As filed with the Securities and Exchange Commission on May 16, 2002
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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ACE LIMITED
(Exact name of registrant as specified in its charter)
Cayman Islands 98-0091805
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
ACE Global Headquarters Ed Ota, Esq.
17 Woodbourne Avenue ACE INA Holdings Inc.
Hamilton, HM 08 Bermuda Two Liberty Place
(441) 295-520 1601 Chestnut Street
(Address, including zip Philadelphia,
code, and telephone Pennsylvania 19103
number, including (215) 640-1000
area code, of
Registrant's principal
executive offices)
(Name, address, including
zip code, and telephone
number,
including area code, of
agent for service)
ACE INA HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 58-2457246
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
Two Liberty Place Ed Ota, Esq.
1601 Chestnut Street ACE INA Holdings Inc.
Philadelphia, Two Liberty Place
Pennsylvania 19103 1601 Chestnut Street
(215) 640-1000 Philadelphia,
(Address, including zip Pennsylvania 19103
code, and telephone (215) 640-1000
number, including
area code, of
Registrant's principal
executive offices)
(Name, address, including
zip code, and telephone
number,
including area code, of
agent for service)
ACE CAPITAL TRUST III
ACE CAPITAL TRUST IV
(Exact name of registrant as specified in its charter)
Delaware Each Applied For
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
c/o ACE INA Holdings Inc. Ed Ota, Esq.
Two Liberty Place ACE INA Holdings Inc.
1601 Chestnut Street Two Liberty Place
Philadelphia, 1601 Chestnut Street
Pennsylvania 19103 Philadelphia,
(215) 640-1000 Pennsylvania 19103
(Address, including zip (215) 640-1000
code, and telephone (Name, address, including
number, including zip code, and telephone
area code, of number,
Registrant's principal including area code, of
executive offices) agent for service)
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Copies to:
Peter N. Mear Edward S. Best L. Markus Wiltshire
General Counsel and Mayer, Brown, Rowe & Maw Sidley, Austin, Brown &
Secretary 190 South LaSalle Street Wood LLP
ACE Limited Chicago, Illinois 875 Third Avenue
ACE Global Headquarters 60603-3441 New York, New York 10022
17 Woodbourne Avenue (312) 782-0600 (212) 906-2000
Hamilton, HM 08, Bermuda
(441) 295-5200
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Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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Proposed
maximum
Proposed maximum aggregate
Title of Each Class of Amount to be aggregate offering offering Amount of
Securities to be Registered (1) Registered(1)(2) price per unit (2) price (2) registration fee
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Ordinary Shares of ACE Limited (3)...
Preferred Shares of ACE Limited (4)..
Depositary Shares of ACE Limited (5).
Debt Securities of ACE Limited (6)...
Warrants to Purchase Ordinary or
Preferred Shares of ACE Limited....
Warrants to Purchase Debt Securities
of ACE Limited.....................
Stock Purchase Contracts of ACE
Limited............................
Stock Purchase Units of ACE Limited
(7)................................
Debt Securities of ACE INA Holdings
Inc. (6)...........................
Preferred Securities of ACE Capital
Trust III..........................
Preferred Securities of ACE Capital
Trust IV...........................
Guarantee of Debt Securities of ACE
INA Holdings Inc. by ACE Limited
(8)................................
Guarantee of Preferred Securities of
ACE Capital Trust III and ACE
Capital Trust IV by ACE Limited
and certain backup undertakings (9)
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Total................................ $1,500,000,000 100% $1,500,000,000 $138,000(10)
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(1) An indeterminate number or amount of Ordinary Shares, Preferred Shares,
Depositary Shares, Debt Securities, Warrants, Stock Purchase Contracts and
Stock Purchase Units of ACE Limited, Debt Securities of ACE INA Holdings
Inc. and Preferred Securities of ACE Capital Trust III and ACE Capital
Trust IV as may from time to time be issued at indeterminate prices, with
an aggregate initial offering price not to exceed $1,500,000,000 or the
equivalent thereof in foreign currencies or currency units, or if any Debt
Securities are issued with original issue discount, such greater amount as
shall result in an aggregate offering prices of $1,500,000,000. Certain
Debt Securities of ACE INA Holdings Inc. may be issued and sold to either
or both of ACE Capital Trust III or ACE Capital Trust IV in connection with
the issuance of Preferred Securities by either or both of the ACE Trusts,
in which even, these Debt Securities may later be distributed to the
holders of the applicable Preferred Securities upon a dissolution of ACE
Capital Trust III and/or ACE Capital Trust IV and the distribution of the
ACE Trust's assets. Securities registered, referred to as the offered
securities, may be sold separately, together or as units with other offered
securities.
(2) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(o) of the rules and regulations under the Securities
Act of 1933, which permits the registration fee to be calculated on the
basis of the maximum offering price of all the securities listed, the table
does not specify by each class information as to the amount to be
registered, proposed maximum offering price per unit or proposed maximum
aggregate offering price. Unless otherwise indicated in an amendment to
this filing, no separate consideration will be received for ordinary
shares, preferred shares or debt securities that are issued by ACE Limited
or ACE INA Holdings Inc. upon conversion or exchange of Debt Securities,
Preferred Shares or Depositary Shares registered under this Registration
statement.
(3) Also includes such presently indeterminate number of Ordinary Shares as may
be issued be ACE Limited (a) upon conversion of or exchange for any Debt
Securities or Preferred Shares that provide for conversion or exchange into
Ordinary Shares, (b) upon exercise of Warrants to purchase Ordinary Shares
or (c) pursuant to Stock Purchase Contracts.
(4) Also includes such presently indeterminate number of Preferred Shares as
may be issued by ACE Limited (a) upon conversion of or exchange for any
Debt Securities that provide for conversion or exchange into
Preferred Shares, (b) upon exercise of warrants to purchase Preferred Shares
or (c) pursuant to Stock Purchase Contracts.
(5) To be represented by depositary receipts representing an interest in all or
a specified portion of an Ordinary Share or Preferred Share.
(6) Subject to Note (1), an indeterminate principal amount of Debt Securities,
which may be senior or subordinated.
(7) Each Stock Purchase unit consists of (a) a Stock Purchase Contract under
which the holder, upon settlement, will purchase an indeterminate number of
Ordinary Shares and (b) a beneficial interest in Debt Securities, Preferred
Securities or debt obligations of third parties purchased with the proceeds
from the sale of the Stock Purchase Units. Each beneficial interest will be
pledged to secure the obligation of the holder to purchase the Ordinary
Shares. No separate consideration will be received for the Stock Purchase
Contract or the related beneficial interests.
(8) No separate consideration will be received for the guarantees of the Debt
Securities issued by ACE INA Holdings Inc.
(9) No separate consideration will be received for the guarantees of the
Preferred Securities issued by ACE Capital Trust III or ACE Capital Trust
IV. The guarantees include the rights of holders of the preferred
securities under the guarantees and certain backup undertakings, comprised
of obligations of ACE Limited under the ACE INA subordinated indenture and
any supplemental indentures thereto and under the applicable trust
agreement to provide certain indemnities in respect of, and be responsible
for certain costs, expenses, debts and liabilities of, each of ACE Capital
Trust III and ACE Capital Trust IV, each as described in this registration
statement. All obligations under the applicable trust agreement, including
indemnity obligations, are included in the back-up undertakings.
(10) Pursuant to Rule 457(p) under the Securities Act of 1933, the amount of
the registration fee payable hereunder has been offset by $30,438.74 of
filing fees paid in respect of $127,358,750 of unsold securities
previously registered under the registrant's Registration Statement on
Form S-3 (No. 333-78841).
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The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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The information in this prospectus supplement and accompanying prospectus is
not complete and may be changed. This prospectus supplement and accompanying
prospectus are not an offer to sell these securities and are not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED May 16, 2002.
PROSPECTUS
$1,500,000,000
ACE Limited
Ordinary Shares, Preferred Shares, Depositary Shares, Debt Securities,
Warrants to Purchase Ordinary Shares, Warrants to Purchase Preferred Shares,
Warrants to Purchase Debt Securities, Stock Purchase Contracts and
Stock Purchase Units
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ACE INA Holdings Inc.
Debt Securities
Fully and Unconditionally Guaranteed by
ACE Limited
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ACE Capital Trust III
ACE Capital Trust IV
Preferred Securities
Fully and Unconditionally Guaranteed to the Extent Provided in this Prospectus
by
ACE Limited
ACE, ACE INA or the applicable ACE Trust will provide the specific terms of
these securities in supplements to this prospectus. The prospectus supplements
may also add, update or change information contained in this prospectus. You
should read this prospectus and any supplements carefully before you invest.
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ACE's ordinary shares are traded on the New York Stock Exchange under the
symbol "ACE."
ACE's principal executive offices are located at: ACE Global Headquarters,
17 Woodbourne Avenue, Hamilton, HM 08, Bermuda, telephone number: (441)
295-5200. The principal executive offices of ACE INA and each of the ACE Trusts
are located at: Two Liberty Place, 1601 Chestnut Street, Philadelphia,
Pennsylvania 19103, telephone number (215) 640-1000.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
This prospectus may not be used to consummate sales of offered securities
unless accompanied by a prospectus supplement.
