities for a new series of capital securities of the Trust as contemplated by the Exchange and Registration Rights Agreement. "Expiration Date" has the meaning specified in Section 9.1. "Global Capital Securities" means a beneficial interest in the Capital Securities Certificates, ownership and transfers of which shall be made through book entries by the Depository as described in Section 5.11. "Global Capital Securities Certificates" means the Capital Securities Certificates representing Global Capital Securities. 8 "Guarantee" means the Guarantee Agreement, as amended from time to time, executed and delivered by the Depositor and First Union National Bank of North Carolina, as guarantee trustee, contemporaneously with the execution and delivery of this Trust Agreement, for the benefit of the Holders of the Initial Capital Securities, and, when and if issued as contemplated by the Exchange and Registration Rights Agreement, the guarantee agreement, as amended from time to time, to be executed and delivered by the Depositor and First Union National Bank of North Carolina, as guarantee trustee, contemporaneously with the issuance of the Exchange Capital Securities as contemplated by the Exchange and Registration Rights Agreement. "Indenture" means the Junior Subordinated Indenture, dated as of February 10, 1997, between the Depositor and the Debenture Trustee, as trustee, as amended or supplemented from time to time. "Initial Capital Security" means an undivided beneficial preferred interest in the assets of the Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution, as provided herein and issued on the Closing Date. "Initial Purchasers" means Goldman, Sachs & Co., Deutsche Morgan Grenfell Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as the initial purchasers named in Schedule I to the Purchase Agreement. "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. "Like Amount" means (a) with respect to a redemption of Trust Securities, Trust Securities having an aggregate Liquidation Amount equal to that portion of the aggregate principal amount of Debentures to be contemporaneously redeemed, or which will contemporaneously mature, the proceeds of which will be used to pay the Redemption Price of such Trust Securities, (b) with respect to a distribution of Debentures to Holders of Trust Securities in connection with a dissolution or liquidation of the Trust, Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Trust Securities of the Holders to whom such Debentures are distributed, and (c) with respect to a repurchase of Debentures following a Change of Control, Debentures having an aggregate principal amount equal to that portion of the aggregate Liquidation Amount of the Capital Securities that are the subject of Repurchase Elections delivered pursuant to Section 10.2(a). "Liquidation Amount" means the stated amount of $1,000 per Trust Security. 9 "Liquidation Date" means the date on which Debentures are to be distributed to Holders of Trust Securities in connection with a termination and liquidation of the Trust pursuant to Section 9.4(a). "Liquidation Distribution" has the meaning specified in Section 9.4(d). "1940 Act" means the Investment Company Act of 1940, as amended. "Officers' Certificate" means a certificate signed by the Chairman, Vice Chairman, Chief Executive Officer, President or any Vice President, and by the Treasurer, an Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary, of the Depositor, and delivered to the appropriate Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 8.16 shall be the principal executive, financial or accounting officer of the Depositor. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for, or an employee of, the Trust, the Property Trustee or the Depositor, and who shall be reasonably acceptable to the Property Trustee. "Original Trust Agreement" has the meaning specified in the recitals to this Trust Agreement. "Outstanding", when used with respect to Trust Securities, means, as of the date of determination, all Trust Securities theretofore executed and delivered under this Trust Agreement, except: (a) Trust Securities theretofore canceled by the Securities Registrar or delivered to the Securities Registrar for cancellation; 10 (b) Trust Securities for whose payment, repurchase or redemption money in the necessary amount has been theretofore deposited with the Property Trustee or any Paying Agent in trust for the Holders of such Trust Securities; provided that, if such Trust Securities are to be redeemed or caused to be repurchased, notice of such redemption or Repurchase Elections have been duly given pursuant to this Trust Agreement; and (c) Trust Securities which have been paid or in exchange for or in lieu of which other Trust Securities have been executed and delivered pursuant to this Trust Agreement, including pursuant to Sections 5.4, 5.5, 5.11 and 5.13, unless proof satisfactory to the Property Trustee is presented that any such Trust Securities are held by Holders in whose hands such Trust Securities are valid, binding and legal obligations of the Trust; provided, however, that in determining whether the Holders of the requisite Liquidation Amount of the Outstanding Capital Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Capital Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor or any Trustee shall be disregarded and deemed not to be Outstanding, except that (a) in determining whether any Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Capital Securities that such Trustee actually knows to be so owned shall be so disregarded and (b) the foregoing shall not apply at any time when all of the outstanding Capital Securities are owned by the Depositor, one or more of the Trustees and/or any such Affiliate. Capital Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Administrative Trustees the pledgee's right so to act with respect to such Capital Securities and that the pledgee is not the Depositor or any Affiliate of the Depositor. "Owner" means each Person who is the beneficial owner of a Global Capital Securities Certificate as reflected in the records of the Depository or, if a Depository Participant is not the beneficial owner, then as reflected in the records of a Person maintaining an account with such Depository (directly or indirectly, in accordance with the rules of such Depository). "Paying Agent" means any paying agent or co-paying agent appointed pursuant to Section 5.9 and shall initially be the Bank. "Payment Account" means a segregated non-interest-bearing corporate trust account maintained by the Property Trustee with the Bank in its corporate trust department for the benefit of the Securityholders in which all amounts paid in respect of the Debentures will be held and from which the Property Trustee, through the Paying Agent, shall make payments to the Securityholders in accordance with Sections 4.1, 4.2 and 10.2. "Person" means any individual, corporation, association, partnership, joint venture, trust, estate, limited liability company or corporation, unincorporated organization or government or any agency or political subdivision thereof. 11 "Property Trustee" means the Person identified as the "Property Trustee" in the preamble to this Trust Agreement solely in its capacity as Property Trustee of the Trust heretofore created and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as herein provided. "Purchase Agreement" means the Purchase Agreement, dated February 10, 1997, among the Trust, the Depositor and the Initial Purchasers. "QIB" means a "qualified institutional buyer" as defined in Rule 144A under the Securities Act. "Redemption Date" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Trust Agreement; provided that each Debenture Redemption Date and the Debenture Maturity Date shall be a Redemption Date for a Like Amount of Trust Securities. "Redemption Price" means, with respect to any Trust Security to be redeemed, the Liquidation Amount of such Trust Security plus accumulated and unpaid Distributions to but excluding the Redemption Date, plus the amount of the premium, if any, paid by the Depositor upon the concurrent redemption of Debentures having a principal amount equal to the Liquidation Amount of such Trust Security if such Trust Security is redeemed upon the redemption of Debentures at maturity or upon earlier redemption as provided under the Indenture. "Relevant Trustee" shall have the meaning specified in Section 8.10. "Repurchase Date," when used with respect to any Trust Security to be repurchased pursuant to Section 10.1, means the date at which such Trust Security is to be repurchased pursuant to Section 10.1. "Repurchase Election" has the meaning specified in Section 10.1. "Repurchase Price," when used with respect to any Trust Security to be repurchased pursuant to Section 10.1, means the price at which such Trust Security is to be repurchased pursuant to Section 10.1. "Reserve Account" has the meaning specified in the Indenture. "Restricted Securities Legend" means the legend set forth in Section 5.11. "Securities Act" means the Securities Act of 1933, and any statute successor thereto, in each case as amended from time to time, and the rules and regulations promulgated thereunder. 12 "Securities Custodian" means the custodian with respect to the Global Capital Securities Certificates (as appointed by the Depository), or any successor entity thereto and shall initially be the Bank. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 5.11. "Securityholder" or "Holder" means a Person in whose name a Trust Security or Trust Securities are registered in the Securities Register; any such Person shall be a beneficial owner within the meaning of the Delaware Business Trust Act. "Shelf Registration Statement" shall have the meaning set forth in the Exchange and Registration Rights Agreement. "Transfer Restricted Securities Certificates" means Capital Securities Certificates that bear or are required to bear the legend set forth in Section 5.11. "Trust" means the Delaware statutory business trust created under the Original Trust Agreement and continued hereby and identified on the cover page to this Trust Agreement. "Trust Agreement" means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof, including (i) all exhibits hereto and (ii) for all purposes of this Trust Agreement and any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Trust Agreement and any such modification, amendment or supplement, respectively. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Property" means (a) the Debentures, (b) any cash on deposit in, or owing to, the Payment Account and (c) all proceeds and rights in respect of the foregoing. "Trust Property" shall not include funds deposited in the Reserve Account but shall include such funds once paid out of the Reserve Account to the Trust. "Trust Securities Certificate" means any one of the Common Securities Certificates or the Capital Securities Certificates. "Trust Security" means any one of the Common Securities or the Capital Securities. 13 "Trustees" means, collectively, the Property Trustee, the Delaware Trustee and the Administrative Trustees. ARTICLE II Continuation of the Trust Section 2.1 Name. The Trust continued hereby shall be known as "Integon Capital I," as such name may be modified from time to time by the Administrative Trustees following written notice to the Holders of Trust Securities and the other Trustees, in which name the Property Trustee and the Administrative Trustees may engage in the transactions contemplated hereby, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. Section 2.2 Office of the Delaware Trustee; Principal Place of Business. The address of the Delaware Trustee in the State of Delaware is c/o First Union Bank of Delaware, One Rodney Square, 1st Floor, 920 King Street, Wilmington, Delaware 19801, Attention: Corporate Trust Department, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Securityholders and the Depositor. The principal executive office of the Trust is c/o Integon Corporation, 500 West Fifth Street, Winston- Salem, North Carolina 27152; Attention: General Counsel. Section 2.3 Initial Contribution of Trust Property; Organizational Expenses. The Property Trustee acknowledges receipt in trust from the Depositor in connection with the Original Trust Agreement of the sum of $10, which constituted the initial Trust Property. The Depositor shall pay organizational expenses of the Trust as they arise or shall, upon request of any Trustee, promptly reimburse such Trustee for any such expenses paid by such Trustee. The Depositor shall make no claim upon the Trust Property for the payment of such expenses. Section 2.4 Issuance of the Capital Securities. As of February 5, 1997, the Depositor, on behalf of the Trust and pursuant to the Original Trust Agreement, executed and delivered the Purchase Agreement. On the Closing Date, an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 5.2, cause to be authenticated, and deliver to the Initial Purchasers Capital Securities Certificates in respect of the Initial Capital Securities, registered in the name of the nominee of the initial Depository, as contemplated by Section 5.4(a), or in the name of such Persons as such Initial 14 Purchasers shall have designated, as contemplated by Section 5.4(c), in an aggregate amount of 100,000 Capital Securities having an aggregate Liquidation Amount of $100,000,000, against receipt of an aggregate purchase price plus accumulated distributions from February 10, 1997 on such Capital Securities of $100,000,000, which amount such Administrative Trustee shall promptly deliver to the Property Trustee. Section 2.5 Issuance of the Common Securities; Subscription and Purchase of Debentures. On the Closing Date, an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 5.2, cause to be authenticated, and deliver to the Depositor Common Securities Certificates, registered in the name of the Depositor, in an aggregate amount of 3,093 Common Securities having an aggregate Liquidation Amount of $3,093,000 against payment by the Depositor of an aggregate purchase price therefor of $3,093,000 which amount such Administrative Trustee shall promptly deliver to the Property Trustee. Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust, shall subscribe to and purchase from the Depositor Debentures, registered in the name of the Trust and having an aggregate principal amount equal to $103,093,000, and, in satisfaction of the purchase price plus accrued interest from February 10, 1997 for such Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the sum of $103,093,000 (being the sum of the amounts delivered to the Property Trustee pursuant to (i) the second sentence of Section 2.4 and (ii) the first sentence of this Section 2.5). Section 2.6 Declaration of Trust. The exclusive purposes and functions of the Trust are (a) to issue and sell Trust Securities, (b) to use the proceeds from such sale to acquire the Debentures and (c) to engage in those activities necessary or incidental thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to have all the rights, powers and duties to the extent set forth herein, and the Trustees hereby accept such appointment. The Property Trustee hereby declares that it will hold the Trust Property in trust upon and subject to the conditions set forth herein for the benefit of the Trust and the Securityholders. The Administrative Trustees shall have all rights, powers and duties set forth herein and in accordance with applicable law with respect to accomplishing the purposes of the Trust. 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 Administrative Trustees 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 Delaware Business Trust Act and taking such actions as are required to be taken by the Delaware Trustee under the Delaware Business Trust Act. 15 Section 2.7 Authorization to Enter into Certain Transactions. (a) The Administrative Trustees and the Property Trustee 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 Article VIII and in accordance with the following provisions (i) and (ii), the Administrative Trustees and the Property Trustee shall have the authority to enter into all transactions and agreements determined by the Administrative Trustees and the Property Trustee to be appropriate in exercising the authority, express or implied, otherwise granted to such Trustees under this Trust Agreement, and to perform all acts in furtherance thereof, including without limitation, the following: (i) As among the Trustees, each Administrative Trustee shall have the power and authority to act on behalf of the Trust with respect to the following: (A) issuing and selling the Trust Securities; (B) causing the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, the Certificate Depository Agreement and such other agreements as may be necessary or desirable in connection with the purposes and function of the Trust; (C) causing the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, the Exchange and Registration Rights Agreement and assisting in the registration of the Capital Securities, as contemplated by the Exchange and Registration Rights Agreement, under the Securities Act and under state securities or blue sky laws, and the qualification of this Trust Agreement as a trust indenture under the Trust Indenture Act; (D) assisting in the listing, if any, of the Capital Securities upon such national securities exchange or exchanges or automated quotation system or systems as shall be determined by the Depositor and the registration of the Capital Securities under the Exchange Act and the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing; (E) sending notices (other than notices of default) and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with this Trust Agreement; (F) appointing a Paying Agent and Securities Registrar in accordance with this Trust Agreement; 16 (G) registering transfers of the Trust Securities in accordance with this Trust Agreement; (H) to the extent provided in this Trust Agreement, winding up the affairs of and liquidating the Trust and executing and filing the certificate of cancellation with the Secretary of State of the State of Delaware; (I) unless otherwise determined by the Depositor, the Property Trustee or the Administrative Trustees, or as otherwise required by the Delaware Business Trust Act or the Trust Indenture Act, executing on behalf of the Trust (either acting alone or together with any or all of the Administrative Trustees) any documents that the Administrative Trustees have the power to execute pursuant to this Trust Agreement; and (J) taking any action incidental to the foregoing as the Trustees 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 Securityholders (without consideration of the effect of any such action on any particular Securityholder). (ii) As among the Trustees, the Property Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following: (A) establishing the Payment Account; (B) receiving the Debentures; (C) collecting interest, principal and any other payments made in respect of the Debentures in the Payment Account; (D) distributing through the Paying Agent amounts owed to the Securityholders in respect of the Trust Securities; (E) exercising all of the rights, powers and privileges of a holder of the Debentures; (F) sending notices of default or change of control and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with this Trust Agreement; (G) distributing the Trust Property in accordance with the terms of this Trust Agreement; and 17 (H) to the extent provided in this Trust Agreement, winding up the affairs of and liquidating the Trust and executing and filing the certificate of cancellation with the Secretary of State of the State of Delaware. Except as otherwise provided in this Section 2.7(a)(ii), the Property Trustee shall have none of the duties, liabilities, powers or authority of the Administrative Trustees set forth in Section 2.7(a)(i). (b) So long as this Trust Agreement remains in effect, the Trust (or the Property Trustee and the Administrative Trustees acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Property Trustee and the Administrative Trustees shall not (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 Securityholders, except as expressly provided herein, (iii) take any action that would cause the Trust to be taxable as a corporation or fail or cease to qualify as a "grantor trust" for United States federal income tax purposes, (iv) incur any indebtedness for borrowed money or issue any other debt, (v) take or consent to any action that would result in the placement of a Lien on any of the Trust Property, (vi) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of Trust Securities pursuant to the terms of this Trust Agreement and of the Trust Securities; (vii) acquire any assets other than the Trust Property, (viii) possess any power or otherwise act in such a way as to vary the Trust Property, (ix) possess any power or otherwise act in such a way as to vary the terms of the Trust Securities in any way whatsoever (except to the extent expressly authorized in this Trust Agreement or by the terms of the Trust Securities) or (x) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Trust Securities. The Administrative Trustees shall 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 Securityholders in their capacity as Securityholders. The Property Trustee may rely on the statements of the Administrative Trustees as to whether any action of the Property Trustee would cause the Trust to be taxable as a corporation or fail or cease to qualify as a "grantor trust" for United States federal income tax purposes. (c) In connection with the issue and sale of the Capital Securities, the Depositor 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 Depositor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects): (i) the negotiation of the terms of, and the execution and delivery of, the Purchase Agreement and any underwriting agreement providing for the sale of the Capital Securities; 18 (ii) the preparation and filing by the Trust with the Commission and the execution on behalf of the Trust of a registration statement on the appropriate form in relation to the Capital Securities, as contemplated by the Exchange and Registration Rights Agreement, including any amendments thereto; (iii) the determination of the states in which to take appropriate action to qualify or register for sale all or part of the Capital 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 Property Trustee and the Administrative Trustees of actions they must take on behalf of the Trust, and the preparation for execution and filing, and the execution on behalf of the Trust of any documents to be executed and filed by the Trust or on behalf of the Trust, as the Depositor deems necessary or advisable in order to comply with the applicable laws of any such states; (iv) the preparation for filing by the Trust and execution on behalf of the Trust of an application to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market or any other automated quotation system for listing upon notice of issuance of any Capital Securities and filing with such exchange or self-regulatory organization such notifications and documents as may be necessary from time to time to maintain such listing; and (v) 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 Administrative Trustees are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust will not be deemed to be an "investment company" required to be registered under the 1940 Act, or be taxable as a corporation or fail or cease to be classified as a grantor trust for United States federal income tax purposes and so that the Debentures will be treated as indebtedness of the Depositor for United States federal income tax purposes. In this connection, the Depositor and the Administrative Trustees are authorized to take any action, not inconsistent with applicable law, the Certificate of Trust or this Trust Agreement, that each of the Depositor and any Administrative Trustee determines in its discretion to be necessary or desirable for such purposes, as long as such action does not adversely affect in any material respect the interests of the Holders of the Capital Securities. 19 Section 2.8 Assets of Trust. The assets of the Trust shall consist solely of the Trust Property. Section 2.9 Title to Trust Property. 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 for the benefit of the Trust and the Securityholders in accordance with this Trust Agreement. ARTICLE III Payment Account Section 3.1 Payment Account. (a) On or prior to the Closing Date, the Property Trustee shall establish the Payment Account. The Property Trustee and any agent of the Property Trustee shall have exclusive control and sole right of withdrawal with respect to the Payment Account for the purpose of making deposits in and withdrawals from the Payment Account in accordance with this Trust Agreement. All monies and other property deposited or held from time to time in the Payment Account (including funds paid by the Depositor to the Trust out of the Reserve Account in satisfaction of the Company's interest payment obligations under the Indenture) shall be held by the Property Trustee in the Payment Account for the exclusive benefit of the Securityholders and for distribution as herein provided, including (and subject to) any priority of payments provided for herein. (b) The Property Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of, or interest or premium on, and any other payments or proceeds with respect to, the Debentures. Amounts held in the Payment Account shall not be invested by the Property Trustee. ARTICLE IV Distributions; Redemption Section 4.1 Distributions. (a) The Trust Securities represent undivided beneficial ownership interests in the Trust Property, and Distributions (including of Additional Amounts) will be made on the Trust 20 Securities at the rate and on the dates that payments of interest (including of Additional Interest, if any,) are made on the Debentures. Accordingly: (i) Distributions on the Trust Securities shall be cumulative, and will accumulate whether or not there are funds of the Trust available for the payment of Distributions. Distributions shall accumulate from February 10, 1997, and, except in the event (and to the extent) that the Depositor exercises its right to defer the payment of interest on the Debentures pursuant to the Indenture, shall be payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 1997. If any date on which a Distribution is otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distribution shall 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, payment of such Distribution shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date (each date on which Distributions are payable in accordance with this Section 4.1(a), a "Distribution Date"). (ii) Distributions on the Trust Securities shall accumulate and be payable at a rate of 10 3/4% per annum of the Liquidation Amount of the Trust Securities. The amount of Distributions payable for any Distribution period shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of Distributions for any partial Distribution period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. The amount of Distributions payable for any period shall include the Additional Amounts, if any. (iii) Distributions on the Trust Securities shall be made by the Property Trustee, who shall deposit with the Paying Agent funds sufficient to pay the applicable Distributions, from the Payment Account and shall be payable on each Distribution Date only to the extent that the Trust has funds then on hand and available in the Payment Account for the payment of such Distributions. (b) Distributions on the Trust Securities with respect to a Distribution Date shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be one Business Day prior to such Distribution Date; provided, however, that in the event that any of the Capital Securities are not held in book-entry form, the relevant record date for all Capital Securities shall be 15 days prior to the relevant Distribution Date (whether or not such record date is a Business Day). 21 Section 4.2 Redemption. (a) On each Debenture Redemption Date and the Debenture Maturity Date, the Trust shall redeem a Like Amount of Trust Securities at the applicable Redemption Price. (b) Notice of redemption shall be given by the Property Trustee by first- class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder's address appearing in the Security Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) the CUSIP number, if any, of the Trust Securities to be redeemed; (iv) if less than all the Outstanding Trust Securities are to be redeemed, the identification and the total Liquidation Amount of the particular Trust Securities to be redeemed; (v) that on the Redemption Date the Redemption Price will become due and payable upon each such Trust Security to be redeemed and that Distributions thereon will cease to accrue on and after said date; and (vi) if any of the Capital Securities are not held in book-entry form, the place and address where the Holders shall surrender their Capital Securities Certificates. (c) The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption or payment at stated maturity of Debentures. Redemptions of the Trust Securities shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Trust has funds then on hand and available in the Payment Account for the payment of such Redemption Price. (d) If the Property Trustee gives a notice of redemption in respect of any Capital Securities, then, by 12:00 noon, New York City time, on the Redemption Date, subject to Section 4.2(c), the Property Trustee will, with respect to Capital Securities that are held in book-entry form, irrevocably deposit with the Depository for the Capital Securities funds sufficient to pay the applicable Redemption Price and will give such Depository irrevocable instructions and authority to pay the Redemption Price to the Holders thereof. With respect to Capital Securities that are not held in book-entry form, the Property Trustee, subject to Section 4.2(c), will irrevocably deposit with the Paying Agent funds sufficient to pay the applicable Redemption Price and will give the Paying Agent irrevocable instructions and authority to pay the 22 Redemption Price to the Holders thereof upon surrender of their Capital Securities Certificates. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Trust Securities called for redemption shall be payable to the Holders of such Trust Securities as they appear on the Securities Register for the Trust Securities on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of Securityholders holding Trust Securities so called for redemption will cease, except the right of such Securityholders to receive the Redemption Price and any Distribution payable on or prior to the Redemption Date, but without interest thereon, and such Trust Securities will cease to be outstanding. In the event that any date on which any Redemption Price is payable is not a Business Day, then payment of the 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. In the event that payment of the Redemption Price in respect of any Trust Securities called for redemption is improperly withheld or refused and not paid either by the Trust or by the Depositor pursuant to the Guarantee, Distributions on such Trust Securities will continue to accrue at the then applicable rate from the Redemption Date originally established by the Trust for such Trust Securities to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price. (e) Payment of the Redemption Price on the Trust Securities shall be made to the recordholders thereof as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be one Business Day prior to the relevant Redemption Date; provided, however, that in the event that any of the Capital Securities are not held in book-entry form, the relevant record date for all Trust Securities shall be the date 15 days prior to the relevant Redemption Date. (f) Subject to Section 4.3(a), if less than all the Outstanding Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be redeemed shall be allocated on a pro rata basis (based on Liquidation Amounts) among the Common Securities and the Capital Securities. The particular Capital Securities to be redeemed shall be selected on a pro rata basis (based upon Liquidation Amounts) not more than 60 days prior to the Redemption Date by the Property Trustee from the Outstanding Capital Securities not previously called for redemption, by such method as the Property Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $1,000 or an integral multiple of $1,000 in excess thereof) of the Liquidation Amount of Capital Securities of a denomination larger than $1,000 or, if the Capital Securities are then held in the form of Global Capital Securities, in accordance with the Depository's customary procedures; provided in each case that any Holder of Capital Securities after redemption has at least 100 Capital Securities remaining after the redemption. The Property Trustee shall promptly notify 23 the Security Registrar in writing of the Capital Securities selected for redemption and, in the case of any Capital Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed. For all purposes of this Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Capital Securities shall relate, in the case of any Capital Securities redeemed or to be redeemed only in part, to the portion of the Liquidation Amount of Capital Securities that has been or is to be redeemed. Section 4.3 Subordination of Common Securities. (a) Payment of Distributions (including Additional Amounts, if applicable) on, and the Redemption Price or the Repurchase Price of, the Trust Securities, as applicable, shall be made, subject to Section 4.2(f), pro rata among the Common Securities and the Capital Securities based on the Liquidation Amount of the Trust Securities; provided, however, that if on any Distribution Date, Redemption Date or Repurchase Date, any Debenture Event of Default shall have occurred and be continuing as a result of any failure by the Depositor to pay principal of and interest on the Debentures when due, no payment of any Distribution (including Additional Amounts, if applicable) on, or Redemption Price of, any Common Security, and no other payment on account of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions (including Additional Amounts, if applicable) on all Outstanding Capital Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all Outstanding Capital Securities then called for redemption, or in the case of payment of the Repurchase Price, the full amount of such Repurchase Price on all Capital Securities subject to Repurchase Elections, 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 (including Additional Amounts, if applicable) on, or the Redemption Price of, Capital Securities then due and payable. (b) In the case of the occurrence of any Event of Default resulting from any Debenture Event of Default, the Holder of Common Securities will be deemed to have waived any right to act with respect to any such Event of Default under this Trust Agreement until the effect of all such Events of Default with respect to the Capital Securities have been cured, waived or otherwise eliminated. Until any such Event of Default under this Trust Agreement with respect to the Capital Securities has been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the Holders of the Capital Securities and not the Holder of the Common Securities, and only the Holders of the Capital Securities will have the right to direct the Property Trustee to act on their behalf. Section 4.4 Payment Procedures. Payments of Distributions (including Additional Amounts, if applicable) on, and the Redemption Price and the Repurchase Price of, the Capital Securities shall be made by wire 24 transfer, direct deposit or check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register or, if the Capital Securities are held by a Depository, such payments shall be made to the Depository in immediately available funds, which shall credit the relevant Persons' accounts at such Depository on the applicable Distribution Dates, Redemption Dates or Repurchase Dates, as the case may be. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed in writing between the Property Trustee and the Common Securityholder. Section 4.5 Tax Returns and Reports. The Administrative Trustees shall prepare (or cause to be prepared), at the Depositor's expense, and file all United States federal, state and local tax and information returns and reports required to be filed by or in respect of the Trust. In this regard, the Administrative Trustees shall (a) prepare and file (or cause to be prepared and filed) the appropriate Internal Revenue Service form required to be filed in respect of the Trust in each taxable year of the Trust and (b) prepare and furnish (or cause to be prepared and furnished) to each Securityholder the appropriate Internal Revenue Service form, if any, and the information required to be provided by the Trust on such form. The Administrative Trustees shall provide the Depositor and the Property Trustee with a copy of all such returns and reports promptly after such filing or furnishing. The Property Trustee and the Administrative Trustees shall comply with United States federal withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Securityholders under the Trust Securities. The Property Trustee may rely on the directions of the Administrative Trustees as to the requirements of the foregoing tax laws. None of the Property Trustee, the Paying Agent nor any of their agents shall (1) have any duty to monitor compliance with or with respect to any federal or state or other securities or tax laws or (2) have any duty to obtain documentation on any transfers or exchanges other than as specifically required hereunder. Section 4.6 Payment of Taxes, Duties, Etc. of the Issuer Trust. Upon receipt under the Debentures of Additional Sums, the Property Trustee shall promptly pay any taxes, duties or governmental charges of whatsoever nature (other than withholding taxes) imposed on the Trust by the United States or any other taxing authority. Section 4.7 Payments under Indenture or Pursuant to Direct Actions. Any amount payable hereunder to any Holder of Capital Securities shall be reduced by the amount of any corresponding payment such Holder (or an Owner with respect to the Holder's Capital Securities) has directly received pursuant to Section 5.8 of the Indenture or Section 5.14 of this Trust Agreement. 25 ARTICLE V Trust Securities Certificates Section 5.1 Initial Ownership. Upon the creation of the Trust and the contribution to the initial Trust Property by the Depositor pursuant to Section 2.3 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are outstanding, the Depositor shall be the sole beneficial owner of the Trust. Section 5.2 The Trust Securities Certificates. The Capital Securities Certificates shall be issued in minimum denominations of $1,000 Liquidation Amount and minimum blocks of at least 100 (representing a minimum of $100,000 aggregate Liquidation Amount), and the Common Securities Certificates shall be issued in denominations of $1,000 Liquidation Amount and integral multiples thereof. The Trust Securities Certificates shall be executed on behalf of the Trust by manual or facsimile signature of at least one Administrative Trustee. The Trust Securities Certificates shall be authenticated by the Property Trustee by manual signature of an authorized signatory thereof. Trust Securities Certificates bearing the manual signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust or the Property Trustee shall be validly issued and entitled to the benefits of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Securityholder, and shall be entitled to the rights and subject to the obligations of a Securityholder hereunder, upon due registration of such Trust Securities Certificate in such transferee's name pursuant to Sections 5.4, 5.11 and 5.13. Section 5.3 Execution and Delivery of Trust Securities Certificates. On the Closing Date, the Administrative Trustees shall cause Trust Securities Certificates, in respect of (a) Initial Capital Securities in an aggregate Liquidation Amount as provided in Section 2.4 and (b) Common Securities, in an aggregate Liquidation Amount as provided in Section 2.5, to be executed on behalf of the Trust, authenticated by the Property Trustee and delivered in accordance with Sections 5.4 and 5.10 to or upon the written order of the Depositor, executed by an authorized officer thereof, without further corporate action by the Depositor. 26 Section 5.4 Capital Securities. Capital Securities Certificates in respect of Initial Capital Securities and the Property Trustee's certificate of authentication shall be substantially in the form of Exhibit B-1 hereto, which is hereby incorporated in and expressly made a part of this Trust Agreement. Any Capital Securities Certificate in respect of Exchange Capital Securities and the Property Trustee's certificate of authentication shall be substantially in the form of Exhibit B-2 hereto, which is incorporated in and expressly made a part of this Trust Agreement. The Capital Securities Certificates may have notations, 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 Trust). Each Capital Security Certificate shall be dated the date of its authentication. (a) Global Capital Securities Certificates. The Initial Capital Securities -------------------------------------- are being offered and sold by the Trust pursuant to the Purchase Agreement. Initial Capital Securities offered and sold to QIBs in accordance with Rule 144A under the Securities Act ("Rule 144A") as provided in the Purchase Agreement, shall be issued initially in the form of a single, permanent Global Capital Security Certificate in definitive, fully registered form with the Restricted Securities Legend and the global security legend set forth in Exhibit B-1 hereto (the "Restricted Global Security"), shall be deposited on behalf of the Initial Purchasers of the Initial Capital Securities represented thereby with the Property Trustee, as Securities Custodian for the Depository, shall be registered in the name of the Depository or a registered nominee of the Depository, and shall be duly executed by an Administrative Trustee on behalf of the Trust and authenticated by the Property Trustee as hereinafter provided. The aggregate Liquidation Amount of the Restricted Global Security may from time to time be increased or decreased by adjustments made on the records of the Property Trustee, as Securities Custodian, and the Depository or its nominee as hereinafter provided. (b) Book-Entry Provisions. This Section 5.4(b) shall apply only to Global --------------------- Capital Securities Certificates deposited with or on behalf of the Depository. Depository Participants or members of the Depository (together, the "Agent Members") shall have no rights under this Trust Agreement with respect to any Global Capital Security held on their behalf by the Depository or by the Property Trustee as the Securities Custodian, and the Depository may be treated by the Trust, the Property Trustee and any agent of the Trust or the Property Trustee as the absolute owner of such Global Capital Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Trust, the Property Trustee or any agent of the Trust or the Property Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or shall impair, as between the Depository and its Agent Members, the operation of customary practices of such 27 Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Capital Security. (c) Certificated Securities. Except as otherwise provided herein, owners ----------------------- of beneficial interests in Global Capital Securities Certificates shall not be entitled to receive physical delivery of certificated Capital Securities. Purchasers of Initial Capital Securities who are not QIBs shall receive certificated Initial Capital Securities bearing the Restricted Securities Legend ("Restricted Certificated Securities"); provided, however, that upon transfer of such Restricted Certificated Securities to a QIB, such Restricted Certificated Securities shall, unless the relevant Global Capital Security has previously been exchanged, be exchanged for an interest in a Global Capital Security pursuant to the provisions of Section 5.11 hereof. Restricted Certificated Securities shall include the Restricted Securities Legend unless removed in accordance with this Section 5.4(c) or Section 5.11(g) hereof. Section 5.5 Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates. If (a) any mutilated Trust Securities Certificate shall be surrendered to the Securities Registrar, or if the Securities Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Securities Certificate and (b) there shall be delivered to the Securities Registrar and the Administrative Trustees such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser, the Administrative Trustees, or any one of them, on behalf of the Trust shall execute by manual or facsimile signature and, if executed on behalf of the Trust by facsimile signature, such certificate shall be countersigned by a transfer agent, and make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities Certificate of like class, tenor and denomination. In connection with the issuance of any new Trust Securities Certificate under this Section, the Administrative Trustees or the Securities Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Trust Securities Certificate issued pursuant to this Section shall constitute conclusive evidence of an undivided beneficial interest in the Trust Property, as if originally issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time. Section 5.6 Persons Deemed Securityholders. The Property Trustee, the Administrative Trustees and the Securities Registrar shall treat the Person in whose name any Trust Securities Certificate shall be registered in the Securities Register as the owner of such Trust Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and none of the Property Trustee, the Administrative Trustees nor the Securities Registrar shall be bound by any notice to the contrary. 28 Section 5.7 Access to List of Securityholders' Names and Addresses. Each Holder and each Owner shall be deemed to have agreed not to hold the Depositor, the Property Trustee or the Administrative Trustees accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. Section 5.8 Maintenance of Office or Agency. The Administrative Trustees shall maintain an office or offices or agency or agencies where Capital Securities Certificates may be surrendered for redemption, repurchase, registration of transfer or exchange and where notices and demands to or upon the Property Trustee or Administrative Trustees in respect of the Trust Securities Certificates may be served. The Administrative Trustees initially designate First Union National Bank of North Carolina, 230 South Tryon Street, 9th Floor, Charlotte, North Carolina 28288-1179, Attn: Bond Administration, as their principal corporate trust office for such purposes. The Administrative Trustees shall give prompt written notice to the Depositor, the Property Trustee and to the Securityholders of any change in the location of the Securities Register or any such office or agency. Section 5.9 Appointment of Paying Agent. Upon receipt from the Property Trustee of funds to make the applicable payments, the Paying Agent shall make Distributions, payments of the Redemption Price and the Repurchase Price, as the case may be, to Securityholders from the Payment Account and shall report the amounts of such Distributions, Redemption Price and Repurchase Price, as the case may be, to the Property Trustee and the Administrative Trustees. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account for the purpose of making the Distributions and Redemption Price and Repurchase Price payments referred to above. The Administrative Trustees may revoke such power and remove the Paying Agent if such Trustees determine in their sole discretion that the Paying Agent shall have failed to perform its obligations under this Trust Agreement in any material respect. The Paying Agent shall initially be the Bank, and any co- paying agent chosen by the Bank, and acceptable to the Administrative Trustees and the Depositor. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Administrative Trustees, the Property Trustee and the Depositor. In the event that the Bank shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Administrative Trustees shall appoint a successor that is acceptable to the Property Trustee and the Depositor to act as Paying Agent (which shall be a bank or trust company). The Administrative Trustees shall cause such successor Paying Agent or any additional Paying Agent appointed by the Administrative Trustees to execute and deliver to the Trustees an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Trustees that as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for 29 payment to the Securityholders in trust for the benefit of the Securityholders entitled thereto until such sums shall be paid to such Securityholders. The Paying Agent shall return all unclaimed funds to the Property Trustee and upon resignation or removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Property Trustee. The provisions of Sections 8.1, 8.3 and 8.6 herein shall apply to the Bank also in its role as Paying Agent, for so long as the Bank shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder, and any Paying Agent shall be bound by the requirements with respect to paying agents of securities issued pursuant to the Trust Indenture Act. Any reference in this Trust Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. Section 5.10 Ownership of Common Securities by Depositor; Common Securities Certificate. (a) On the Closing Date, the Depositor shall acquire and retain beneficial and record ownership of the Common Securities. To the fullest extent permitted by law, other than a transfer in connection with a consolidation or merger of the Depositor into another Person, any conveyance, transfer or lease by the Depositor of its properties and assets substantially as an entirety to any Person, pursuant to Section 8.1 of the Indenture, or a transfer to a wholly owned subsidiary of the Depositor, any attempted transfer of the Common Securities shall be void. The Administrative Trustees shall cause each Common Securities Certificate issued to the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE TO A PERSON WHO IS NOT A WHOLLY OWNED SUBSIDIARY OF HOLDER". (b) A single Common Securities Certificate representing the Common Securities shall be issued to the Depositor in the form of a definitive Common Securities Certificate. Section 5.11 Registration of Transfer and Exchange of Securities Certificates. The Depositor shall keep or cause to be kept, at the office or agency maintained pursuant to Section 5.8, a register or registers for the purpose of registering Trust Securities Certificates and transfers and exchanges of Capital Securities Certificates (the "Securities Register") in which the transfer agent and registrar designated by the Depositor (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Capital Securities Certificates and Common Securities Certificates (subject to Section 5.10 in the case of the Common Securities Certificates) and registration of transfers and exchanges of Capital Securities Certificates as herein provided. The Bank shall be the initial Securities Registrar. Upon surrender for registration of transfer of any Capital Securities Certificate at the office or agency maintained pursuant to Section 5.8, the Administrative Trustees or any one of 30 them shall execute on behalf of the Trust (and if executed on behalf of the Trust by a facsimile signature, such certificate shall be countersigned by a transfer agent or its agent) and deliver, in the name of the designated transferee or transferees, one or more new Capital Securities Certificates in authorized denominations of a like aggregate Liquidation Amount dated the date of execution by such Administrative Trustee or Trustees. (a) Transfer and Exchange of Definitive Capital Securities Certificates. ------------------------------------------------------------------- When Definitive Capital Securities Certificates are presented to the Securities Registrar with a request: (i) to register the transfer of such Definitive Capital Securities Certificates; or (ii) to exchange such Definitive Capital Securities Certificates for Definitive Capital Securities Certificates in an equal aggregate Liquidation Amount of Definitive Capital Securities of other authorized denominations, the Securities Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Capital Securities Certificates surrendered or transferred or exchanged: (A) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to an Administrative Trustee and the Securities Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (B) in the case of Transfer Restricted Securities Certificates that are Definitive Capital Securities Certificates, are being transferred or exchanged either pursuant to an effective registration statement under the Securities Act or pursuant to clause (1), (2) or (3) below and are accompanied by the following additional information and documents, as applicable: (1) if such Transfer Restricted Securities Certificates are being delivered to the Securities Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in substantially the form set forth on the reverse of the Security); or (2) if such Transfer Restricted Securities Certificates are being transferred to the Trust or to a QIB in accordance with Rule 144A under the Securities Act, a certification to that effect (in substantially the form set forth on the reverse of the Security); or (3) if such Transfer Restricted Securities Certificates are being transferred (w) pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act; or (x) to an institutional "accredited investor" within the 31 meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is acquiring the security for its own account, or for the account of such an institutional accredited investor, in each case in a minimum Liquidation Amount of the Capital Securities of $100,000 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 (y) in reliance on another exemption from the registration requirements of the Securities Act: (i) a certification to that effect (in substantially the form set forth on the reverse of the Security). (ii) if an Administrative Trustee or the Securities Registrar so requests, an Opinion of Counsel reasonably acceptable to an Administrative Trustee and to the Securities Registrar to the effect that such transfer is in compliance with the Securities Act and (iii) in the case of clause (x) a signed letter substantially in the form of Exhibit E hereto. (b) Restrictions of Transfer of a Definitive Capital Security For a --------------------------------------------------------------- Beneficial Interest in a Global Capital Security. A Definitive Capital Security - ------------------------------------------------ may not be exchanged for a beneficial interest in a Global Capital Security except upon satisfaction of the requirements set forth below. Upon receipt by the Property Trustee of a Definitive Capital Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to an Administrative Trustee, together with: (i) if such Definitive Capital Security is a Transfer Restricted Security, certification that such Definitive Capital Security is being transferred to a QIB in accordance with Rule 144A under the Securities Act; and (ii) whether or not such Definitive Capital Security is a Transfer Restricted Security, written instructions directing the Property Trustee to make, or to direct the Securities Custodian to make, an adjustment on its books and records with respect to such Global Capital Security to reflect an increase in the aggregate Liquidation Amount of the Capital Securities represented by the Global Capital Security, then the Administrative Trustees or any one of them shall cancel such Definitive Capital Security and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing between the Depository and the Securities Custodian, the aggregate Liquidation Amount of Capital Securities represented by the Global Capital Security to be increased accordingly. If no Global Capital Securities Certificates are then outstanding, the Trust shall issue and the Property Trustee shall authenticate, upon written order of the Trust in the form of an Officers' Certificate, a new Global Capital Security in the appropriate Liquidation Amount. None of the Trustees or the Securities Registrar has duties to obtain certificates or other documentation with respect to the transfer or exchange between or among any depositary 32 participants, members or beneficial owners in any global security and shall have no liability or responsibility with respect to the legality thereof. (c) Transfer and Exchange of Global Capital Securities Certificates. The --------------------------------------------------------------- transfer and exchange of Global Capital Securities Certificates or beneficial interests therein shall be effected through the Depository, in accordance with this Trust Agreement (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. (d) Transfer of a Beneficial Interest in a Global Capital Security For a -------------------------------------------------------------------- Definitive Capital Security. - --------------------------- (i) Any person having a beneficial interest in a Global Capital Security that is being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to clause (A), (B) or (C) below may upon request, and if accompanied by the information specified below, exchange such beneficial interest for a Definitive Capital Security of the same aggregate Liquidation Amount. Upon receipt by the Property Trustee of written instructions or such other form of instructions as is customary for the Depository from the Depository or its nominee on behalf of any Person having a beneficial interest in a Global Capital Security and upon receipt by the Property Trustee of a written order or such other form of instructions as is customary for the Depository or the Person designated by the Depository as having such a beneficial interest in a Transfer Restricted Security only, the following additional information and documents (all of which may be submitted by facsimile): (A) if such beneficial interest is being transferred to the Person designated by the Depository as being the owner of a beneficial interest in a Global Capital Security, a certification from such Person to that effect (in substantially the form set forth on the reverse of the Security); or (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certification to that effect (in substantially the form set forth on the reverse of the Security); or (C) if such beneficial interest is being transferred (w) pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or Regulation S under the Securities Act, or (x) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is acquiring the security for its own account, or for the account of such an 33 institutional accredited investor, in each case in a minimum Liquidation Amount of the Capital Securities of $100,000 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 (y) in reliance on another exemption from the registration requirements of the Securities Act: (i) a certification to that effect from the transferee or transferor, (ii) if an Administrative Trustee or the Securities Registrar so requests, an opinion of counsel from the transferee or transferor reasonably acceptable to an Administrative Trustee and to the Securities Registrar to the effect that such transfer is in compliance with the Securities Act and (iii) in the case of clause (x) a signed letter substantially in the form of Exhibit E hereto, then the Property Trustee or the Securities Custodian, at the direction of the Administrative Trustees, shall cause, in accordance with the standing instructions and procedures existing between the Depository and the Securities Custodian, the aggregate Liquidation Amount of the Global Capital Security to be reduced on its books and records and, following such reduction, the Administrative Trustees or any one of them shall execute, shall cause the Property Trustee to authenticate and shall deliver to the transferee a Definitive Capital Security. (ii) Definitive Capital Securities Certificates issued in exchange for a beneficial interest in a Global Capital Security pursuant to this Section 5.11(d) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from direct or indirect Depository Participants or otherwise, shall instruct the Administrative Trustees. The Administrative Trustees shall deliver such Definitive Capital Securities Certificates to the persons in whose names such Capital Securities are so registered in accordance with the written instructions of the Depository. (e) Restrictions on Transfer and Exchange of Global Capital Securities ------------------------------------------------------------------ Certificates. Notwithstanding any other provisions of this Trust Agreement - ------------ (other than the provisions set forth in Section 5.13), a Global Capital Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (f) Legend. ------ (i) Except as permitted by the following paragraph (ii), each Capital Security Certificate evidencing the Global Capital Securities and Definitive Capital Securities (and all Capital Securities Certificates issued in exchange therefor or substitution thereof) shall bear a legend in substantially the following form: 34 THIS CAPITAL SECURITY AND ANY JUNIOR SUBORDINATED DEBENTURES ISSUABLE IN CONNECTION THEREWITH HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY THE INITIAL INVESTOR, (I) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (B) BY SUBSEQUENT INVESTORS, AS SET FORTH IN (A) ABOVE AND, IN ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER JURISDICTIONS OF THE UNITED STATES. THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. THIS CAPITAL SECURITY WILL BE ISSUED, AND MAY BE HELD OR TRANSFERRED, ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000. ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS CAPITAL SECURITY IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000, OR RESULTING IN A HOLDER'S HOLDING CAPITAL SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER, ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH CAPITAL SECURITY FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO THE RECEIPT OF DISTRIBUTIONS ON SUCH CAPITAL SECURITY, AND SUCH TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH CAPITAL SECURITY." (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security that is a Global Capital Security) pursuant to Rule 144 under the Securities Act or an effective registration statement under the Securities Act: 35 (A) in the case of any Transfer Restricted Security that is a Definitive Capital Security, the Securities Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Capital Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) any such Transfer Restricted Security represented by a Global Capital Security shall not be subject to the provisions set forth in clause (i) of this Section 5.11(f) (such sales or transfers being subject only to the provisions of Section 5.11(c) hereof); provided, however, that with respect to any request for an exchange of a Transfer Restricted Security that is represented by a Global Capital Security for a Definitive Capital Security that does not bear a legend, which request is made in reliance upon Rule 144, the Holder thereof shall certify in writing to the Securities Registrar that such request is being made pursuant to Rule 144. (g) Cancellation and/or Adjustment of Global Capital Security. At such --------------------------------------------------------- time as all beneficial interests in a Global Capital Security have either been exchanged for Definitive Capital Securities, redeemed, repurchased or canceled, such Global Capital Security shall be returned to the Depository for cancellation or retained and canceled by the Property Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Capital Security is exchanged for Definitive Capital Securities, redeemed, repurchased or canceled, the Liquidation Amount of Capital Securities represented by such Global Capital Security shall be reduced and an adjustment shall be made on the books and records of the Property Trustee (if it is then the Securities Custodian for such Global Capital Security) with respect to such Global Capital Security, by the Property Trustee or the Securities Custodian, to reflect such reduction. (h) Obligations With Respect to Transfers and Exchanges of Capital -------------------------------------------------------------- Securities. - ---------- (i) To permit registrations of transfers and exchanges, the Administrative Trustees or any one of them shall execute and the Property Trustee shall authenticate Definitive Capital Securities Certificates and Global Capital Securities Certificates at the Securities Registrar's written request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Securities Registrar may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith. (iii) The Securities Registrar shall not be required to register the transfer of or exchange of any Capital Security called for redemption during a period beginning 15 days before the day of selection for such redemption. 36 (iv) Prior to the due presentation for registration of transfer of any Capital Security, the Trust, the Property Trustee, the Administrative Trustees, the Paying Agent or the Securities Registrar may deem and treat the person in whose name a Capital Security is registered in the Securities Register as the absolute owner of such Capital Security for the purpose of receiving payment of Distributions on, and the Redemption Price or the Repurchase Price of, such Capital Security and for all other purposes whatsoever, whether or not such Capital Security is overdue, and none of the Trust, the Trustees, the Paying Agent, or the Securities Registrar shall be affected by notice to the contrary. (v) All Capital Securities issued upon any transfer or exchange pursuant to the terms of this Trust Agreement shall evidence the same Capital Securities and shall be entitled to the same benefits under this Trust Agreement as the Capital Securities surrendered upon such transfer or exchange. (i) Termination of Certain Restrictions on Transfer and Provisions as to -------------------------------------------------------------------- Legends and Global Form. After a transfer of any Initial Capital Securities - ----------------------- during the period of the effectiveness of, and pursuant to, a Shelf Registration Statement with respect to the Initial Capital Securities, all requirements pertaining to legends on such Initial Capital Securities shall cease to apply, the requirements requiring that any such Initial Capital Securities issued to certain Holders be issued in global form shall cease to apply, and certificated Initial Capital Securities without legends shall be made available to the Holders of such Initial Capital Securities. Upon the consummation of a Registered Exchange Offer with respect to the Initial Capital Securities pursuant to which Holders of Initial Capital Securities are offered Exchange Capital Securities in exchange for their Initial Capital Securities, all requirements pertaining to such Initial Capital Securities that Initial Capital Securities issued to certain Holders be issued in global form shall cease to apply and certificated Initial Capital Securities with the Restricted Securities Legend shall be available to Holders of such Initial Capital Securities that do not exchange their Initial Capital Securities, and Exchange Capital Securities in certificated form shall be available to Holders that exchange such Initial Capital Securities in such Registered Exchange Offer. Section 5.12 Notices to Depository. To the extent that a notice or other communication to the Owners is required under this Trust Agreement, unless and until Definitive Capital Securities Certificates shall have been issued to Owners pursuant to Sections 5.11 or 5.13, the Trustees shall give all such notices and communications specified herein to be given to Owners to the Depository, and shall have no obligations to the Owners. 37 Section 5.13 Definitive Capital Securities Certificates. If (a) the Depositor advises the Administrative Trustees in writing that the Depository is no longer willing or able to properly discharge its responsibilities with respect to the Global Capital Securities Certificates, and the Depositor is unable to locate a qualified successor, (b) the Depositor at its option advises the Administrative Trustees in writing that it elects to terminate the book-entry system through the Depository or (c) after the occurrence of a Debenture Event of Default, Owners of Global Capital Securities representing beneficial interests aggregating at least a majority of the Liquidation Amount of the Capital Securities advise the Administrative Trustees in writing that the continuation of a book-entry system through the Depository is no longer in the best interest of the Owners of Global Capital Securities, then the Administrative Trustees shall notify the other Trustees and the Depository, and the Depository, in accordance with its customary rules and procedures, shall notify all Depository Participants for whom it holds Capital Securities of the occurrence of any such event and of the availability of the Definitive Capital Securities Certificates to Owners of such class or classes, as applicable, requesting the same. Upon surrender to the Administrative Trustees of the typewritten Capital Securities Certificate or Certificates representing the Global Capital Securities by the Depository, accompanied by registration instructions, the Administrative Trustees, or any one of them, shall execute the Definitive Capital Securities Certificates in accordance with the instructions of the Depository and shall cause such Definitive Capital Securities Certificates to be authenticated. Neither the Securities Registrar nor the Administrative Trustees shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Capital Securities Certificates, the Administrative Trustees and the Property Trustee shall recognize the Holders of the Definitive Capital Securities Certificates as Securityholders. The Definitive Capital Securities Certificates shall be typewritten, printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrative Trustees that meets the requirements of any stock exchange or automated quotation system on which the Capital Securities are then listed or approved for trading, as evidenced by the execution thereof by the Administrative Trustees or any one of them. Section 5.14 Rights of Securityholders. (a) The legal title to the Trust Property is vested exclusively in the Property Trustee (in its capacity as such) in accordance with Section 2.9, and the Securityholders shall not have any right or title therein other than the undivided beneficial ownership interest in the assets of the Trust conferred by their Trust 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 Trust Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. The Trust Securities shall have no preemptive or similar rights and when issued and delivered to Securityholders against payment of the purchase price therefor will be fully paid and nonassessable by the Trust. The Holders of the Capital Securities, in their capacities as such, 38 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. (b) For so long as any Capital Securities remain Outstanding, if, upon a Debenture 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 at least 25% in aggregate Liquidation Amount of the Capital Securities then Outstanding shall have such right by a notice in writing to the Depositor and the Debenture Trustee; and upon any such declaration such principal amount of and the accrued interest on all of the Debentures shall become immediately due and payable as set forth in the Indenture, provided that the payment of principal, premium and interest on such Debentures shall remain subordinated to the extent provided in the Indenture. At any time after such 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 in the Indenture provided, the Holders of a majority in aggregate Liquidation Amount of the Capital Securities, by written notice to the Property Trustee, the Depositor and the Debenture Trustee, may rescind and annul such declaration and its consequences if: (i) the Depositor has paid or deposited with the Debenture Trustee a sum sufficient to pay (A) all overdue installments of interest (including any Additional Interest) on all of the Debentures, (B) the principal of (and premium, if any, on) any Debentures which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Debentures, and (C) 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 non-payment of the principal of the Debentures which has become due solely by such acceleration, have been cured or waived as provided in Section 5.13 of the Indenture. The Holders of a majority in aggregate Liquidation Amount of the Capital Securities may, on behalf of the Holders of all the Capital Securities, waive any past default under the Indenture, except a default in the payment of principal, premium or interest (unless all Events of 39 Default with respect to the Debentures, other than the non-payment of the principal of the Debentures which has become due solely by such acceleration, have been cured or annulled as provided in Section 5.3 of the Indenture and the Company has paid or deposited with the Debenture Trustee a sum sufficient to pay all overdue installments of interest (including any Additional Interest) on the Debentures, the principal of (and premium, if any, on) any Debentures which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Debentures, and 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) or a default in respect of a covenant or provision which 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 the Capital Securities, a record date shall be established for determining Holders of Outstanding Capital 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 of Outstanding Capital Securities 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 which 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 which 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 5.14(b). (c) For so long as any Capital Securities remain Outstanding, to the fullest extent permitted by law and subject to the terms of this Trust Agreement and the Indenture, upon a Debenture Event of Default specified in Section 5.1(1) or 5.1(2) of the Indenture, any Holder of Capital Securities shall have the right to institute a proceeding directly against the Depositor, pursuant to Section 5.8 of the Indenture, for enforcement of payment to such Holder of the principal amount of or premium or interest on Debentures having a principal amount equal to the Liquidation Amount of the Capital Securities of such Holder (a "Direct Action"). Except as set forth in Section 5.14(b) and this Section 5.14(c), the Holders of Capital Securities shall have no right to exercise directly any right or remedy available to the holders of, or in respect of, the Debentures. 40 Section 5.15 CUSIP Numbers. The Administrative Trustees in issuing the Capital Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Property Trustee shall use "CUSIP" numbers in notices of redemption or other notices as a convenience to Holders; provided that any such notice may state that no -------- representation is made as to the correctness of such numbers either as printed on the Capital Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Capital Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Administrative Trustees will promptly notify the Property Trustee of any change in the CUSIP numbers. ARTICLE VI Acts of Securityholders; Meetings; Voting Section 6.1 Limitations on Voting Rights. (a) Except as provided in this Section, in Sections 5.14, 8.10 and 11.3 and in the Indenture and as otherwise required by law, no Holder of Capital Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Trust Securities Certificates, be construed so as to constitute the Securityholders from time to time as partners or members of an association. (b) So long as any Debentures are held by the Property Trustee, neither the Property Trustee nor the Administrative Trustees shall (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or executing any trust or power conferred on the Debenture Trustee with respect to such Debentures, (ii) waive any past default which is waiveable under Section 5.13 of 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 to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of at least a majority in Liquidation Amount of all Outstanding Capital Securities, provided, however, that where a consent under the Indenture would require the consent of each holder of Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior written consent of each Holder of Capital Securities. Neither the Property Trustee nor the Administrative Trustees shall revoke any action previously authorized or approved by a vote of the Holders of Capital Securities, except by a subsequent vote of the Holders of Capital Securities. The Property Trustee shall notify all Holders of the Capital 41 Securities of any notice of default received from the Debenture Trustee with respect to the Debentures. In addition to obtaining the foregoing approvals of the Holders of the Capital Securities, prior to taking any of the foregoing actions, the Administrative Trustees shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced in such matters to the effect that such action shall not cause the Trust to fail to be classified as a grantor trust or cause the Trust to be taxable as a corporation for United States federal income tax purposes. (c) If any proposed amendment to the Trust Agreement provides for, or the Property Trustee or the Administrative Trustees otherwise propose to effect, (i) any action that would adversely affect in any material respect the powers, preferences or special rights of the Capital Securities, whether by way of amendment to the Trust Agreement or otherwise, or (ii) the dissolution, winding- up or termination of the Trust, other than pursuant to the terms of this Trust Agreement, then the Holders of Outstanding Capital Securities as a 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 aggregate Liquidation Amount of the Outstanding Capital Securities. Notwithstanding any other provision of this Trust Agreement, no amendment to this Trust Agreement may be made if, as a result of such amendment, it would cause the Trust to fail to be classified as a grantor trust or cause the Trust to be taxable as a corporation for United States federal income tax purposes. Section 6.2 Notice of Meetings. Notice of all meetings of the Capital Securityholders, stating the time, place and purpose of the meeting, shall be given by the Property Trustee pursuant to Section 11.9 to each Capital Securityholder of record, at his registered address, at least 15 days and not more than 90 days before the meeting. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. The Administrative Trustees shall provide notice to the Property Trustee of the requisite information and in a sufficiently timely manner so as to permit the Property Trustee to provide notices of meetings as contemplated by this Section 6.2. Section 6.3 Meetings of Capital Securityholders. No annual meeting of Securityholders is required to be held. The Administrative Trustees, however, shall call a meeting of Capital Securityholders to vote on any matter upon the written request of the Capital Securityholders of record of 25% of the Outstanding Capital Securities (based upon their Liquidation Amount) and the Administrative Trustees or the Property Trustee may, at any time in their discretion, call a meeting of Capital Securityholders to vote on any matters as to which Capital Securityholders are entitled to vote. 42 Capital Securityholders of record of 50% of the Outstanding Capital Securities (based upon their Liquidation Amount), present in person or by proxy, shall constitute a quorum at any meeting of Capital Securityholders. If a quorum is present at a meeting, an affirmative vote by the Capital Securityholders of record present, in person or by proxy, holding at least a majority of the Outstanding Capital Securities (based upon their Liquidation Amount) held by holders of record of Outstanding Capital Securities present, either in person or by proxy, at such meeting shall constitute the action of the Capital Securityholders, unless this Trust Agreement requires a greater number of affirmative votes. Section 6.4 Voting Rights. Securityholders shall be entitled to one vote for each $1,000 of Liquidation Amount represented by their Trust Securities in respect of any matter as to which such Securityholders are entitled to vote. Section 6.5 Proxies, etc. At any meeting of Securityholders, any Securityholder entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Administrative Trustees, or with such other officer or agent of the Trust as the Administrative Trustees may direct, for verification prior to the time at which such vote shall be taken. Proxies may be solicited in the name of the Administrative Trustees. Only Security holders of record shall be entitled to vote. When Trust Securities are held jointly by several Persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Securityholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution. Section 6.6 Securityholder Action by Written Consent. Any action which may be taken by Securityholders at a meeting may be taken without a meeting if Securityholders holding at least a majority of all Outstanding Trust Securities (based upon their Liquidation Amount) entitled to vote in respect of such action (or such larger proportion thereof as shall be required by any express provision of this Trust Agreement) shall consent to the action in writing. 43 Section 6.7 Record Date for Voting and Other Purposes. For the purposes of determining the Securityholders who are entitled to notice of and to vote at any meeting or by written consent, or to participate in any Distribution on the Trust Securities in respect of which a record date is not otherwise provided for in this Trust Agreement, or for the purpose of any other action, the Administrative Trustees may from time to time fix a date, not more than 90 days prior to the date of any meeting of Securityholders or the payment of a Distribution or other action, as the case may be, as a record date for the determination of the identity of the Securityholders of record for such purposes. Section 6.8 Acts of Securityholders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Trust Agreement to be given, made or taken by Securityholders or Owners may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Securityholders or Owners in person or by an agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to an Administrative Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Securityholders or Owners signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Trust Agreement and (subject to Section 8.1) conclusive in favor of the Trustees, if made in the manner provided in this Section. The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which any Trustee receiving the same deems sufficient. The ownership of Capital Securities shall be proved by the Securities Register. Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Securityholder of any Trust Security shall bind every future Securityholder of the same Trust Security and the Securityholder of every Trust Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustees or the Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. 44 Without limiting the foregoing, a Securityholder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such Liquidation Amount. If any dispute shall arise between the Securityholders and the Administrative Trustees or among such Securityholders or Trustees with respect to the authenticity, validity or binding nature of any request, demand, authorization, direction, consent, waiver or other Act of such Securityholder or Trustee under this Article VI, then the determination of such matter by the Property Trustee shall be conclusive with respect to such matter. Section 6.9 Inspection of Records. Upon reasonable notice to the Administrative Trustees and the Property Trustee, the records of the Trust shall be open to inspection by Securityholders during normal business hours for any purpose reasonably related to such Securityholder's interest as a Securityholder. Section 6.10 Reports to Holders of Capital Securities. The Administrative Trustees shall, promptly upon receipt from the Depositor, deliver to each of the Capital Securityholders, all annual reports, information, documents and other reports filed by the Depositor with the Commission pursuant to Section 13 or 15(d) of the Exchange Act (whether or not the Depositor is subject to those filing requirements), as well as the consolidated financial statements, comparable to those which would have been required to appear in annual or quarterly reports filed with the Commission and delivered by the Depositor to the Property Trustee. ARTICLE VII Representations and Warranties Section 7.1 Representations and Warranties of the Property Trustee and the Delaware Trustee. The Property Trustee and the Delaware Trustee, each severally on behalf of and as to itself, hereby represents and warrants for the benefit of the Depositor and the Securityholders that: (a) the Property Trustee is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America. 45 (b) the Property Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (c) the Delaware Trustee is a Delaware banking corporation duly organized, validly existing and in good standing in the State of Delaware; (d) the Delaware Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (e) this Trust Agreement has been duly authorized, executed and delivered by the Property Trustee and the Delaware Trustee and constitutes the valid and legally binding agreement of each of the Property Trustee and the Delaware Trustee enforceable against each of them in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (f) the execution, delivery and performance of this Trust Agreement has been duly authorized by all necessary corporate or other action on the part of the Property Trustee and the Delaware Trustee and does not require any approval of stockholders of the Property Trustee or the Delaware Trustee and such execution, delivery and performance will not (i) violate the charter or by-laws of the Property Trustee or the Delaware Trustee, (ii) violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of, any Lien on any properties included in the Trust Property pursuant to the provisions of, any indenture, mortgage, credit agreement, license or other agreement or instrument to which the Property Trustee or the Delaware Trustee is a party or by which it is bound, or (iii) violate any law, governmental rule or regulation of the United States in the case of the Property Trustee, or the State of Delaware in the case of the Delaware Trustee, as the case may be, governing the banking, trust or general powers of the Property Trustee or the Delaware Trustee (as appropriate in context) or any order, judgment or decree applicable to the Property Trustee or the Delaware Trustee; (g) neither the authorization, execution or delivery by the Property Trustee or the Delaware Trustee of this Trust Agreement nor the consummation of any of the transactions by the Property Trustee or the Delaware Trustee (as appropriate in context) contemplated herein or therein requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any governmental authority or agency under any existing United States laws in the case of the Property Trustee, or Delaware law in the case of the Delaware United States, governing the banking, trust or general powers of the Property Trustee or the Delaware Trustee, as the case may be; and 46 (h) there are no proceedings pending or, to the best of each of the Property Trustee's and the Delaware Trustee's knowledge, threatened against or affecting the Property Trustee or the Delaware Trustee in any court or before any governmental authority, agency or arbitration board or tribunal which, individually or in the aggregate, would materially and adversely affect the Trust or would question the right, power and authority of the Property Trustee or the Delaware Trustee, as the case may be, to enter into or perform its obligations as one of the Trustees under this Trust Agreement. Section 7.2 Representations and Warranties of Depositor. The Depositor hereby represents and warrants for the benefit of the Securityholders that: (a) the Trust Securities Certificates issued on behalf of the Trust at the Closing Date and any Trust Securities Certificates issued on behalf of the Trust as provided in the Exchange and Registration Rights Agreement have been or will be (as the case may be) duly authorized and have been or will be duly and validly executed, issued, authenticated and delivered by the Trustees pursuant to the terms and provisions of, and in accordance with the requirements of, this Trust Agreement and the Securityholders will be, as of such date, entitled to the benefits of this Trust Agreement; and (b) there are no taxes, fees or other governmental charges payable by the Trust (or the Trustees on behalf of the Trust) under the laws of the State of Delaware or any political subdivision thereof in connection with the execution, delivery and performance by the Property Trustee or the Delaware Trustee, as the case may be, of this Trust Agreement. ARTICLE VII The Trustees Section 8.1 Certain Duties and Responsibilities. (a) The duties and responsibilities of the Trustees shall be as provided by this Trust Agreement and, in the case of the Property Trustee, by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Trust Agreement shall require the Trustees 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 they shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to them. 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 Trustees shall be subject to the provisions of this Section. Nothing in this Trust Agreement shall be construed to release an Administrative Trustee or the Delaware Trustee from 47 liability for its own grossly negligent action, its own grossly negligent failure to act, or its own willful misconduct. To the extent that, at law or in equity, an Administrative Trustee or the Delaware Trustee has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to the Securityholders, such Administrative Trustee or Delaware Trustee shall not be liable to the Trust or to any Securityholder for such Trustee'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 Administrative Trustees and the Delaware Trustee otherwise existing at law or in equity, are agreed by the Depositor and the Securityholders to replace such other duties and liabilities of the Administrative Trustees and the Delaware Trustee. The Property Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Trust Agreement and no implied covenants or obligations shall be read in this Trust Agreement against the Property Trustee. (b) All payments made by the Property Trustee or a Paying Agent in respect of the Trust Securities shall be made only from the revenue and proceeds from the Trust Property and only to 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 Securityholder, by its acceptance of a Trust 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 Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 8.1(b) does not limit the liability of the Trustees expressly set forth elsewhere in this Trust Agreement or, in the case of the Property Trustee, in the Trust Indenture Act. (c) No provision of this Trust Agreement shall be construed to relieve the Property Trustee from liability for 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 an authorized 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 Trust Securities 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, safe keeping and physical preservation of the Debentures and the Payment Account shall be to 48 deal with such property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Trust Agreement and the Trust Indenture Act; (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 Depositor; and money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Payment Account maintained by the Property Trustee pursuant to Section 3.1 and except to the extent otherwise required by law; and (v) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall the Property Trustee be liable for the default or misconduct of the Administrative Trustees or the Depositor. Section 8.2 Certain Notices. Within ten Business Days after the occurrence of any Event of Default actually known to the Property Trustee, the Property Trustee shall transmit, in the manner and to the extent provided in Section 11.9, notice of such Event of Default to the Securityholders, the Administrative Trustees and the Depositor, unless such Event of Default shall have been cured or waived. Within five Business Days after the receipt of notice of the Depositor's exercise of its right to defer the payment of interest on the Debentures pursuant to the Indenture, the Administrative Trustees shall transmit, in the manner and to the extent provided in Section 11.9, notice of such exercise to the Securityholders and the Property Trustee, unless such exercise shall have been revoked. Section 8.3 Certain Rights of Property Trustee. Subject to the provisions of Section 8.1: (a) the Property Trustee may rely and shall 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, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) if (i) in performing its duties under this Trust Agreement the Property Trustee is required to decide between alternative courses of action or (ii) in construing any of the 49 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 Capital Securityholders are entitled to vote under the terms of this Trust Agreement, the Property Trustee shall deliver a notice to the Depositor requesting written instructions of the Depositor 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 to take, or to refrain from taking, by the Depositor; provided, however, that if the Property Trustee does not receive such instructions of the Depositor within ten Business Days after it has delivered such notice, or such reasonably shorter period of time set forth in such notice (which to the extent practicable shall not be less than two Business Days), it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Trust Agreement as it shall deem advisable and in the best interests of the Securityholders, in which event the Property Trustee shall have no liability except for its own bad faith, negligence or willful misconduct; (c) any direction or act of the Depositor or the Administrative Trustees 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 established before undertaking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Depositor or the Administrative Trustees; (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 Depositor or any of its Affiliates, and may include any of its employees) 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 Securityholders pursuant to this Trust Agreement, unless such Securityholders shall have offered to the Property Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; 50 (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 Securityholders, 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, provided that the Property Trustee shall be responsible for its own negligence or recklessness with respect to selection of any agent or attorney appointed by it hereunder; (j) whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable to receive written instructions with respect to enforcing any remedy or right or taking any other action hereunder the Property Trustee (i) may request written instructions from the Holders of the Trust Securities which written instructions may only be given by the Holders of the same proportion in Liquidation Amount of the Trust Securities as would be entitled to direct the Property Trustee under the terms of the Trust 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 written instructions are received, and (iii) shall be protected in acting in accordance with such written instructions; and (k) except as otherwise expressly provided by 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. 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 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 8.4 Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Trust Securities Certificates shall be taken as the statements of the Trust, and the Trustees do not assume any responsibility for their correctness. The Trustees shall not be accountable for the use or application by the Depositor of the proceeds of the Debentures. 