The date of this prospectus is , 2002.
You should rely only on the information contained or incorporated by
reference in this prospectus or any supplement. None of ACE, ACE INA or either
ACE Trust has authorized anyone else to provide you with different information.
ACE, ACE INA and the ACE Trusts are offering these securities only in states
where the offer is permitted. You should not assume that the information in
this prospectus or any supplement is accurate as of any date other than the
date on the front of those documents. ACE's business, financial condition,
results of operations and prospects may have changed since that date.
Except as expressly provided in an underwriting agreement, no offered
securities may be offered or sold in the Cayman Islands or Bermuda (although
offers may be made to persons in Bermuda from outside Bermuda) and offers may
only be accepted from persons resident in Bermuda, for Bermuda exchange control
purposes, where such offers have been delivered outside of Bermuda. Persons
resident in Bermuda, for Bermuda exchange control purposes, may require the
prior approval of the Bermuda Monetary Authority in order to acquire any
offered securities.
In this prospectus, references to "dollars" and "$" are to United States
currency, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that ACE, ACE INA and
the ACE Trusts filed with the Securities and Exchange Commission utilizing a
"shelf" registration process, relating to the ordinary shares, preferred
shares, depositary shares, debt securities, debt securities guarantee,
warrants, stock purchase contracts, stock purchase units, preferred securities
and preferred securities guarantees described in this prospectus. Under this
shelf process, ACE, ACE INA and the ACE Trusts may sell the securities
described in this prospectus in one or more offerings up to a total initial
offering price of $1,500,000,000. This prospectus provides you with a general
description of the securities ACE, ACE INA or an ACE Trust may offer. This
prospectus does not contain all of the information set forth in the
registration statement as permitted by the rules and regulations of the SEC.
For additional information regarding ACE, ACE INA, the ACE Trusts and the
offered securities, please refer to the registration statement. Each time ACE,
ACE INA or an ACE Trust sells securities, it will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with additional information described under the
heading "Where You Can Find More Information."
ACE LIMITED
ACE Limited is a holding company incorporated with limited liability in the
Cayman Islands, which maintains its business office in Bermuda. Through our
various subsidiaries, we provide a broad range of insurance and reinsurance
products to insureds worldwide through operations in the United States and
almost 50 other countries. In addition, we provide funds at Lloyd's of London,
through ACE Global Markets, to support underwriting capacity for Lloyd's
syndicates managed by Lloyd's managing agencies which are wholly owned
subsidiaries of ACE. At December 31, 2001, we had total assets of $37.1 billion
and shareholders' equity of $6.1 billion. We derive our revenue principally
from premiums, fees and investment income. We operate through four business
segments: Insurance-- North America, Insurance--Overseas General, Global and
Financial Products.
ACE was incorporated in August 1985. ACE's principal executive offices are
located at ACE Global Headquarters, 17 Woodbourne Avenue, Hamilton, HM 08,
Bermuda, and its telephone number is (441) 295-5200.
ACE INA
ACE INA is an indirect subsidiary of ACE that was formed in December 1998 to
acquire and hold the international and domestic property and casualty
businesses of CIGNA Corporation. ACE INA is a U.S. holding company and has no
direct operations. ACE INA's principal asset is the capital stock of its
insurance subsidiaries. The principal executive offices of ACE INA are located
at Two Liberty Place, 1601 Chestnut Street, Philadelphia, Pennsylvania 19103,
and its telephone number is (215) 640-1000.
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THE ACE TRUSTS
ACE Capital Trust III is a statutory business trust created under Delaware
law pursuant to (1) a trust agreement executed by ACE, as original sponsor of
the ACE Trust, and the ACE Trustees for the ACE Trust and (2) the filing of a
certificate of trust with the Delaware Secretary of State on May 19, 1999. On
August 5, 1999, ACE assigned its rights and obligations as sponsor of ACE
Capital Trust III to ACE INA. ACE Capital Trust IV is a statutory business
trust created under Delaware law pursuant to (1) a trust agreement executed by
ACE INA, as sponsor of the ACE Trust, and the ACE Trustees for the ACE Trust
and (2) the filing of a certificate of trust with the Delaware Secretary of
State on May 14, 2002. Each trust agreement will be amended and restated in its
entirety substantially in the form filed as an exhibit to the registration
statement of which this prospectus forms a part. Each restated trust agreement
will be qualified as an indenture under the Trust Indenture Act of 1939. Each
ACE Trust exists for the exclusive purposes of:
. issuing and selling the preferred securities and common securities that
represent undivided beneficial interests in the assets of the ACE Trust,
. using the gross proceeds from the sale of the preferred securities and
common securities to acquire a particular series of ACE INA subordinated
debt securities, and
. engaging in only those other activities necessary, convenient or
incidental to the issuance and sale of the preferred securities and
common securities and purchase of the ACE INA subordinated debt
securities.
ACE INA will directly or indirectly own all of the common securities of each
ACE Trust. The common securities of an ACE Trust will rank equally, and
payments will be made thereon pro rata, with the preferred securities of that
ACE Trust, except that, if an event of default under the restated trust
agreement resulting from an event of default under the ACE INA subordinated
debt securities held by the ACE Trust has occurred and is continuing, the
rights of the holder 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 preferred securities. Unless
otherwise disclosed in the applicable prospectus supplement, ACE INA will,
directly or indirectly, acquire common securities in an aggregate liquidation
amount equal to at least 3% of the total capital of each ACE Trust. Each of the
ACE Trusts is a legally separate entity, and the assets of one are not
available to satisfy the obligations of any of the others.
Unless otherwise disclosed in the related prospectus supplement, each ACE
Trust has a term of approximately 55 years but may dissolve earlier as provided
in the restated trust agreement of the ACE Trust. Unless otherwise disclosed in
the applicable prospectus supplement, each ACE Trust's business and affairs
will be conducted by the trustees, referred to collectively as the ACE
Trustees, appointed by ACE INA, as the direct or indirect holder of all of the
common securities. ACE INA, as the direct or indirect holder of the common
securities, will be entitled to appoint, remove or replace any of, or increase
or reduce the number of, the ACE Trustees of an ACE Trust, subject to the terms
of the restated trust agreement of the ACE Trust. The duties and obligations of
the ACE Trustees of an ACE Trust will be governed by the restated trust
agreement of the ACE Trust. Unless otherwise disclosed in the related
prospectus supplement, two of the ACE Trustees, referred to as the
Administrative Trustees, of each ACE Trust will be persons who are employees or
officers of or affiliated with ACE INA. One ACE Trustee of each ACE Trust will
be a financial institution, referred to as the Property Trustee, that is not
affiliated with ACE INA and has a minimum amount of combined capital and
surplus of not less than $50,000,000, which shall act as property trustee and
as indenture trustee for the purposes of compliance with the provisions of the
Trust Indenture Act, pursuant to the terms set forth in the applicable
prospectus supplement. In addition, one ACE Trustee of each ACE Trust (which
may be the Property Trustee, if it otherwise meets the requirements of
applicable law) will have its principal place of business or reside in the
State of Delaware, referred to as the Delaware Trustee. ACE will pay all fees
and expenses related to each ACE Trust and the offering of preferred securities
and common securities.
The office of the Delaware Trustee for each ACE Trust in the State of
Delaware is located at c/o Bank One Delaware, Inc., Three Christina Centre, 201
North Walnut Street, Wilmington, Delaware 19801. The principal executive
offices for each of the ACE Trusts are located at c/o ACE INA Holdings Inc.,
Two Liberty Place, 1601 Chestnut Street, Philadelphia, Pennsylvania 19103. The
telephone number of each of the ACE Trusts is (215) 640-1000.
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USE OF PROCEEDS
Unless otherwise disclosed in the applicable prospectus supplement, ACE and
ACE INA intend to use the net proceeds from the sale of the offered securities
for general corporate purposes, which may include repayment of indebtedness,
expansion of our net underwriting capacity and acquisitions. Each ACE Trust
will invest all proceeds received from the sale of its preferred securities and
common securities in a particular series of subordinated debt securities of ACE
INA, which will use such funds for general corporate purposes, which may
include repayment of indebtedness, expansion of our net underwriting capacity
and acquisitions.
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED SHARE DIVIDENDS OF ACE
For purposes of computing the following ratios, earnings consist of net
income before income tax expense (excluding interest costs capitalized) plus
fixed charges to the extent that such charges are included in the determination
of earnings. Fixed charges consist of interest costs (including interest costs
capitalized) plus one-third of minimum rental payments under operating leases
(estimated by management to be the interest factor of such rentals).
Three Months Three Months
Ended Fiscal Year Ended Ended Year Ended
March 31, December 31, December 31, September 30,
------------ ----------------- ------------ -------------
2002 2001 2001 2000 1999 1998 1997 1998 1997
---- ---- ---- ---- ---- ----- ----- ----- -----
Ratio of Earnings to Fixed Charges. 5.32 3.82 (1) 3.6x 4.1x 48.4x 72.5x 22.4x 40.7x
Ratio of Earnings to Combined Fixed
Charges and Preferred Share
Dividends........................ 4.84 3.55 (1) 3.6x 4.1x 48.4x 72.5x 22.4x 40.7x
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(1) Earnings for the year ended December 31, 2001 were insufficient to cover
fixed charges by $17.4 million.