51 Section 8.5 May Hold Securities. Any Trustee or any other agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and, subject to Sections 8.8 and 8.13, except as provided in the definition of the term "Outstanding" in Article I, may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such other agent. Section 8.6 Compensation; Indemnity; Fees. The Depositor shall: (a) pay to the Trustees from time to time such compensation as shall be agreed in writing with the Holder of the Common Securities for all services rendered by them hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, reimburse the Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance with any provision of this Trust Agreement (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 (in the case of the Property Trustee), its gross negligence (in the case of the Administrative Trustees and the Delaware Trustee), or its bad faith; and (c) to the fullest extent permitted by applicable law, indemnify and hold harmless (i) each Trustee, (ii) any Affiliate of any Trustee, (iii) any officer, director, shareholder, employee, representative or agent of any Trustee, and (iv) any employee or agent of the Trust or its Affiliates, (referred to herein as an "Indemnified Person") from and against any and all loss, damage, liability, tax, penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person, including, without limitation, any liability arising under federal or state securities laws, by reason of the creation, operation or termination of the Trust or 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 authority conferred on such Indemnified Person by this Trust Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of its negligence (in the case of the Property Trustee), its gross negligence (in the case of the Administrative Trustees and the Delaware Trustee), or its willful misconduct with respect to such acts or omissions. When the Property Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1(4) or Section 5.1(5) of the Indenture, the expenses (including the reasonable charges and expenses 52 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 8.6 shall survive the termination of this Trust Agreement. No Trustee may claim any lien or charge on any Trust Property as a result of any amount due pursuant to this Section 8.6. The Depositor and any Trustee (in the case of the Property Trustee, subject to Section 8.8 hereof) 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 Trust 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 business of the Trust, shall not be deemed wrongful or improper. Neither the Depositor, nor any 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 the Depositor or any 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 Trustee may engage or be interested in any financial or other transaction with the Depositor or any Affiliate of the Depositor, or may act as depository for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Depositor or its Affiliates. Section 8.7 Corporate Property Trustee Required; Eligibility of Trustees. (a) There shall at all times be a Property Trustee hereunder with respect to the Trust Securities. The Property Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Property Trustee with respect to the Trust Securities shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. (b) There shall at all times be one or more Administrative Trustees hereunder with respect to the Trust Securities. Each Administrative Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind that entity. 53 (c) There shall at all times be a Delaware Trustee hereunder with respect to the Trust 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 with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law that shall act through one or more persons authorized to bind such entity. Section 8.8 Conflicting Interests. If the Property Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Property Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Trust Agreement. Section 8.9 Co-Trustees and Separate Trustee. Unless an Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Depositor and the Administrative Trustees, by agreed action of the majority of such Trustees, shall have power to appoint, and upon the written request of the Administrative Trustees, the Depositor shall for such purpose join with the Administrative Trustees in the execution, delivery, and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Property Trustee either to act as co- trustee, jointly with the Property Trustee, of all or any part of such Trust Property, or to the extent required by law to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section. If the Depositor does not join in such appointment within 15 days after the receipt by it of a request so to do, or in case a Debenture Event of Default has occurred and is continuing, the Property Trustee alone shall have power to make such appointment. Any co-trustee or separate trustee appointed pursuant to this Section shall either be (i) a natural person who is at least 21 years of age and a resident of the United States or (ii) a legal entity with its principal place of business in the United States that shall act through one or more persons authorized to bind such entity. Should any written instrument from the Depositor be required by any co- trustee or separate trustee so appointed for more fully confirming to such co- trustee or separate trustee such property, title, right, or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Depositor. Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely: 54 (a) The Trust Securities shall be executed and delivered and all rights, powers, duties, and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustees specified hereunder shall be exercised solely by such Trustees and not by such co-trustee or separate trustee. (b) The rights, powers, duties, and obligations hereby conferred or imposed upon the Property Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Property Trustee or by the Property Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Property Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co- trustee or separate trustee. (c) The Property Trustee at any time, by an instrument in writing executed by it, with the written concurrence of the Depositor, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, in case a Debenture Event of Default has occurred and is continuing, the Property Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Depositor. Upon the written request of the Property Trustee, the Depositor shall join with the Property Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section. (d) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Property Trustee or any other trustee hereunder. (e) The Property Trustee shall not be liable by reason of any act of a co- trustee or separate trustee. (f) Any Act of Holders delivered to the Property Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. Section 8.10 Resignation and Removal; Appointment of Successor. No resignation or removal of any Trustee (the "Relevant Trustee") and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 8.11. Subject to the immediately preceding paragraph, the Relevant Trustee may resign at any time by giving written notice thereof to the Common Securityholders. If the instrument of 55 acceptance by the successor Trustee required by Section 8.11 shall not have been delivered to the Relevant Trustee within 30 days after the giving of such notice of resignation, the Relevant Trustee may petition, at the expense of the Trust, any court of competent jurisdiction for the appointment of a successor Relevant Trustee. Unless a Debenture Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by Act of the Common Securityholder. If a Debenture Event of Default shall have occurred and be continuing, the Property Trustee or the Delaware Trustee, or both of them, may be removed at such time by Act of the Holders of a majority in Liquidation Amount of the Capital Securities, delivered to the Relevant Trustee (in its individual capacity and on behalf of the Trust). An Administrative Trustee may be removed by the Common Securityholder at any time. If the instrument of acceptance by the successor Trustee required by Section 8.11 shall not have been delivered to the Relevant Trustee within 30 days after such removal, the Relevant Trustee may petition, at the expense of the Trust, any court of competent jurisdiction for the appointment of a successor Relevant Trustee. If any Trustee shall resign, be removed or become incapable of acting as Trustee, or if a vacancy shall occur in the office of any Trustee for any cause, at a time when no Debenture Event of Default shall have occurred and be continuing, the Common Securityholder, by Act of the Common Securityholder delivered to the retiring Trustee, shall promptly appoint a successor Trustee or Trustees, and the retiring Trustee shall comply with the applicable requirements of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign, be removed or become incapable of continuing to act as the Property Trustee or the Delaware Trustee, as the case may be, at a time when a Debenture Event of Default shall have occurred and be continuing, the Capital Securityholders, by Act of the Securityholders of a majority in Liquidation Amount of the Capital Securities then Outstanding delivered to the retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee or Trustees, and such successor Trustee shall comply with the applicable requirements of Section 8.11. If an Administrative Trustee shall resign, be removed or become incapable of acting as an Administrative Trustee, at a time when a Debenture Event of Default shall have occurred and be continuing, the Common Securityholder by Act of the Common Securityholder delivered to the Administrative Trustees shall promptly appoint a successor Administrative Trustee or Administrative Trustees and such successor Administrative Trustee or Trustees shall comply with the applicable requirements of Section 8.11. If no successor Relevant Trustee shall have been so appointed by the Common Securityholder or the Capital Securityholders and accepted appointment in the manner required by Section 8.11, any Securityholder who has been a Securityholder of Trust Securities for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Relevant Trustee. The Property Trustee shall give notice of each resignation and each removal of a Trustee and each appointment of a successor Trustee to all Securityholders in the manner provided in Section 11.9 and shall give notice to the Depositor. Each notice shall include the name of the 56 successor Relevant Trustee and the address of its Corporate Trust Office if it is the Property Trustee. Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrative Trustee or a Delaware Trustee who is a natural person dies or becomes, in the opinion of the Depositor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (a) the unanimous act of the remaining Administrative Trustees if there are at least two of them or (b) otherwise by the Depositor (with the successor in each case being a Person who satisfies the eligibility requirement for Administrative Trustees or Delaware Trustee, as the case may be, set forth in Section 8.7). Section 8.11 Acceptance of Appointment by Successor. In case of the appointment hereunder of a successor Relevant Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with respect to the Trust Securities shall execute and deliver an instrument wherein each successor Relevant Trustee shall accept such appointment and which shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Trust, and upon the execution and delivery of such instrument the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee; but, on written request of the Trust or any successor Relevant Trustee such retiring Relevant Trustee shall, upon payment of its charges, duly assign, transfer and deliver to such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Trust Securities and the Trust. Upon written request of any such successor Relevant Trustee, the Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Relevant Trustee all such rights, powers and trusts referred to in the preceding paragraph. No successor Relevant Trustee shall accept its appointment unless at the time of such acceptance such successor Relevant Trustee shall be qualified and eligible under this Article. Section 8.12 Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Property Trustee or the Delaware 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 such Relevant Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder, without the execution or filing of any paper 57 or any further act on the part of any of the parties hereto; provided such Person shall be otherwise qualified and eligible under this Article. Section 8.13 Preferential Collection of Claims Against Depositor or Trust. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other similar judicial proceeding relative to the Trust or any other obligor upon the Trust Securities or the property of the Trust or of such other obligor or their creditors, the Property Trustee (irrespective of whether any Distributions on the Trust Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Property Trustee shall have made any demand on the Trust for the payment of any past due Distributions) shall be entitled and empowered, to the fullest extent permitted by law, by intervention in such proceeding or otherwise: (a) to file and prove a claim for the whole amount of any Distributions owing and unpaid in respect of the Trust Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Property Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Property Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Property Trustee and, in the event the Property Trustee shall consent to the making of such payments directly to the Holders, to pay to the Property Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Property Trustee, its agents and counsel, and any other amounts due the Property Trustee. Nothing herein contained shall be deemed to authorize the Property Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or compensation affecting the Trust Securities or the rights of any Holder thereof or to authorize the Property Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 8.14 Reports by Property Trustee. (a) The Property Trustee shall transmit to Securityholders such reports concerning the Property Trustee and its actions under this Trust Agreement as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. If required by 58 Section 313(a) of the Trust Indenture Act, the Property Trustee shall, within sixty days after each May 15 following the date of this Trust Agreement deliver to Securityholders a brief report, dated as of such May 15, which complies with the provisions of such Section 313(a). (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Property Trustee with each national stock exchange, the Nasdaq National Market or such other interdealer quotation system or self- regulatory organization upon which the Trust Securities are listed or traded, if any, with the Commission and with the Depositor. The Depositor will promptly notify the Property Trustee of any such listing or trading. Section 8.15 Reports to the Property Trustee. The Depositor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314(a) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. Delivery of such reports, information and documents to the Property Trustee is for informational purposes only and the Property Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Trust's compliance with any of its covenants hereunder (as to which the Property Trustee is entitled to rely exclusively on Officers' Certificates). Section 8.16 Evidence of Compliance with Conditions Precedent. Each of the Depositor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Trust Agreement that relate to any of the matters set forth in Section 314 (c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an Officers' Certificate. Section 8.17 Number of Trustees. (a) The number of Trustees shall initially be five, provided that the Holder of all of the Common Securities by written instrument may increase or decrease the number of Administrative Trustees. The Property Trustee and the Delaware Trustee may be the same Person. (b) If a Trustee ceases to hold office for any reason and the number of Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the number of Trustees is increased 59 pursuant to Section 8.17(a), a vacancy shall occur. The vacancy shall be filled with a Trustee appointed in accordance with Section 8.10. (c) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of a Trustee shall not operate to dissolve, terminate or annul the Trust. Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with Section 8.10, the Administrative Trustees in office, regardless of their number (and notwithstanding any other provision of this Agreement), shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Trust Agreement. Section 8.18 Delegation of Power. (a) Any Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 2.7(a), including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) The Administrative Trustees shall have power to delegate from time to time to such of their number or to the Depositor the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of this Trust Agreement, as set forth herein. ARTICLE IX Termination, Liquidation and Merger Section 9.1 Termination Upon Expiration Date. Unless earlier dissolved, the Trust shall automatically dissolve on February 15, 2028 (the "Expiration Date"), and shall terminate following the distribution of the Trust Property in accordance with Section 9.4. Section 9.2 Early Termination. The first to occur of any of the following events is an "Early Termination Event": (a) the occurrence of a Bankruptcy Event in respect of, or the dissolution or liquidation of, the Depositor; 60 (b) the written direction to the Property Trustee from the Depositor at any time to dissolve the Trust and, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, distribute Debentures to Securityholders in exchange for the Capital Securities (which direction is optional and wholly within the discretion of the Depositor); (c) the redemption of all of the Capital Securities in connection with the redemption or maturity of all of the Debentures; (d) the repurchase of all of the Capital Securities in connection with the occurrence of a Change of Control; and (e) the entry of an order for dissolution of the Trust by a court of competent jurisdiction. Section 9.3 Termination. The respective obligations and responsibilities of the Trustees and the Trust created and continued hereby shall terminate upon the latest to occur of the following: (a) the distribution by the Property Trustee to Securityholders upon the liquidation of the Trust pursuant to Section 9.4, or upon the redemption or repurchase of all of the Trust Securities pursuant to Section 4.2 or Section 10.10, respectively, of all amounts required to be distributed hereunder upon the final payment of the Trust Securities; (b) the payment of any expenses owed by the Trust; (c) the discharge of all administrative duties of the Administrative Trustees, including the performance of any tax reporting obligations with respect to the Trust or the Securityholders; and (d) the filing with the Secretary of State of the State of Delaware of a certificate of cancellation for the Trust as required by the Delaware Business Trust Act. Section 9.4 Liquidation. (a) If an Early Termination Event specified in clause (a), (b) or (e) of Section 9.2 occurs or upon the Expiration Date, the Trust shall be liquidated by the Property Trustee and the Administrative Trustees as expeditiously as such Trustees determine to be possible by distributing, after satisfaction or the making of reasonable provisions for the payment of liabilities to creditors of the Trust as provided by applicable law, to each Securityholder a Like Amount of Debentures, subject to Section 9.4(d). Notice of liquidation shall be given by the Property Trustee by first-class mail, postage prepaid mailed not later than 30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All notices of liquidation shall: (i) state the CUSIP Number of the Trust Securities; (ii) state the Liquidation Date; 61 (iii) state that from and after the Liquidation Date, the Trust Securities will no longer be deemed to be Outstanding and any Trust Securities Certificates not surrendered for exchange will be deemed to represent a Like Amount of Debentures; and (iv) provide such information with respect to the mechanics by which Holders may exchange Trust Securities Certificates for Debentures, or if Section 9.4(d) applies receive a Liquidation Distribution, as the Administrative Trustees or the Property Trustee shall deem appropriate. (b) Except where Section 9.2(c), 9.2(d) or 9.4(d) applies, in order to effect the liquidation of the Trust and distribution of the Debentures to Securityholders, the Property Trustee shall establish a record date for such distribution (which shall be not more than 45 days prior to the Liquidation Date) and, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish such procedures as the Administrative Trustees shall direct to effect the distribution of Debentures in exchange for the Outstanding Trust Securities Certificates. (c) Except where Section 9.2(c), 9.2(d) or 9.4(d) applies, after the Liquidation Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii) certificates representing a Like Amount of Debentures will be issued to Holders of Trust Securities Certificates, upon surrender of such certificates to the Administrative Trustees or their agent for exchange, (iii) the Depositor shall use its best efforts to have the Debentures listed on the New York Stock Exchange or on such other exchange, interdealer quotation system or self-regulatory organization as the Capital Securities are then listed or traded, (iv) any Trust Securities Certificates not so surrendered for exchange will be deemed to represent a Like Amount of Debentures, accruing interest at the rate provided for in the Debentures from the last Distribution Date on which a Distribution was made on such Trust Securities Certificates until such certificates are so surrendered (and until such certificates are so surrendered, no payments of interest or principal will be made to Holders of Trust Securities Certificates with respect to such Debentures) and (v) all rights of Securityholders holding Trust Securities will cease, except the right of such Securityholders to receive Debentures upon surrender of Trust Securities Certificates. (d) In the event that, notwithstanding the other provisions of this Section 9.4, whether because of an order for dissolution entered by a court of competent jurisdiction or otherwise, distribution of the Debentures in the manner provided herein is determined by the Property Trustee not to be practical, the Trust Property shall be liquidated, and the Trust shall be dissolved, wound-up or terminated, by the Property Trustee. In such event, on the date of the dissolution, winding-up or other termination of the Trust, Securityholders will be entitled to receive out of the assets of the Trust available for distribution to Securityholders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to the Liquidation Amount per Trust Security plus accumulated and unpaid Distributions thereon 62 to the date of payment (such amount being the "Liquidation Distribution"). If, upon any such dissolution, winding up or termination, 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, subject to the next succeeding sentence, the amounts payable by the Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holder of the Common Securities will be entitled to receive Liquidation Distributions upon any such dissolution, winding-up or termination pro rata (determined as aforesaid) with Holders of Capital Securities, except that, if a Debenture Event of Default has occurred and is continuing as a result of any failure by the Depositor to pay any principal of (and premium, if any) or any interest on the Debentures when due, the Capital Securities shall have a priority over the Common Securities such that no Holder of Common Securities will be entitled to receive any Liquidation Distributions before the Holders of Capital Securities have been paid in full. Section 9.5 Mergers, Consolidations, Amalgamations or Replacements of the Trust. The Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other Person, except pursuant to this Article IX. At the request of the Depositor, and with the consent of the Holders of at least a majority in aggregate Liquidation Amount of the Capital Securities, the Trust may merge with or into, consolidate, amalgamate, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any State; provided, that (i) such successor entity either (a) expressly assumes all of the obligations of the Trust with respect to the Capital Securities or (b) substitutes for the Capital Securities other securities having substantially the same terms as the Capital Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Capital Securities rank in priority with respect to distributions and payments upon liquidation, redemption and otherwise, (ii) the Depositor expressly appoints a trustee of such successor entity possessing the same powers and duties as the Property Trustee as the holder of the Debentures, (iii) the Successor Securities are listed or traded, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Capital Securities are then listed or traded, if any, (iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Capital Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Capital Securities (including any Successor Securities) in any material respect, (vi) such successor entity has a purpose identical to that of the Trust, (vii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Depositor has received an Opinion of Counsel to the effect that (a) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Capital Securities (including any Successor Securities) in any material respect, and (b) following such merger, consolidation, amalgamation, replacement, 63 conveyance, transfer or lease, neither the Trust nor such successor entity will be required to register as an investment company under the 1940 Act and (viii) the Depositor owns all of the common securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee. Notwithstanding the foregoing, the Trust shall not, except with the consent of Holders of 100% in aggregate Liquidation Amount of the Capital Securities, 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 other Person or permit any other Person to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or the successor entity to be taxable as a corporation or to be classified as other than a grantor trust for United States federal income tax purposes. An Administrative Trustee shall furnish the Delaware Trustee at least five Business Days prior written notice of the consummation of any merger, consolidation, amalgamation or replacement; provided that failure to provide such notice shall not affect the validity of any such transaction. ARTICLE X Repurchase Upon Change of Control Section 10.1 Repurchase. (a) Upon the occurrence of a Change of Control, each Holder of Capital Securities will have the right, at such Holder's option, to require the Trust to repurchase any Capital Security of such Holder, and upon the exercise of such right the Trust shall repurchase, all of such Holder's Capital Securities, or any portion of the Liquidation Amount thereof, at a cash price equal to 101% of the aggregate Liquidation Amount of such Capital Securities plus accumulated and unpaid Distributions thereon to but not including the Repurchase Date (the "Repurchase Price"), provided, however, that upon a repurchase in part of its Capital Securities, such Holder shall retain ownership of Capital Securities having a minimum Liquidation Amount of $100,000. (b) Within three Business Days following the receipt, pursuant to the Indenture, by the Trust as holder of the Debentures or the receipt by the Property Trustee of a notice from the Depositor to the effect that a Change of Control has occurred, the Property Trustee will send a notice (a "Change of Control Notice") to each Holder of Capital Securities with a copy to the Property Trustee by first-class mail, postage prepaid, at such Holder's address appearing in the Security Register, which Change of Control Notice shall state: (i) that a Change of Control has occurred and that each Holder has the right to require the Trust to repurchase its Capital Securities, in whole or in part, at the Repurchase Price; 64 (ii) the circumstances and relevant facts regarding such Change of Control (including any relevant information with respect to the transaction giving rise to such Change of Control); (iii) the date by which the repurchase right must be exercised; (iv) a description of the procedure which a Holder must follow to exercise a repurchase right and the place or places where such Securities are to be surrendered for payment of the Repurchase Price and accrued interest, if any; (v) the Repurchase Date (which shall be the date selected by the Depositor as the repurchase date for the Debentures); and (vi) that on the Repurchase Date, the Repurchase Price will become due and payable upon each such Capital Security (or portion thereof) designated by the Holder for repurchase, and that Distributions thereon, if any, shall cease to accumulate on and after said date. Section 10.2 Repurchase Procedures. (a) Holders wishing to exercise their right to cause a repurchase of Capital Securities pursuant to this Article X ("Electing Holders") shall notify the Property Trustee in writing not later than 12:00 noon, New York City time, on the 30th day after receipt of the Change of Control Notice of their election (a "Repurchase Election") to do so, which notice shall identify the Capital Securities to be repurchased (including CUSIP number, if a CUSIP number has been assigned to such Capital Securities). Any Repurchase Election shall be deemed irrevocable from the date it is made. (b) Upon the receipt of Repurchase Elections from Electing Holders, the Property Trustee as holder of the Debentures shall notify the Depositor, in accordance with Section 10.10(c) of the Indenture, of its election to require the Depositor to repurchase a Like Amount of Debentures under the Indenture upon the terms and conditions set forth therein. The Property Trustee shall not cause the Depositor to repurchase any Debentures under the Indenture unless, and then only to the extent, Electing Holders shall make Repurchase Elections. (c) Trust Securities repurchased on the Repurchase Date shall be repurchased at the Repurchase Price with the proceeds from the contemporaneous repurchase by the Depositor of a Like Amount of Debentures as contemplated by Section 10.2(b). Repurchases of Trust Securities shall be made and the Repurchase Price shall be payable on the Repurchase Date only to the extent that the Trust has funds then on hand and available in the Payment Account for the payment of such Repurchase Price. 65 (d) If the Electing Holders make a Repurchase Election, then, by 12:00 noon, New York City time, on the Repurchase Date, subject to Section 10.2(c), in the case of Capital Securities held in book-entry form, the Property Trustee will deposit irrevocably with the Depository for the Capital Securities funds sufficient to pay the applicable Repurchase Price and will give such Depository irrevocable instructions and authority to pay the Repurchase Price to the Electing Holders thereof. With respect to Capital Securities not held in book- entry form, the Property Trustee, subject to Section 10.2(c), will irrevocably deposit with the Paying Agent for the Capital Securities funds sufficient to pay the applicable Repurchase Price and will give such Paying Agent irrevocable instructions and authority to pay the Repurchase Price to the Electing Holders thereof upon surrender of their Capital Securities Certificates. Notwithstanding the foregoing, Distributions payable on or prior to the Repurchase Date for any Capital Securities of Electing Holders shall be payable to such Electing Holders as they appear on the Securities Register for the Capital Securities on the relevant record dates for the related Distribution Dates. If Election Notices shall have been given and funds deposited as required, then upon the date of such deposit, all rights of Electing Holders will cease with respect to their Capital Securities that are being repurchased, except the right of such Electing Holders to receive the Repurchase Price, but without interest on such Repurchase Price, and the Capital Securities elected for repurchase hereunder will cease to be outstanding. In the event that any date fixed for the repurchase of Capital Securities is not a Business Day, then payment of the Repurchase 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. In the event that payment of the Repurchase Price is improperly withheld or refused and not paid either by the Trust or by the Depositor pursuant to the Guarantee, Distributions on such Capital Securities will continue to accumulate at the then applicable rate, from the Repurchase Date originally established by the Trust for such Capital Securities to the date such Repurchase Price is actually paid, in which case the actual payment date will be the date fixed for repurchase for purposes of calculating the Repurchase Price. (e) Payment of the Repurchase Price on the Capital Securities of Electing Holders shall be made to the record holders thereof as they appear on the Securities Register for the Capital Securities on the relevant record date, which shall be one Business Day prior to the relevant Repurchase Date; provided, however, that in the event that any of the Capital Securities are not held in book-entry form, the relevant record date for all Capital Securities being repurchased shall be the date 15 days prior to the Repurchase Date. (f) To the extent that the Trust has funds on hand and available in the Payment Account for the payment of the Repurchase Price (from the proceeds of the corresponding repurchase by the Depositor of the Like Amount of the Debentures or from payments made by the Depositor pursuant to the Guarantee), on and after the Repurchase Date, Distributions 66 on the Capital Securities subject to the repurchase will cease to accumulate (and interest on the Like Amount of the Debentures will cease to accrue). (g) If any Repurchase Elections have been made, the Capital Securities or portion of Capital Securities subject to such Repurchase Elections shall become due and payable on the date and at the place or places stated in such notice at the applicable Repurchase Price. On presentation and surrender of such Capital Securities at the place of payment specified in said notice, the said securities or the specified portions thereof shall be paid and repurchased by the Property Trustee at the applicable Repurchase Price to the Repurchase Date; provided, however, that installment of Distributions whose Stated Maturity is on or prior to the Repurchase Date will be payable to the Holders of such Capital Securities, or one or more Predecessor Capital Securities, registered as such at the close of business on the relevant Record Dates according to their terms. (h) Upon presentation of any Capital Security repurchased in part only, an Administrative Trustee shall execute and the Property Trustee shall authenticate and make available for delivery to the Holder thereof, at the expense of the Depositor, a new Capital Security or Securities of authorized denominations, in aggregate Liquidation Amount equal to the non-repurchased portion of the Capital Security so presented and having the same original issue date, and terms. If a Global Capital Security is so surrendered, such new Capital Security will also be a Global Capital Security. Section 10.3 Repurchase of Common Securities. Upon the repurchase of Capital Securities pursuant to Section 10.1, the Property Trustee shall cause the repurchase of a pro rata Liquidation Amount of Common Securities. ARTICLE XI Miscellaneous Provisions Section 11.1 Limitation of Rights of Securityholders. The death, incapacity, liquidation, dissolution, termination or bankruptcy of any Person having an interest, beneficial or otherwise, in Trust Securities shall not operate to terminate this Trust Agreement, nor entitle the legal representatives or heirs of such Person or any Securityholder for such Person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. 67 Section 11.2 Liability of the Common Securityholder. The Depositor shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities) to the extent not satisfied out of the Trust's assets. Section 11.3 Amendment. (a) This Trust Agreement may be amended from time to time by the Property Trustee, the Administrative Trustees and the Depositor, without the consent of any Securityholders, (i) to cure any ambiguity, correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Trust Agreement, which shall not be inconsistent with the other provisions of this Trust Agreement, or (ii) to modify, eliminate or add to any provisions of this Trust Agreement to such extent as shall be necessary to ensure that the Trust will be classified for United States federal income tax purposes as a grantor trust and not be taxable as a corporation at all times that any Trust Securities are outstanding or to ensure that the Trust will not be required to register as an investment company under the 1940 Act; provided, however, that in the case of clause (i) or clause (ii), such action shall not adversely affect in any material respect the interests of any Securityholder, and any amendments of this Trust Agreement shall become effective when notice thereof is given to the Securityholders. (b) Except as provided in Section 11.3(c) hereof, any provision of this Trust Agreement may be amended by the Trustees and the Depositor with (i) the consent of Trust Securityholders representing not less than a majority (in aggregate Liquidation Amounts) of the Trust Securities then Outstanding and (ii) receipt by the Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment will not affect the Trust's exemption from status of an investment company under the 1940 Act or the Trust's status as a grantor trust for United States federal income tax purposes and will not result in the Trust being taxable as a corporation for United States federal income tax purposes. (c) In addition to and notwithstanding any other provision in this Trust Agreement, without the consent of each affected Securityholder (such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this Trust Agreement may not be amended to (i) change the amount or timing of any Distribution on the Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date or (ii) restrict the right of a Securityholder to institute suit for the enforcement of any such payment on or after such date; notwithstanding any other provision herein, without the unanimous consent of the Securityholders (such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this paragraph (c) of this Section 11.3 may not be amended. 68 (d) Notwithstanding any other provisions of this Trust Agreement, no Trustee shall enter into or consent to any amendment to this Trust Agreement which would cause the Trust to (i) fail or cease to qualify for the exemption from status of an investment company under the 1940 Act, (ii) fail or cease to be classified as a grantor trust for United States federal income tax purposes or (iii) be taxable as a corporation for United States federal income tax purposes. (e) Notwithstanding anything in this Trust Agreement to the contrary, (i) without the consent of the Depositor, this Trust Agreement may not be amended in a manner which imposes any additional obligation on the Depositor and (ii) without the consent of the Delaware Trustee, this Trust Agreement may not be amended if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee. (f) In the event that any amendment to this Trust Agreement is made, the Administrative Trustees shall promptly provide to the Depositor a copy of such amendment. (g) Neither the Property Trustee nor the Delaware Trustee shall be required to enter into any amendment to this Trust Agreement which affects its own rights, powers, duties, obligations or immunities under this Trust Agreement. The Property Trustee shall be entitled to receive an Opinion of Counsel and an Officers' Certificate stating that any amendment to this Trust Agreement is in compliance with this Trust Agreement and shall be fully protected against liability in relying on such document. Section 11.4 Separability. In case any provision in this Trust Agreement or in the Trust Securities Certificates shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 11.5 Governing Law. THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES). 69 Section 11.6 Payments Due on Non-Business Day. If the date fixed for any payment on any Trust Security shall be a day that is not a Business Day, then such payment need not be made on such date but may be made on the next succeeding day that is a Business Day (except as otherwise provided in Sections 4.1(a) and 4.2(d)), with the same force and effect as though made on the date fixed for such payment, and no interest shall accrue thereon for the period after such date. Section 11.7 Successors. This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Depositor, the Trust or the Relevant Trustee, including any successor by operation of law. Except in connection with a consolidation, merger or sale involving the Depositor that is permitted under Article Eight of the Indenture and pursuant to which the assignee agrees in writing to perform the Depositor's obligations hereunder, the Depositor shall not assign its obligations hereunder. Section 11.8 Headings. The Article and Section headings are for convenience only and shall not affect the construction of this Trust Agreement. Section 11.9 Reports, Notices and Demands. Any report, notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon any Securityholder or the Depositor may be given or served in writing by deposit thereof, first-class postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed, (a) in the case of a Capital Securityholder, to such Capital Securityholder as such Securityholder's name and address may appear on the Securities Register; and (b) in the case of the Common Securityholder or the Depositor, to Integon Corporation, 500 West Fifth Street, Winston-Salem, North Carolina, Attention: General Counsel, telephone no.: (910) 770-2000. Such notice, demand or other communication to or upon a Securityholder shall be deemed to have been sufficiently given or made, for all purposes, upon hand delivery, mailing or transmission. Any notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon the Trust, the Property Trustee, the Delaware Trustee or the Administrative Trustees shall be given in writing addressed (until another address is published by the Trust) as follows: (a) with respect to the Property Trustee to First Union National Bank of North Carolina, 230 South Tryon Street, 9th Floor, Charlotte, North Carolina, Attention: Bond Administration; (b) with respect to the Delaware Trustee, to First Union Bank of Delaware, One Rodney Square, lst Floor, 920 King Street, 70 Wilmington, Delaware 19801, with a copy to the Property Trustee at the address set forth in Clause (a); and (c) with respect to the Trust or the Administrative Trustees, to them at the address above for notices to the Depositor, marked "Attention Administrative Trustees of Integon Capital I." Such notice, demand or other communication to or upon the Trust, the Administrative Trustees or the Property Trustee shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Trust, the Administrative Trustees or the Property Trustee. Section 11.10 Agreement Not to Petition. Each of the Trustees and the Depositor agree for the benefit of the Securityholders that, until at least one year and one day after the Trust has been terminated in accordance with Article IX, they shall not file, or join in the filing of, a petition against the Trust under any bankruptcy, insolvency, reorganization or other similar law (including, without limitation, the United States Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in the commencement of any proceeding against the Trust under any Bankruptcy Law. In the event the Depositor takes action in violation of this Section 11.10, the Property Trustee agrees, for the benefit of Securityholders, that at the expense of the Depositor, it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such petition by the Depositor against the Trust or the commencement of such action and raise the defense that the Depositor has agreed in writing not to take such action and should be stopped and precluded therefrom and such other defenses, if any, as counsel for the Property Trustee or the Trust may assert. The provisions of this Section 11.10 shall survive the termination of this Trust Agreement. Section 11.11 Trust Indenture Act; Conflict with Trust Indenture Act. (a) This Trust Agreement is subject to the provisions of the Trust Indenture Act that are required or deemed to be part of this Trust Agreement pursuant to the terms herein and shall, to the extent applicable, be governed by such provisions. The Trust Agreement shall be subject to and governed by the Trust Indenture Act upon the consummation of the exchange offer pursuant to the Exchange and Registration Rights Agreement. Until such exchange offer, the Trust Indenture Act shall not apply to this Trust Agreement. (b) The Property Trustee shall be the only Trustee which is a trustee for the purposes of the Trust Indenture Act. (c) If any provision hereof limits, qualifies or conflicts with another provision hereof which is required or deemed to be included in this Trust Agreement by any of the provisions of the Trust Indenture Act, such required or deemed provision shall control. If any provision of this Trust Agreement modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Trust Agreement as so modified or excluded, as the case may be. 71 (d) The application of the Trust Indenture Act to this Trust Agreement shall not affect the nature of the Trust Securities as equity securities representing undivided beneficial interests in the assets of the Trust. Section 11.12 Acceptance of Terms of Trust Agreement, Guarantee and Indenture. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON BEHALF OF A SECURITY HOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE SECURITY HOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH SECURITY HOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITY HOLDER AND SUCH OTHERS. Section 11.13 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 the signature of each of the Trustees on one 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. 72 IN WITNESS WHEREOF, the undersigned have caused this Amended and Restated Trust Agreement to be executed as of the day and year first above written. INTEGON CORPORATION By: /s/ John B. Yorke ----------------------------------- Name: John B. Yorke Title: Vice President, Corporate General Counsel & Secretary FIRST UNION NATIONAL BANK OF NORTH CAROLINA as Property Trustee By: /s/ Shawn K. Bednasek ----------------------------------- Name: Shawn K. Bednasek Title: Asst. Vice President 73 FIRST UNION BANK OF DELAWARE, as Delaware Trustee By: /s/ Stephen J. Kaba ----------------------------------- Name: Stephen J. Kaba Title: Vice President /s/ John B. Yorke -------------------------------------- John B. Yorke, as Administrative Trustee /s/ Donald F. McKee -------------------------------------- Donald F. McKee, as Administrative Trustee /s/ Steven C. Andrews -------------------------------------- Steven C. Andrews, as Administrative Trustee 74 STATE OF NORTH CAROLINA) ) : ss.: COUNTY OF FORSYTH ) On the ___ day of February, 1997, before me personally came John B. Yorke, to me known, who, being by me duly sworn, did depose and say that he/she is Vice President, Corporate General Counsel & Secretary of Integon Corporation, one of the corporations described in and which executed the foregoing instrument, and that he/she signed his/her name thereto pursuant to authority of the Board of Directors of said corporation. -------------------------------------- Notary Public STATE OF NORTH CAROLIA ) ): ss.: COUNTY OF MECKLENBURG ) On the 7th day of February, 1997, before me personally came Shawn K. Bednasek, to me known, who, being by me duly sworn, did depose and say that he/she is Assistant Vice President of First Union National Bank of North Carolina, one of the corporations described in and which executed the foregoing instrument, and that he/she signed his/her name thereto pursuant to the bylaws of said corporation. -------------------------------------- Notary Public STATE OF DELAWARE ) : ss.: COUNTY OF ) On the ___ day of February, 1997, before me personally came ________________________________________________________________________________ ________________, to me known, who, being by me duly sworn, did depose and say that he/she is ____________________________________________________________________________ of First Union Bank of Delaware, one of the corporations described in and which executed the foregoing instrument, and that he/she signed his/her name thereto pursuant to the bylaws of said corporation. -------------------------------------- Notary Public 75 STATE OF NORTH CAROLINA) ): ss.: COUNTY OF FORSYTH ) On the ___ day of February, 1997, before me personally came ________________________________________________________________________________ __________________________, to me known, who, being by me duly sworn, did depose and say that he/she executed the foregoing instrument. -------------------------------------- Notary Public STATE OF ) ): ss.: COUNTY OF ) On the ___ day of February, 1997, before me personally came ________________________________________________________________________________ _________________________, to me known, who, being by me duly sworn, did depose and say that he/she executed the foregoing instrument. -------------------------------------- Notary Public EXHIBIT A CERTIFICATE OF TRUST OF INTEGON CAPITAL I This Certificate of Trust of Integon Capital I (the "Trust"), dated January 27, 1997, is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. (S) 3801 et seq.). 1. NAME. The name of the business trust being formed hereby is Integon Capital I. 2. DELAWARE TRUSTEE. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware is First Union Bank of Delaware, One Rodney Square, lst Floor, 920 King Street, Wilmington, Delaware 19801. 3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon the filing of this Certificate of Trust. IN WITNESS WHEREOF, the undersigned trustee of the Trust, has executed this Certificate of Trust as of the date first above written. FIRST UNION BANK OF DELAWARE, as Trustee By:________________________________ Name: Title: ___________________________________ JOHN YORKE, as Trustee EXHIBIT B-1 [Form of Face of Initial Capital Security] [This Capital Security is a Global Capital Security Certificate within the meaning of the Trust Agreement hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depository") or a nominee of the Depository. This Capital Security is exchangeable for Capital Securities registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Trust Agreement and no transfer of this Capital Security (other than a transfer of this Capital Security as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository, which may be treated by Integon and any agent thereof as the owner and holder of this Global Security for all purposes) may be registered except in limited circumstances described in the Trust Agreement. Unless this Capital Security is presented by an authorized representative of the Depository (55 Water Street, New York) to Integon Capital I or its agent for registration of transfer, exchange or payment, and any Capital Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of the Depositary and any payment hereon is made to Cede & Co. (or to such other entity as shall be requested by an authorized representative of the Depository), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.]/1/ THIS CAPITAL SECURITY AND ANY JUNIOR SUBORDINATED DEBENTURES ISSUABLE IN CONNECTION THEREWITH HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY THE INITIAL INVESTOR, (I) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION /1/ These paragraphs should only be added if the Capital Security is issued in global form. B-1-1 STATEMENT UNDER THE SECURITIES ACT, OR (B) BY SUBSEQUENT INVESTORS, AS SET FORTH IN (A) ABOVE AND, IN ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER JURISDICTIONS OF THE UNITED STATES. THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. THIS CAPITAL SECURITY WILL BE ISSUED, AND MAY BE HELD OR TRANSFERRED, ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000. ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS CAPITAL SECURITY IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000, OR RESULTING IN A HOLDER'S HOLDING CAPITAL SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER, ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH CAPITAL SECURITY FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO THE RECEIPT OF DISTRIBUTIONS ON SUCH CAPITAL SECURITY, AND SUCH TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH CAPITAL SECURITY. CERTIFICATE NUMBER NUMBER OF CAPITAL SECURITIES CUSIP NO. CERTIFICATE EVIDENCING CAPITAL SECURITIES OF INTEGON CAPITAL I 10 3/4% CAPITAL SECURITIES, SERIES A (LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) Integon Capital I, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that (the "Holder") is the registered owner of capital securities of the Trust representing a preferred undivided beneficial interest in the assets of the Trust and designated the Integon Capital I 10 3/4% Capital Securities, Series A (liquidation amount $1,000 per Capital Security) (the "Capital Securities"). The Capital B-1-2 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 as provided in Section 5.11 of the Trust Agreement (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities are set forth in, and this certificate and the Capital Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust, dated as of February 10, 1997, as the same may be amended from time to time (the "Trust Agreement") including the designation of the terms of Capital Securities as set forth therein. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder and by acceptance hereof agrees to the provisions of (i) the Guarantee Agreement entered into by Integon Corporation, a Delaware corporation ("Integon"), and First Union National Bank of North Carolina, a national banking association organized and existing under the laws of the United States of America ("First Union"), as guarantee trustee, dated as of February 10, 1997, and (ii) the Indenture entered into by Integon and First Union, as trustee, dated as of February 10, 1997. IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed this certificate this _____ day of ________, ____. INTEGON CAPITAL I By: ---------------------------------- Name: Administrative Trustee B-1-3 This certificate evidences the Capital Securities of the Trust referred to in the within-mentioned Trust Agreement. Dated: FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Property Trustee By: ---------------------------------- Name: Title: B-1-4 ASSIGNMENT FORM To assign this Capital Security, fill in the form below: I or we assign and transfer this Capital Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Capital Security on the books of the Trust. The agent may substitute another to act for him. Date: Your Signature: Signature Guarantee: (Signature must be guaranteed by a participant in a recognized signature guarantee medallion program) Sign exactly as your name appears on the other side of this Capital Security. B-1-5 CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF INITIAL CAPITAL SECURITIES This certificate relates to Capital Securities in $________ Liquidation Amount held in (check applicable space) ____ global or ____ definitive form by the undersigned. The undersigned (check one box below): / / has requested the Administrative Trustees by written order to deliver in exchange for its beneficial interest in the Global Capital Security held by the Depository a Capital Security or Capital Securities in definitive, registered form of authorized denominations and an aggregate Liquidation Amount equal to its beneficial interest in such Global Capital Security (or the portion thereof indicated above); / / has requested the Administrative Trustees by written order to exchange or register the transfer of a Capital Security or Capital Securities. In connection with any transfer or exchange of any of the Capital Securities evidenced by this certificate occurring prior to the date that is three years after the later of the date of original issuance of such Capital Securities and the last date, if any, on which such Capital Securities were owned by the Trust or any Affiliate of the Trust, the undersigned confirms that such Capital Securities are being: CHECK ONE BOX BELOW: (1) / / acquired for the undersigned's own account, without transfer; or (2) / / transferred to the Trust; or (3) / / transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or (4) / / transferred to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended), that has furnished to the Administrative Trustees a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Administrative Trustees); or (5) / / transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended. Unless one of the boxes is checked, the Administrative Trustees shall refuse to register any of the Capital Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (3), (4) or (5) is checked, the B-1-6 Administrative Trustees or the Trust may require, prior to registering any such transfer of the Capital Securities, in its sole discretion, such legal opinions, certifications and other information as an Administrative Trustee or Trust has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended, such as the exemption provided by Rule 144 under such Act. ------------------------------------- Signature Signature Guarantee: - ----------------------- ------------------------------------- Signature (Signature must be guaranteed by a participant in a signature guarantee medallion program) - -------------------------------------------------------------------------------- B-1-7 EXHIBIT B-2 [Form of Face of Exchange Capital Security] [This Capital Security is a Global Capital Security Certificate within the meaning of the Trust Agreement hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depository") or a nominee of the Depository. This Capital Security is exchangeable for Capital Securities registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Trust Agreement and no transfer of this Capital Security (other than a transfer of this Capital Security as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository, which may be treated by the Trust and any agent as the owner and holder of this Global Capital Security for all purposes) may be registered except in limited circumstances described in the Trust Agreement. Unless this Capital Security is presented by an authorized representative of the Depository (55 Water Street, New York) to Integon Capital I or its agent for registration of transfer, exchange or payment, and any Capital Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of the Depository and any payment hereon is made to Cede & Co. (or to such other entity as may be requested by an authorized representative of the Depository), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.]/2/ CERTIFICATE NUMBER NUMBER OF CAPITAL SECURITIES CUSIP NO. CERTIFICATE EVIDENCING CAPITAL SECURITIES OF INTEGON CAPITAL I 10 3/4% CAPITAL SECURITIES, SERIES A (LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) - ---------------------- /2/ These paragraphs should only be added if the Capital Security is issued in global form. B-2-1 Integon Capital I, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that (the "Holder") is the registered owner of ( ) capital securities of the Trust representing a preferred undivided beneficial interest in the assets of the Trust and designated the Integon Capital I 10 3/4% Capital Securities, Series A (liquidation amount $1,000 per Capital Security) (the "Capital Securities"). The Capital 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 as provided in Section 5.11 of the Trust Agreement (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities are set forth in, and this certificate and the Capital Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust, dated as of February 10, 1997, as the same may be amended from time to time (the "Trust Agreement") including the designation of the terms of Capital Securities as set forth therein. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder and by acceptance hereof agrees to the provisions of (i) the Guarantee Agreement entered into by Integon Corporation, a Delaware corporation ("Integon"), and First Union National Bank of North Carolina, a national banking association organized and existing under the laws of the United States of America ("First Union"), as guarantee trustee, dated as of February 10, 1997, and (ii) the Indenture entered into by Integon and First Union, as trustee, dated as of February 10, 1997. IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed this certificate this _____ day of ________, ____. INTEGON CAPITAL I By: ------------------------------- Name: Administrative Trustee B-2-2 This certificate evidences the Capital Securities of the Trust referred to in the within-mentioned Trust Agreement. Dated: FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Property Trustee By: ------------------------------------ Name: Title: B-2-3 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security to: (Insert assignee's social security or tax identification number) (Insert address and zip code of assignee) and irrevocably appoints agent to transfer this Capital 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 Capital Security Certificate) The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. B-2-4 EXHIBIT C [FORM OF CERTIFICATE OF DEPOSITORY AGREEMENT] ___________, 199_ The Depository Trust Company, 55 Water Street, 49th Floor, New York, New York 10041-0099. Attention: General Counsel's Office Re: Integon Capital I ___% Capital Securities, Series A CUSIP ---------------------------------------- Ladies and Gentlemen: The purpose of this letter is to set forth certain matters relating to the issuance and deposit with The Depository Trust Company ("DTC") of the global- only portion of the ___% Capital Securities, Series A (the "Capital Securities"), of Integon Capital I, a statutory business trust formed under the laws of the State of Delaware (the "Issuer"), governed by the Amended and Restated Trust Agreement, dated as of __________, 1997, between Integon Corporation ("the Corporation"), as Depositor, First Union National Bank of North Carolina, as Property Trustee, and First Union Bank of Delaware, as Delaware Trustee. The payment of distributions on the Capital Securities and payments due upon liquidation of the Issuer or redemption of the Capital Securities, to the extent the Issuer has funds available for the payment thereof, are guaranteed by the Corporation to the extent set forth in a Guarantee Agreement, dated as of ___________, 1997, between the Corporation and First Union National Bank of North Carolina, as Guarantee Trustee with respect to the Capital Securities. The Corporation and the Issuer propose to sell the Capital Securities to certain initial purchasers (the "Initial Purchasers") named in and pursuant to a Purchase Agreement, dated as of ___________, 1997, by and among the Initial Purchasers, the Issuer and the Corporation, and certain of the Initial Purchasers wish to take delivery of the Capital Securities through DTC. First Union National Bank of North Carolina is acting as transfer agent and registrar with respect to the Capital Securities (the "Transfer Agent and Registrar"). C-1 To induce DTC to accept the Capital Securities as eligible for deposit at DTC, and to act in accordance with DTC's rules with respect to the Capital Securities, the Issuer and the Transfer Agent and Registrar make the following representations to DTC: 1. Prior to the closing of the sale of the Capital Securities to the Initial Purchasers on ____________, 1997, there shall be deposited with, or held by the Transfer Agent and Registrar as custodian for, DTC one or more global certificates (individually and collectively, the "Global Certificate") registered in the name of DTC's nominee, Cede & Co., representing an aggregate of [_________] Capital Securities and bearing the following legend: Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 2. The Amended and Restated Trust Agreement of the Issuer provides for the voting by holders (with no provision for revocation of consents or votes by subsequent holders) of the Capital Securities under certain limited circumstances. The Issuer shall establish a record date for such purposes and shall, to the extent possible, give DTC notice of such record date not less than 15 calendar days in advance of such record date. 3. In the event of a stock split, conversion, recapitalization, reorganization or any other similar transaction resulting in the cancellation of all or any part of the Capital Securities outstanding, the Issuer or the Transfer Agent and Registrar shall send DTC a notice of such event as soon as possible, but at least 5 business days prior to the effective date of such event. 4. In the event of any distribution on, or an offering or issuance of rights with respect to, the Capital Securities outstanding, the Issuer or the Transfer Agent and Registrar shall send DTC a notice specifying: (a) the amount of and conditions, if any, applicable to the payment of any such distribution or any such offering or issuance of rights; (b) any applicable expiration or deadline date, or any date by which any action on the part of the holders of Capital Securities is required; and (c) the date any required notice is to be mailed by or on behalf of the Issuer to holders of Capital Securities or published by or on behalf of the Issuer (whether by mail or publication, the "Publication Date"). Such notice shall be sent to DTC by a secure means (e.g., - - legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before the Publication Date. The Issuer or the Transfer Agent and Registrar will forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission of multiple CUSIP numbers (if applicable) that includes a manifest or list of each CUSIP number submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use of such means and the timeliness of such notice.) The C-2 Publication Date shall be not less than 30 calendar days nor more than 60 calendar days prior to the payment of any such distribution or any such offering or issuance of rights with respect to the Capital Securities. After establishing the amount of payment to be made on the Capital Securities, the Issuer or the Transfer Agent and Registrar will notify DTC's Dividend Department of such payment 5 business days prior to payment date. Notices to DTC's Dividend Department by telecopy shall be sent to (212) 709-1723. Such notices by mail or by any other means shall be sent to: Manager, Announcements Dividend Department The Depository Trust Company 7 Hanover Square, 23rd Floor New York, New York 10004-2695 The Issuer or the Transfer Agent and Registrar shall confirm DTC's receipt of such telecopy by telephoning the Dividend Department at (212) 709-1270. 5. In the event of a redemption by the Issuer of the Capital Securities, notice specifying the terms of the redemption and the Publication Date of such notice shall be sent by the Issuer or the Transfer Agent and Registrar to DTC not less than 30 calendar days prior to such event by a secure means in the manner set forth in paragraph 4. Such redemption notice shall be sent to DTC's Call Notification Department at (516) 227-4164 or (516) 227-4190, and receipt of such notice shall be confirmed by telephoning (516) 227-4070. Notice by mail or by any other means shall be sent to: Call Notification Department The Depository Trust Company 711 Stewart Avenue Garden City, New York 11530-4719 6. In the event of any invitation to tender the Capital Securities, notice specifying the terms of the tender and the Publication Date of such notice shall be sent by the Issuer or the Transfer Agent and Registrar to DTC by a secure means and in a timely manner as described in paragraph 4. Notices to DTC pursuant to this paragraph and notices of other corporate actions (including mandatory tenders, exchanges and capital changes), shall be sent, unless notification to another department is expressly provided for herein, by telecopy to DTC's Reorganization Department at (212) 709-1093 or (212) 709-1094 and receipt of such notice shall be confirmed by telephoning (212) 709-6884, or by mail or any other means to: C-3 Manager, Reorganization Department Reorganization Window The Depository Trust Company 7 Hanover Square, 23rd Floor New York, New York 10004-2695 7. All notices and payment advices sent to DTC shall contain the CUSIP number or numbers of the Capital Securities and the accompanying designation of the Capital Securities, which, as of the date of this letter, is "Integon Capital I, ___% Capital Securities, Series A". 8. Distribution payments or other cash payments with respect to the Capital Securities shall be governed by DTC's current Principal and Income Payments Rider, a copy of which is attached hereto as Annex I. For purposes of this letter, the term "Agent" used in Annex I shall be deemed to refer to First Union National Bank of North Carolina or any successor Property Trustee under the Amended and Restated Trust Agreement. 9. DTC may direct the Issuer and the Transfer Agent and Registrar to use any other telecopy number or address of DTC as the number or address to which notices or payments may be sent. 10. In the event of a conversion, redemption, or any other similar transaction (e.g., tender made and accepted in response to the Issuer's or the - - Transfer Agent and Registrar's invitation) necessitating a reduction in the aggregate number of Capital Securities outstanding evidenced by the Global Certificate, DTC, in its discretion: (a) may request the Issuer or the Transfer Agent and Registrar to issue and countersign a new Global Certificate; or (b) may make an appropriate notation on the Global Certificate indicating the date and amount of such reduction. 11. DTC may discontinue its services as a securities depositary with respect to the Capital Securities at any time by giving reasonable prior written notice to the Issuer and the Transfer Agent and Registrar (at which time DTC will confirm with the Issuer or the Transfer Agent and Registrar the aggregate number of Capital Securities deposited with it) and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the Issuer may determine to make alternative arrangements for global settlement for the Capital Securities, make available one or more separate global certificates evidencing Capital Securities to any Participant having Capital Securities credited to its DTC account, or issue definitive Capital Securities to the beneficial holders thereof, and in any such case, DTC agrees to cooperate fully with the Issuer and the Transfer Agent and Registrar and to return the Global Certificate, duly endorsed for transfer as directed by the Issuer or the Transfer Agent and Registrar, together with any other documents of transfer reasonably requested by the Issuer or the Transfer Agent and Registrar. 12. In the event that the Issuer determines that beneficial owners of Capital Securities shall be able to obtain definitive Capital Securities, the Issuer or the Transfer Agent and Registrar shall notify DTC of the availability of certificates. In such event, the Issuer or the C-4 Transfer Agent and Registrar shall issue, transfer and exchange certificates in appropriate amounts, as required by DTC and others, and DTC agrees to cooperate fully with the Issuer and the Transfer Agent and Registrar and to return the Global Certificate, duly endorsed for transfer as directed by the Issuer or the Transfer Agent and Registrar, together with any other documents of transfer reasonably requested by the Issuer or the Transfer Agent and Registrar. 13. This letter may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. C-5 Nothing herein shall be deemed to require the Transfer Agent and Registrar to advance funds on behalf of Integon Capital I. Very truly yours, Integon Capital I (As Issuer) By:________________________________ Name: Administrator First Union National Bank of North Carolina (As Transfer Agent and Registrar) By:________________________________ Name: Title: RECEIVED AND ACCEPTED: THE DEPOSITORY TRUST COMPANY By:_______________________________ Authorized Officer C-6 EXHIBIT D [Form of Face of Common Security] THIS CERTIFICATE IS NOT TRANSFERABLE TO A PERSON WHO IS NOT A WHOLLY OWNED SUBSIDIARY OF HOLDER CERTIFICATE NUMBER: NUMBER OF COMMON SECURITIES: CERTIFICATE EVIDENCING COMMON SECURITIES OF INTEGON CAPITAL I 10 3/4% COMMON SECURITIES (LIQUIDATION AMOUNT $1,000 PER COMMON SECURITY) Integon Capital I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that _____________________ (the "Holder") is the registered owner of ______ common securities of the Trust representing a common undivided beneficial interest in the assets of the Trust having a liquidation amount of $1,000 per common security and designated the 10 3/4% Common Securities (the "Common Securities"). The designations, rights, privileges, restrictions, preferences, obligations and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of February 10, 1997, as the same may be amended from time to time (the "Trust Agreement"). Except as set forth under Section 5.10 of the Trust Agreement the Common Securities are not transferable and any attempted transfer hereof shall be void. The Trust will furnish a copy of the Trust Agreement to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder and by acceptance hereof agrees to the provisions of (i) the Guarantee Agreement entered into by Integon Corporation, a Delaware corporation ("Integon"), and First Union National Bank of North Carolina, a national banking association organized and existing D-1 under the laws of the United States of America ("First Union"), as guarantee trustee, dated as of February 10, 1997, and (ii) the Indenture entered into by Integon and First Union, as trustee, dated as of February 10, 1997. In Witness Whereof, one of the Administrative Trustees of the Trust has executed this certificate. INTEGON CAPITAL I By: ______________________________ Name: Administrative Trustee D-2 EXHIBIT E [FORM OF TRANSFEREE LETTER OF REPRESENTATION] Integon Capital I c/o Integon Corporation Dear Sirs: This certificate is delivered to request a transfer of $ _________ of the [_____]% Capital Securities, Series A (Liquidation Amount $1,000 per Capital Security) (the "Capital Securities") Integon Capital I (the "Trust"). Upon transfer, the Capital Securities would be registered in the name of the new beneficial owner as follows: Name: _________________________ Address: _______________________ Taxpayer ID Number:_____________ The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor," and we are acquiring the Capital Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risk of our investment in the Capital Securities and invest in or purchase securities similar to the Capital Securities in the normal course of our business. We and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 2. We understand that the Capital Securities have not been registered under the Securities Act and, unless so registered, may not be 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 Capital Securities to offer, sell or otherwise transfer such Capital Securities prior to the date which is three years after the later of the date of original issue and the last date on which the Trust or any affiliate of the Trust was the owner of such Capital Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Trust, (b) pursuant to a registration statement which has been declared effective under the Securities E-1 Act, (c) in a transaction comply with the requirements of Rule 144A under the Securities Act, to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor", in each case in a minimum Liquidation Amount of Capital Securities of 100,000 or (e) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Capital Securities is proposed to be made pursuant to clause (d) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Property and the Property Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Notes for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Trust and the Property Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Termination Date of the Capital Securities pursuant to clauses (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Trust and the Administrative Trustees. TRANSFEREE:__________________________ BY____________________________________ E-2 EX-4.6 7 GUARANTEE AGREEMENT EXHIBIT 4.6 EXECUTION COPY - -------------------------------------------------------------------------------- GUARANTEE AGREEMENT BETWEEN INTEGON CORPORATION (AS GUARANTOR) AND FIRST UNION NATIONAL BANK OF NORTH CAROLINA (AS GUARANTEE TRUSTEE) DATED AS OF FEBRUARY 10, 1997 - -------------------------------------------------------------------------------- CROSS-REFERENCE TABLE* Section of Trust Indenture Act Section of of 1939, as amended Guarantee Agreement - ------------------- ------------------- 310(a).......................................... 4.1(a) 310(b).......................................... 4.1(c), 2.8 310(c).......................................... Inapplicable 311(a).......................................... 2.9 311(b).......................................... 2.9 311(c).......................................... Inapplicable 312(a).......................................... 2.2(b) 312(b).......................................... 2.2(b) 312(c).......................................... 2.2 313............................................. 2.3 314(a).......................................... 2.4 314(b).......................................... Inapplicable 314(c).......................................... 2.5 314(d).......................................... Inapplicable 314(e).......................................... 1.1, 2.5, 3.2 314(f).......................................... 2.1, 3.2 315(a).......................................... 3.1(d) 315(b).......................................... 2.7 315(c).......................................... 3.1 315(d).......................................... 3.1(d) 315(e).......................................... 3.3 316(a).......................................... 1.1, 2.6, 5.4 316(b).......................................... 5.3, 5.4 316(c).......................................... 8.2 317(a).......................................... Inapplicable 317(b).......................................... Inapplicable 318(a).......................................... 2.1(b) 318(b).......................................... 2.1 318(c).......................................... 2.1(a) - ---------------- * This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. TABLE OF CONTENTS -----------------
Page ---- ARTICLE I. DEFINITIONS.........;;;;;;;;;;;;......................................... 1 Section 1.1. Definitions.................................................. 1 ARTICLE II. TRUST INDENTURE ACT...................................................... 4 Section 2.1. Trust Indenture Act; Application............................. 4 Section 2.2. List of Holders.............................................. 4 Section 2.3. Reports by the Guarantee Trustee............................. 5 Section 2.4. Periodic Reports to the Guarantee Trustee.................... 5 Section 2.5. Evidence of Compliance with Conditions Precedent............. 5 Section 2.6. Events of Default; Waiver.................................... 5 Section 2.7. Event of Default; Notice..................................... 6 Section 2.8. Conflicting Interests........................................ 6 Section 2.9. Preferential Collection of Claims against Guarantor.......... 6 ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE...................... 6 Section 3.1. Powers and Duties of the Guarantee Trustee................... 6 Section 3.2. Certain Rights of Guarantee Trustee.......................... 8 Section 3.3. Indemnity.................................................... 9 ARTICLE IV. GUARANTEE TRUSTEE........................................................ 10 Section 4.1. Guarantee Trustee: Eligibility............................... 10 Section 4.2. Appointment, Removal and Resignation of the Guarantee Trustee 10 ARTICLE V. GUARANTEE................................................................. 11 Section 5.1. Guarantee.................................................... 11 Section 5.2. Waiver of Notice and Demand.................................. 11 Section 5.3. Obligations Not Affected..................................... 11 Section 5.4. Rights of Holders............................................ 12 Section 5.5. Guarantee of Payment......................................... 13 Section 5.6. Subrogation.................................................. 13 Section 5.7. Independent Obligations...................................... 13 ARTICLE VI. COVENANTS AND SUBORDINATION.............................................. 13 Section 6.1. Subordination................................................ 13 ARTICLE VII. TERMINATION............................................................. 14 Section 7.1. Termination.................................................. 14
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Page ---- ARTICLE VIII. MISCELLANEOUS....................................................... 14 Section 8.1. Successors and Assigns....................................... 14 Section 8.2. Amendments................................................... 14 Section 8.3. Notices...................................................... 14 Section 8.4. Benefit...................................................... 15 Section 8.5. Interpretation............................................... 16 Section 8.6. Governing Law................................................ 16
-ii- EXHIBIT 4.6 GUARANTEE AGREEMENT This GUARANTEE AGREEMENT, dated as of February 10, 1997, is executed and delivered by INTEGON CORPORATION, a Delaware corporation (the "Guarantor") having its principal office at 500 West Fifth Street, Winston-Salem, North Carolina 27152, and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association organized and existing under the laws of the United States of America, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Capital Securities and Common Securities (each as defined in the Trust Agreement, and together, the "Securities") of Integon Capital I, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as of February 10, 1997 (as amended and in effect from time to time, the "Trust Agreement"), among the Guarantor, as Depositor, the Guarantee Trustee, as Property Trustee, the Delaware Trustee named therein, the Administrative Trustees named therein and the Holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing Capital Securities representing preferred undivided beneficial interests in the assets of the Issuer and having the terms set forth in the Trust Agreement; WHEREAS, the Capital Securities will be issued by the Issuer and the proceeds thereof, together with the proceeds from the issuance of the Issuer's Common Securities, will be used to purchase the Debentures (as defined in the Trust Agreement) of the Guarantor which will be deposited with First Union National Bank of North Carolina, as Property Trustee under the Trust Agreement, as trust assets; and WHEREAS, as incentive for the Holders to purchase Securities the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth herein, to pay to the Holders of the 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 Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders from time to time of the Securities. ARTICLE I. DEFINITIONS Section 1.1. Definitions. As used in this Guarantee Agreement, the terms set forth below shall, unless the context otherwise requires, have the following meanings. Capitalized or otherwise defined terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Trust Agreement as in effect on the date hereof. 2 "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person; provided, however, that an Affiliate of the Guarantor shall not be deemed to be an Affiliate of the Issuer. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Guarantee Agreement; provided, however, that, except with respect to a default in payment of any of the Guarantee Payments, the Guarantor shall have received a notice of such default and shall not have cured such default within 90 days after receipt of such notice. "Exchange Guarantee Agreement" means the guarantee agreement, as amended, modified or supplemented from time to time, to be executed and delivered by the Guarantor and the Guarantee Trustee as contemplated by the Exchange and Registration Rights Agreement, dated as of February 10, 1997, among the Guarantor, the Issuer and the Initial Purchasers named therein, as amended, modified or supplemented form time to time. "Guarantee Agreement" means the Initial Guarantee Agreement, and, when and if issued, the Exchange Guarantee Agreement. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by or on behalf of the Issuer: (i) any accumulated and unpaid Distributions required to be paid on the Securities, to the extent the Issuer shall have funds on hand available therefor at such time, (ii) the Redemption Price and the Repurchase Price with respect to any Securities called for redemption by the Issuer or the repurchase of which is caused by the Holders thereof under the Trust Agreement, to the extent the Issuer shall have funds on hand available therefor at such time, or (iii) upon a voluntary or involuntary termination, winding up or liquidation of the Issuer (unless Debentures are distributed to the Holders), the lesser of (a) the aggregate Liquidation Amount plus accumulated and unpaid Distributions to the date of payment, to the extent the Issuer shall have funds on hand available therefor at such time, and (b) the amount of assets of the Issuer remaining available for distribution to Holders on liquidation of the Issuer after satisfaction of liabilities to creditors of the Issuer as required by applicable law (in either case, the "Liquidation Payment"). "Guarantee Trustee" means First Union National Bank of North Carolina, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement, and thereafter means each such Successor Guarantee Trustee. "Holder" means any holder, as registered on the books and records of the Issuer, of any Securities; provided, however, that in determining whether the holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not 3 include the Guarantor, the Guarantee Trustee, or any Affiliate of the Guarantor or the Guarantee Trustee. "Indenture" means the Junior Subordinated Indenture dated as of February 10, 1997, between the Guarantor and First Union National Bank of North Carolina, as trustee, as may be modified, amended or supplemented and in effect from time to time. "Initial Capital Security" means an undivided beneficial preferred interest in the assets of the Issuer, having a Liquidation Amount of $1,000 and having the rights provided therefor in the Trust Agreement, including the right to receive Distributions and a Liquidation Distribution, as provided therein. "Initial Guarantee Agreement" means this Guarantee Agreement, dated as of February 10, 1997 between the Guarantor and the Guarantee Trustee, on behalf of and for the benefit of the Holders of the Initial Capital Securities, as may be modified, amended or supplemented and in effect from time to time. "Majority in aggregate Liquidation Amount of the Capital Securities" means, except as provided by the Trust Indenture Act, a vote by the Holders of Capital Securities, voting separately as a class, of more than 50% of the aggregate Liquidation Amount of all then outstanding Capital Securities. "Officers' Certificate" means, with respect to any Person, a certificate signed by the Chairman or a Vice Chairman of the Board of Directors of such Person or the President or a Vice President of such Person, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of such Person, and delivered to the Guarantee Trustee. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each officer, such condition or covenant has been complied with. 4 "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. "Responsible Officer" when used with respect to the Guarantee Trustee means any officer of the Guarantee Trustee assigned by the Guarantee Trustee from time to time to administer its corporate trust matters. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended and as in effect on the date of this Guarantee Agreement. ARTICLE II. TRUST INDENTURE ACT Section 2.1. Trust Indenture Act; Application. (a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. Section 2.2. List of Holders. (a) The Guarantor will furnish or cause to be furnished to the Guarantee Trustee: (i) semi-annually, not more than 15 days after January 15 and July 15 in each year, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders as of such January 1 and July 1, and (ii) at such other times as the Guarantee Trustee may request in writing, within 30 days after the receipt by the Guarantor 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, excluding from any such list names and addresses received by the Guarantee Trustee in its capacity as Securities Registrar. 5 (b) The Guarantee Trustee shall comply with its obligations under Section 312(a) and Section 312(b) of the Trust Indenture Act. Section 2.3. Reports by the Guarantee Trustee. The Guarantee Trustee shall transmit to Holders such reports concerning the Guarantee Trustee and its actions under this Guarantee Agreement as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the Guarantee Trustee shall, within sixty days after each May 15 following the date of this Guarantee Agreement deliver to Holders a brief report, dated as of such May 15, which complies with the provisions of such Section 313(a). Section 2.4. Periodic Reports to the Guarantee Trustee. The Guarantor shall provide to the Guarantee Trustee, the Securities and Exchange Commission and the Holders such documents, reports and information, if any, as required by Section 314 of the Trust Indenture Act and the compliance certificate required by Section 314 of the Trust Indenture Act, in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. Delivery of such reports, information and documents to the Guarantee Trustee is for informational purposes only and the Guarantee Trustee's receipt of such shall not constitute constructive notice of any information contained therein, including the Guarantor's compliance with any of its covenants hereunder (as to which the Guarantee Trustee is entitled to rely exclusively on Officers' Certificates). Section 2.5. Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with such conditions precedent, if any, provided for in this Guarantee Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. Section 2.6. Events of Default; Waiver. The Holders of a Majority in aggregate Liquidation Amount of the Capital Securities may, by vote, on behalf of the Holders, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent therefrom. 6 Section 2.7. Event 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, notices of all Events of Default actually known to the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, that, except in the case of a default in the payment of a Guarantee Payment, the Guarantee Trustee shall be protected in withholding such notice if and so long as the Board of Directors, the executive committee or a trust committee of the Board of Directors and/or Responsible Officers of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interest of the Holders. (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, or a Responsible Officer charged with the administration of this Guarantee Agreement shall have obtained written notice, of such Event of Default. Section 2.8. Conflicting Interests. The Trust Agreement shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. Section 2.9. Preferential Collection of Claims against Guarantor. If and when the Guarantee Trustee shall be or become a creditor of the Guarantor or the Issuer (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Guarantor or the Issuer (or any other such obligor). ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE Section 3.1. Powers and Duties of the Guarantee Trustee. (a) This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except a Holder exercising his or her rights pursuant to Section 5.4(iv) 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, upon acceptance by such Successor Guarantee Trustee of its appointment hereunder, 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. 7 (b) If an Event of Default has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders. (c) The Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, 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 Agreement 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 Agreement, 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 Agreement; 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 Agreement; but in the case of any such certificates or opinions that by any provision hereof or of the Trust Indenture Act 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 Agreement; (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 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 direction of the Holders of not less than a Majority in aggregate Liquidation Amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee 8 Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) no provision of this Guarantee Agreement 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 or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. Section 3.2. Certain Rights of Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) The Guarantee Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document reasonably 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 Agreement shall be sufficiently evidenced by an Officers' Certificate unless otherwise prescribed herein. (iii) Whenever, in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting to take 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 rely upon an Officers' Certificate which, upon receipt of such request from the Guarantee Trustee, shall be promptly delivered by the Guarantor. (iv) The Guarantee Trustee may consult with legal counsel of its selection, and the written advice or opinion of such legal counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or opinion. Such legal counsel may be legal counsel to the Guarantor or any of its Affiliates and may be one of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction. (v) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such adequate security and indemnity as would satisfy a reasonable person in the position of the Guarantee Trustee, 9 against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(v) shall be taken to 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 Agreement. (vi) 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. (vii) The Guarantee 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 Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. (viii) Whenever in the administration of this Guarantee Agreement the Guarantee Trustee shall deem it desirable to receive written instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (A) may request instructions from the Holders, (B) may refrain from enforcing such remedy or right or taking such other action until such written instructions are received, and (C) shall be protected in acting in accordance with such written instructions. (ix) The Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Guarantee Agreement. (b) No provision of this Guarantee Agreement 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 to act in accordance with such power and authority. Section 3.3. Indemnity. The Guarantor agrees to indemnify the Guarantee Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Guarantee Trustee, arising out of or in connection with the acceptance or administration of this 10 Guarantee Agreement, 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. ARTICLE IV. GUARANTEE TRUSTEE Section 4.1. 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 Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000, and shall be a corporation or association meeting the requirements of Section 310(a) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority, then, for the purposes of this Section and to the extent permitted by the Trust Indenture Act, 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 4.