The ACE Trusts had no operations during the periods set forth above.
4
GENERAL DESCRIPTION OF THE OFFERED SECURITIES
ACE may from time to time offer under this prospectus, separately or
together:
. ordinary shares,
. preferred shares, which may be represented by depositary shares as
described below,
. unsecured senior or subordinated debt securities,
. warrants to purchase ordinary shares,
. warrants to purchase preferred shares,
. warrants to purchase debt securities of ACE,
. stock purchase contracts to purchase ordinary shares, and
. stock purchase units, each representing ownership of a stock purchase
contract and, as security for the holder's obligation to purchase
ordinary shares under the stock purchase contract, any of (1) debt
securities of ACE INA, fully and unconditionally guaranteed by ACE, (2)
debt obligations of third parties, including U.S. Treasury securities or
(3) preferred securities of an ACE Trust.
ACE INA may from time to time offer unsecured senior or subordinated debt
securities, which will be fully and unconditionally guaranteed by ACE.
Each of ACE Capital Trust III and ACE Capital Trust IV may offer preferred
securities representing undivided beneficial interests in their respective
assets, which will be fully and unconditionally guaranteed to the extent
described in this prospectus by ACE.
The aggregate initial offering price of the offered securities will not
exceed $1,500,000,000.
DESCRIPTION OF ACE CAPITAL STOCK
The following is a summary of certain provisions of ACE's Memorandum of
Association and Articles of Association. Because this summary is not complete,
you should refer to ACE's Memorandum and Articles for complete information
regarding the provisions of the Memorandum and Articles, including the
definitions of some of the terms used below. Copies of the Memorandum and
Articles are incorporated by reference as exhibits to the registration
statement of which this prospectus forms a part. Whenever particular sections
or defined terms of the Memorandum and Articles are referred to, such sections
or defined terms are incorporated herein by reference, and the statement in
connection with which such reference is made is qualified in its entirety by
such reference.
ACE's authorized share capital consists of two classes of shares: (1)
500,000,000 ordinary shares, par value $0.041666667 per share, of which
261,897,433 ordinary shares were issued and outstanding as of March 31, 2002,
and (2) 20,000,000 other shares, 6,000,000 shares of which were issued and
outstanding as of March 31, 2002 as 8.25% Cumulative Redeemable Preferred
Shares, Series A.
Ordinary Shares
The ordinary shares are listed on the New York Stock Exchange under the
symbol "ACE." The ordinary shares currently issued and outstanding are fully
paid and nonassessable. The ordinary shares offered by a prospectus supplement,
upon issuance against full consideration, will be fully paid and nonassessable.
There are no provisions of Cayman Islands law or the Memorandum or the Articles
which impose any limitation on the rights of shareholders to hold or vote
ordinary shares by reason of their not being residents of the Cayman Islands.
5
Dividend Rights
After all dividends on all classes or series of preferred shares have been
paid or declared and set apart for payment, holders of ordinary shares are
entitled to receive such dividends as may be declared from time to time by
ACE's Board of Directors, referred to as the Board, in its discretion, out of
funds legally available therefor.
Liquidation
In the event of any dissolution, liquidation or winding up of ACE, whether
voluntary or involuntary, after there shall have been paid or set aside for
payment to the holders of any outstanding shares ranking senior to the ordinary
shares as to distribution on liquidation, dissolution or winding up, the full
amounts to which they shall be entitled, the holders of the then outstanding
ordinary shares will be entitled to receive, pro rata, according to the number
of ordinary shares registered in the names of such shareholders, any remaining
assets of ACE available for distribution to its shareholders; provided, if, at
such time, any holder of ordinary shares has any outstanding debts, liabilities
or engagements to or with ACE (whether presently payable or not), either alone
or jointly with any other person, whether a shareholder or not (including,
without limitation, any liability associated with the unpaid purchase price of
such ordinary shares), the liquidator appointed to oversee the liquidation of
ACE will deduct from the amount payable in respect of such ordinary shares the
aggregate amount of such debts, liabilities and engagements and apply such
amount to any of such holder's debts, liabilities or engagements to or with ACE
(whether presently payable or not). The liquidator may distribute, in kind, to
the holders of the ordinary shares remaining assets of ACE or may sell,
transfer or otherwise dispose of all or any part of such remaining assets to
any other corporation, trust or entity and receive payment therefor in cash,
shares or obligations of such other corporation, trust or entity or any
combination thereof, and may sell all or part of the consideration so received
and may distribute the consideration received or any balance or proceeds
thereof to holders of the ordinary shares.
Voting Rights
The Articles provide that the quorum required for a general meeting of
shareholders is not less than six shareholders present in person or by proxy
holding at least 50% of the issued and outstanding shares entitled to vote at
such meeting. A quorum for considering a "special resolution" is 66 2/3% of the
issued and outstanding shares entitled to vote at such meeting. Subject to
applicable law and any provision of the Articles requiring a greater majority,
ACE may from time to time by special resolution alter or amend the Memorandum
or Articles; voluntarily liquidate, dissolve or windup its affairs; increase
its share capital; consolidate and divide all or any of its share capital;
subdivide the whole or any part of its share capital; reduce its share capital,
any capital redemption reserve fund or any share premium account; or change its
name or alter its objects.
Each holder of ordinary shares is entitled to one vote per share on all
matters submitted to a vote of shareholders at any such meeting, subject to the
10% voting limitation described below. All matters, including the election of
directors, voted upon at any duly held shareholders' meeting will be carried by
a majority of the votes cast at the meeting by shareholders represented in
person or by proxy, except (1) approval of a merger, consolidation or
amalgamation, or the sale, lease or exchange of all or substantially all of the
assets of ACE, which requires (in addition to any regulatory or court
approvals) the approval of at least 66 2/3% of the outstanding voting shares,
voting together as a single class, (2) approval of a special resolution, (3)
amendment of certain provisions of the Articles which require the approval of
at least 66 2/3% of the outstanding voting shares, voting together as a single
class and (4) as otherwise provided in the Articles. A special resolution
requires the approval of at least 66 2/3% of the votes cast by such
shareholders represented in person or by proxy at a duly convened meeting.
The Articles provide that, except as otherwise required by law and subject
to the rights of the holders of any class or series of shares issued by ACE
having a preference over the ordinary shares as to dividends or upon
liquidation to elect directors in specified circumstances, extraordinary
general meetings of ACE's shareholders may be called only by (1) the directors
or (2) at the request in writing of shareholders owning at least 25% of the
outstanding shares generally entitled to vote.
6
Each ordinary share has one vote, except that, if and so long as, the
"Controlled Shares" of any person constitute 10% or more of the issued ordinary
shares, the voting rights with respect to the controlled shares owned by such
person will be limited, in the aggregate, to a voting power of approximately
10%, pursuant to a formula specified in the Articles. "Controlled Shares" means
(1) all shares of ACE directly, indirectly or constructively owned by any
person within the meaning of Section 958 of the U.S. Internal Revenue Code of
1986, as amended, referred to in this prospectus as the Code, and (2) all
shares of ACE directly, indirectly or beneficially owned by such person within
the meaning of Section 13(d) of the Exchange Act (including any shares owned by
a group of persons as so defined and including any shares that would otherwise
be excluded by the provisions of Section 13(d)(6) of the Exchange Act).
The ordinary shares have noncumulative voting rights, which means that the
holders of a majority of the ordinary shares may elect all of ACE's directors
and, in such event, the holders of the remaining shares will not be able to
elect any directors. The Board is presently divided into three classes, two of
which have four directors and one of which has five directors. At present, each
class is elected for a three-year term, with the result that shareholders will
not vote for the election of a majority of directors in any single year.
Directors may be removed without cause only by the affirmative vote of the
holders of at least 66 2/3% of the outstanding shares generally entitled to
vote, voting together as a single class, at a meeting of shareholders.
Directors may be removed with cause by the affirmative vote of the holders of a
majority of the votes cast at a meeting of shareholders.
This classified board provision could prevent a party who acquires control
of a majority of the outstanding voting power from obtaining control of the
Board until the second annual shareholders meeting following the date the
acquiror obtains the controlling share interest. The classified board provision
could have the effect of discouraging a potential acquiror from making a tender
offer or otherwise attempting to obtain control of ACE and could thus increase
the likelihood that incumbent directors will retain their positions.
Preemptive Rights
No holder of ordinary shares, solely by reason of such holding, has or will
have any preemptive right to subscribe to any additional issue of shares of any
class or series nor to any security convertible into such shares.