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(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 and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. Section 4.2. Appointment, Removal and Resignation of the Guarantee Trustee. (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Guarantee Trustee shall not be removed 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. If an instrument of acceptance by a Successor Guarantee Trustee shall not have been delivered to the Guarantee Trustee within 30 days after such removal, the Guarantee Trustee being removed may petition any court of competent jurisdiction for the appointment of a Successor Guarantee Trustee. (c) The Guarantee Trustee appointed hereunder 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 11 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 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 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Guarantee Trustee may petition, at the expense of the Guarantor, 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. ARTICLE V. GUARANTEE Section 5.1. Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full on a subordinated basis to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by or on behalf of the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert other than the defense of payment. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. Section 5.2. Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of the Guarantee Agreement and any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Guarantee Trustee, Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. Section 5.3. Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement 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 Securities to be performed or observed by the Issuer; 12 (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions (other than an extension of time for payment of Distributions that results from the extension or deferral of any interest payment period on the Debentures as provided in the Indenture), Redemption Price, Repurchase Price, Liquidation Payment or any other sums payable under the terms of the Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Securities; (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 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 Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 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 the consent of, the Guarantor with respect to the happening of any of the foregoing. Section 5.4. Rights of Holders. The Guarantor expressly acknowledges that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in aggregate Liquidation Amount of the Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee Agreement or directing the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Guarantee Trustee, the Issuer or any other Person. 13 Section 5.5. Guarantee of Payment. This Guarantee Agreement creates a guarantee of payment and not of collection and will apply only to the extent that the Issuer has funds sufficient to make such payments. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Issuer) or upon distribution of Debentures to Holders as provided in the Trust Agreement. Section 5.6. Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement and shall have the right to waive payment by the Issuer pursuant to Section 5.1; 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 which 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 Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. Section 5.7. Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the 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 Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI. COVENANTS AND SUBORDINATION Section 6.1. Subordination. The obligations of the Guarantor under this Guarantee Agreement will constitute unsecured obligations of the Guarantor and will rank subordinate and junior in right of payment to all Senior Indebtedness (as defined in the Indenture) of the Guarantor, except those made pari passu or subordinate to such obligations expressly by their terms, in the same manner as set forth in Article XIII of the Indenture. 14 ARTICLE VII. TERMINATION Section 7.1. Termination. This Guarantee Agreement shall terminate and be of no further force and effect upon (i) full payment of the Redemption Price or the Repurchase Price for all outstanding Securities, (ii) the distribution of Debentures to the Holders in exchange for all of the Securities, (iii) full payment of the amounts payable in accordance with the Trust Agreement upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid with respect to Capital Securities or this Guarantee Agreement. ARTICLE VIII. MISCELLANEOUS Section 8.1. Successors and Assigns. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Securities then outstanding. Except in connection with a consolidation, merger or sale involving the Guarantor that is permitted under Article VIII of the Indenture and pursuant to which the successor or assignee agrees in writing to perform the Guarantor's obligations hereunder, the Guarantor shall not assign its obligations hereunder. Section 8.2. Amendments. Except with respect to any changes which do not adversely affect the rights of the Holders or the Guarantee Trustee in any material respect (in which case no consent of the Holders or the Guarantee Trustee, as the case may be, will be required), this Guarantee Agreement may only be amended by the Guarantor with the prior approval of the Holders of not less than a Majority in aggregate Liquidation Amount of the Capital Securities and of the Guarantee Trustee. The provisions of Article VI of the Trust Agreement concerning meetings of the Holders shall apply to the giving of such approval. Section 8.3. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be in writing, duly signed by the party giving such notice, and delivered, telecopied or mailed by first class mail as follows: (a) if given to the Guarantor, to the address set forth below or such other address, facsimile number or to the attention of such other Person as the Guarantor may give notice to the Holders: 15 Integon Corporation 500 West Fifth Street Winston-Salem North Carolina 27152 Telephone No.: (910) 770-2000 Attention: General Counsel (b) if given to the Issuer, in care of the Guarantee Trustee, at the Issuer's (and the Guarantee Trustee's) address set forth below or such other address as the Guarantee Trustee on behalf of the Issuer may give notice to the Holders: Integon Capital I c/o Integon Corporation 500 West Fifth Street Winston-Salem North Carolina 27152 Telephone No.: (910) 770-2000 Attention: General Counsel with a copy to: First Union National Bank of North Carolina 230 South Tryon Street, 9th Floor Charlotte, North Carolina 28288-1179 Facsimile No.: 704-383-6648 Attention: Bond Administration (c) if given to any Holder, at the address set forth on the books and records of the Issuer. All notices hereunder 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. The Initial Guarantee Agreement is solely for the benefit of the Holders of the Initial Capital Securities and is not separately transferable from the Initial Capital Securities. The Exchange Guarantee Agreement when and if executed by the Guarantor, shall be solely for the benefit of the 16 Holders of the Exchange Capital Securities and shall not be separately transferable from the Exchange Capital Securities. Section 8.5. Interpretation. In this Guarantee Agreement, unless the context otherwise requires: (a) capitalized terms used in this Guarantee Agreement but not defined in the preamble hereto have the respective meanings assigned to them in Section 1.1; (b) a term defined anywhere in this Guarantee Agreement has the same meaning throughout; (c) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (d) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires; (f) a reference to the singular includes the plural and vice versa; and (g) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders. Section 8.6. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. 17 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. Integon Corporation By: /s/ John B. Yorke -------------------------- Name: John B. Yorke Title: Vice President, Corporate General Counsel & Secretary First Union National Bank of North Carolina as Guarantee Trustee By: /s/ Shawn K. Bednasek -------------------------- Name: Shawn K. Bednasek Title: Asst. Vice President 18 STATE OF ) ) : ss.: COUNTY OF ) On the ___ day of February, 1997, before me personally came ________________________________________________________________________________ ____________________, to me known, who, being by me duly sworn, did depose and say that he/she is ____________________________________________________ of Integon Corporation, one of the corporations described in and which executed the foregoing instrument; that he/she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he/she signed his/her name thereto by like authority. ----------------------------- Notary Public STATE OF NORTH CAROLINA ) ): ss.: COUNTY OF ) On the ___ day of February, 1997, before me personally came ________________________________________________________________________________ ___________________, to me known, who, being by me duly sworn, did depose and say that he/she is ______________________________________________________ of First Union National Bank of North Carolina, one of the corporations described in and which executed the foregoing instrument, and that he/she signed his/her name thereto pursuant to the bylaws of said Corporation. --------------------------- Notary Public EX-4.7 8 REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.7 February 10, 1997 GOLDMAN, SACHS & CO. 85 Broad Street New York, New York 10004 DEUTSCHE MORGAN GRENFELL INC. 31 West 52nd Street New York, New York 10019 MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED World Financial Center-North tower 250 Vesey Street New York, New York 10287-1325 Dear Sirs: Integon Capital I, a statutory business trust created pursuant to a Trust Agreement, as amended and restated (the "Trust Agreement"), under the laws of the state of Delaware (the "Trust"), proposes to issue and sell to certain purchasers (the "Initial Purchasers"), upon the terms set forth in a purchase agreement, dated February 5, 1997 (the "Purchase Agreement"), $100,000,000 liquidation amount of 10 3/4% Capital Securities, Series A (liquidation amount $1,000 per Capital Security) (the "Capital Securities"). Capitalized terms used but not specifically defined herein are defined in the Purchase Agreement. The Trust exists for the sole purpose of issuing its trust interests and investing the proceeds thereof in 10 3/4% Junior Subordinated Deferable Interest Debentures, Series A (the "Junior Subordinated Debentures") to be issued by Integon Corporation, a Delaware corporation (the "Company"). The Company has, through a Guarantee Agreement, the Trust Agreement, the Junior Subordinated Debentures, the Indenture under which the Junior Subordinated Debentures are issued (the "Indenture") and an Expense Agreement (the "Guarantee" and, together with the Capital Securities and the Junior Subordinated Debentures, the "Securities") guaranteed certain obligations in respect of the Capital Securities. As an inducement to the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to your obligations thereunder, the Company and the Trust agree with you, for the benefit of the holders of the Capital Securities (including the Initial Purchasers) (the "Holders"), as follows: 2 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED 1. REGISTERED EXCHANGE OFFER. The Company and the Trust shall use their best efforts to file with the Commission within 90 calendar days after the Closing Date a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act with respect to a proposed offer (the "Registered Exchange Offer") to the Holders to issue and deliver to such Holders, in exchange for (a) the Capital Securities a like amount of a new series of capital securities of the Trust (the "Exchange Capital Securities") with terms substantially identical to those of the Capital Securities (except that the Exchange Capital Securities will not contain terms with respect to transfer restrictions under the Securities Act, and will be entitled, to the extent applicable, to the benefits of trust indentures which have been qualified under the Trust Indenture Act), (b) the Guarantee the Company's guarantee in respect of the Exchange Capital Securities (the "Exchange Guarantee") with terms substantially identical to those of the Guarantee (except that the Exchange Guarantee will not contain terms with respect to transfer restrictions under the Securities Act) and (c) the Junior Subordinated Debentures a like amount of a new series of junior subordinated debentures (the "Exchange Junior Subordinated Debentures" and, together with the Exchange Capital Securities and the Exchange Guarantee, the "Exchange Securities") with terms substantially identical to those of the Junior Subordinated Debentures (except that the Exchange Junior Subordinated Debentures will not contain terms with respect to transfer restrictions under the Securities Act, and will be entitled, to the extent applicable, to the benefits of trust indentures which have been qualified under the Trust Indenture Act), shall use their best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act within 120 calendar days of the Closing Date and shall keep the Exchange Offer Registration Statement effective for not less than 30 calendar days (or longer, if required by applicable law) after the date notice of the Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). The Exchange Securities will be issued under the Indenture or an indenture (the "Exchange Securities Indenture") between the Company and the Debenture Trustee or such other bank or trust company reasonably satisfactory to you, as trustee (the "Exchange Securities Trustee"), such indenture to be identical in all material respects to the Indenture except for the transfer restrictions relating to the Securities (as described above). Upon the effectiveness of the Exchange Offer Registration Statement, the Company and the Trust shall promptly commence the Registered Exchange Offer. An exchange for purposes of clauses (i) and (ii) of the next sentence will be deemed to have been completed only if the Exchange Securities received by holders, other 3 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED than holders that are unable to make the representations set forth in the penultimate paragraph of Section 1 or are referred to in clause (iv) of Section 2 hereof, are, upon receipt, transferable by each such holder without restriction under the Securities Act and without material restrictions under the blue sky or securities laws of a substantial majority of the States of the United States of America. The Exchange Offer shall be deemed to have been completed upon the earlier to occur of (i) the Company and the Trust having exchanged the Exchange Securities for all outstanding Securities pursuant to the Exchange Offer and (ii) the Company having exchanged, pursuant to the Exchange Offer, Exchange Securities for all Securities that have been properly tendered and not withdrawn before the expiration of the Exchange Offer Registration Period. The Company and the Trust acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, (i) each Holder that is a broker-dealer electing to exchange Securities, acquired for its own account as a result of market making activities or other trading activities, for Exchange Securities (an "Exchanging Dealer"), is required to deliver a prospectus containing the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section, and in Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) if any Initial Purchaser elects to sell Exchange Securities acquired in exchange for Securities constituting any portion of an unsold allotment it is required to deliver a prospectus, containing the information required by Items 507 and/or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such a sale. In connection with the Registered Exchange Offer, the Company and the Trust shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less that 30 days after the date notice thereof is mailed to the Holders (or longer if required by applicable law); (c) utilize the services of a Depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; 4 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (d) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; and (e) otherwise comply in all respects with all applicable laws applicable to the Registered Exchange Offer. As soon as practicable after the close of the Registered Exchange Offer, the Company and/or the Trust, as the case may be, shall: (a) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (b) deliver to the Property Trustee for cancellation all Capital Securities so accepted for exchange; and (c) cause the Property Trustee promptly to authenticate and deliver to each holder of Capital Securities, Exchange Capital Securities equal in liquidation amount to the Capital Securities of such holder so accepted for exchange. The Company shall make available for a period of 180 days after the consummation of the Registered Exchange Offer, a copy of the prospectus forming part of the Exchange Offer Registration Statement to any broker-dealer for use in connection with any resale of any Exchange Securities. The Company shall keep the Exchange Offer Registration Statement effective for a period (the "Resale Period") beginning when Exchange Securities are first issued in the Exchange Offer and ending upon the earlier of (i) either (a) the expiration of the 180th day after the Exchange Offer has been completed or (b) in the event the Company and the Trust have at any time suspended the use of the prospectus contained in the Exchange Offer Registration Statement pursuant to Section 4(b) hereof, the day beyond the 180th day after the Exchange Offer has been completed that reflects an additional period of days equal to the number of days during all of the periods from and including the dates the Company and the Trust give notice pursuant to Section 4(b) hereof to and including the date when broker-dealers receive an amended or supplemented prospectus necessary to permit resales of Exchange Securities or to and including the date on which the Company and the Trust give a Resumption Notice (as defined in Section 4(x)) or (ii) such time as such broker- dealers no longer own any Exchange Securities whose resales by them are subject to the prospectus delivery requirements 5 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED under the Securities Act. With respect to such registration statement, each broker-dealer that holds Exchange Securities received in an Exchange Offer in exchange for Securities not acquired by it directly from the Company shall have the benefit of the rights of indemnification and contribution set forth in Section 6 hereof in connection with resales of Exchange Securities during the Resale Period. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company and the Trust that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act and (iii) such Holder is not an affiliate of the Company within the meaning of the Securities Act. Notwithstanding any other provisions hereof, the Company and the Trust will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 2. SHELF REGISTRATION. If (i) the Company and the Trust are not required to file the Exchange Offer Registration Statement or permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, (ii) for any reason the Exchange Offer Registration Statement is not declared effective within 120 calendar days after the Closing Date, (iii) the Company has received an opinion of counsel, rendered by a law firm having a recognized national tax practice, to the effect that, as a result of the consummation of the Exchange Offer, there is more than an insubstantial risk that (x) 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 6 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED Junior Subordinated Debentures or Exchange Junior Subordinated Debentures, (y) interest payable by the Company on such Junior Subordinated Debentures or Exchange Junior Subordinated 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 (z) the Trust is, or will be within 90 days of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges, or (iv) any holder of Transfer Restricted Securities notifies the Company or the Trust on or by the 20th business day following the consummation of the Exchange Offer that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer, (B) it may not resell the Exchange Capital Securities, the Exchange Guarantees and the Exchange Junior Subordinated Debentures acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) it is a broker-dealer and owns Capital Securities acquired directly from the Trust or an affiliate of the Trust, or (v) if the Company so elects, then the following provisions shall apply: (a) The Company and the Trust shall use their best efforts as promptly as practicable to file with the Commission and thereafter shall use their best efforts to cause to be declared effective a "shelf" registration statement on an appropriate form under the Securities Act providing for the registration of, and the sale on a con tinuous or delayed basis by the holders of, all of the Transfer Restricted Securities, pursuant to Rule 415 or any similar rule that may be adopted by the Commission (hereafter, a "Shelf Registration Statement" and, together with any Exchange Offer Registration Statement, a "Registration Statement"). (b) The Company and the Trust shall use their best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be usable by Holders for a period ending on the earlier of (i) (x) the third anniversary of the Closing Date, (y) the expiration of the period following the Closing Date after which Rule 144(k) under the Securities Act generally becomes available to non-affiliates of an issuer or (z) in the event the Company and the Trust have at any time suspended the use of the prospectus contained in the Shelf Registration Statement pursuant to Section 4(b) hereof, the date beyond the earlier of the periods referred to in clauses (x) and (y) that reflects an additional period of days equal to the number of days during all of the periods from and including the dates the Company and the Trust give notice of such suspension pursuant to Section 4(b) to and including the date when holders of Securities receive 7 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED an amended or supplemented prospectus necessary to permit resales of Securities under the Shelf Registration Statement or to and including the date on which the Company and Trust give a Resumption Notice or (ii) such time as all of the Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or pursuant to Rule 144 (in any such case, such period being called the "Shelf Registration Period"). The Company and the Trust shall be deemed not to have used their best efforts to keep the Shelf Registration Statement effective during the requisite period if they voluntarily take any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action, in the opinion of the Company after consulting with legal counsel, is required by applicable law. (c) Notwithstanding any other provisions hereof, the Company and the Trust will ensure that (i) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Shelf Registration Statement, and any supplement to such prospectus does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 3. LIQUIDATED DAMAGES. (a) The parties hereto agree that the Holders of Securities will suffer damages if the Company fails to fulfill its obligations under Section 1 or Section 2, as applicable, and that it would not be feasible to ascertain the extent of such damages. Accordingly, if (i) the applicable Registration Statement is not filed with the Commission on or prior to 90 calendar days after the Closing Date, (ii) the Exchange Offer Registration Statement or, as the case may be, the Shelf Registration Statement, is not declared effective within 120 calendar days after the Closing Date, (iii) the Exchange Offer is not consummated on or prior to 30 business days after the date on which the Exchange Offer Registration Statement was declared effective by the Commission, or (iv) the Shelf Registration Statement is filed and declared effective within 120 calendar days after the Closing Date but shall thereafter cease to 8 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 30 calendar days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company will pay to holders of Transfer Restricted Securities (as defined below) as liquidated damages, additional interest in respect of the Junior Subordinated Debentures, and corresponding distributions shall accumulate on the Liquidation Amount of Capital Securities, at a rate of 0.25% per annum until (i) the applicable Registration Statement is filed, (ii) the Exchange Registration Statement is declared effective and the Exchange Offer is consummated, (iii) the Shelf Registration Statement is declared effective or (iv) the Shelf Registration Statement again becomes effective, as the case may be. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. "Transfer Restricted Securities" means each Capital Security, Guarantee and Junior Subordinated Debenture until (i) the date on which such securities have been exchanged for a freely transferable Exchange Capital Security, Exchange Guarantee and Exchange Junior Subordinated Debenture in the Exchange Offer, (ii) the date on which such securities have been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such securities are distributed to the public pursuant to Rule 144 under the Securities Act or are salable pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary in this Section 3(a), the Company shall not be required to pay liquidated damages to the holder of Transfer Restricted Securities if such holder: (a) failed to comply with its obligations to make the representations in the second to last paragraph of Section 1; or (b) failed to provide the information required to be provided by it, if any, pursuant to Section 4(n). (b) The Company and the Trust shall notify the Property Trustee under the Trust Agreement immediately upon the happening of each and every Registration Default. The Company shall pay the liquidated damages due on the Transfer Restricted Securities by depositing with the Property Trustee (which may not be the Company for these purposes), in trust, for the benefit of the Holders thereof, prior to 10:00 a.m. New York City time on the next date specified by the Trust Agreement and the Capital Securities for the payment of cash distributions in respect of the Capital Securities, sums sufficient to pay the liquidated damages then due. The liquidated damages due shall be payable on each distribution payment date specified by the Trust Agreement and the Capital Securities to the record holder entitled to receive this distribution payment to be made on such date. Each obligation 9 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED to pay liquidated damages shall be deemed to accrue from and including the applicable Registration Default. (c) The parties hereto agree that the liquidated damages provided for in this Section 3 constitute a reasonable estimate of and are intended to constitute the sole damages that will be suffered by holders of Transfer Restricted Securities by reason of the failure of (i) the Shelf Registration Statement or the Exchange Offer Registration Statement to be filed, (ii) the Shelf Registration Statement to be declared effective or to remain effective, or (iii) the Exchange Offer Registration Statement to be declared effective and the Exchange Offer to be consummated, to the extent required by this Agreement. 4. REGISTRATION PROCEDURES. In connection with any Registration Statement, the following provisions shall apply: (a) The Company and the Trust shall (i) furnish to you, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that any of the Initial Purchasers (with respect to any portion of an unsold allotment from the original offering) are participating in the Registered Exchange Offer or the Shelf Registration, shall use reasonable efforts to reflect in each such document, when so filed with the Commission, such comments as you reasonably may propose; (ii) with respect to an Exchange Offer Registration Statement, include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement, and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if requested by any Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement. (b) The Company and the Trust shall advise you and, in the case of a Shelf Registration Statement, the Holders (if applicable), and, if requested by you or any such Holder, confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): 10 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (i) when the Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any comments by the Commission and by the Blue Sky or securities commissioner or regulator of any state with respect thereto or of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation or threatening of any proceedings for that purpose; (iv) of the receipt by the Company or the Trust of any notification with respect to the suspension of the qualification of the Securities or the Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the making of any changes in the Registration Statement, prospectus, prospectus amendment or supplement or post-effective amendment so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Company and the Trust will use their best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement at the earliest possible time. (d) The Company and the Trust will furnish to each Holder of Securities included within the coverage of any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits (including those incorporated by reference). 11 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (e) The Company and the Trust will deliver to each Holder of Securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company and the Trust consent to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of Securities in connection with the offering and sale of the Securities covered by the prospectus or any amendment or supplement thereto. (f) The Company and the Trust will furnish to each Exchanging Dealer or Initial Purchaser, as applicable, which so requests, without charge, at least one copy of the Exchange offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Exchanging Dealer or Initial Purchaser, as applicable, so requests in writing, all exhibits (including those incorporated by reference). (g) The Company and the Trust will, during the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, promptly deliver to each Exchanging Dealer or Initial Purchaser, as applicable, without charge, as many copies of the prospectus included in such Exchange Offer Registration Statement or Shelf Registration Statement, as applicable, and any amendment or supplement thereto as such Exchanging Dealer or Initial Purchaser, as applicable, may reasonably request for delivery by (i) such Exchanging Dealer in connection with a sale of Exchange Securities received by it pursuant to the Registered Exchange Offer or (ii) such Initial Purchaser in connection with a sale of Exchange Securities received by it in exchange for Securities constituting any portion of an unsold allotment; and the Company and the Trust consent to the use of the prospectus or any amendment or supplement thereto by any such Exchanging Dealer or Initial Purchaser, as applicable, as aforesaid. (h) Prior to any public offering of Securities or Exchange Securities pursuant to any Registration Statement, the Company and the Trust will use their best efforts to register or qualify or cooperate with the Holders of Securities included therein and their respective counsel in connection with the registration or qualification of such securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities or Exchange Securities covered by such Registration 12 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED Statement; provided, however, that the Company and the Trust (or any subsidiary or affiliate of the Company) will not be required to qualify generally to do business in any jurisdiction where they are not then so qualified or to take any action which would subject them to general service of process or to taxation in any such jurisdiction where they are not then so subject. (i) The Company and the Trust will cooperate with the Holders of Securities to facilitate the timely preparation and delivery of certificates representing Securities or Exchange Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request in writing prior to delivery of Securities or Exchange Securities pursuant to such Registration Statement. (j) Upon the occurrence of any event contemplated by para graphs (b)(ii) through (v) above during the period for which the Company and the Trust are required to maintain an effective Registration Statement, the Company and the Trust will promptly prepare a post-effective amendment to the Registration Statement or a supplement to the related prospectus or file any other required document so that, as so amended or supplemented, the prospectus will not include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Not later than the effective date of the applicable Registra tion Statement, the Company and the Trust will provide a CUSIP number for the Securities or Exchange Securities, as the case may be, and provide the applicable trustee with printed certificates for the Securities or Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company will comply with all applicable rules and regulations of the Commission and will make generally available to its security holders not later than 90 days after the end of the 12 month period beginning at the end of the fiscal quarter in which the applicable Registration Statement first became effective under the Securities Act, an earnings statement (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act. (m) The Company and the Trust will cause the Trust Agreement and the Indenture or the Exchange Securities Indenture, as the case may 13 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED be, to be qualified under the Trust Indenture Act as required by applicable law in a timely manner. (n) The Company and the Trust may require each Holder of Securities to be sold pursuant to any Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of such Securities as the Company may from time to time reasonably request in writing for inclusion in such Registration Statement, but only to the extent that such information is required in order to comply with the Securities Act or the Rules of the NASD, and the Company may exclude from such registration the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. (o) The Company and the Trust shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as Holders of a majority in aggregate liquidation amount of Capital Securities or Exchange Capital Securities being sold or the managing underwriters (if any) shall reasonably request in order to facilitate the disposition of Securities pursuant to any Shelf Registration Statement. (p) In the case of a Shelf Registration Statement, the Company shall provide to any of (A) the holders of the securities to be included in such registration statement, (B) the underwriters (which term, for purposes of this Exchange and Registration Rights Agreement, shall include a person deemed to be an underwriter within the meaning of Section 2(11) of the Securities Act), if any, thereof, (C) the sales or placement agent, if any, therefor, (D) counsel for such underwriters or agent and (E) not more than one counsel for all the holders of such securities who so request of the Company in writing the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission and each amendment or supplement thereto. (q) In the case of a Shelf Registration Statement, for a reasonable period prior to the filing thereof, the Company shall (i) make reasonably available for inspection by the persons referred to in Section 4(p) who shall certify to the Company and the Trust that they have a current intention to sell the Securities pursuant to the Shelf Registration Statement, all relevant financial and other records, pertinent corporate documents and properties of the Company and the Subsidiaries and (ii) use reasonable efforts to have Company's and the Subsidiaries' officers, 14 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED directors, employees, counsel, accountants and independent auditors supply all relevant information reasonably requested by such persons (each, an "Inspector") in connection with any such Registration Statement, as shall be reasonably necessary, in the judgment of the respective counsel referred to in such Section, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act, subject to executing a confidentiality undertaking in customary form with respect to confidential or proprietary information of the Company or such Subsidiary. (r) In the case of a Shelf Registration Statement, the Company and the Trust shall, if requested by any managing underwriter or underwriters, any placement or sales agent or any holder of Securities, promptly incorporate in a prospectus supplement or post-effective amendment such information as is required by the applicable rules and regulations of the Commission that such managing underwriter or underwriters, such agent or such holder specifies should be included therein relating to the terms of the sale of such Securities, including information with respect to the principal amount of Securities being sold by such holder or agent or to any underwriters, the name and description of such holder, agent or underwriter, the offering price of such Securities and any discount, commission or other compensation payable in respect thereof, the purchase price being paid therefor by such underwriters and with respect to any other terms of the offering of the Securities to be sold by such holder or agent or to such underwriters; and make all required filings of such prospectus supplement or post- effective amendment promptly after notification of the matters to be incorporated in such prospectus supplement or post-effective amendment. (s) In the case of a Shelf Registration Statement, the Company and the Trust, shall (A) make such representations and warranties to the holders of such Securities and the placement or sales agent, if any, therefor and the underwriters, if any, thereof in form, substance and scope as are customarily made by the Company in connection with an offering of debt securities pursuant to any appropriate agreement or to a registration statement filed on the form applicable to the Shelf Registration; (B) obtain an opinion of counsel to the Company and an opinion of counsel to the Trust in each case in customary form and covering such matters, of the type customarily covered by such an opinion, and in the case of the Company as customarily given in public offerings of the Company's debt securities as the managing underwriters, if any, or as any holders of at least 25% in aggregate principal amount of the Securities at the time outstanding may reasonably request, addressed to such holder or holders and the placement or sales agent, if any, therefor 15 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and the underwriters, if any, thereof and dated the effective date of such registration statement (and if such registration statement contemplates an underwritten offering of a part or all of the Securities, dated the date of the closing under the underwriting agreement relating thereto); (C) to the extent permitted by Statement of Auditing Standards No. 72, obtain a "cold comfort" letter or letters from the independent certified public accountants of the Company addressed to the selling holders of Securities, the placement or sales agent, if any, therefor or the underwriters, if any, thereof, dated (i) the effective date of such registration statement and (ii) the effective date of any prospectus supplement to the prospectus included in such registration statement or post-effective amendment to such registration statement which includes audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus (and, if such registration statement contemplates an underwritten offering pursuant to any prospectus supplement to the prospectus included in such registration statement or post-effective amendment to such registration statement which includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus, dated the date of the closing under the underwriting agreement relating thereto), such letter or letters to be in customary form and covering such matters of the type customarily covered by letters of such type in public offerings of debt securities of the Company; (D) deliver such documents and certificates, including officers' or trustees' or Administrative Trustees' certificates, as applicable, as may be reasonably requested by any holders of at least 25% in aggregate principal amount of the Securities at the time outstanding or the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof to evidence the accuracy of the representations and warranties made pursuant to clause (A) above and the compliance with or satisfaction of any agreements or conditions contained in the underwriting agreement or other agreement entered into by the Company or the Trust, as applicable; and (E) undertake such obligations relating to expense reimbursement, indemnification and contribution as are provided in Section 6 hereof. (t) The Company will use reasonable efforts to cause the Capital Securities or the Exchange Capital Securities, as applicable, covered by a Registration Statement to be rated with an appropriate rating agency, if so requested by Holders of a majority in aggregate liquidation amount of Capital Securities covered by such Registration Statement or the Exchange Capital Securities, as the case may be, or by the managing underwriters, if any. 16 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (u) The Company will use reasonable efforts to cause the Capital Securities or the Exchange Capital Securities, as applicable, relating to such Registration Statement to be listed on each securities exchange, if any, on which debt securities issued by the Company are then listed, if so requested by Holders of a majority in aggregate liquidation amount of Capital Securities covered by such Registration State ment or the Exchange Capital Securities, as the case may be, or by the managing underwriters, if any. (v) In the case of a Shelf Registration Statement, the Company and/or the Trust shall notify in writing each holder of Securities of any proposal by the Company and/or the Trust to amend or waive any provision of this Registration Rights Agreement pursuant to Section 9(a) hereof and of any amendment or waiver effected pursuant thereto, each of which notices shall contain the text of the amendment or waiver proposed or effected, as the case may be; (w) In the case of a Shelf Registration Statement, in the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Rules of Conduct and the By-Laws of the National Association of Securities Dealers, Inc. ("NASD") or any successor thereto, as amended from time to time) thereof, whether as a holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company and the Trust shall assist such broker-dealer in complying with the requirements of such Rules and By-Laws, including by (A) if such Rules shall so require, permitting a "qualified independent underwriter" (as defined in such Rules (or any successor thereto)) to participate in the preparation of the registration statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such registration statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (B) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 6 hereof, and (C) providing such information to such broker- dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules of Conduct of the NASD. (x) In the case of a Shelf Registration Statement, each Holder of Securities agrees by acquisition of such Securities that, upon receipt of any notice of the Company pursuant to Section 4(b)(ii) through (v) hereof, such Holder 17 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED will discontinue disposition of such Securities covered by such Registration Statement until such Holder's receipt of copies of the supplemental or amended prospectus contemplated by Section 4(j) hereof, or until advised in writing (the "Resumption Notice") by the Company that the use of the applicable prospectus may be resumed. 5. REGISTRATION EXPENSES. The Company agrees to bear and to pay or cause to be paid promptly upon request being made therefor all expenses incident to the Company's and the Trust's performance of or compliance with this Registration Rights Agreement, including the reasonable fees and disbursements of one firm of attorneys (in addition to local counsel) chosen by the Holders of a majority in aggregate principal amount of the Securities and the Exchange Securities to be sold pursuant to a Registration Statement (the "Special Counsel") acting for the Holders in connection therewith (the "Registration Expenses"). To the extent that any Registration Expenses are incurred, assumed or paid by any Holder, or any placement or sales agent therefor or underwriter thereof on behalf of the Company or the Trust, the Company shall reimburse such person for the full amount of the Registration Expenses so incurred, assumed or paid promptly after receipt of a request therefor with appropriate documentation in support thereof. The Holders shall be responsible for all underwriting commissions and discounts in the case of a Shelf Registration Statement. 6. INDEMNIFICATION. (a) Upon the registration of the Securities pursuant to Section 1 or 2 hereof, and in consideration of the agreements of the Initial Purchasers contained herein, and as an inducement to the Initial Purchasers to purchase the Capital Securities, each of the Company and the Trust shall, and it hereby agrees jointly and severally to, indemnify and hold harmless each of the holders of Securities to be included in such registration, and each person who participates as an underwriter in any offering or sale of such Securities and each person who controls any such person against any losses, claims, damages or liabilities, joint or several, to which such holder or underwriter may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any registration statement under which such Securities were registered under the Securities Act, or any preliminary, final or summary prospectus contained therein or furnished by the Company or the Trust to any such 18 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED holder or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading and each of the Company and the Trust shall, and it hereby agrees jointly and severally to, reimburse each such holder or underwriter for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company and the Trust shall not be liable to any such person in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, or preliminary, final or summary prospectus, or amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company and the Trust by holders of Securities expressly for use therein. This indemnity agreement will be in addition to any liability which the Company or the Trust may otherwise have. (b) The Company and the Trust may require, as a condition to including any Securities in any registration statement filed pursuant to Section 1 or 2 hereof or to entering into any underwriting agreement with respect thereto, that the Company and the Trust shall have received an undertaking reasonably satisfactory to it from the holder of such Securities and from each underwriter named in any such underwriting agreement, severally and not jointly, to indemnify and hold harmless the Company and the Trust, each of the Company's directors, and each person who controls the Company or the Trust within the meaning of either the Securities Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company and the Trust, but only with reference to written information furnished to the Company and the Trust by or on behalf of such person specifically for use in any registration statement, or any preliminary or final or summary prospectus contained therein or any amendment or supplement thereto. This indemnity agreement will be in addition to any liability which any such person may otherwise have. (c) Promptly after receipt by an indemnified party under Section 6(a) or (b) of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; provided, however, that failure to so notify an indemnifying party shall not relieve such indemnifying party from any obligation that it may have pursuant to this Section except to the extent it has been materially prejudiced by such failure; provided 19 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED further, however, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than on account of this Section. If any such claim or action shall be brought against an indemnified party, and the indemnified party notifies the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel satisfactory to the indemnified party, provided that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action and approval by the indemnified party of counsel, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that an indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence, (3) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all 20 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED such indemnified party or parties. Each indemnified party shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent, but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) Each party hereto agrees that, if for any reason the indemnification provisions contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein (other than by reason of the exceptions to the indemnification obligations set forth in such Sections), then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified party in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, or liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. 21 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(d) were determined by pro rata allocation (even if the holders or any agents or underwriters or all of them were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwith standing the provisions of this Section, an indemnifying party that is a holder of Transfer Restricted Securities or Exchange Securities shall not be required to contribute any amount in excess of the amount by which the dollar amount of the proceeds received by such holder from the sale of any Securities (after deducting any fees, discounts and commissions applicable thereto) exceeds the amount of any damages that such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to any contribution from any person who was not guilty of such fraudulent misrepresentation. The holders' and any underwriters' obligations in this Section 6(d) to contribute shall be several in proportion to the principal amount of Securities registered or underwritten, as the case may be, by them and not joint. 7. RULES 144 AND 144A. The Company shall use its best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the written request of any holder of Transfer Restricted Securities, make publicly available other information so long as necessary to permit sales of such holder's securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any holder of Transfer Restricted Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including, without limitation, the requirements of Rule 144A(d)(4)). Upon the written request of any holder of Transfer Restricted Securities, the Company shall deliver to such holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be 22 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED deemed to require the Company or the Trust to register any of its securities pursuant to the Exchange Act. 8. UNDERWRITTEN REGISTRATIONS. If any of the Transfer Restricted Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the holders of a majority in aggregate liquidation amount of Capital Securities to be included in such offering, subject to the consent of the Company (which shall not be unreasonably withheld or delayed). The Holders shall be responsible for all underwriting commissions and discounts. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 9. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company and the Trust have obtained the written consent of Holders of a majority in aggregate liquidation amount of the Capital Securities and the Exchange Capital Securities, taken as a single class. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of the Holders of Securities whose Securities or Exchange Securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by Holders of a majority in aggregate liquidation amount of the Capital Securities or Exchange Capital Securities being sold by such Holders pursuant to such Registration Statement. (b) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first- class mail, telecopier, or air courier guaranteeing overnight delivery: 23 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (1) if to a Holder, at the most current address given by such Holder to the Trust in accordance with the provisions of this Section 9(b), which address initially is, with respect to each Holder, the address of such Holder maintained by the Trustee under the Trust Agreement; (2) if to you, initially at the respective addresses set forth in the Purchase Agreement; and (3) if to the Company or the Trust, initially at the address set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; one business day after being delivered to a next-day air courier; five business days after being deposited in the mail; when answered back, if faxed; and when receipt is acknowledged by the recipient's telecopier machine, if telecopied. (c) SUCCESSORS AND ASSIGNS. All the terms and provisions of this Registration Rights Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the respective successors and assigns of the parties hereto. In the event that any transferee of any holder of Securities shall, in any manner, whether by gift, bequest, purchase, operation of law or otherwise acquire Transfer Restricted Securities, such transferee shall, without any further writing or action of any kind, be deemed a party hereto for all purposes and such Securities shall be held subject to all of the terms of this Registration Rights Agreement, and by taking and holding such Securities such transferee shall be entitled to receive the benefits of, and be conclusively deemed to have agreed to be bound by and to perform, all of the applicable terms and provisions of this Registration Rights Agreement. (d) COUNTERPARTS. This Agreement may be executed in any number of counterparts (which may be delivered in original form or by telecopies) and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 24 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (e) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (f) GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY AND THE TRUST HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPT FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY AND THE TRUST IRREVOCABLY WAIVE, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER OF A TRANSFER RESTRICTED SECURITY TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. (g) REMEDIES. In the event of a breach by the Company, the Trust or a holder of Transfer Restricted Securities, of any of their obligations under this Agreement, each holder of Transfer Restricted Securities or the Company or the Trust, as the case may be, in addition to being entitled to exercise all rights granted by law, including recovery of damages (other than the recovery of damages for a breach by the Company or the Trust of their obligations under Sections 1 and 2 25 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED hereof for which liquidated damages have been paid pursuant to Section 3 hereof), will be entitled to specific performance of its rights under this Agreement. The Company, the Trust and each holder of Transfer Restricted Securities agree that, except for such liquidated damages, when payable monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (h) NO INCONSISTENT AGREEMENTS. The Company and the Trust have not, nor shall they on or after the date of this Agreement, enter into any agreement that is inconsistent with the rights granted to the holders of Transfer Restricted Securities in this Agreement or otherwise conflicts with the provisions hereof. The Company and the Trust have not previously entered into any agreement which remains in effect granting any registration rights with respect to any capital securities to any person. Without limiting the generality of the foregoing, without the written consent of the holders of a majority in aggregate principal amount of the then outstanding Transfer Restricted Securities, the Company and the Trust shall not grant to any person the right to request the Company to register any capital securities of the Company or the Trust under the Securities Act unless the rights so granted are subject in all respects to the prior rights of the holders of Transfer Restricted Securities set forth herein, and are not otherwise in conflict or inconsistent with the provisions of the Agreement. (i) NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor any of its securityholders (other than the holders of Transfer Restricted Securities in such capacity) shall have the right to include any securities of the Company in any Shelf Registration or Exchange Offer other than Transfer Restricted Securities. (j) SEVERABILITY. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or enforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, 26 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (k) SURVIVAL. The respective indemnities, agreements, representations, warranties and each other provision set forth in this Registration Rights Agreement or made pursuant hereto shall remain in full force and effect regardless of any investigation (or statement as to the results thereof) made by or on behalf of any holder of Securities, any director, officer or partner of such holder, any agent or underwriter or any director, officer or partner thereof, or any controlling person of any of the foregoing, and shall survive delivery of and payment for the Securities pursuant to the Purchase Agreement and the transfer and registration of Securities by such holder and the consummation of an Exchange Offer. (l) INSPECTION. For so long as this Registration Rights Agreement shall be in effect, this Registration Rights Agreement and a complete list of the names and addresses of all the holders of Securities shall be made available, upon reasonable prior notice to the Company, the Property Trustee or the Trustee under the Indenture, as applicable, for inspection and copying on any business day by any holder of Securities for proper purposes only (which shall include any purpose related to the rights of the holders of Securities under the Securities, the Indenture and this Agreement) at the offices of the Company at the address thereof referenced in Section 9(b) above, at the office of the Property Trustee or at the office of the Trustee under the Indenture. 27 GOLDMAN, SACHS & CO. DEUTSCHE MORGAN GRENFELL INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED Please confirm that the foregoing correctly sets forth the agreement between the Company and you. Very truly yours, INTEGON CAPITAL I By: /s/ John B. Yorke ------------------------------- Name: John B. Yorke Title: Administrative Trustee INTEGON CORPORATION By: /s/ John B. Yorke -------------------------------- Name: John B. Yorke Title: Accepted as of the date hereof: Goldman, Sachs & Co. Deutsche Morgan Grenfell Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated By: /s/ Goldman, Sachs & Co. ---------------------------- (Goldman, Sachs & Co.) On behalf of each of the Initial Purchasers EXHIBIT 4.7(A) ANNEX A Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired by such broker-dealer as a result of market- making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." EXHIBIT 4.7(B) ANNEX B Each broker-dealer that receives Exchange Securities for its own account in exchange for Securities, where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See "Plan of Distribution." EXHIBIT 4.7(C) ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 199 , all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus./*/ The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the- counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange -------------------- /*/ In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Exchange Offer prospectus. Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. EXHIBIT 4.7(D) ANNEX D [ ] check here if you are a broker-dealer and wish to receive 10 additional copies of the prospectus and 10 copies of any amendments or supplements thereto. Name: ------------------------------------------------- Address: ------------------------------------------------- ------------------------------------------------- If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker- dealer that will receive Exchange Securities for its own account in exchange for Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. EX-4.8 9 EXPENSE AGREEMENT EXHIBIT 4.8 AGREEMENT AS TO EXPENSES AND LIABILITIES, dated as of February 10, 1997 (as modified, amended or supplemented, this "Agreement"), between Integon Corporation, a Delaware corporation (the "Company"), and Integon Capital I, a Delaware business trust (the "Series A Issuer"). WHEREAS, the Series A Issuer intends to issue its Common Securities (the "Common Securities") to and acquire the Debentures from the Company and to issue and sell 10 3/4% Capital Securities, Series A (the "Capital Securities") with such powers, preferences and special rights and restrictions as are set forth in the Amended and Restated Trust Agreement, dated as of February 10, 1997, among the Company, as Depositor, First Union Bank of Delaware, as Delaware Trustee, First Union National Bank of North Carolina, as Property Trustee, and the Administrative Trustees named therein, as the same may be amended from time to time (the "Trust Agreement"); and WHEREAS, the Company will own all of the Common Securities of the Series A Issuer and will issue the Debentures; and WHEREAS, capitalized terms used but not defined herein have the meanings set forth in the Trust Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Series A Issuer hereby agree as follows: ARTICLE I Section 1.1. Guarantee by Company. Subject to the terms and conditions hereof, the Company hereby irrevocably and unconditionally guarantees to each person or entity to whom the Series A Issuer is now or hereafter becomes indebted or liable (the "Beneficiaries") the full payment, when and as due, of any and all Obligations (as hereinafter defined) to such Beneficiaries. As used herein, "Obligations" means any costs, expenses or liabilities of the Series A Issuer, other than obligations of the Series A Issuer to pay to holders of any Trust Securities the amounts due such holders pursuant to the terms of the Trust Securities. This Agreement 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 1.2. Subordination of Guarantee. The guarantee and other liabilities and obligations of the Company under this Agreement shall constitute unsecured obligations of the Company and shall rank subordinate and junior in right of payment to all Senior Indebtedness (as defined in the Indenture) of the Company to the extent and in the manner set forth in the Indenture with respect to the Debentures, and the provisions of Article XIII of the Indenture will apply, mutatis mutandis, to the obligations of the Company hereunder. The obligations of the Company hereunder do not constitute Senior Indebtedness (as defined in the Indenture) of the Company. Section 1.3. Term of Agreement. This Agreement shall terminate and be of no further force and effect upon the dissolution of the Series A Issuer; provided, however, that this Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any holder of Capital Securities or any Beneficiary must restore payment of any sums paid under the Capital Securities, under any Obligation, under the Guarantee Agreement dated the date hereof by the Company, as guarantor, and First Union National Bank of North Carolina, as guarantee trustee, or under this Agreement for any reason whatsoever. Except to the extent set forth in the preceding sentence, this Agreement is continuing, irrevocable, unconditional and absolute. Section 1.4. Waiver of Notice. The Company hereby waives notice of acceptance of this Agreement and of any Obligation to which it applies or may apply, and the Company hereby waives presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. Section 1.5. No Impairment. The obligations, covenants, agreements and duties of the Company under this Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the extension of time for the payment by the Series A Issuer of all or any portion of the Obligations or for the performance of any other obligation under, arising out of, or in connection with, the Obligations; (b) any failure, omission, delay or lack of diligence on the part of the Beneficiaries to enforce, assert or exercise any right, privilege, power or remedy conferred on the Beneficiaries with respect to the Obligations or any action on the part of the Series A Issuer granting indulgence or extension of any kind; or (c) 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 Series A Issuer or any of the assets of the Series A Issuer (other than the dissolution of the Series A Issuer in accordance with the terms of the Trust Agreement). There shall be no obligation of the Beneficiaries to give notice to, or obtain the consent of, the Company with respect to the happening of any of the foregoing. -2- Section 1.6. Enforcement. A Beneficiary may enforce this Agreement directly against the Company and the Company waives any right or remedy to require that any action be brought against the Series A Issuer or any other person or entity before proceeding against the Company. Section 1.7. Subrogation. The Company shall be subrogated to all rights (if any) of any Beneficiary against the Series A Issuer in respect of any amounts paid to the Beneficiaries by the Company under this Agreement; provided, however, that the Company 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 Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Agreement. ARTICLE II Section 2.1. Assignment. This Agreement may not be assigned by either party hereto without the consent of the other, and any purported assignment without such consent shall be void. Section 2.2. Binding Effect. All guarantees and agreements contained in this Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the Beneficiaries. Section 2.3. Amendment. So long as there remains any Beneficiary or any Capital Securities are Outstanding, this Agreement shall not be modified or amended in any manner adverse to such Beneficiary or to the Holders of the Capital Securities without the consent of such Beneficiary or the Holders of the Capital Securities, as the case may be. Section 2.4. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be given in writing by delivering the same against receipt therefor by facsimile transmission (confirmed by mail) or by registered or certified mail, addressed as follows (and if so given, shall be deemed given when telecopied with receipt confirmed or when mailed): Integon Corporation 500 West Fifth Street Winston-Salem, North Carolina 27512 Facsimile No.: (910) 770-2747 Attention: General Counsel -3- Integon Capital I c/o Integon Corporation 500 West Fifth Street Winston-Salem, North Carolina 27512 Facsimile No.: (910) 770-2747 Attention: General Counsel With a copy to: First Union National Bank of North Carolina 230 South Tryon Street, 9th Floor Charlotte, North Carolina 28228-1179 Facsimile No.: (704) 383-7316 Attention: Corporate Trust Administration Section 2.4. Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. -4- IN WITNESS WHEREOF, this Agreement as to Expenses and Liabilities is executed as of the day and year first above written. Integon Corporation By: /s/ John B. Yorke --------------------------- Name: John B. Yorke Title: Integon Capital I By: /s/ John B. Yorke -------------------------- Name: John B. Yorke Administrative Trustee -5- EX-5.1 10 OPINION OF RICHARDS, LAYTON & FINGER [RICHARDS, LAYTON & FINGER LETTERHEAD] EXHIBIT 5.1 March 4, 1997 Integon Capital I c/o Integon Corporation 500 West Fifth Street Winston-Salem, North Carolina 27152 Re: Integon Capital I ----------------- Ladies and Gentlemen: We have acted as special Delaware counsel for Integon Capital I, a Delaware statutory business trust (the "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of the Trust, dated January 27, 1997 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on January 27, 1997; (b) The Trust Agreement of the Trust, dated as of January 27, 1997, as amended and restated by the Amended and Restated Trust Agreement of the Trust, dated as of February 10, 1997 (including Exhibits B and D thereto) (collectively, the "Trust Agreement"), among Integon Corporation, a Delaware corporation (the "Company"), as Depositor, the trustees of the Trust named therein (collectively, the "Trustees") and the holders, from time to time, of undivided beneficial interests in the assets of the Trust; Integon Capital I March 4, 1997 Page 2 (c) The Registration Statement (the "Registration Statement") on Form S-4, including a prospectus with respect to the Company and the Trust (the "Prospectus"), relating to the 10 3/4% Capital Securities, Series B, of the Trust representing preferred undivided beneficial interests in the assets of the Trust (each, an "Exchange Security" and collectively, the "Exchange Securities"), filed by the Company and the Trust with the Securities and Exchange Commission; and (d) A Certificate of Good Standing for the Trust, dated March 4, 1997, hereof, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Trust Agreement. For purposes of this opinion, we have not reviewed any documents other than the documents listed above, and we have assumed that there exists no provision in any document that we have not reviewed that bears upon or is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that the Trust Agreement constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the creation, operation and termination of the Trust, and that the Trust Agreement and the Certificate are in full force and effect and have not been amended, (ii) except to the extent provided in paragraph 1 below, the due creation or due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its creation, organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) the receipt by each Person to whom an Exchange Security is to be issued by the Trust (collectively, the "Security Holders") of a certificate for such Exchange Security and the payment for the Exchange Security acquired by it, in accordance Integon Capital I March 4, 1997 Page 3 with the Trust Agreement and the Prospectus, and (vii) that the Exchange Securities are issued and sold to the Security Holders in accordance with the Trust Agreement and the Prospectus. We have not participated in the preparation of the Prospectus and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Business Trust Act. 2. When issued and sold, the Exchange Securities will represent valid and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust. 3. The Security Holders, as beneficial owners of the Trust, will 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. We note that the Security Holders may be obligated to make payments as set forth in the Trust Agreement. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. In addition, we hereby consent to the use of our name under the heading "Validity of Securities" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of Persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, EAM /s/ Richards, Layton & Finger EX-5.2 11 OPINION OF PAUL, WEISS, RIFKIND, WHARTON & GARRISON [PAUL, WEISS, RIFKIND, WHARTON & GARRISON LETTERHEAD] EXHIBIT 5.2 March 4, 1997 Integon Corporation 500 West Fifth Street Winston-Salem, North Carolina 27152 Integon Capital I c/o Integon Corporation 500 West Fifth Street Winston-Salem, North Carolina 27152 Ladies and Gentlemen: We have acted as counsel to Integon Corporation, a Delaware corporation (the "Company") in connection with the preparation and filing with the Securities and Exchange Commission (the "SEC") of a Registration Statement on Form S-4 (the "Registration Statement") by the Company and Integon Capital I, a Delaware statutory business trust (the "Trust"), pursuant to the Securities Act of 1933, as amended, and the rules and regulations thereunder (the "Act"). The Registration Statement relates to the Trust's $100,000,000 aggregate Liquidation Amount of 10 3/4% Capital Securities, Series B, having a Liquidation Amount of $1,000 per Capital Security (the "Exchange Capital Securities"), the Company's Integon Corporation Integon Capital I 2 10 3/4% Junior Subordinated Deferrable Interest Debentures, Series B (the "Exchange Junior Subordinated Debentures"), and the Company's Guarantee with respect to the Exchange Capital Securities (the "Exchange Guarantee") to be executed and delivered by the Company for the benefit of the holders from time to time of the Exchange Capital Securities. In connection with the Registration Statement, we have been requested to render our opinion as to the validity of the Exchange Junior Subordinated Debentures and the Exchange Guarantee. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed thereto in the Registration Statement. In connection with this opinion, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents (collectively, the "Documents"): 1. The Amended and Restated Trust Agreement of the Trust, dated as of February 10, 1997, among the Company, First Union National Bank of North Carolina ("First Union"), as property trustee, First Union Bank of Delaware, as Delaware trustee, the administrators of the Trust and the several holders of the Capital Securities; 2. The Junior Subordinated Indenture (the "Indenture"), dated as of February 10, 1997, between the Company and First Union, as indenture trustee; Integon Corporation Integon Capital I 3 3. The Guarantee Agreement (the "Guarantee Agreement"), dated as of February 10, 1997, between the Company and First Union, as guarantee trustee; 4. The Expense Agreement, dated as of February 10, 1997, between the Company and the Trust; 5. A specimen of the Exchange Junior Subordinated Debentures furnished to us by the Company; 6. A specimen of the Outstanding Junior Subordinated Debentures furnished to us by the Company; and 7. The Exchange and Registration Rights Agreement (the "Registration Rights Agreement"), dated as of February 10, 1997, among the Company, the Trust, Goldman, Sachs & Co., Deutsche Morgan Grenfell Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as initial purchasers. In addition, we have examined such corporate records and other instruments as we have deemed necessary or appropriate, including the certificate of incorporation and by-laws, of the Company and such other certificates, agreements and documents as we have deemed relevant and necessary as a basis for the opinions hereinafter expressed. In our examination of the aforesaid documents, we have assumed, without independent investigation, the genuineness of all signatures other than signatures of the Company contained in the Documents, the authenticity of all Integon Corporation Integon Capital I 4 documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as certified, photostatic, reproduced or conformed copies of valid existing agreements and other documents, the authenticity of all such latter documents and the legal capacity of all individuals who have executed any of the documents. In expressing the opinions set forth herein, we have assumed that the Exchange Junior Subordinated Debentures will be in the form of the Specimen Exchange Junior Subordinated Debenture and that any information omitted from such form and indicated as such by a blank space has been properly added. The opinions expressed herein are limited to the laws of the State of New York, the federal laws of the United States and the General Corporation Law of the State of Delaware. Please be advised that no member of this firm is admitted to practice in the State of Delaware. Our opinion is rendered only with respect to the laws, and the rules, regulations and orders thereunder, which are currently in effect. Based upon the foregoing, and subject to the assumptions, exceptions and qualifications set forth herein, we are of the opinion that the Exchange Junior Subordinated Debentures and the Exchange Guarantee have been duly authorized by all necessary corporate action of the Company and, assuming (i) the Exchange Junior Subordinated Debentures are issued and delivered in accordance with the terms of the Indenture and (ii) the Exchange Junior Subordinated Debentures are issued and Integon Corporation Integon Capital I 5 delivered and the Exchange Guarantee is delivered in accordance with the terms and conditions of the Registration Rights Agreement as contemplated by the Registration Statement, the Exchange Junior Subordinated Debentures and the Exchange Guarantee will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as enforceability thereof may be subject to (a) bankruptcy, insolvency, fraudulent conveyance or transfer, reorganization, moratorium or other similar laws now or hereafter in effect affecting creditors' rights generally and (b) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity) and will be entitled to the benefits of the Indenture and the Guarantee Agreement. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the heading "Validity of Securities" in the Registration Statement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act. Very truly yours, /s/ PAUL, WEISS, RIFKIND, WHARTON & GARRISON EX-8 12 OPINION OF PAUL, WEISS, RIFKIND, WHARTON & GARRISON [PAUL, WEISS, RIFKIND, WHARTON & GARRISON LETTERHEAD] EXHIBIT 8 373-3744 373-2077 March 4, 1997 Integon Corporation 500 West 5th Street Winston-Salem, North Carolina 27102 Integon Capital I c/o Integon Corporation 500 West 5th Street Winston-Salem, North Carolina 27102 Re: Integon Capital I $100,000,000 10 3/4% Capital Securities Dear Sir or Madam: We have acted as special tax counsel for Integon Corporation (the "Company") and Integon Capital I ("Trust") in connection with the offer to exchange up to $100,000,000 aggregate Liquidation Amount of the Trust's 10 3/4% Capital Securities, Series B, which have been registered under the Securities Act of 1933, as amended (the "Act"), for a like aggregate Liquidation Amount of outstanding 10 3/4% Capital Securities, Series A. In rendering our opinion, we have examined the Integon Corporation Integon Capital I 2 Amended and Restated Trust Agreement, dated as of February 10, 1997, ("Trust Agreement") and have assumed the Issuer Trustees will conduct the affairs of the Trust in accordance with the Trust Agreement. We hereby confirm the opinion set forth under the caption "Certain Federal Income Tax Considerations" in the prospectus (the "Prospectus") that is part of the Registration Statement on Form S-4 filed by the Company and the Trust with the Securities and Exchange Commission on March 5, 1997. Capitalized terms used herein but not defined have the meanings as provided in the Prospectus. We hereby consent to the use of our name under the caption "Certain Federal Income Tax Considerations" in the Prospectus. The issuance of such a consent does not concede that we are an "expert" for the purposes of the Act. Very truly yours, /s/ Paul, Weiss, Rifkind, Wharton & Garrison EX-12 13 STATEMENT OF COMPUTATION
Exhibit 12 Integon Corporation and Subsidiaries Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (Unaudited) (In thousands, except ratios) Year ended December 31, ---------------------------------------------------------------------------- 1996 1995 1994 1993 1992 ---------------------------------------------------------------------------- Income from continuing operations $ 170 $ 36,619 $ 22,538 $ 43,286 $ 31,324 Federal income tax (benefit) (2,082) 16,321 9,652 20,234 15,462 Fixed charges deducted from income from continuing operations: Interest 15,021 14,510 8,433 6,255 8,086 Portion of rents representative of interest factor 978 1,372 1,415 857 704 Total fixed charges deducted ---------------------------------------------------------------------------- from income 15,999 15,882 9,848 7,112 8,790 ---------------------------------------------------------------------------- Earnings available for fixed charges and preferred dividends $ 14,087 $ 68,822 $ 42,038 $ 70,632 $ 55,576 ============================================================================ Fixed charges deducted from income from continuing operations per above $ 15,999 $ 15,882 $ 9,848 $ 7,112 $ 8,790 Preferred dividends (1) 8,569 8,053 1,260 504 ---------------------------------------------------------------------------- Fixed charges and preferred dividends $ 24,568 $ 23,935 $ 11,108 $ 7,112 $ 9,294 ============================================================================ Ratio of earnings to fixed charges 0.88 4.33 4.27 9.93 6.32 ---------------------------------------------------------------------------- Ratio of earnings to combined fixed charges and preferred stock dividends 0.57 2.88 3.78 9.93 5.98 ----------------------------------------------------------------------------
(1) Adjusted to an amount equal to the pre-tax earnings necessary to provide the required dividends. EX-23.1 14 CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Integon Capital I and Integon Corporation on Form S-4 of our report dated January 22, 1997, appearing in the Annual Report on Form 10-K of Integon Corporation for the year ended December 31, 1996 and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. /s/ Deloitte & Touche LLP Winston-Salem, North Carolina March 5, 1997 EX-25.1 15 FORM T-1 EXHIBIT 25.1 ________________________________________________________________________________ ________________________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________________________________ FORM T-1 __________________________________________ STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT FOR 1939, AS AMENDED, OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE _________________________________________ FIRST UNION NATIONAL BANK OF NORTH CAROLINA (Exact name of Trustee as specified in its charter) 230 SOUTH TRYON STREET, 8TH FLOOR CHARLOTTE, NORTH CAROLINA 28288-1179 56-0900030 (Address of principal executive (Zip Code) (I.R.S. Employer Identification office) No.) _________________________________________________ INTEGON CORPORATION (Exact name of obligor as specified in its charter) Delaware 13-3559471 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 500 West Fifth Street Winston-Salem, North Carolina 27152 (Address of principal executive offices) (Zip Code) _______________________________________________ 10 3/4% Junior Subordinated Deferrable Interest Debentures, Series B (Title of the indenture securities) ________________________________________________________________________________ ________________________________________________________________________________ 1. GENERAL INFORMATION. (a) The following are the names and addresses of each examining or supervising authority to which the Trustee is subject: Board of Governors of the Federal Reserve System Washington, DC The Comptroller of the Currency Washington, D.C. Securities and Exchange Commission, Division of Market Regulation Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. (b) The Trustee is authorized to exercise corporate trust powers. 2. AFFILIATIONS WITH OBLIGOR. The obligor is not an affiliate of the Trustee. (See Note 1 on Page 4) 3. VOTING SECURITIES OF THE TRUSTEE. The following information is furnished as to each class of voting securities of the Trustee: As of January 31, 1997 - -------------------------------------------------------------------------------- Column A Column B - -------------------------------------------------------------------------------- Title of Class Amount Outstanding - -------------------------------------------------------------------------------- Common Stock, par value $3.33-1/3 a share 286,793,193 shares 4. TRUSTEESHIPS UNDER OTHER INDENTURES. The Trustee is not a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are outstanding. 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR UNDERWRITERS. Neither the Trustee nor any of the directors or executive officers of the Trustee is a director, officer, partner, employee, appointee or representative of the obligor or of any underwriter for the obligor. 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS. The amount of voting securities of First Union Corporation, the parent of the trustee owned, beneficially by the obligor and its directors, partners, executive officers, taken as a group, do not exceed one (1) percent of the outstanding voting securities of First Union Corporation. 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR OFFICIALS. The amount of voting securities of First Union Corporation, the parent of the Trustee, owned beneficially by any underwriter for the the obligor and its directors, partners, and executive officers, taken as a group, do not exceed one(1) percent of the outstanding voting securities of First Union Corporation. 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE. The trustee does not own beneficially or hold as collateral security for obligations in default any securities of any class of the obligor in excess of one (1) percent of the outstanding securities of such class. 2 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE. The trustee does not own beneficially or hold as collateral security for obligations in default any securities of an underwriter for the obligor in excess of one (1) percent of the outstanding securities of such class.. 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR. The Trustee does not own beneficially or hold as collateral security for obligations in default any voting securities of any class of a person who, to the knowledge of the Trustee (1) owns 10% or more of the voting securities of the obligor or (2) is an affiliate, other than a subsidiary, of the obligor, in excess of one (1) percent of the outstanding voting securities of such class. 11. OWNERSHIP OF HOLDERS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR. The Trustee does not own beneficially or hold as collateral security for obligations in default any securities of any class of a person who, to the knowledge of Trustee, owns 50% or more of the voting securities of the obligor, in excess of one (1) percent of the outstanding securities of such class. 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE. The obligor has a $75,000,000 revolving credit facility in which First Union National Bank of North Carolina participates with a commitment of $25,000,000. The credit facility has a termination date of July 25, 1999. 13. DEFAULTS BY THE OBLIGOR. Not applicable. 14. AFFILIATIONS WITH THE UNDERWRITERS. No underwriter is an affiliate of the Trustee. 15. FOREIGN TRUSTEE. Not applicable. 16. LIST OF EXHIBITS. (1) Articles of Association of the Trustee as now in effect. Incorporated in Exhibit (1) filed with Form T-1 Statement included in Registration Statement No. 33-45946. (2) Certificate of Authority of the Trustee to commence business. Incorporated by reference in Exhibit (2) filed with Form T-1 Statement included in Registration Statement No. 33-45946. (3) Authorization of the Trustee to exercise corporate trust powers, if such authorization is not contained in the documents specified in exhibits (1) and (2) above. Included at Page 6 of this Form T-1 Statement. (4) By-Laws of the Trustee. Incorporated by reference in Exhibit (4) filed with Form T-1 Statement included in Registration Statement No. 33-45946. (5) Not applicable. (6) Consent by the Trustee required by Section 321(b) of the Trust Indenture Act of 1939. Included at Page 6 of this Form T-1 Statement. (7) Report of condition of Trustee. Incorporated by reference in Exhibit (7) filed with Form T-1 Statement included in Registration Statement No. 33-45946. (8) Not applicable. (9) Not applicable. 3 _________________________________________________ NOTES _________________________________________________ 1. Since the trustee is a member of First Union Corporation, a bank holding company, all of the voting securities of the trustee are held by First Union Corporation. The securities of First Union Corporation are described in Item 3. 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking organization, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Charlotte, and State of North Carolina on the 26th day of February, 1997. FIRST UNION NATIONAL BANK OF NORTH CAROLINA (Trustee) BY:/s/ Pablo de la Canal ----------------------------------------------- Pablo de la Canal, Assistant Vice President EXHIBIT T-1 (6) CONSENTS OF TRUSTEE Pursuant to the requirements of section 321(b) of the Trust Indenture Act of 1939 and in connection with the proposed issuance by Integon Corporation of its 10 3/4 % Junior Subordinated Deferrable Interest Debentures, Series B, First Union National Bank of North Carolina, as the Trustee herein named, hereby consents that reports of examinations of said Trustee by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. FIRST UNION NATIONAL BANK OF NORTH CAROLINA BY:/s/ Daniel J. Ober ----------------------------------------------- Daniel J. Ober, Vice President Dated: February 26, 1997 5 EXHIBIT T-1 (3) EXTRACT FROM THE BY-LAW OF FIRST UNION NATIONAL BANK OF NORTH CAROLINA SECTION 8.2. Execution of Instruments. All agreements, indentures, ------------------------ mortgages, deeds, conveyances, transfers, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, proxies, and other instruments or documents may be signed, executed, acknowledged, verified, delivered or accepted in behalf of the Association by the Chairman of the Board, or the President, or any Vice Chairman of the Board, any Vice president or Assistant Vice President, or the Secretary or Assistant Secretary, Cashier, or Assistant Cashier, or, if in connection with the exercise of fiduciary powers of the Association, by any of said officers or by any Trust Officer or Assistant Trust Office; provided, however, that where required, any such instruments may also be executed, acknowledge, verified, delivered, or accepted in behalf of The Association in such other manner and by such other officers as the Board of Directors may from time to time direct. the provisions of this Section 8.2 are supplementary to any other provision of these By Laws. I HEREBY CERTIFY THAT THE forgoing is a true and complete extract from the By- Laws of First Union National Bank of North Carolina, a national banking association, now in full force and affect. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of said Association on February 26, 1997. /s/ Daniel J. Ober -------------------------- Assistant Secretary 6 EX-25.2 16 FORM T-1 EXHIBIT 25.2 ________________________________________________________________________________ ________________________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________________________________ FORM T-1 __________________________________________ STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT FOR 1939, AS AMENDED, OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE _________________________________________ FIRST UNION NATIONAL BANK OF NORTH CAROLINA (Exact name of Trustee as specified in its charter) 230 SOUTH TRYON STREET, 8TH FLOOR CHARLOTTE, NORTH CAROLINA 28288-1179 56-0900030 (Address of principal executive (Zip Code) (I.R.S. Employer Identification office) No.) _________________________________________________ INTEGON CAPITAL I (Exact name of obligor as specified in its charter) Delaware Applied for (State or other jurisdiction of incorporation (I.R.S. Employer Identification or organization) No.) 500 West Fifth Street Winston-Salem, North Carolina 27152 (Address of principal executive offices) (Zip Code) _______________________________________________ 10 3/4% Capital Securities Series B (Title of the indenture securities) ________________________________________________________________________________ ________________________________________________________________________________ 1. GENERAL INFORMATION. (a) The following are the names and addresses of each examining or supervising authority to which the Trustee is subject: Board of Governors of the Federal Reserve System Washington, DC The Comptroller of the Currency Washington, D.C. Securities and Exchange Commission, Division of Market Regulation Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. (b) The Trustee is authorized to exercise corporate trust powers. 2. AFFILIATIONS WITH OBLIGOR. The obligor is not an affiliate of the Trustee. (See Note 1 on Page 4) 3. VOTING SECURITIES OF THE TRUSTEE. The following information is furnished as to each class of voting securities of the Trustee: As of January 31, 1997 - -------------------------------------------------------------------------------- Column A Column B - -------------------------------------------------------------------------------- Title of Class Amount Outstanding - -------------------------------------------------------------------------------- Common Stock, par value $3.33-1/3 a share 286,793,193 shares 4. TRUSTEESHIPS UNDER OTHER INDENTURES. The Trustee is not a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are outstanding. 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR UNDERWRITERS. Neither the Trustee nor any of the directors or executive officers of the Trustee is a director, officer, partner, employee, appointee or representative of the obligor or of any underwriter for the obligor. 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS. The amount of voting securities of First Union Corporation, the parent of the trustee owned, beneficially by the obligor and its directors, partners, executive officers, taken as a group, do not exceed one (1) percent of the outstanding voting securities of First Union Corporation. 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR OFFICIALS. The amount of voting securities of First Union Corporation, the parent of the Trustee, owned beneficially by any underwriter for the the obligor and its directors, partners, and executive officers, taken as a group, do not exceed one(1) percent of the outstanding voting securities of First Union Corporation. 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE. The trustee does not own beneficially or hold as collateral security for obligations in default any securities of any class of the obligor in excess of one (1) percent of the outstanding securities of such class. 2 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE. The trustee does not own beneficially or hold as collateral security for obligations in default any securities of an underwriter for the obligor in excess of one (1) percent of the outstanding securities of such class.. 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR. The Trustee does not own beneficially or hold as collateral security for obligations in default any voting securities of any class of a person who, to the knowledge of the Trustee (1) owns 10% or more of the voting securities of the obligor or (2) is an affiliate, other than a subsidiary, of the obligor, in excess of one (1) percent of the outstanding voting securities of such class. 11. OWNERSHIP OF HOLDERS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR. The Trustee does not own beneficially or hold as collateral security for obligations in default any securities of any class of a person who, to the knowledge of Trustee, owns 50% or more of the voting securities of the obligor, in excess of one (1) percent of the outstanding securities of such class. 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE. The obligor has a $75,000,000 revolving credit facility in which First Union National Bank of North Carolina participates with a commitment of $25,000,000. The credit facility has a termination date of July 25, 1999. 13. DEFAULTS BY THE OBLIGOR. Not applicable. 14. AFFILIATIONS WITH THE UNDERWRITERS. No underwriter is an affiliate of the Trustee. 15. FOREIGN TRUSTEE. Not applicable. 16. LIST OF EXHIBITS. (1) Articles of Association of the Trustee as now in effect. Incorporated in Exhibit (1) filed with Form T-1 Statement included in Registration Statement No. 33-45946. (2) Certificate of Authority of the Trustee to commence business. Incorporated by reference in Exhibit (2) filed with Form T-1 Statement included in Registration Statement No. 33-45946. (3) Authorization of the Trustee to exercise corporate trust powers, if such authorization is not contained in the documents specified in exhibits (1) and (2) above. Included at Page 6 of this Form T-1 Statement. (4) By-Laws of the Trustee. Incorporated by reference in Exhibit (4) filed with Form T-1 Statement included in Registration Statement No. 33-45946. (5) Not applicable. (6) Consent by the Trustee required by Section 321(b) of the Trust Indenture Act of 1939. Included at Page 6 of this Form T-1 Statement. (7) Report of condition of Trustee. Incorporated by reference in Exhibit (7) filed with Form T-1 Statement included in Registration Statement No. 33-45946. (8) Not applicable. (9) Not applicable. 