Other Classes or Series of Shares
The Articles authorize the directors to create and issue one or more other
classes or series of shares and to determine the rights and preferences of each
such class or series, to the extent permitted by the Articles and applicable
law. Among other rights, the directors may determine:
. the number of shares of that class or series and the distinctive
designation thereof;
. the voting powers, full or limited, if any, of the shares of that class
or series;
. the dividend rights of the shares of that class or series, whether
dividends will be cumulative and, if so, from which date or dates and the
relative rights or priority, if any, of payment of dividends on shares of
that class or series and any limitations, restrictions or conditions on
the payment of dividends;
. the relative amounts, and the relative rights or priority, if any, of
payment in respect of shares of that class or series, which the holders
of the shares of that class or series will be entitled to receive upon
any liquidation, dissolution or winding up of ACE;
. the terms and conditions (including the price or prices, which may vary
under different conditions and at different redemption dates), if any,
upon which all or any part of the shares of that class or series may be
redeemed and any limitations, restrictions or conditions on such
redemption;
. the terms, if any, of any purchase, retirement or sinking fund to be
provided for the shares of that class or series;
7
. the terms, if any, upon which the shares of that class or series will be
convertible into or exchangeable for shares of any other class, classes
or series, or other securities, whether or not issued by ACE;
. the restrictions, limitations and conditions, if any, upon the issuance
of indebtedness of ACE so long as any shares of that class or series are
outstanding; and
. any other preferences and relative, participating, optional or other
rights and limitations not inconsistent with applicable law or the
Articles.
Preferred Shares
From time to time, pursuant to the authority granted to the directors by the
Articles to create other classes or series of shares, the Board may create and
issue one or more classes or series of preferred shares, setting forth the
rights and preferences of each such class or series in a Certificate of
Designation, Preferences and Rights. The preferred shares, upon issuance
against full consideration, will be fully paid and nonassessable. The
particular rights and preferences of the preferred shares offered by any
prospectus supplement and the extent, if any, to which the general provisions
described below may apply to the offered preferred shares, will be described in
the prospectus supplement. Because the following summary of the terms of
preferred shares is not complete, you should refer to the Memorandum, the
Articles and the applicable Certificate of Designation, Preferences and Rights
for complete information regarding the terms of the class or series of
preferred shares described in a prospectus supplement. Whenever particular
sections or defined terms of the Memorandum, the Articles and the applicable
Certificate of Designation, Preferences and Rights are referred to, such
sections or defined terms are incorporated herein by reference, and the
statement in connection with which such reference is made is qualified in its
entirety by such reference.
A prospectus supplement will specify the terms of a particular class or
series of preferred shares as follows:
. the number of shares to be issued and sold and the distinctive
designation thereof;
. the voting powers, full or limited, if any, of the preferred shares;
. the dividend rights of the preferred shares, whether dividends will be
cumulative and, if so, from which date or dates and the relative rights
or priority, if any, of payment of dividends on preferred shares and any
limitations, restrictions or conditions on the payment of dividends on
the preferred shares and the ordinary shares;
. the relative amounts, and the relative rights or priority, if any, of
payment in respect of preferred shares, which the holders of the
preferred shares will be entitled to receive upon any liquidation,
dissolution or winding up of ACE;
. the terms and conditions (including the price or prices, which may vary
under different conditions and at different redemption dates), if any,
upon which all or any part of the preferred shares may be redeemed, and
any limitations, restrictions or conditions on such redemption;
. the terms, if any, of any purchase, retirement or sinking fund to be
provided for the preferred shares;
. the terms, if any, upon which the preferred shares will be convertible
into or exchangeable for shares of any other class, classes or series, or
other securities, whether or not issued by ACE;
. the restrictions, limitations and conditions, if any, upon the issuance
of indebtedness of ACE so long as any preferred shares are outstanding;
and
. any other preferences and relative, participating, optional or other
rights and limitations not inconsistent with applicable law, the
Memorandum or the Articles.
Dividends
The holders of preferred shares will be entitled to receive dividends at the
rate set by the Board, payable on specified dates each year for the respective
dividend periods ending on such dates, referred to in this prospectus
8
as dividend periods, when and as declared by the Board. Such dividends will
accrue on each preferred share from the first day of the dividend period in
which such share is issued or from such other date as the Board may fix for
such purpose. All dividends on preferred shares will be cumulative so that if
ACE does not pay or set apart for payment the dividend, or any part thereof, on
the issued and outstanding preferred shares for any dividend period, the
deficiency in the dividend on the preferred shares must thereafter be fully
paid or declared and set apart for payment, but without interest, before any
dividend may be paid or declared and set apart for payment on the ordinary
shares. The holders of preferred shares will not be entitled to participate in
any other or additional earnings or profits of ACE, except for such premiums,
if any, as may be payable in case of redemption or liquidation, dissolution or
winding up of ACE.
Any dividend paid upon the preferred shares at a time when any accrued
dividends for any prior dividend period are delinquent will be expressly
declared to be in whole or partial payment of the accrued dividends to the
extent thereof, beginning with the earliest dividend period for which dividends
are then wholly or partly delinquent, and will be so designated to each
shareholder to whom payment is made.
No dividends will be paid upon any shares of any class or series of
preferred shares for a current dividend period unless there will have been paid
or declared and set apart for payment dividends required to be paid to the
holders of each other class or series of preferred shares for all past dividend
periods of such other class or series. If any dividends are paid on any of the
preferred shares with respect to any past dividend period at any time when less
than the total dividends then accumulated and payable for all past dividend
periods on all of the preferred shares then outstanding are to be paid or
declared and set apart for payment, then the dividends being paid will be paid
on each class or series of preferred shares in the proportions that the
dividends then accumulated and payable on each class or series for all past
dividend periods bear to the total dividends then accumulated and payable for
all past dividend periods on all outstanding preferred shares.
Liquidation, Dissolution or Winding Up
In case of voluntary or involuntary liquidation, dissolution or winding up
of ACE, the holders of each class or series of preferred shares will be
entitled to receive out of the assets of ACE in money or money's worth the
liquidation preference with respect to that class or series of preferred
shares, together with all accrued but unpaid dividends thereon (whether or not
earned or declared), before any of such assets will be paid or distributed to
holders of ordinary shares. In case of voluntary or involuntary liquidation,
dissolution or winding up of ACE, if the assets are insufficient to pay the
holders of all of the classes or series of preferred shares then outstanding
the full amounts to which they may be entitled, the holders of each outstanding
class or series of preferred shares will share ratably in such assets in
proportion to the amounts which would be payable with respect to such class or
series if all amounts payable thereon were paid in full. The consolidation or
merger of ACE with or into any other corporation, or a sale of all or any part
of its assets, will not be deemed a liquidation, dissolution or winding up of
ACE within the meaning of this paragraph.
Redemption
Except as otherwise provided with respect to a particular class or series of
preferred shares, the following general redemption provisions will apply to
each class or series of preferred shares.
On or prior to the date fixed for redemption of a particular class or series
of preferred shares or any part thereof as specified in the notice of
redemption for such class or series, ACE will deposit adequate funds for such
redemption, in trust for the account of holders of such class or series, with a
bank or trust company that has an office in the United States, and that has, or
is an affiliate of a bank or trust company that has, capital and surplus of at
least $50,000,000. If the name and address of such bank or trust company and
the deposit of or intent to deposit the redemption funds in such trust account
have been stated in the redemption notice, then, from and after the mailing of
the notice and the making of such deposit, the shares of the class or series
called for redemption will no longer be deemed to be outstanding for any
purpose whatsoever, and all rights of the holders of such
9
shares in or with respect to ACE will cease and terminate except only the right
of the holders of the shares (1) to transfer such shares prior to the date
fixed for redemption, (2) to receive the redemption price of such shares,
including accrued but unpaid dividends to the date fixed for redemption,
without interest, upon surrender of the certificate or certificates
representing the shares to be redeemed, and (3) on or before the close of
business on the fifth day preceding the date fixed for redemption to exercise
privileges of conversion, if any, not previously expired. Any moneys so
deposited by ACE which remain unclaimed by the holders of the shares called for
redemption and not converted will, at the end of six years after the redemption
date, be paid to ACE upon its request, after which repayment the holders of the
shares called for redemption can no longer look to such bank or trust company
for the payment of the redemption price but must look only to ACE for the
payment of any lawful claim for such moneys which holders of such shares may
still have. After such six-year period, the right of any shareholder or other
person to receive such payment may be forfeited in the manner and with the
effect provided under Cayman Islands law. Any portion of the moneys so
deposited by ACE, in respect of preferred shares called for redemption that are
converted into ordinary shares, will be repaid to ACE upon its request.
In case of redemption of only a part of a class or series of preferred
shares, ACE will designate by lot, in such manner as the Board may determine,
the shares to be redeemed or will effect such redemption pro rata.
Conversion Rights
Except as otherwise provided with respect to a particular class or series of
preferred shares, the following general conversion provisions will apply to
each class or series of preferred shares that is convertible into ordinary
shares.
All ordinary shares issued upon conversion will be fully paid and
nonassessable and will be free of all taxes, liens and charges with respect to
the issue thereof except taxes, if any, payable by reason of issuance in a name
other than that of the holder of the shares converted and except as otherwise
provided by applicable law or the Articles.
The number of ordinary shares issuable upon conversion of a particular class
or series of preferred shares at any time will be the quotient obtained by
dividing the aggregate conversion value of the shares of such class or series
surrendered for conversion, by the conversion price per share of ordinary
shares then in effect for such class or series. ACE will not be required,
however, upon any such conversion, to issue any fractional share of ordinary
shares, but instead ACE will pay to the holder who would otherwise be entitled
to receive such fractional share, if issued, a sum in cash equal to the value
of such fractional share based on the last reported sale price per ordinary
share on the NYSE at the date of determination. Preferred shares will be deemed
to have been converted as of the close of business on the date of receipt at
the office of the transfer agent of the certificates, duly endorsed, together
with written notice by the holder of his election to convert the shares.
The basic conversion price per ordinary share for a class or series of
preferred shares, as fixed by the Board, will be subject to adjustment from
time to time as follows:
. In case ACE (1) pays a dividend or makes a distribution to all holders of
outstanding ordinary shares as a class in ordinary shares, (2) subdivides
or splits the outstanding ordinary shares into a larger number of shares
or (3) combines the outstanding ordinary shares into a smaller number of
shares, the basic conversion price per ordinary share in effect
immediately prior to that event will be adjusted retroactively so that
the holder of each outstanding share of each class or series of preferred
shares which, by its terms, is convertible into ordinary shares will
thereafter be entitled to receive upon the conversion of such share the
number of ordinary shares which that holder would have owned and been
entitled to receive after the happening of any of the events described
above had such share of such class or series been converted immediately
prior to the happening of that event. An adjustment made pursuant to this
clause will become effective retroactively immediately after such record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, split or combination. Such
adjustments will be made successively whenever any event described in
this clause occurs.
10
. In case ACE issues to all holders of ordinary shares as a class any
rights or warrants enabling them to subscribe for or purchase ordinary
shares at a price per share less than the current market price per
ordinary share at the record date for determination of shareholders
entitled to receive such rights or warrants, the basic conversion price
per ordinary share in effect immediately prior thereto for each class or
series of preferred shares which, by its terms, is convertible into
ordinary shares will be adjusted retroactively by multiplying such basic
conversion price by a fraction, the numerator of which will be the sum of
number of ordinary shares outstanding at such record date and the number
of ordinary shares which the aggregate exercise price (before deduction
of underwriting discounts or commissions and other expenses of ACE in
connection with the issue) of the total number of shares so offered for
subscription or purchase would purchase at such current market price per
share and the denominator of which will be the sum of the number of
ordinary shares outstanding at such record date and the number of
additional ordinary shares so offered for subscription or purchase. An
adjustment made pursuant to this clause will become effective
retroactively immediately after the record date for determination of
shareholders entitled to receive such rights or warrants. Such
adjustments will be made successively whenever any event described in
this clause occurs.
. In case ACE distributes to all holders of ordinary shares as a class
evidences of indebtedness or assets (other than cash dividends), the
basic conversion price per ordinary share in effect immediately prior
thereto for each class or series of preferred shares which, by its terms,
is convertible into ordinary shares will be adjusted retroactively by
multiplying such basic conversion price by a fraction, the numerator of
which will be the difference between the current market price per
ordinary share at the record date for determination of shareholders
entitled to receive such distribution and the fair value (as determined
by the Board) of the portion of the evidences of indebtedness or assets
(other than cash dividends) so distributed applicable to one ordinary
share and the denominator of which will be the current market price per
ordinary share. An adjustment made pursuant to this clause will become
effective retroactively immediately after such record date. Such
adjustments will be made successively whenever any event described in
this clause occurs.
For the purpose of any computation under the last clause above, the current
market price per ordinary share on any date will be deemed to be the average of
the high and low sales prices of the ordinary shares, as reported in the New
York Stock Exchange--Composite Transactions (or such other principal market
quotation as may then be applicable to the ordinary shares) for each of the 30
consecutive trading days commencing 45 trading days before such date.
No adjustment will be made in the basic conversion price for any class or
series of preferred shares in effect immediately prior to such computation if
the amount of such adjustment would be less than 50 cents. However, any
adjustments which, by reason of the preceding sentence, are not required to be
made will be carried forward and taken into account in any subsequent
adjustment. Notwithstanding anything to the contrary, any adjustment required
for purposes of making the computations described above will be made not later
than the earlier of (1) three years after the effective date described above
for such adjustment or (2) the date as of which such adjustment would result in
an increase or decrease of at least 3% in the aggregate number of ordinary
shares issued and outstanding on the first date on which an event occurred
which required the making of a computation described above. All calculations
will be made to the nearest cent or to the nearest 1/100th of a share, as the
case may be.
In the case of any capital reorganization or reclassification of ordinary
shares, or if ACE consolidates with or merges into, or sells or disposes of all
or substantially all of its property and assets to, any other corporation,
proper provisions will be made as part of the terms of such capital
reorganization, reclassification, consolidation, merger or sale that any shares
of a particular class or series of preferred shares at the time outstanding
will thereafter be convertible into the number of shares of stock or other
securities or property to which a holder of the number of ordinary shares
deliverable upon conversion of such preferred shares would have been entitled
upon such capital reorganization, reclassification, consolidation or merger.
11
No dividend adjustment with respect to any preferred shares or ordinary
shares will be made in connection with any conversion.
Whenever there is an issue of additional ordinary shares requiring a change
in the conversion price as provided above, and whenever there occurs any other
event which results in a change in the existing conversion rights of the
holders of shares of a class or series of preferred shares, ACE will file with
its transfer agent or agents a statement signed by the Chairman, President and
Chief Executive Officer, or by any Executive Officer of ACE, specifically
describing such issue of additional ordinary shares or such other event (and,
in the case of a capital reorganization, reclassification, consolidation or
merger, the terms thereof) and the actual conversion prices or basis of
conversion as changed by such issue or event and the change, if any, in the
securities issuable upon conversion. Whenever there are issued by ACE to all
holders of ordinary shares as a class any rights or warrants enabling them to
subscribe for or purchase ordinary shares, ACE will also file in like manner a
statement describing the same and the consideration it will receive therefrom.
The statement so filed will be open to inspection by any holder of record of
shares of any class or series of preferred shares.
ACE will at all times have authorized, and will at all times reserve and set
aside, a sufficient number of duly authorized ordinary shares for the
conversion of all shares of all then outstanding classes or series of preferred
shares which are convertible into ordinary shares.
Reissuance of Shares
Any preferred shares retired by purchase or redemption, through conversion,
or through the operation of any sinking fund or redemption or purchase account
will have the status of authorized but unissued preferred shares and may be
reissued as part of the same class or series or may be reclassified and
reissued by the Board in the same manner as any other authorized and unissued
preferred shares.
Voting Rights
Except as indicated below or as otherwise required by applicable law, the
holders of preferred shares will have no voting rights.
Whenever dividends payable on any class or series of preferred shares are in
arrears in an aggregate amount equivalent to six full quarterly dividends on
all of the preferred shares of that class or series then outstanding, the
holders of preferred shares of that class or series will have the exclusive and
special right, voting separately as a class, to elect two directors of ACE, and
the number of directors constituting the Board will be increased to the extent
necessary to effectuate such right. Whenever such right of the holders of any
class or series of the preferred shares has vested, such right may be exercised
initially either at an extraordinary meeting of the holders of such class or
series of the preferred shares, or at any annual meeting of shareholders, and
thereafter at annual meetings of shareholders. The right of the holders of any
class or series of the preferred shares voting separately as a class to elect
members of the Board will continue until such time as all dividends accumulated
on such class or series of the preferred shares have been paid in full, at
which time that special right will terminate, subject to revesting in the event
of each and every subsequent default in an aggregate amount equivalent to six
full quarterly dividends.
At any time when such special voting power has vested in the holders of any
class or series of the preferred shares as described in the preceding
paragraph, a proper officer of ACE will, upon the written request of the
holders of record of at least 10% of such class or series of the preferred
shares then outstanding addressed to the Secretary of ACE, call an
extraordinary meeting of the holders of such class or series of the preferred
shares for the purpose of electing directors. Such meeting will be held at the
earliest practicable date in such place as may be designated pursuant to the
Articles (or, if there be no designation, at the principal office of ACE in
Hamilton, Bermuda). If such meeting shall not be called by the proper officers
of ACE within 20 days after the Secretary of ACE has been personally served
with such request, or within 30 days after mailing the same within the United
12
States by registered or certified mail addressed to the Secretary of ACE at its
principal office, then the holders of record of at least 10% of such class or
series of the preferred shares then outstanding may designate in writing one of
their number to call such meeting at ACE's expense, and such meeting may be
called by such person so designated upon the notice required for annual
meetings of shareholders and will be held in Hamilton, Bermuda. Any holder of
such class or series of preferred shares so designated will have access to the
stock books of ACE for the purpose of causing meetings of shareholders to be
called pursuant to these provisions. Notwithstanding the foregoing, no such
extraordinary meeting will be called during the period within 90 days
immediately preceding the date fixed for the next annual meeting of
shareholders.
At any annual or extraordinary meeting at which the holders of any class or
series of the preferred shares have the special right, voting separately as a
class, to elect directors as described above, the presence, in person or by
proxy, of the holders of 33 1/3% of such class or series of the preferred
shares will be required to constitute a quorum of such class or series for the
election of any director by the holders of such class or series, voting as a
class. At any such meeting or adjournment thereof, (1) the absence of a quorum
of such class or series of the preferred shares will not prevent the election
of directors other than those to be elected by such class or series of the
preferred shares, voting as a class, and the absence of a quorum for the
election of such other directors will not prevent the election of the directors
to be elected by such class or series of the preferred shares, voting as a
class, and (2) in the absence of either or both such quorums, a majority of the
holders present in person or by proxy of any class or series of stock for which
a quorum is lacking will have power to adjourn the meeting for the election of
directors which they are entitled to elect, from time to time until a quorum
shall be present, without notice other than announcement at the meeting.