3 ________________________________________________ NOTES ________________________________________________ 1. Since the trustee is a member of First Union Corporation, a bank holding company, all of the voting securities of the trustee are held by First Union Corporation. The securities of First Union Corporation are described in Item 3. 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking organization, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Charlotte, and State of North Carolina on the 26th day of February, 1997. FIRST UNION NATIONAL BANK OF NORTH CAROLINA (Trustee) BY:/s/ Pablo de la Canal ----------------------------------------------- Pablo de la Canal, Assistant Vice President EXHIBIT T-1 (6) CONSENTS OF TRUSTEE Pursuant to the requirements of section 321(b) of the Trust Indenture Act of 1939 and in connection with the proposed issuance by Integon Capital I of its 10 3/4 % Capital Securities Series B, First Union National Bank of North Carolina, as the Trustee herein named, hereby consents that reports of examinations of said Trustee by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. FIRST UNION NATIONAL BANK OF NORTH CAROLINA BY:/s/ Daniel J. Ober ----------------------------------------------- Daniel J. Ober, Vice President Dated: February 26, 1997 5 EXHIBIT T-1 (3) EXTRACT FROM THE BY-LAW OF FIRST UNION NATIONAL BANK OF NORTH CAROLINA SECTION 8.2. Execution of Instruments. All agreements, indentures, ------------------------ mortgages, deeds, conveyances, transfers, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, proxies, and other instruments or documents may be signed, executed, acknowledged, verified, delivered or accepted in behalf of the Association by the Chairman of the Board, or the President, or any Vice Chairman of the Board, any Vice president or Assistant Vice President, or the Secretary or Assistant Secretary, Cashier, or Assistant Cashier, or, if in connection with the exercise of fiduciary powers of the Association, by any of said officers or by any Trust Officer or Assistant Trust Office; provided, however, that where required, any such instruments may also be executed, acknowledge, verified, delivered, or accepted in behalf of The Association in such other manner and by such other officers as the Board of Directors may from time to time direct. the provisions of this Section 8.2 are supplementary to any other provision of these By Laws. I HEREBY CERTIFY THAT THE forgoing is a true and complete extract from the By- Laws of First Union National Bank of North Carolina, a national banking association, now in full force and affect. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of said Association on February 26, 1997. /s/ Daniel J. Ober -------------------------- Assistant Secretary 6 EX-25.3 17 FORM T-1 EXHIBIT 25.3 ________________________________________________________________________________ ________________________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________________________________ FORM T-1 __________________________________________ STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT FOR 1939, AS AMENDED, OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE _________________________________________ FIRST UNION NATIONAL BANK OF NORTH CAROLINA (Exact name of Trustee as specified in its charter) 230 SOUTH TRYON STREET, 8TH FLOOR CHARLOTTE, NORTH CAROLINA 28288-1179 56-0900030 (Address of principal executive (Zip Code) (I.R.S. Employer Identification office) No.) _________________________________________________ INTEGON CORPORATION (Exact name of obligor as specified in its charter) Delaware 13-3559471 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 500 West Fifth Street Winston-Salem, North Carolina 27152 (Address of principal executive offices) (Zip Code) _______________________________________________ Guarantee with respect to the 10 3/4% Capital Securities, Series B (Title of the indenture securities) ________________________________________________________________________________ ________________________________________________________________________________ 1. GENERAL INFORMATION. (a) The following are the names and addresses of each examining or supervising authority to which the Trustee is subject: Board of Governors of the Federal Reserve System Washington, DC The Comptroller of the Currency Washington, D.C. Securities and Exchange Commission, Division of Market Regulation Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. (b) The Trustee is authorized to exercise corporate trust powers. 2. AFFILIATIONS WITH OBLIGOR. The obligor is not an affiliate of the Trustee. (See Note 1 on Page 4) 3. VOTING SECURITIES OF THE TRUSTEE. The following information is furnished as to each class of voting securities of the Trustee: As of January 31, 1997 - -------------------------------------------------------------------------------- Column A Column B - -------------------------------------------------------------------------------- Title of Class Amount Outstanding - -------------------------------------------------------------------------------- Common Stock, par value $3.33-1/3 a share 286,793,193 shares 4. TRUSTEESHIPS UNDER OTHER INDENTURES. The Trustee is not a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are outstanding. 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR UNDERWRITERS. Neither the Trustee nor any of the directors or executive officers of the Trustee is a director, officer, partner, employee, appointee or representative of the obligor or of any underwriter for the obligor. 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS. The amount of voting securities of First Union Corporation, the parent of the trustee owned, beneficially by the obligor and its directors, partners, executive officers, taken as a group, do not exceed one (1) percent of the outstanding voting securities of First Union Corporation. 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR OFFICIALS. The amount of voting securities of First Union Corporation, the parent of the Trustee, owned beneficially by any underwriter for the the obligor and its directors, partners, and executive officers, taken as a group, do not exceed one(1) percent of the outstanding voting securities of First Union Corporation. 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE. The trustee does not own beneficially or hold as collateral security for obligations in default any securities of any class of the obligor in excess of one (1) percent of the outstanding securities of such class. 2 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE. The trustee does not own beneficially or hold as collateral security for obligations in default any securities of an underwriter for the obligor in excess of one (1) percent of the outstanding securities of such class.. 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR. The Trustee does not own beneficially or hold as collateral security for obligations in default any voting securities of any class of a person who, to the knowledge of the Trustee (1) owns 10% or more of the voting securities of the obligor or (2) is an affiliate, other than a subsidiary, of the obligor, in excess of one (1) percent of the outstanding voting securities of such class. 11. OWNERSHIP OF HOLDERS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR. The Trustee does not own beneficially or hold as collateral security for obligations in default any securities of any class of a person who, to the knowledge of Trustee, owns 50% or more of the voting securities of the obligor, in excess of one (1) percent of the outstanding securities of such class. 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE. The obligor has a $75,000,000 revolving credit facility in which First Union National Bank of North Carolina participates with a commitment of $25,000,000. The credit facility has a termination date of July 25, 1999. 13. DEFAULTS BY THE OBLIGOR. Not applicable. 14. AFFILIATIONS WITH THE UNDERWRITERS. No underwriter is an affiliate of the Trustee. 15. FOREIGN TRUSTEE. Not applicable. 16. LIST OF EXHIBITS. (1) Articles of Association of the Trustee as now in effect. Incorporated in Exhibit (1) filed with Form T-1 Statement included in Registration Statement No. 33-45946. (2) Certificate of Authority of the Trustee to commence business. Incorporated by reference in Exhibit (2) filed with Form T-1 Statement included in Registration Statement No. 33-45946. (3) Authorization of the Trustee to exercise corporate trust powers, if such authorization is not contained in the documents specified in exhibits (1) and (2) above. Included at Page 6 of this Form T-1 Statement. (4) By-Laws of the Trustee. Incorporated by reference in Exhibit (4) filed with Form T-1 Statement included in Registration Statement No. 33-45946. (5) Not applicable. (6) Consent by the Trustee required by Section 321(b) of the Trust Indenture Act of 1939. Included at Page 6 of this Form T-1 Statement. (7) Report of condition of Trustee. Incorporated by reference in Exhibit (7) filed with Form T-1 Statement included in Registration Statement No. 33-45946. (8) Not applicable. (9) Not applicable. 3 ________________________________________________ NOTES ________________________________________________ 1. Since the trustee is a member of First Union Corporation, a bank holding company, all of the voting securities of the trustee are held by First Union Corporation. The securities of First Union Corporation are described in Item 3. 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking organization, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Charlotte, and State of North Carolina on the 26th day of February, 1997. FIRST UNION NATIONAL BANK OF NORTH CAROLINA (Trustee) BY:/s/ Pablo de la Canal ----------------------------------------------- Pablo de la Canal, Assistant Vice President EXHIBIT T-1 (6) CONSENTS OF TRUSTEE Pursuant to the requirements of section 321(b) of the Trust Indenture Act of 1939 and in connection with the proposed issuance by Integon Corporation of its Guarantee with respect to 10 3/4 % Capital Securities Series B, First Union National Bank of North Carolina, as the Trustee herein named, hereby consents that reports of examinations of said Trustee by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. FIRST UNION NATIONAL BANK OF NORTH CAROLINA BY:/s/ Daniel J. Ober ----------------------------------------------- Daniel J. Ober, Vice President Dated: February 26, 1997 5 EXHIBIT T-1 (3) EXTRACT FROM THE BY-LAW OF FIRST UNION NATIONAL BANK OF NORTH CAROLINA SECTION 8.2. Execution of Instruments. All agreements, indentures, ------------------------ mortgages, deeds, conveyances, transfers, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, proxies, and other instruments or documents may be signed, executed, acknowledged, verified, delivered or accepted in behalf of the Association by the Chairman of the Board, or the President, or any Vice Chairman of the Board, any Vice president or Assistant Vice President, or the Secretary or Assistant Secretary, Cashier, or Assistant Cashier, or, if in connection with the exercise of fiduciary powers of the Association, by any of said officers or by any Trust Officer or Assistant Trust Office; provided, however, that where required, any such instruments may also be executed, acknowledge, verified, delivered, or accepted in behalf of The Association in such other manner and by such other officers as the Board of Directors may from time to time direct. the provisions of this Section 8.2 are supplementary to any other provision of these By Laws. I HEREBY CERTIFY THAT THE forgoing is a true and complete extract from the By- Laws of First Union National Bank of North Carolina, a national banking association, now in full force and affect. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of said Association on February 26, 1997. /s/ Daniel J. Ober -------------------------- Assistant Secretary 6 EX-99.1 18 LETTER OF TRANSMITTAL EXHIBIT 99.1 LETTER OF TRANSMITTAL INTEGON CAPITAL I OFFER TO EXCHANGE ITS 10 3/4% CAPITAL SECURITIES, SERIES B (THE "EXCHANGE CAPITAL SECURITIES") WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OF ITS OUTSTANDING 10 3/4% CAPITAL SECURITIES, SERIES A (THE "OUTSTANDING CAPITAL SECURITIES") (LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) PURSUANT TO THE PROSPECTUS, DATED ______ __, 1997 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997 OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY BE EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE. TO: FIRST UNION NATIONAL BANK OF NORTH CAROLINA, EXCHANGE AGENT BY MAIL: BY HAND OR OVERNIGHT DELIVERY: FIRST UNION NATIONAL BANK FIRST UNION NATIONAL BANK OF NORTH CAROLINA OF NORTH CAROLINA 230 SOUTH TRYON STREET 230 SOUTH TRYON STREET 9TH FLOOR 9TH FLOOR CHARLOTTE, NC 28288-1179 CHARLOTTE, NC 28288-1179 ATTENTION: MIKE KLOTZ ATTENTION: MIKE KLOTZ BY FACSIMILE: (704) 383-7199 TO CONFIRM BY TELEPHONE OR FOR INFORMATION: (704) 383-4105 (800) 829-8432 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX BELOW -------------------- 2 List below the Outstanding Capital Securities to which this Letter of Transmittal relates. If the space provided below is inadequate, certificate numbers and number of Outstanding Capital Securities represented thereby should be listed on a separate signed schedule affixed hereto.
Description of Outstanding Capital Securities (1) (2) (3) - ------------------------------------------------------------------------------------------------------------------ NUMBER NUMBER OF OF OUTSTANDING OUTSTANDING CAPITAL SECURITIES NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE CAPITAL TENDERED (PLEASE FILL IN, IF BLANK) NUMBER(S)/*/ SECURITIES (IF LESS THAN ALL)/**/ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------
/*/ Need not be completed by book-entry holders. /**/ Outstanding Capital Securities may be tendered in whole or in part in denominations of $100,000 (100 Outstanding Capital Securities) or any integral multiple of $1,000 in excess thereof, provided that if any Outstanding Capital Securities are tendered for exchange in part, the untendered aggregate Liquidation Amount thereof must be $100,000 (100 Outstanding Capital Securities) or any integral multiple of $1,000 in excess thereof. Unless otherwise indicated, the holder will be deemed to have tendered the full number of Outstanding Capital Securities represented by such certificates of Outstanding Capital Securities. 3 The undersigned acknowledges that he or she has received and reviewed the Prospectus, dated ______________, 1997 (the "Prospectus"), of Integon Capital I, a Delaware business trust (the "Trust"), and this Letter of Transmittal (the "Letter"), which together constitute the Trust's offer (the "Exchange Offer") to exchange its 10 3/4% Capital Securities, Series B (the "Exchange Capital Securities") for a like aggregate Liquidation Amount of its issued and outstanding 10 3/4% Capital Securities, Series A (the "Outstanding Capital Securities"), respectively, from the holders thereof. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Prospectus. The undersigned has completed the appropriate boxes above and below and signed this letter to indicate the action the undersigned desires to take with respect to the Exchange Offer. This Letter is to be used either if certificates representing Outstanding Capital Securities are to be forwarded herewith or if delivery of Outstanding Capital Securities is to be made by book-entry transfer to an account maintained by the Exchange Agent at The Depository Trust Company, pursuant to the procedures set forth in "Exchange Offer--Procedures for Tendering Outstanding Capital Securities" in the Prospectus. Delivery of this Letter and any other required documents should be made to the Exchange Agent. Delivery of documents to a book-entry transfer facility does not constitute delivery to the Exchange Agent. Holders whose Outstanding Capital Securities are not immediately available or who cannot deliver their Outstanding Capital Securities and all other documents required hereby to the Exchange Agent on or prior to the Expiration Date must tender their Outstanding Capital Securities according to the guaranteed delivery procedure set forth in the Prospectus under the caption "Exchange Offer--Procedures for Tendering Outstanding Capital Securities." See Instruction 1. [ ] CHECK HERE IF OUTSTANDING CAPITAL SECURITIES ARE BEING DELIVERED BY BOOK- ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution [ ] The Depository Trust Company ------------------ Account Number ------------------------------------------------------------------ Transaction Code Number --------------------------------------------------------- [ ] CHECK HERE IF OUTSTANDING CAPITAL SECURITIES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name of Registered Holder(s) ---------------------------------------------------- Name of Eligible Institution that Guaranteed Delivery --------------------------- If delivered by book-entry transfer: Name of Tendering Institution --------------------------------------------------------------------- Account Number ------------------------------------------------------------------ Transaction Code Number --------------------------------------------------------- [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name ---------------------------------------------------------------------------- Address ------------------------------------------------------------------------- ------------------------------------------------------------------------- 4 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Trust and Integon Corporation, a Delaware corporation (the "Company") the aggregate Liquidation Amount of Outstanding Capital Securities indicated above in exchange for a like aggregate Liquidation Amount of Exchange Capital Securities of the Trust, upon the terms and subject to the conditions set forth in the Prospectus. Subject to, and effective upon, the acceptance for exchange of the Outstanding Capital Securities tendered hereby, the undersigned hereby sells, exchanges, assigns and transfers to, or upon the order of, the Trust all right, title and interest in and to such Outstanding Capital Securities as are being tendered hereby. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, exchange, sell, assign and transfer the Outstanding Capital Securities tendered hereby and that the Trust will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims or proxies when the same are accepted by the Trust. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company, Trust or the Exchange Agent to be necessary or desirable to complete the tender, exchange, sale, assignment and transfer of the Outstanding Capital Securities tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney in fact (with full knowledge that the Exchange Agent is also acting as agent of the Company and the Trust in connection with the Exchange Offer) of the undersigned with respect to the tendered Outstanding Capital Securities, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), subject only to the right of withdrawal described in Instruction 2, to (i) deliver certificates for the tendered Outstanding Capital Securities to the Company or the Trust or cause ownership of the tendered Outstanding Capital Securities to be transferred to, or upon the order of, the Trust, on the books of the registrar for the Outstanding Capital Securities and deliver all accompanying evidences of transfer and authenticity to, or transfer ownership of such Outstanding Capital Securities on the account books maintained by DTC to, or upon the order of, the Trust, upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange Capital Securities to be issued in exchange for such Outstanding Capital Securities pursuant to the Exchange Offer, and (ii) receive for the account of the Trust all benefits and otherwise exercise all rights of beneficial ownership of the tendered Outstanding Capital Securities, all in accordance with the terms of the Exchange Offer. The undersigned also acknowledges that this Exchange Offer is being made in reliance on the Company's and the Trust's belief, based on no-action letters issued by the staff of the Securities and Exchange Commission (the "SEC") to third parties, that the Exchange Capital Securities issued in exchange for the Outstanding Capital Securities pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than (i) a broker-dealer who purchases such Exchange Capital Securities directly from the Trust to resell pursuant to Rule 144A or any other available exemption under the Securities Act of 1933, as amended (the "Securities Act"), or (ii) a person that is an "affiliate" of the Trust or the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such Exchange Capital Securities are acquired in the ordinary course of such holders' business and such holders have no arrangements with any person to participate in the distribution of such Exchange Capital Securities. If the undersigned is not a broker-dealer or is a broker-dealer but will not receive Exchange Capital Securities for its own account in exchange for Outstanding Capital Securities, the undersigned represents that (i) the Exchange Capital Securities acquired pursuant to the Exchange Offer are being obtained in the ordinary course of such holder's business, (ii) such holder has no arrangements or understanding with any person to participate in the distribution of such Exchange Capital Securities, and (iii) such holder is not an "affiliate" of the Trust or the Company, as defined in Rule 405 under the Securities Act, or, if such holder is an affiliate, that such holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If the undersigned is a broker-dealer that will receive Exchange Capital Securities for its own account in exchange for Outstanding Capital Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Capital Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 5 The Company and the Trust have agreed that, subject to the provisions of the Registration Rights Agreement and to the limitations described in the Prospectus, the Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer (as defined below) in connection with resales of Exchange Capital Securities received in exchange for Outstanding Capital Securities where such Outstanding Capital Securities were acquired by such Participating Broker-Dealer for its own account as a result of market-making activities or other trading activities, for a period ending 180 days after the Exchange Offer is completed or, if earlier, when all such Exchange Capital Securities have been disposed of by such Participating Broker- Dealer. In that regard, each broker-dealer who acquired Outstanding Capital Securities for its own account as a result of market-making or other trading activities (a "Participating Broker-Dealer"), by tendering such Outstanding Capital Securities and executing this Letter, agrees that, upon receipt of notice from the Company or the Trust of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in the Prospectus untrue in any material respect or which causes the Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference therein, in light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Rights Agreement, such Participating Broker-Dealer will suspend the sale of Exchange Capital Securities (or the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as applicable) pursuant to the Prospectus until the Company or the Trust has amended or supplemented the Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to such Participating Broker-Dealer or the Company or the Trust has given notice that the sale of the Exchange Capital Securities (or the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as applicable) may be resumed, as the case may be. The undersigned acknowledges that holders of Outstanding Capital Securities whose Outstanding Capital Securities are accepted for exchange will be deemed to have waived the right to receive any payment in respect of any unpaid dividends on the Outstanding Capital Securities that have accumulated to the date of the issuance of the Exchange Capital Securities. Consequently, holders who exchange their Outstanding Capital Securities for Exchange Capital Securities will receive the same dividends on the Exchange Capital Securities that holders of the Outstanding Capital Securities who do not accept the Exchange Offer will receive on the Outstanding Capital Securities. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in the instructions contained in this Letter. The undersigned understands that tenders of the Outstanding Capital Securities pursuant to any one of the procedures described under "Exchange Offer--Procedures for Tendering Outstanding Capital Securities" in the Prospectus and in the instructions hereto will constitute a binding agreement among the undersigned, the Company and the Trust in accordance with the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under certain circumstances set forth in the Prospectus under "Exchange Offer--Certain Conditions to the Exchange Offer," the Trust and the Company may not be required to accept for exchange any of the Outstanding Capital Securities tendered. Outstanding Capital Securities not accepted for exchange or withdrawn will be returned to the undersigned at the address set forth below unless otherwise indicated under "Special Delivery Instructions" below. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, the undersigned hereby requests that the Exchange Capital Securities (and, if applicable, substitute certificates representing Outstanding Capital Securities for any Outstanding Capital Securities not exchanged) be issued in the name of the undersigned. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, the undersigned hereby requests that the Exchange Capital Securities (and, if applicable, substitute certificates representing Outstanding Capital Securities for any Outstanding Capital Securities not exchanged) be sent to the undersigned at the address shown above in the box entitled "Description Outstanding Capital Securities." THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING CAPITAL SECURITIES" ABOVE AND SIGNING THIS LETTER AND DELIVERING SUCH OUTSTANDING 6 CAPITAL SECURITIES AND THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OUTSTANDING CAPITAL SECURITIES AS SET FORTH IN SUCH BOX ABOVE. 7 PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS) (Complete Accompanying Substitute Form W-9) X .............................. .............................. X .............................. .............................. Signature(s) of Owner(s) Date Area Code and Telephone Number .......... If a holder is tendering any Outstanding Capital Securities, this Letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Outstanding Capital Securities or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please indicate such capacity below. See Instruction 3. Name(s): ...................................................................... ...................................................................... (PLEASE TYPE OR PRINT) Capacity: ...................................................................... Address: ...................................................................... ...................................................................... (INCLUDE ZIP CODE) SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 3) Signature(s) Guaranteed by an Eligible Institution: ...................................................... (AUTHORIZED SIGNATURE) .............................................................................. (TITLE) .............................................................................. (NAME OF FIRM) Dated: ........................................................................ 8
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if Exchange Capital To be completed ONLY if Exchange Capital Securities (and if applicable Outstanding Capital Securities (and if applicable Outstanding Capital Securities not exchanged) are to be issued in the Securities not exchanged) are to be sent to someone name of and sent to someone other than the person other than the person or persons whose signature(s) or persons whose signature(s) appear on this Letter appear(s) on this Letter above or to such person or above. persons at an address other than shown in the box entitled "Description of Outstanding Capital Securities" on this Letter above. Issue Exchange Capital Securities (and if applicable Outstanding Capital Securities not exchanged) to: Mail Exchange Capital Securities (and if applicable Outstanding Capital Securities not exchanged) to: Name(s): .......................................... (PLEASE TYPE OR PRINT) Name(s): .......................................... .......................................... (PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT) .......................................... Address: (PLEASE TYPE OR PRINT) .......................................... Address: (INCLUDE ZIP CODE) .......................................... .......................................... (COMPLETE SUBSTITUTE FORM W-9 (INCLUDE ZIP CODE) AND SIGNATURE GUARANTEE SECTION)
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH, THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATE(S) FOR OUTSTANDING CAPITAL SECURITIES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER OF OUTSTANDING CAPITAL SECURITIES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. 9 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER AND OUTSTANDING CAPITAL SECURITIES; GUARANTEED DELIVERY PROCEDURE This Letter is to be used to forward, and must accompany, all Outstanding Capital Securities tendered pursuant to the Exchange Offer. Certificates representing the Outstanding Capital Securities in proper form for transfer (or a confirmation of book-entry transfer of such Outstanding Capital Securities into the Exchange Agent's account at the book-entry transfer facility) as well as a properly completed and duly executed copy of this Letter and all other documents and signature guarantees required by this Letter, must be received by the Exchange Agent at its address set forth herein on or before the Expiration Date. THE METHOD OF DELIVERY OF THIS LETTER, THE OUTSTANDING CAPITAL SECURITIES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDERS. DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, OR AN OVERNIGHT OR HAND DELIVERY SERVICE, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY DELIVERY. NO OUTSTANDING CAPITAL SECURITIES SHOULD BE SENT TO THE TRUST OR THE COMPANY. If a holder desires to tender Outstanding Capital Securities and the certificates representing such holder's Outstanding Capital Securities are not immediately available or time will not permit such holder's Letter, certificates representing Outstanding Capital Securities (or a confirmation of book-entry transfer of Outstanding Capital Securities into the Exchange Agent's account at the book-entry transfer facility) or other required documents to reach the Exchange Agent on or before the Expiration Date, such holder may nevertheless tender Outstanding Capital Securities if: (a) such tender is made by or through an Eligible Institution (as defined below); (b) on or prior to the Expiration Date, the Exchange Agent has received a telegram, facsimile or letter from such Eligible Institution setting forth the name and address of the holder of such Outstanding Capital Securities, the name in which such Outstanding Capital Securities are registered, if possible, the certificate number or numbers of the certificate or certificates representing Outstanding Capital Securities to be tendered, and the number of Outstanding Capital Securities tendered and stating that the tender is being made thereby and guaranteeing that, within three business days after the Expiration Date, a duly executed Letter of Transmittal, or facsimile thereof, together with the Outstanding Capital Securities in proper form for transfer (or a confirmation of book-entry transfer of such Outstanding Capital Securities into the Exchange Agent's account at the book-entry transfer facility), and any other documents required by this Letter and the instructions hereto, will be deposited by such Eligible Institution with the Exchange Agent; and (c) this Letter, or a facsimile hereof, and Outstanding Capital Securities in proper form for transfer (or a confirmation of book-entry transfer of such Outstanding Capital Securities into the Exchange Agent's account at the book-entry transfer facility) and all other required documents are received by the Exchange Agent within three business days after the Expiration Date. See "Exchange Offer" in the Prospectus. 10 2. Partial Tenders; Withdrawals Tenders of Outstanding Capital Securities will be accepted only in the aggregate Liquidation Amount of $100,000 (100 Outstanding Capital Securities) or any integral multiple of $1,000 (1 Outstanding Capital Security) in excess thereof, provided that if any Outstanding Capital Securities are tendered for exchange in part, the untendered aggregate Liquidation Amount thereof must be $100,000 (100 Outstanding Capital Securities) or any integral multiple of $1,000 (1 Outstanding Capital Security) in excess thereof. If less than the entire aggregate Liquidation Amount of Outstanding Capital Securities evidenced by any certificate submitted is tendered, the tendering holder should fill in the Liquidation Amount tendered in the column labeled "Number of Outstanding Capital Securities Tendered" of the box entitled "Description of Outstanding Capital Securities" above. The entire aggregate Liquidation Amount of Outstanding Capital Securities delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire aggregate Liquidation Amount of all Outstanding Capital Securities is not tendered, new certificate(s) for Outstanding Capital Securities for the Liquidation Amount of Outstanding Capital Securities not tendered and Exchange Capital Securities exchanged for any Outstanding Capital Securities tendered will be sent to the holder at his or her registered address, unless a different address is provided in the appropriate box on this Letter, as soon as practicable following the Expiration Date. Any holder who has tendered Outstanding Capital Securities may withdraw the tender by delivering written notice of withdrawal to the Exchange Agent prior to the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal sent by letter, telegram or facsimile must be received by the Exchange Agent at its address or facsimile number set forth herein. Any such notice of withdrawal must (i) specify the name of the person having tendered the Outstanding Capital Securities to be withdrawn (the "Depositor"), (ii) identify the Outstanding Capital Securities to be withdrawn (including the certificate number or numbers of the certificate or certificates representing such Outstanding Capital Securities, and number of such Outstanding Capital Securities), (iii) be signed by the holder in the same manner as the original signature on this Letter by which such Outstanding Capital Securities were tendered or as otherwise set forth in Instruction 3 below (including any required signature guarantees), or be accompanied by documents of transfer sufficient to have the Transfer Agent with respect to the Outstanding Capital Securities (the "Transfer Agent") register the transfer of such Outstanding Capital Securities into the name of the person withdrawing the tender and (iv) specify the name in which any Outstanding Capital Securities are to be registered, if different from that of the Depositor. If Outstanding Capital Securities have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Outstanding Capital Securities or otherwise comply with the book-entry transfer facility's procedures. See "Exchange Offer--Withdrawal Rights" in the Prospectus. All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company and the Trust in their sole discretion, which determination will be final and binding on all parties. Any Outstanding Capital Securities so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Capital Securities will be issued with respect thereto unless the Outstanding Capital Securities so withdrawn are validly retendered. Any Outstanding Capital Securities which have been tendered but which are withdrawn will be returned to the holder thereof without cost to such holder as soon as practicable after such withdrawal. Properly withdrawn Outstanding Capital Securities may be retendered by following one of the procedures described in the Prospectus under "Exchange Offer--Procedures for Tendering Outstanding Capital Securities" at any time prior to the Expiration Date. 3. Signatures on this Letter; Stock Powers and Endorsements; Guarantee of Signatures If this Letter is signed by the registered holder of the Outstanding Capital Securities tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without any change whatsoever. If any tendered Outstanding Capital Securities are owned of record by two or more joint owners, all such owners must sign this Letter. 11 If any tendered Outstanding Capital Securities are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates. If this Letter or any Outstanding Capital Securities or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Trust or the Company, proper evidence satisfactory to the Trust and the Company of their authority so to act must be submitted. The signatures on this Letter or a notice of withdrawal, as the case may be, must be guaranteed unless the Outstanding Capital Securities surrendered for exchange pursuant thereto are tendered (i) by a registered holder of the Outstanding Capital Securities who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" in this Letter or (ii) for the account of an Eligible Institution. In the event that the signatures in this Letter or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., or by a commercial bank or trust company having an office or correspondent in the United States (collectively, "Eligible Institutions"). If Outstanding Capital Securities are registered in the name of a person other than the signer of this Letter, the Outstanding Capital Securities surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Trust or the Company in their sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Institution. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS Tendering holders of Outstanding Capital Securities should indicate in the applicable box the name and address to which Exchange Capital Securities issued pursuant to the Exchange Offer are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. If no such instructions are given, any Exchange Capital Securities will be issued in the name of, and delivered to, the name or address of the person signing this Letter and any Outstanding Capital Securities not accepted for exchange will be returned to the name or address of the person signing his Letter. 5. Backup Federal Income Tax Withholding and Substitute Form W-9 Under the federal income tax laws, payments that may be made by the Trust on account of Exchange Capital Securities issued pursuant to the Exchange Offer may be subject to backup withholding at the rate of 31%. In order to avoid such backup withholding, each tendering holder should complete and sign the Substitute Form W-9 included in this Letter and either (a) provide the correct taxpayer identification number ("TIN") and certify, under penalties of perjury, that the TIN provided is correct and that (i) the holder has not been notified by the Internal Revenue Service (the "IRS") that the holder is subject to backup withholding as a result of failure to report all interest or dividends or (ii) the IRS has notified the holder that the holder is no longer subject to backup withholding; or (b) provide an adequate basis for exemption. If the tendering holder has not been issued a TIN and has applied for one, or intends to apply for one in the near future, such holder should write "Applied For" in the space provided for the TIN in Part I of the Substitute Form W-9, sign and date the Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I, the Trust (or the Transfer Agent for the Exchange Capital Securities) shall retain 31% of payments made to the tendering holder during the sixty (60) day period following the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent or the Trust with its TIN within sixty (60) days after the date of the Substitute Form W-9, the Trust (or the Paying Agent with respect to the Capital Securities (the "Paying Agent")) shall remit such amounts retained during the sixty (60) day period to the holder and no further amounts shall be retained or withheld from payments made to the holder thereafter. If, however, the holder has not provided the Exchange Agent or the Trust with its TIN within such sixty (60) day period, the Trust (or the Paying Agent) shall remit such previously retained amounts to the IRS as backup withholding. In general, if a holder is an individual, the taxpayer identification number is the Social Security number of such individual. If the Exchange Agent or the Trust is not provided with the 12 correct taxpayer identification number, the holder may be subject to a $50 penalty imposed by the IRS. Certain holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such holder must submit a statement (generally, IRS Form W-8), signed under penalties of perjury, attesting to that individual's exempt status. Such statements can be obtained from the Exchange Agent. For further information concerning backup withholding and instructions for completing the Substitute Form W-9 (including how to obtain a taxpayer identification number if you do not have one and how to complete the Substitute Form W-9 if Outstanding Capital Securities are registered in more than one name), consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. Failure to complete the Substitute Form W-9 will not, by itself, cause Outstanding Capital Securities to be deemed invalidly tendered, but may require the Trust (or the Paying Agent) to withhold 31% of the amount of any payments made on account of the Exchange Capital Securities. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. 6. Transfer Taxes The Company will pay all transfer taxes, if any, applicable to the exchange of Outstanding Capital Securities to the Trust or its order pursuant to the Exchange Offer. If, however, certificates representing Exchange Capital Securities or Outstanding Capital Securities not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Outstanding Capital Securities tendered hereby, or if tendered Outstanding Capital Securities are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the exchange of Outstanding Capital Securities to the Trust or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Outstanding Capital Securities specified in this Letter. 7. No Conditional Tenders; WAIVER OF CONDITIONS All questions as to the validity, form, eligibility (including time of receipt) and acceptance of Outstanding Capital Securities tendered for exchange will be determined by the Company and the Trust in their sole discretion, which determination will be final and binding on all parties. The Company and the Trust reserve the right to reject any and all tenders of any particular Outstanding Capital Securities not properly tendered or reject any particular Outstanding Capital Securities the acceptance of which might, in the judgment of the Company and the Trust or their counsel, be unlawful. The Company and the Trust also reserve the absolute right to waive any defects or irregularities or condition of the Exchange Offer as to any particular Outstanding Capital Securities either before or after the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Outstanding Capital Securities in the Exchange Offer). The interpretation of the terms and conditions of the Exchange Offer (including the Letter of Transmittal and the instructions thereto) by the Company and the Trust shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Outstanding Capital Securities for exchange must be cured within such time as the Company and the Trust shall determine. None of the Company, the Trust, nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Outstanding Capital Securities for exchange, nor shall any of them incur any liability for failure to give such notification. 8. Inadequate Space If the space provided herein is inadequate, the number of Outstanding Capital Securities being tendered and the certificate number or numbers (if available) should be listed on a separate schedule attached hereto and separately signed by all parties required to sign this Letter. 13 9. Mutilated, Lost, Stolen or Destroyed Outstanding Capital Securities Any holder whose certificates representing Outstanding Capital Securities have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. The Letter and related documents cannot be processed until the procedures for replacing mutilated, lost, destroyed or stolen certificates have been followed. 10. Requests for Assistance or Additional Copies Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, may be directed to the Exchange Agent at the address and telephone number indicated above. 14 TO BE COMPLETED BY ALL TENDERING HOLDERS (See Instruction 5) PAYER'S NAME: INTEGON CAPITAL I SUBSTITUTE PART I--Taxpayer Identification Number Form W-9 ______________________________ Department of the Treasury Enter your taxpayer identification number in the Social Security Number Internal Revenue Service appropriate box. For most individuals, this is your social security number. If you do not have a number, see OR how to obtain a "TIN" in the enclosed Guidelines. ______________________________ NOTE: If the account is in more than one name, see the Employer Identification Number chart on page 2 of the enclosed Guidelines to determine what number to give. - ------------------------------------------------------------------------------------------------------------------------------------ PART II--For Payees Exempt From Backup Withholding (see enclosed Guidelines) - ------------------------------------------------------------------------------------------------------------------------------------ Payer's Request for Taxpayer CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT: Identification Number (TIN) (1) the number shown on this form is my correct Taxpayer Identification Number (or I am waiting and Certification for a number to be issued to me), and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends or the IRS has notified me that I am no longer subject to backup withholding. - ------------------------------------------------------------------------------------------------------------------------------------ SIGNATURE______________________________________ DATE____________________ - ------------------------------------------------------------------------------------------------------------------------------------ Certification Guidelines -- You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to backup withholding because of underreporting of interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). - ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER I certify, under penalties of perjury, that a Taxpayer Identification Number has not been issued to me, and that I mailed or delivered an application to receive a Taxpayer Identification Number to the appropriate Internal Revenue Service Center or Social Security Administration Office (or I intend to mail or deliver an application in the near future). I understand that if I do not provide a Taxpayer Identification Number to the payer, 31 percent of all payments made to me on account of the Exchange Capital Securities shall be retained until I provide a Taxpayer Identification Number to the payer and that, if I do not provide my Taxpayer Identification Number within sixty (60) days, such retained amounts shall be remitted to the Internal Revenue Service as backup withholding and 31 percent of all reportable payments made to me thereafter will be withheld and remitted to the Internal Revenue Service until I provide a Taxpayer Identification Number. SIGNATURE DATE --------------------------- --------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE EXCHANGE CAPITAL SECURITIES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 15 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.-- Social Security numbers have nine digits separated by two hyphens: i.e., 000- 00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer.