During any period in which the holders of any class or series of the
preferred shares have the right to vote as a class for directors as described
above, any vacancies in the Board will be filled only by vote of a majority
(even if that be only a single director) of the remaining directors theretofore
elected by the holders of the class or series of stock which elected the
directors whose office shall have become vacant. During such period, the
directors so elected by the holders of any class or series of the preferred
shares will continue in office (1) until the next succeeding annual meeting or
until their successors, if any, are elected by such holders and qualify or (2)
unless required by applicable law to continue in office for a longer period,
until termination of the right of the holders of such class or series of the
preferred shares to vote as a class for directors, if earlier. If and to the
extent permitted by applicable law, immediately upon any termination of the
right of the holders of any class or series of the preferred shares to vote as
a class for directors as provided herein, the term of office of the directors
then in office so elected by the holders of such class or series will terminate.
Whether or not ACE is being wound up, the rights attached to any class or
series of preferred shares may only be varied with (1) the consent in writing
of the holders of three-fourths of the issued shares of that class or series or
(2) the sanction of a special resolution approved by at least 66 2/3% of the
votes cast by the holders of the shares of that class or series at a duly
convened meeting where at least one-third of the issued shares of that class or
series are represented, either in person or by proxy. The rights attached to
any class or series of preferred shares will not be deemed to be varied by the
creation or issue of any shares or any securities convertible into or
evidencing the right to purchase shares ranking prior to or equally with such
class or series of the preferred shares with respect to the payment of
dividends or of assets upon liquidation, dissolution or winding up. Holders of
preferred shares are not entitled to vote on any amalgamation, consolidation,
merger or statutory share exchange, except to the extent that such a
transaction would vary the rights attached to any class or series of preferred
shares, in which case any such variation is subject to the approval process
described above. Holders of preferred shares are not entitled to vote on any
sale of all or substantially all of the assets of ACE.
On any item on which the holders of the preferred shares are entitled to
vote, such holders will be entitled to one vote for each preferred share held.
Restrictions in Event of Default in Dividends on Preferred Shares
If at any time ACE has failed to pay dividends in full on the preferred
shares, thereafter and until dividends in full, including all accrued and
unpaid dividends for all past quarterly dividend periods on the preferred shares
13
outstanding, shall have been declared and set apart in trust for payment or
paid, or if at any time ACE has failed to pay in full amounts payable with
respect to any obligations to retire preferred shares, thereafter and until
such amounts shall have been paid in full or set apart in trust for payment (1)
ACE, without the affirmative vote or consent of the holders of at least 66 2/3%
of the preferred shares at the time outstanding given in person or by proxy,
either in writing or by resolution adopted at an extraordinary meeting called
for the purpose, at which the holders of the preferred shares shall vote
separately as a class, regardless of class or series, may not redeem less than
all of the preferred shares at such time outstanding; (2) ACE may not purchase
any preferred shares except in accordance with a purchase offer made in writing
to all holders of preferred shares of all classes or series upon such terms as
the Board in its sole discretion after consideration of the respective annual
dividend rate and other relative rights and preferences of the respective
classes or series, will determine (which determination will be final and
conclusive) will result in fair and equitable treatment among the respective
classes or series; provided that (a) ACE, to meet the requirements of any
purchase, retirement or sinking fund provisions with respect to any class or
series, may use shares of such class or series acquired by it prior to such
failure and then held by it as treasury stock and (b) nothing will prevent us
from completing the purchase or redemption of preferred shares for which a
purchase contract was entered into for any purchase, retirement or sinking fund
purposes, or the notice of redemption of which was initially mailed, prior to
such failure; and (3) ACE may not redeem, purchase or otherwise acquire, or
permit any subsidiary to purchase or acquire, any shares of any other class of
stock of ACE ranking junior to the preferred shares as to dividends and upon
liquidation.
Preemptive Rights
No holder of preferred shares, solely by reason of such holding, has or will
have any preemptive right to subscribe to any additional issue of shares of any
class or series nor to any security convertible into such shares.
Transfer Agent
ACE's registrar and transfer agent for the ordinary shares and the preferred
shares is Mellon Investor Services.
Transfer of Shares
The Articles contain various provisions affecting the transferability of
ACE's shares. Under the Articles, the Board has absolute discretion to decline
to register a transfer of shares (1) unless a registration statement under the
Securities Act is in effect with respect to such shares or a written opinion
from counsel acceptable to the directors is obtained to the effect that such
registration is not required or (2) if the Board determines that such transfer
would result in a person having controlled shares that constitute 10% or more
of any class or series of ACE's issued shares. The Board also has absolute
discretion to decline to register any transfer of shares. The Board has waived
its right to decline to register any transfer of shares which have been traded
in the public market (including the ordinary and preferred shares offered by a
prospectus supplement) or which were outstanding immediately prior to ACE's
initial public offering.
Maples and Calder, ACE's Cayman Islands counsel, has advised it that, while
the precise form of the restrictions on transfers contained in the Articles is
untested, as a matter of general principle, restrictions on transfers are
enforceable under Cayman Islands law and are not uncommon. The transferor of
such shares will be deemed to own such shares for dividend, voting and
reporting purposes until a transfer of such shares has been registered on our
stock transfer records.
The restrictions on voting and ownership of more than 10% of any class or
series of our issued shares described above, as well as the provisions
discussed below under "Anti-Takeover Effects of Articles of Association" and
"Shareholder Rights Plan," may have the effect of discouraging an attempt to
obtain control of ACE through certain actions.
The Articles also provide that the Board may suspend the registration of
transfer for such periods as the Board may determine, but shall not suspend the
registration of transfer for more than 45 days in any year.
14
Lloyd's Related Requirements
Under Lloyd's regulations as currently in effect, any person who, along with
any associates, beneficially holds 10% or more of the votes or economic
interest in ACE or who controls decisions by ACE's Board is deemed to be a
"controller" of any ACE subsidiary that is a Lloyd's corporate member or
Lloyd's managing agent. Lloyd's imposes an absolute prohibition on any company
being a 10% controller of a Lloyd's corporate member or Lloyd's managing agent
without first notifying Lloyd's and receiving their consent. This prohibition
is qualified in respect of a person who breaches the 20%, 33%, 50% or majority
controller thresholds in that the Lloyd's corporate member or Lloyd's managing
agent must do all that lies within its powers to comply with Lloyd's
requirements. In these latter circumstances, this essentially means that notice
must have been given to the Council of Lloyd's that the relevant threshold will
be exceeded and that the Council of Lloyd's has not objected. Lloyd's requires
each "controller" of a Lloyd's corporate member or Lloyd's managing agent to
execute and deliver a declaration and undertaking to Lloyd's containing
representations concerning the absence of criminal activities, censure,
insolvency, civil liabilities and government investigations, etc., and
submitting to the jurisdiction of the English courts. Any person that becomes
the owner of 10% (or subsequently 20%, 33%, 50% or a majority) of the ordinary
shares would have to deliver this declaration and undertaking to Lloyd's in the
form prescribed by Lloyd's, unless Lloyd's exempts such person from this
requirement. Lloyd's regulations give Lloyd's the right to withhold consent to
a person becoming a controller of a Lloyd's corporate member, even where the
declaration and undertaking has been provided, if Lloyd's, in its discretion,
does not consider such person to be "fit and proper."
In addition, under English law, if any person who is connected with a
Lloyd's broker holds or subsequently becomes the holder of more than 5% of the
ordinary shares in ACE, that Lloyd's broker risks losing its Lloyd's license.
For these purposes, a person is treated as connected with a Lloyd's broker if
that person is the subsidiary or holding company of a corporate Lloyd's broker
or a subsidiary of any such holding company (all being regarded as related
companies) or a director of such a Lloyd's broker or any related company that
controls (a test based on one-third voting rights or control of the Board) or
is controlled by such a Lloyd's broker or any related company or, if the
Lloyd's broker is a partnership, any person who is a partner in or who controls
or is controlled by (on a similar test) such a Lloyd's broker or any company
which is controlled by a partner in such a Lloyd's broker or any related
company of any such partner or any director of any such controlled or related
company.
Lien on Shares
The Articles provide that ACE will have a first lien on all shares for all
debts, liabilities or engagements to or with ACE (whether presently payable or
not) by the holder of such shares, except for shares declared to be exempt by
the Board. This lien would extend to the payment of dividends or other money
payable in respect of any ordinary shares or preferred shares subject to the
lien. The Articles also provide that the directors may deduct from any dividend
payable to a shareholder all sums of money presently payable by such
shareholder to ACE on any account. The Board has exempted from these provisions
the ordinary and preferred shares offered by a prospectus supplement.
Anti-Takeover Effects of Articles of Association
The Articles contain certain provisions that make it more difficult to
acquire control of ACE by means of a tender offer, open market purchase, proxy
fight or otherwise. These provisions, as well as the shareholder rights plan
described under "Shareholder Rights Plan" below, are designed to encourage
persons seeking to acquire control of ACE to negotiate with its directors. The
directors believe that, as a general rule, the interests of its shareholders
would be best served if any change in control results from negotiations with
the directors. The directors would negotiate based upon careful consideration
of the proposed terms, such as the price to be paid to shareholders, the form
of consideration to be paid and the anticipated tax effects of the transaction.
However, these provisions could have the effect of discouraging a prospective
acquiror from making a tender offer or otherwise attempting to obtain control
of ACE. To the extent these provisions discourage takeover attempts, they could
deprive shareholders of opportunities to realize takeover premiums for their
shares or could depress the market price of the shares.
15
In addition to those provisions of the Articles discussed above, set forth
below is a description of other material provisions of the Articles. Because
the following description is intended as a summary only and is therefore not
complete, you should refer to the Articles, which are incorporated by reference
as an exhibit to the registration statement of which this prospectus forms a
part, for complete information regarding these provisions.
No Shareholder Action by Written Consent
The Articles provide that any action required or permitted to be taken by
ACE's shareholders must be taken at a duly called annual general or
extraordinary general meeting of its shareholders and may not be taken by
consent in writing or otherwise.
The affirmative vote of the holders of at least 66 2/3% of the outstanding
shares generally entitled to vote, voting together as a single class, is
required to amend or repeal, or adopt any provision inconsistent with, this
provision of the Articles.
Availability of Shares of Capital Stock for Future Issuances
The availability of shares for issue by ACE's directors without further
action by shareholders (except as may be required by applicable stock exchange
requirements) could be viewed as enabling the directors to make more difficult
a change in control of ACE, including by issuing warrants or rights to acquire
shares to discourage or defeat unsolicited stock accumulation programs and
acquisition proposals and by issuing shares in a private placement or public
offering to dilute or deter stock ownership of persons seeking to obtain
control of ACE.
Shareholder Proposals
The Articles provide that if a shareholder desires to submit a proposal for
consideration at an annual general meeting or extraordinary general meeting, or
to nominate persons for election as directors, written notice of such
shareholder's intent to make such a proposal or nomination must be given and
received by the Secretary of ACE at its principal executive offices not later
than (1) with respect to an annual general meeting, 60 days prior to the
anniversary date of the immediately preceding annual general meeting, and (2)
with respect to an extraordinary general meeting, the close of business on the
tenth day following the date on which notice of such meeting is first sent or
given to shareholders. The notice must describe the proposal or nomination in
sufficient detail for a proposal or nomination to be summarized on the agenda
for the meeting and must set forth (1) the name and address of the shareholder,
(2) a representation that the shareholder is a holder of record of shares of
ACE entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to present such proposal or nomination and (3) the class
and number of shares of ACE that are beneficially owned by the shareholder. In
addition, the notice must set forth the reasons for conducting such proposed
business at the meeting and any material interest of the shareholder in such
business. In the case of a nomination of any person for election as a director,
the notice must set forth: (1) the name and address of any person to be
nominated; (2) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons; (3) such other
information regarding such nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to Regulation 14A
under the Exchange Act, whether or not we are then subject to such Regulation;
and (4) the consent of each nominee to serve as a director of ACE, if so
elected. The presiding officer of the annual general meeting or extraordinary
general meeting will, if the facts warrant, refuse to acknowledge a proposal or
nomination not made in compliance with the foregoing procedure.
The affirmative vote of the holders of at least 66 2/3% of the outstanding
shares entitled to vote, voting together as a single class, will be required to
amend or repeal, or adopt any provision inconsistent with, the foregoing
provision of the Articles.
The advance notice requirements regulating shareholder nominations and
proposals may have the effect of precluding a contest for the election of
directors or the introduction of a shareholder proposal if the procedures
summarized above are not followed and may discourage or deter a third party
from conducting a solicitation of proxies to elect its own slate of directors
or to introduce a proposal.
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Shareholder Rights Plan
On May 7, 1999, ACE's board of directors declared a dividend of one
preference share purchase right for each outstanding ordinary share to
shareholders of record at the close of business on June 1, 1999. Subject to
certain exceptions, each right, when exercisable, entitles the holder to
purchase from ACE one one-thousandth of a series A junior participating
preference share at an exercise price of $150, subject to certain antidilution
adjustments. Because of the nature of the preference shares' dividend,
liquidation and voting rights, the value of the one one-thousandth of a
preference share purchasable upon the exercise of each right should approximate
the value of one ordinary share.
The rights generally will only be exercisable:
. 10 days following a public announcement that a person or a group of
affiliated or associated persons has acquired, or obtained the right to
acquire, 15% or more of the outstanding ordinary shares of ACE, or
. 15 business days following the commencement of, or the announcement of an
intention to make, a tender or exchange offer for 15% or more of the
outstanding ordinary shares of ACE.
In the following description, a person or group that acquires, or obtains
the right to acquire, 15% or more of the outstanding ordinary shares of ACE is
referred to as an "Acquiring Person."
Generally, if any person or group becomes an Acquiring Person, each right,
except for rights held by the Acquiring Person, will entitle its holder to
purchase ordinary shares having a value equal to two times the exercise price
of the right.
If ACE is acquired in a merger, amalgamation or other business combination
transaction, or if 50% or more of ACE's assets or earnings power is sold, then
proper provision will be made so that each holder of a right, except for the
Acquiring Person, will be entitled to receive common stock of the acquiring or
surviving company having a value equal to two times the exercise price of the
right.
ACE's board of directors has the option, at any time after any person or
group becomes an Acquiring Person but before the Acquiring Person acquires 50%
or more of the outstanding ordinary shares, to exchange each right, except for
rights held by the Acquiring Person, for one ordinary share.
At any time prior to the time that any person or group becomes an Acquiring
Person, ACE's board of directors may redeem the rights in whole, but not in
part, at a price of $0.01 per right. The rights will expire on June 1, 2009 if
they have not been previously exercised, exchanged or redeemed.
17
DESCRIPTION OF THE DEPOSITARY SHARES
General
ACE may, at its option, elect to offer depositary shares, each representing
a fraction (to be set forth in the prospectus supplement relating to a
particular series of preferred shares) of a share of a particular series of
preferred shares as described below. In the event ACE elects to do so,
depositary receipts evidencing depositary shares will be issued to the public.
The shares of any class or series of preferred shares represented by
depositary shares will be deposited under a deposit agreement among ACE, a
depositary selected by ACE and the holders of the depositary receipts. The
depositary will be a bank or trust company having its principal office in the
United States and having a combined capital and surplus of at least
$50,000,000. Subject to the terms of the deposit agreement, each owner of a
depositary share will be entitled, in proportion to the applicable fraction of
a preferred share represented by such depositary share, to all the rights and
preferences of the preferred shares represented thereby (including dividend,
voting, redemption and liquidation rights).
The depositary shares will be evidenced by depositary receipts issued
pursuant to the deposit agreement. Depositary receipts will be distributed to
those persons purchasing the fractional shares of the related class or series
of preferred shares in accordance with the terms of the offering described in
the related prospectus supplement. Copies of the forms of deposit agreement and
depositary receipt are filed as exhibits to the registration statement of which
this prospectus forms a part, and the following summary is qualified in its
entirety by reference to such exhibits.
Pending the preparation of definitive depositary receipts, the depositary
may, upon the written order of ACE, issue temporary depositary receipts
substantially identical to (and entitling the holders thereof to all the rights
pertaining to) the definitive depositary receipts but not in definitive form.
Definitive depositary receipts will be prepared thereafter without unreasonable
delay, and temporary depositary receipts will be exchangeable for definitive
depositary receipts without charge to the holder thereof.
Dividends and Other Distributions
The depositary will distribute all cash dividends or other distributions
received in respect of the related class or series of preferred shares to the
record holders of depositary shares relating to such class or series of
preferred shares in proportion to the number of such depositary shares owned by
such holders.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary shares
entitled thereto, unless the depositary determines that it is not feasible to
make such distribution, in which case the depositary may, with the approval of
ACE, sell such property and distribute the net proceeds from such sale to such
holders.
Withdrawal of Shares
Upon surrender of the depositary receipts at the corporate trust office of
the depositary (unless the related depositary shares have previously been
called for redemption), the holder of the depositary shares evidenced thereby
is entitled to delivery of the number of whole shares of the related class or
series of preferred shares and any money or other property represented by such
depositary shares. Holders of depositary shares will be entitled to receive
whole shares of the related class or series of preferred shares on the basis
set forth in the prospectus supplement for such class or series of preferred
shares, but holders of such whole preferred shares will not thereafter be
entitled to exchange them for depositary shares. If the depositary receipts
delivered by the holder evidence a number of depositary shares in excess of the
number of depositary shares representing the number of whole preferred shares
to be withdrawn, the depositary will deliver to such holder at the same time a
new depositary receipt evidencing such excess number of depositary shares. In
no event will fractional preferred shares be delivered upon surrender of
depositary receipts to the depositary.
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Redemption of Depositary Shares
Whenever ACE redeems preferred shares held by the depositary, the depositary
will redeem as of the same redemption date the number of depositary shares
representing shares of the related class or series of preferred shares so
redeemed. The redemption price per depositary share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such class or series of the preferred shares. If less than all the depositary
shares are to be redeemed, the depositary shares to be redeemed will be
selected by lot or pro rata as may be determined by the depositary.