- ---------------------------------------------------------------------------------------------------------------------------------- Give the Give the EMPLOYER For this type of account: SOCIAL SECURITY For this type of account: IDENTIFICATION number of-- number of-- - ---------------------------------------------------------------------------------------------------------------------------------- 1. An individual's account The individual 9. A valid trust, estate or The Legal entity (Do not pension trust furnish the identifying number of the personal representative 2. Two or more individuals The actual owner of the or trustee unless the legal (joint account) account or, if combined entity itself is not designated funds, any one of the in the account title.)/5/ individuals/1/ 3. Husband and wife (joint The actual owner of the 10. Corporate account The corporation account) account or, if joint funds, either person/1/ 4. Custodian account of a The minor/2/ 11. Religious, charitable, The organization minor (Uniform Gift to or Minors Act) educational organization account 5. Adult and minor (joint The adult or, if the minor 12. Company account held in The company account) is the name of the business the only contributor, the minor/1/ 6. Account in the name of The ward, minor, or 13. Association, club, or The organization guardian or committee for a incompetent person/3/ other tax-exempt designated ward, minor, or organization incompetent person 7. a. The usual revocable The grantor-trustee/1/ 14. A broker or registered The broker or nominee savings trust account nominee (grantor is also trustee) b. So-called trust account The actual owner/1/ 15. Account with the The public entity that is not a legal or Department of valid trust under State Agriculture in the name law of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments 16. Sole proprietorship The owner/4/ 8. Sole proprietorship account The owner/4/ account - ----------------------------------------------------------------------------------------------------------------------------------
/1/ List first and circle the name of the person whose number you furnish. - --- /2/ Circle the minor's name and furnish the minor's social security number. - --- /3/ Circle the ward's, minor's or incompetent person's name and furnish such - --- person's social security number. /4/ Show the name of the owner. See item 8 or 16. You may also enter your - --- business name. /5/ List first and circle the name of the legal trust, estate, or pension - --- trust. Note: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 16 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Obtaining a Number If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. Payees Exempt from Backup Withholding Payees specifically exempted from backup withholding on ALL payments include the following: . A corporation. . A financial institution. . An organization exempt from tax under section 501(a), or an individual retirement plan. . The United States or any agency or instrumentality thereof. . A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. . A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. . An international organization or any agency, or instrumentality thereof. . A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. . A real estate investment trust. . A common trust fund operated by a bank under section 584(a). . An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). . An entity registered at all times under the Investment Company Act of 1940. . A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: . Payment to nonresident aliens subject to withholding under section 1441. . Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. . Payments of patronage dividends where the amount received is not paid in money. . Payments made by certain foreign organizations. . Payments made to a nominee. Payments of interest not generally subject to backup with holding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $500 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. . Payments of tax-exempt interest (including exempt-interest dividends under section 852). . Payments described in section 6049(b)(5) to nonresident aliens. . Payments on tax-free covenant bonds under section 1451. . Payments made by certain foreign organizations. . Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. Privacy Act Notice.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. Penalties (1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) Civil Penalty for False Information With Respect to Withholding.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) Criminal Penalty for Falsifying Information.-- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-99.2 19 NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF 10 3/4% CAPITAL SECURITIES, SERIES A (LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY) OF INTEGON CAPITAL I As set forth in the Exchange Offer (as defined below), this Notice of Guaranteed Delivery (or a facsimile hereof) or one substantially equivalent hereto or the electronic form used by The Depository Trust Company ("DTC") for this purpose must be used to accept the Exchange Offer if certificates for 10 3/4% Capital Securities, Series A (the "Outstanding Capital Securities") of Integon Capital I, a Delaware statutory business trust (the "Trust"), are not immediately available to the registered holder of such Outstanding Capital Securities, or if a participant in DTC is unable to complete the procedures for book-entry transfer on a timely basis of Outstanding Capital Securities to the account maintained by First Union National Bank of North Carolina (the "Exchange Agent") at DTC, or if time will not permit all documents required by the Exchange Offer to reach the Exchange Agent prior to 5:00 p.m., New York City time, on _______________ 1997, unless extended (the "Expiration Date"). This Notice of Guaranteed Delivery (or a facsimile hereof) or one substantially equivalent hereto may be delivered by mail (registered or certified mail is recommended), by facsimile transmission, by hand or by overnight carrier to the Exchange Agent. See "Exchange Offer--Procedures for Tendering Outstanding Capital Securities." Capitalized terms used herein and not defined herein have the meanings assigned to them in the Exchange Offer. The Exchange Agent is: First Union National Bank of North Carolina By Registered or Certified By Facsimile: By Hand/Overnight Carrier: Mail: First Union National Bank First Union National Bank First Union National Bank of North Carolina of North Carolina of North Carolina Attn: Mike Klotz 230 South Tryon Street 230 South Tryon Street (704) 383-7199 Charlotte, NC 28288-1179 Charlotte, NC 28288-1179 Attn: Mike Klotz (For Eligible Institutions Only) Confirm by Telephone: (704) 383-4105 For Information Call: (800) 829-8432
2 Delivery of this Notice of Guaranteed Delivery to an address other than as set forth above or transmission of this Notice of Guaranteed Delivery via a facsimile number other than the number listed above will not constitute a valid delivery. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution (as defined therein) under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. The undersigned hereby tenders to the Trust and to Integon Corporation, a Delaware corporation ("the Company"), the aggregate liquidation amount of Outstanding Capital Securities indicated below pursuant to the guaranteed delivery procedures and upon the terms and subject to the conditions set forth in the accompanying Prospectus dated ____________, 1997 (as the same may be amended or supplemented from time to time, the "Prospectus") and in the related Letter of Transmittal (which together with the Prospectus constitute the "Exchange Offer"), receipt of which is hereby acknowledged. The undersigned hereby represents, warrants and agrees that the undersigned has full power and authority to tender, exchange, sell, assign, and transfer the tendered Outstanding Capital Securities and that the Trust will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances when the tendered Outstanding Capital Securities are acquired by the Trust as contemplated herein, and the tendered Outstanding Capital Securities are not subject to any adverse claims or proxies. The undersigned warrants and agrees that the undersigned will, upon request, execute and deliver any additional documents deemed by the Company, the Trust of the Exchange Agent to be necessary or desirable to complete the tender, exchange, sale, assignment and transfer of the tendered Outstanding Capital Securities, and that the undersigned will comply with its obligations under the Registration Rights Agreement. The undersigned has read and agrees to all of the terms of the Exchange Offer. BY TENDERING OUTSTANDING CAPITAL SECURITIES AND EXECUTING THIS NOTICE OF GUARANTEED DELIVERY, THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT (i) NEITHER THE UNDERSIGNED NOR ANY BENEFICIAL OWNER(S) IS AN "AFFILIATE" OF THE COMPANY OR THE TRUST, (ii) ANY EXCHANGE CAPITAL SECURITIES TO BE RECEIVED BY THE UNDERSIGNED AND ANY BENEFICIAL OWNER(S) ARE BEING ACQUIRED BY THE UNDERSIGNED AND ANY BENEFICIAL OWNER(S) IN THE ORDINARY COURSE OF BUSINESS OF THE UNDERSIGNED ANY BENEFICIAL OWNER(S), (iii) THE UNDERSIGNED AND EACH BENEFICIAL OWNER HAVE NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO 3 PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF EXCHANGE CAPITAL SECURITIES TO BE RECEIVED IN THE EXCHANGE OFFER, AND (iv) IF THE UNDERSIGNED OR ANY BENEFICIAL OWNER IS NOT A BROKER-DEALER, THE UNDERSIGNED OR ANY SUCH BENEFICIAL OWNER IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH EXCHANGE CAPITAL SECURITIES. BY TENDERING OUTSTANDING CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS NOTICE OF GUARANTEED DELIVERY, THE UNDERSIGNED OR ANY BENEFICIAL OWNER(S) OF OUTSTANDING CAPITAL SECURITIES WHICH IS A BROKER- DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT SUCH OUTSTANDING CAPITAL SECURITIES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS THE RESULT OF MARKET- MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL DELIVER A PROSPECTUS MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH EXCHANGE CAPITAL SECURITIES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT). All questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of tendered Outstanding Capital Securities will be determined by the Company and the Trust, in their sole discretion, whose determination shall be final and binding on all parties. The Company and the Trust reserve the absolute right, in their sole and absolute discretion, to reject any and all tenders determined by the Company and the Trust not to be in proper form or the acceptance of which, or exchange for, may, in the view of the Company and the Trust or of counsel to the Company and the Trust, be unlawful. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, legal representatives, successors and assigns of the undersigned. 4 Name(s) of Registered Holder(s):__________________________________________ __________________________________________________________________________ Please Print Address(es):______________________________________________________________ __________________________________________________________________________ Area Code and Tel. No(s):_________________________________________________ x____________________________________________________________________ x____________________________________________________________________ Signature(s) of Owner(s) or Authorized Signatory Must be signed by the registered holder(s) of the tendered Outstanding Capital Securities as their name(s) appear(s) on certificates for such tendered Outstanding Capital Securities, or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below.
Certificate No(s) Aggregate Liquidation Aggregate Liquidation (if available) Amount Represented Amount Tendered by Certificate _________________ _____________________ _____________________ _________________ _____________________ _____________________ _________________ _____________________ _____________________ _________________ _____________________ _____________________ _________________ _____________________ _____________________
If Outstanding Capital Securities will be delivered by book-entry transfer to The Depository Trust Company, provide the following information: Signature: ____________________________________________________________ Account Number: ______________________________________________________________ Date: ____________________________________________________________ THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED 5 GUARANTEE (Not to be used for signature guarantee) The undersigned, a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, as an "eligible guarantor institution," including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker, municipal securities dealer, government securities broker, government securities dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association recognized program (each of the foregoing being referred to as an "Eligible Institution"), hereby guarantees delivery to the Exchange Agent, at one of its addresses set forth above, either certificates for the Outstanding Capital Securities tendered hereby, in proper form for transfer, or confirmation of the book-entry transfer of such Outstanding Capital Securities to the Exchange Agent's account at The Depository Trust Company, pursuant to the procedures for book-entry transfer set forth in the Prospectus, in either case together with one or more properly completed and duly executed Letter(s) of Transmittal (or facsimile thereof) and any other documents required by the Letter of Transmittal, all within three (3) business days after the date of execution of this Notice of Guaranteed Delivery. The undersigned acknowledges that it must communicate the guarantee to the Exchange Agent and must deliver the Letter of Transmittal and certificates for the Outstanding Capital Securities tendered hereby to the Exchange Agent within the time period shown hereon and that failure to do so could result in a financial loss to the undersigned.
______________________ ___________________________________ Firm Authorized Signature ______________________ Name ______________________________ Address (Please Type or Print) ______________________ Title ____________________________ Zip Code Dated: ___________________, 1997 Area Code and Tel. No.: ____________________________________
DO NOT SEND CERTIFICATES FOR OUTSTANDING CAPITAL SECURITIES WITH THIS NOTICE OF GUARANTEED DELIVERY. ACTUAL SURRENDER OF OUTSTANDING CAPITAL SECURITIES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS. EX-99.3 20 EXCHANGE AGENCY AGREEMENT EXHIBIT 99.3 EXCHANGE AGENCY AGREEMENT ------------------------- March __, 1997 First Union National Bank of North Carolina 230 South Tryon Street 9th Floor Charlotte, NC 28288-1179 Ladies and Gentlemen: Integon Corporation, a Delaware Corporation (the "Company"), and Integon Capital I, a Delaware statutory business trust (the "Trust"), propose to make an offer (the "Exchange Offer") to exchange 10 3/4% Capital Securities, Series B of the Trust, having a Liquidation Amount of $1,000 per security (the "Exchange Capital Securities"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like aggregate Liquidation Amount of outstanding 10 3/4% Capital Securities, Series A of the Trust, having a Liquidation Amount of $1,000 per security (the "Outstanding Capital Securities"). The terms and conditions of the Exchange Offer as currently contemplated are set forth in a prospectus, dated ____________________, 1997 (the "Prospectus"), and in the related Letter of Transmittal, proposed to be distributed to all record holders of Outstanding Capital Securities. The Outstanding Capital Securities and the Exchange Capital Securities are collectively referred to herein as the "Capital Securities." The Company and the Trust hereby appoint First Union National Bank of North Carolina ("First Union") to act as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. References hereinafter to "you" shall refer to First Union. The Exchange Offer is expected to be commenced by the Company and the Trust on or about ___________________, 1997. The Letter of Transmittal accompanying the Prospectus is to be used by the holders of Outstanding Capital Securities to accept the Exchange Offer, and contains instructions with respect to the delivery of certificates representing Outstanding Capital Securities tendered in connection therewith. The Exchange Offer shall expire at 5:00 P.M., New York City time, on ____________________, 1997 or on such later date or time to which the Company and the Trust may extend the Exchange Offer (the "Expiration Date"). Subject to the terms and conditions set forth in the Prospectus, the Company and the Trust expressly reserve the right to extend the Exchange Offer from time to time and may extend the Exchange Offer by giving oral (confirmed in writing) or written notice to you before 2 9:00 A.M., New York City time, on the business day following the previously scheduled Expiration Date. The Company and the Trust expressly reserve the right to amend or terminate the Exchange Offer, and not to accept for exchange any Outstanding Capital Securities not theretofore accepted for exchange, upon the occurrence of any of the conditions of the Exchange Offer specified in the Prospectus under the caption "Exchange Offer--Conditions to the Exchange Offer." The Company and the Trust will give oral (confirmed in writing) or written notice of any amendment, termination or nonacceptance to you as promptly as practicable. In carrying out your duties as Exchange Agent, you are to act in accordance with the following instructions: 1. You will perform such duties and only such duties as are specifically set forth in the section of the Prospectus captioned "Exchange Offer" or as specifically set forth herein; provided, however, that in no way -------- ------- will your general duty to act in good faith be discharged by the foregoing. 2. You will arrange with The Depository Trust Company (the "Book-Entry Transfer Facility") for the establishment of an account or other procedures with respect to the Outstanding Capital Securities at The Book-Entry Transfer Facility for purposes of the Exchange Offer within two business days after the date of the Prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of the Outstanding Capital Securities by causing the Book-Entry Transfer Facility to transfer such Outstanding Capital Securities into your account in accordance with the Book-Entry Transfer Facility's procedure for such transfer. 3. You are to examine each of the Letters of Transmittal and certificates representing Outstanding Capital Securities (or confirmation of book-entry transfer into your account at the Book-Entry Transfer Facility) and any other documents delivered or mailed to you by or for holders of Outstanding Capital Securities and any book-entry confirmations received by you with respect to Outstanding Capital Securities, to ascertain whether: (i) the Letters of Transmittal and any such other documents are duly executed and properly completed in accordance with the instructions set forth therein and that such book-entry confirmations are in due and proper form and contain the information required to be set forth therein, (ii) Outstanding Capital Securities have otherwise been properly tendered, (iii) Outstanding Capital Securities are tendered in aggregate liquidation amounts of $100,000 (100 Outstanding Capital Securities) or any integral multiple of $1,000 in excess thereof and if any Outstanding Capital Securities are tendered for exchange in part, the untendered aggregate liquidation amount thereof is $100,000 (100 Outstanding Capital Securities) or any integral multiple of $1,000 in excess thereof and (iv) holders have provided their correct Tax Identification Number or 3 required certification. Determination of all questions as to validity, form, eligibility and acceptance for exchange of any Outstanding Capital Securities shall be made by the Company or the Trust, whose determination shall be final and binding. In each case where the Letter of Transmittal or any other document has been improperly completed or executed or any of the certificates representing Outstanding Capital Securities are not in proper form for transfer or some other irregularity in connection with the acceptance of the Exchange Offer exists, you will endeavor promptly to inform the presenters of the need for fulfillment of all requirements and promptly to take any other action as may be necessary or advisable to cause such irregularity to be corrected, and you will promptly notify the Company and the Trust thereof. 4. With the approval of any of the Chairman, the Chief Executive Officer, the President, any Vice President or the Secretary of the Company (each, a "Designated Officer") or an Administrative Trustee of the Trust, or of counsel to the Company or the Trust (such approval, if given orally, to be confirmed in writing) or any other party designated by such a Designated Officer or Administrative Trustee, you are authorized to waive any irregularities in connection with any tender of Outstanding Capital Securities pursuant to the Exchange Offer. 5. Tenders of Outstanding Capital Securities may be made only as set forth in the Letter of Transmittal and in the section of the Prospectus captioned "Exchange Offer--Procedures for Tendering Outstanding Capital Securities," and Outstanding Capital Securities shall be considered properly tendered to you only when tendered in accordance with the procedures set forth therein. Notwithstanding the provisions of this paragraph 5, Outstanding Capital Securities that a Designated Officer or an Administrative Trustee of the Trust shall approve as having been properly tendered shall be considered to be properly tendered (such approval, if given orally, shall be confirmed in writing). 6. You shall advise the Company and the Trust with respect to any Outstanding Capital Securities received as soon as possible after 5:00 p.m. New York City time on the Expiration Date and accept their instructions with respect to disposition of such Outstanding Capital Securities. 7. You shall accept tenders: (a) in cases where Outstanding Capital Securities are registered in two or more names only if signed by all named holders; (b) in cases where the signing person (as indicated on the Letter of Transmittal) is acting in a fiduciary or a representative capacity only when proper evidence of his or her authority so to act is submitted; and 4 (c) from persons other than the registered holder of Outstanding Capital Securities provided that customary transfer requirements, including payment of any applicable transfer taxes, have been satisfied. You shall accept partial tenders of Outstanding Capital Securities where so indicated and as permitted in the Letter of Transmittal and deliver certificates representing Outstanding Capital Securities to the transfer agent for split-up and return any untendered Outstanding Capital Securities to the holder (or such other person as may be designated in the Letter of Transmittal) as promptly as practicable after expiration or termination of the Exchange offer. 8. Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company or the Trust will notify you (such notice if given orally, to be confirmed in writing) of its acceptance, promptly after the Expiration date, of all Outstanding Capital Securities properly tendered and you, on behalf of the Company and the Trust, will exchange such Outstanding Capital Securities for Exchange Capital Securities and cause such Outstanding Capital Securities to be canceled. Delivery of Exchange Capital Securities will be made on behalf of the Trust by you at the rate of $1,000 aggregate liquidation amount of Exchange Capital Securities for each $1,000 aggregate liquidation amount of Outstanding Capital Securities tendered as soon as practicable after notice (such notice if given orally, to be confirmed in writing) of acceptance of said Outstanding Capital Securities by the Company and the Trust; provided, however, that in all cases, Outstanding Capital Securities tendered pursuant to the Exchange Offer will be exchanged only after timely receipt by you of certificates representing such Outstanding Capital Securities (or confirmation of book-entry transfer into your account at the Book-Entry Transfer Facility), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees and any other required documents. Unless otherwise instructed by the Company and the Trust, you shall issue Exchange Capital Securities only in denominations of $100,000 (100 Exchange Capital Securities) or any integral multiple $1,000 in excess thereof. 9. Tenders pursuant to the Exchange Offer are irrevocable, except that, subject to the terms and upon the conditions set forth in the Prospectus and the Letter of Transmittal, Outstanding Capital Securities tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. 10. The Company and the Trust shall not be required to exchange any Outstanding Capital Securities tendered if any of the conditions set forth in the Exchange Offer are not met. Notice of any decision by the Company and the Trust not to exchange any Outstanding Capital Securities tendered shall be given (such notice if given orally, to be confirmed in writing) by the Company or the Trust to you. 5 11. If, pursuant to the Exchange Offer, the Company or the Trust do not accept for exchange all or part of the Outstanding Capital Securities tendered because of an invalid tender, the occurrence of certain other events set forth in the Prospectus under the caption "Exchange Offer--Certain Conditions to the Exchange Offer" or otherwise, you shall as soon as practicable after the expiration or termination of the Exchange Offer return those certificates representing unaccepted Outstanding Capital Securities (or effect appropriate book-entry transfer), together with any related required documents and the Letters of Transmittal relating thereto that are in your possession, to the persons who deposited them. 12. All certificates representing reissued Outstanding Capital Securities, unaccepted Outstanding Capital Securities or Exchange Capital Securities shall be forwarded by (a) first-class certified mail, return receipt requested under a blanket surety bond protecting you, the Company and the Trust from loss or liability arising out of the non-receipt or non-delivery of such certificates or (b) by registered mail insured separately for the replacement value of each of such certificates. 13. You are not authorized to pay or offer to pay any concessions, commissions or solicitation fees to any broker, dealer, bank or other persons or to engage or utilize any person to solicit tenders. 14. As Exchange Agent hereunder you: (a) shall have no duties or obligations other than those specifically set forth herein or as may be subsequently agreed to in writing by you, the Company and the Trust; (b) will be regarded as making no representations and having no responsibilities as to the validity, sufficiency, value or genuineness of any of the certificates or the Outstanding Capital Securities represented thereby deposited with you pursuant to the Exchange Offer, and will not be required to and will make no representation as to the validity, value or genuineness of the Exchange Offer; provided, however, that in no way will your general duty to act -------- ------- in good faith be discharged by the foregoing; (c) shall not be obligated to take any legal action hereunder which might in your reasonable judgment involve any expense or liability, unless you shall have been furnished with reasonable indemnity; (d) may reasonably rely on and shall be protected in acting in reliance upon any certificate, instrument, opinion, notice, letter, telegram or other document or security delivered to you and reasonably believed by you to be genuine and to have been signed by the proper party or parties; 6 (e) may reasonably act upon any tender, statement, request, comment, agreement or other instrument whatsoever not only as to its due execution and validity and effectiveness of its provisions, but also as to the truth and accuracy of any information contained therein, which you shall in good faith believe to be genuine or to have been signed or represented by a proper person or persons; (f) may rely on and shall be protected in acting upon written or oral instructions from any Designated Officer or Administrative Trustee of the Trust; (g) may consult with your counsel with respect to any questions relating to your duties and responsibilities and the written opinion of such independent counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by you hereunder in good faith and in accordance with the written opinion of such counsel; and (h) shall not advise any person tendering Outstanding Capital Securities pursuant to the Exchange Offer as to the wisdom of making such tender or as to the market value or decline or appreciation in market value of any Outstanding Capital Securities. 15. You shall take such action as may from time to time be requested by the Company or the Trust or their respective counsel (and such other action as you may reasonably deem appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery or such other forms as may be approved from time to time by the Company or the Trust, to all persons requesting such documents and to accept and comply with telephone requests for information relating to the Exchange Offer, provided that such information shall relate only to the procedures for accepting (or withdrawing from) the Exchange Offer. The Company or the Trust will furnish you with copies of such documents at your request. 16. You shall advise by cable, facsimile transmission or telephone, and promptly thereafter confirm in writing to the Company and the Trust and such other person or persons as they may request, daily (and more frequently during the week immediately preceding the Expiration Date and if otherwise requested) up to and including the Expiration Date, as to the number of Outstanding Capital Securities that have been tendered pursuant to the Exchange Offer and the items received by you pursuant to this Agreement, separately reporting and giving cumulative totals as to items properly received and items improperly received. In addition, you will also inform, and cooperate in making available to, the Company, the Trust or any such other person or persons upon oral request made from time to time prior to the Expiration Date such other information as it or he or she reasonably requests. Such cooperation shall include, without limitation, the granting by you to the Company and the Trust and such person as the Company or the Trust may request of access to those 7 persons on your staff who are responsible for receiving tenders, in order to ensure that immediately prior to the Expiration Date the Company and the Trust shall have received information in sufficient detail to enable them to decide whether to extend the Exchange Offer. You shall prepare a final list of all persons whose tenders were accepted, the aggregate liquidation amount of Outstanding Capital Securities tendered and the aggregate liquidation amount of Outstanding Capital Securities accepted and you shall deliver said list to the Company and the Trust. 17. Letters of Transmittal, book-entry confirmations and Notices of Guaranteed Delivery shall be stamped by you as to the date and the time of receipt thereof and shall be preserved by you for a period of time at least equal to the period of time you preserve other records pertaining to the transfer of securities, or one year, whichever is longer, and thereafter shall be delivered by you to the Company and the Trust. You shall dispose of unused Letters of Transmittal and other surplus materials by returning them to the Company or the Trust. 18. You hereby expressly waive any lien, encumbrance or right of set-off whatsoever that you may have with respect to funds deposited with you for the payment of transfer taxes by reasons of amounts, if any, borrowed by the Company or the Trust, or any of their subsidiaries or affiliates pursuant to any loan or credit agreement with you or for compensation owed to you hereunder or for any other matter. 19. For services rendered as Exchange Agent hereunder, you shall be entitled to such compensation as set forth on Schedule 1 attached hereto. 20. You hereby acknowledge receipt of the Prospectus and the Letter of Transmittal and further acknowledge that you have examined each of them. Any inconsistency between this Agreement, on the one hand, and the Prospectus and the Letter of Transmittal (as they may be amended from time to time), on the other hand, shall be resolved in favor of the latter two documents, except with respect to the duties, liabilities and indemnification of you as Exchange Agent which shall be controlled by this Agreement. 21. The Company and the Trust covenant and agree to indemnify and hold you in your capacity as Exchange Agent hereunder harmless against any loss, liability, cost or expense, including reasonable attorneys' fees arising out of or in connection with any act, omission, delay or refusal made by you in reasonable reliance upon any signature, endorsement, assignment, certificate, order, request, notice, instruction or other instrument or document reasonably believed by you to be valid, genuine and sufficient and in accepting any tender or effecting any transfer of Outstanding Capital Securities reasonably believed by you in good faith to be authorized, and in delaying or refusing in good faith to accept any tenders or effect any transfer of Outstanding Capital Securities; provided, however, that the Company and the Trust shall not be liable for - -------- ------- indemnification or otherwise for any loss, liabil- 8 ity, cost or expense to the extent arising out of your gross negligence, willful misconduct or bad faith. In no case shall the Company or the Trust be liable under this indemnity with respect to any claim against you unless the Company and the Trust shall be notified by you, by letter or cable or by facsimile confirmed by letter, of the written assertion of a claim against you or of any other action commenced against you, promptly after you shall have received any such written assertion or shall have been served with a summons in connection therewith. In addition, the Company and the Trust shall not be liable for any loss, liability, cost or expense resulting from a settlement entered into without their consent. The Company and the Trust shall be entitled to participate at their own expense in the defense of any such claim or other action, and, if the Company or the Trust so elect, the Company and/or the Trust shall assume the defense of any suit brought to enforce any such claim. In the event that the Company and/or the Trust shall assume the defense of any such suit, the Company and the Trust shall not be liable for the fees and expenses of any additional counsel thereafter retained by you, so long as the Company and the Trust shall retain counsel reasonably satisfactory to you to defend such suit. 22. You shall arrange to comply with all requirements under the tax laws of the United States, including those relating to missing Tax Identification Numbers, and shall file any appropriate reports with the Internal Revenue Service. The Company and the Trust understand that you are required to deduct 31% on payments to holders who have not supplied their correct Taxpayer Identification Number or required certification. Such funds will be turned over to the Internal Revenue Service in accordance with applicable regulations. 23. You shall deliver or cause to be delivered, in a timely manner to each governmental authority to which any transfer taxes are payable in respect of the exchange of Outstanding Capital Securities, your check in the amount of all transfer taxes so payable, and the Company and the Trust shall reimburse you for the amount of any and all transfer taxes payable in respect of the exchange of Outstanding Capital Securities; provided, however, that you shall reimburse -------- ------- the Company or the Trust for amounts refunded to you in respect of your payment of any such transfer taxes, at such time as such refund is received by you. 24. This Agreement and your appointment as Exchange Agent hereunder shall be construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such state, and shall inure to the benefit of, and the obligations created hereby shall be binding upon, the successors and assigns of each of the parties hereto. 25. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 9 26. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 27. This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. This Agreement may not be modified orally. 28. Unless otherwise provided herein, all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party, addressed to it, at its address or telecopy number set forth below: If to the Trust: c/o Integon Corporation 500 West Fifth Street Winston-Salem, North Carolina 27152 Facsimile: (910) 770-2747 Attention: General Counsel If to the Company: Integon Corporation 500 West Fifth Street Winston-Salem, North Carolina 27152 Facsimile: (910) 770-2747 Attention: General Counsel If to the Exchange Agent: First Union National Bank of North Carolina 230 South Tryon Street 9th Floor Charlotte, North Carolina 28288-1179 Facsimile: (704) 383-7199 Attention: Mike Klotz 29. Unless terminated earlier by the parties hereto, this Agreement shall terminate 90 days following the Expiration Date. Notwithstanding the foregoing, Paragraphs 19, 21 and 23 shall survive the termination of this Agreement. Upon any termination of this Agreement, you shall promptly deliver to the Company or the Trust any certificates, funds or property then held by you as Exchange Agent under this Agreement. 10 30. This Agreement shall be binding and effective as of the date hereof. 11 Please acknowledge receipt of this Agreement and confirm the arrangements herein provided by signing and returning the enclosed copy. INTEGON CAPITAL I By:_________________________________ Name: Title: Administrative Trustee INTEGON CORPORATION By:_________________________________ Name: Title: Accepted as of the date first above written. FIRST UNION NATIONAL BANK OF NORTH CAROLINA By:______________________________ Name: Title: Attested By: _________________________________ Name: Title: Schedule 1 FEE SCHEDULE ------------ Pursuant to Paragraph NINETEEN of the Exchange Agency Agreement, the fee for the Exchange Agent is $2,000 plus out-of-pocket expenses. -----END PRIVACY-ENHANCED MESSAGE-----