Voting the Preferred Shares
Upon receipt of notice of any meeting at which the holders of the preferred
shares are entitled to vote, the depositary will mail the information contained
in such notice of meeting to the record holders of the depositary shares
relating to such preferred shares. Each record holder of such depositary shares
on the record date (which will be the same date as the record date for the
preferred shares) will be entitled to instruct the depositary as to the
exercise of the voting rights pertaining to the amount of the class or series
of preferred shares represented by such holder's depositary shares. The
depositary will endeavor, insofar as practicable, to vote the number of the
preferred shares represented by such depositary shares in accordance with such
instructions, and ACE will agree to take all action which the depositary deems
necessary in order to enable the depositary to do so. The depositary will
abstain from voting preferred shares to the extent it does not receive specific
instructions from the holders of depositary shares representing such preferred
shares.
Amendment and Termination of the Deposit Agreement
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may at any time be amended by agreement
between ACE and the depositary. However, any amendment which materially and
adversely alters the rights of the holders of depositary receipts will not be
effective unless such amendment has been approved by the holders of depositary
receipts representing at least a majority (or, in the case of amendments
relating to or affecting rights to receive dividends or distributions or voting
or redemption rights, 66 2/3%, unless otherwise provided in the related
prospectus supplement) of the depositary shares then outstanding. The deposit
agreement may be terminated by ACE or the depositary only if (1) all
outstanding depositary shares have been redeemed, (2) there has been a final
distribution in respect of the related class or series of preferred shares in
connection with any liquidation, dissolution or winding up of ACE and such
distribution has been distributed to the holders of depositary receipts or (3)
upon the consent of holders of depositary receipts representing not less than
66 2/3% of the depositary shares outstanding.
Charges of Depositary
ACE will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. ACE will pay charges
of the depositary in connection with the initial deposit of the related class
or series of preferred shares and any redemption of such preferred shares.
Holders of depositary receipts will pay all other transfer and other taxes and
governmental charges and such other charges as are expressly provided in the
deposit agreement to be for their accounts.
The depositary may refuse to effect any transfer of a depositary receipt or
any withdrawal of shares of a class or series of preferred shares evidenced
thereby until all such taxes and charges with respect to such depositary
receipt or such preferred shares are paid by the holders thereof.
Miscellaneous
The depositary will forward all reports and communications from ACE which
are delivered to the depositary and which ACE is required to furnish to the
holders of the preferred shares.
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Neither the depositary nor ACE will be liable if it is prevented or delayed
by law or any circumstance beyond its control in performing its obligations
under the deposit agreement. The obligations of ACE and the depositary under
the deposit agreement will be limited to performance in good faith of their
duties thereunder, and neither ACE nor the depositary will be obligated to
prosecute or defend any legal proceeding in respect of any depositary shares or
class or series of preferred shares unless satisfactory indemnity is furnished.
ACE and the depositary may rely on written advice of counsel or accountants or
on information provided by persons presenting preferred shares for deposit,
holders of depositary shares or other persons believed to be competent and on
documents believed to be genuine.
Resignation and Removal of Depositary
The depositary may resign at any time by delivering to ACE notice of its
election to do so, and ACE may at any time remove the depositary. Any such
resignation or removal of the depositary will take effect upon the appointment
of a successor depositary, which successor depositary must be appointed within
60 days after delivery of the notice of resignation or removal and must be a
bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000.
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DESCRIPTION OF ACE DEBT SECURITIES
The following description of the ACE debt securities sets forth the material
terms and provisions of the ACE debt securities to which any prospectus
supplement may relate. The ACE senior debt securities are to be issued under an
indenture, referred to as the ACE senior indenture, between ACE and Bank One
Trust Company, N.A., as trustee, dated as of March 15, 2002, a copy of which is
incorporated by reference as an exhibit to the registration statement of which
this prospectus forms a part. The ACE subordinated debt securities are to be
issued under an indenture, referred to as the ACE subordinated indenture,
between ACE and Bank One Trust Company, N.A., as trustee, the form of which is
filed as an exhibit to the registration statement of which this prospectus
forms a part. The ACE senior indenture and the ACE subordinated indenture are
sometimes referred to herein collectively as the ACE indentures and each
individually as an ACE indenture. The particular terms of the ACE debt
securities offered by any prospectus supplement, and the extent to which the
general provisions described below may apply to the offered ACE debt
securities, will be described in the prospectus supplement.
Because the following summaries of the material terms and provisions of the
ACE indentures and the ACE debt securities are not complete, you should refer
to the forms of the ACE indentures and the ACE debt securities for complete
information regarding the terms and provisions of the ACE indentures, including
the definitions of some of the terms used below, and the ACE debt securities.
Wherever particular articles, sections or defined terms of an ACE indenture are
referred to, those articles, sections or defined terms are incorporated herein
by reference, and the statement in connection with which such reference is made
is qualified in its entirety by such reference. The ACE indentures are
substantially identical, except for certain covenants of ACE and provisions
relating to subordination.
General
The ACE indentures do not limit the aggregate principal amount of ACE debt
securities which ACE may issue thereunder and provide that ACE may issue ACE
debt securities thereunder from time to time in one or more series. (Section
3.1) The ACE indentures do not limit the amount of other Indebtedness (as
defined below) or ACE debt securities other than certain secured Indebtedness
as described below, which ACE or its subsidiaries may issue.
Unless otherwise provided in a prospectus supplement, the ACE senior debt
securities will be unsecured obligations of ACE and will rank equally with all
of its other unsecured and unsubordinated indebtedness. The ACE subordinated
debt securities of each series will be unsecured obligations of ACE,
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness of ACE (which term includes ACE senior debt securities) with
respect to such series, as described below under "Subordination of ACE
Subordinated Debt Securities" and in the applicable prospectus supplement.
Because ACE is a holding company, its rights and the rights of its creditors
(including the holders of ACE debt securities) and shareholders to participate
in any distribution of assets of any subsidiary upon the subsidiary's
liquidation or reorganization or otherwise would be subject to the prior claims
of the subsidiary's creditors, except to the extent that ACE may itself be a
creditor with recognized claims against the subsidiary. The right of creditors
of ACE (including the holders of ACE debt securities) to participate in the
distribution of stock owned by ACE in certain of its subsidiaries, including
ACE's insurance subsidiaries, may also be subject to approval by certain
insurance regulatory authorities having jurisdiction over such subsidiaries.
The prospectus supplement relating to the particular ACE debt securities
offered thereby will describe the following terms of the offered ACE debt
securities:
. the title of such ACE debt securities and the series in which such ACE
debt securities will be included, which may include medium-term notes;
. any limit upon the aggregate principal amount of such ACE debt securities;
21
. the date or dates, or the method or methods, if any, by which such date
or dates will be determined, on which the principal of such ACE debt
securities will be payable;
. the rate or rates at which such ACE debt securities will bear interest,
if any, which rate may be zero in the case of certain ACE debt securities
issued at an issue price representing a discount from the principal
amount payable at maturity, or the method by which such rate or rates
will be determined (including, if applicable, any remarketing option or
similar method), and the date or dates from which such interest, if any,
will accrue or the method by which such date or dates will be determined;
. the date or dates on which interest, if any, on such ACE debt securities
will be payable and any regular record dates applicable to the date or
dates on which interest will be so payable;
. whether and on what terms ACE will have the option to redeem such ACE
debt securities in lieu of paying additional amounts in respect of
certain Bermuda or Cayman Islands taxes, fees, duties, assessments or
governmental charges that might be imposed on holders of such ACE debt
securities (and the terms of such option);
. the place or places where the principal of, any premium or interest on or
any additional amounts with respect to such ACE debt securities will be
payable, any of such ACE debt securities that are issued in registered
form may be surrendered for registration of transfer or exchange, and any
such ACE debt securities may be surrendered for conversion or exchange;
. whether any of such ACE debt securities are to be redeemable at the
option of ACE and, if so, the date or dates on which, the period or
periods within which, the price or prices at which and the other terms
and conditions upon which such ACE debt securities may be redeemed, in
whole or in part, at the option of ACE;
. whether ACE will be obligated to redeem or purchase any of such ACE debt
securities pursuant to any sinking fund or analogous provision or at the
option of any holder thereof and, if so, the date or dates on which, the
period or periods within which, the price or prices at which and the
other terms and conditions upon which such ACE debt securities will be
redeemed or purchased, in whole or in part, pursuant to such obligation,
and any provisions for the remarketing of such ACE debt securities so
redeemed or purchased;
. if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which any ACE debt securities to be issued in
registered form will be issuable and, if other than a denomination of
$5,000, the denominations in which any ACE debt securities to be issued
in bearer form will be issuable;
. whether the ACE debt securities will be convertible into ordinary shares
and/or exchangeable for other securities, whether or not issued by ACE,
and, if so, the terms and conditions upon which such ACE debt securities
will be so convertible or exchangeable;
. if other than the principal amount, the portion of the principal amount
(or the method by which such portion will be determined) of such ACE debt
securities that will be payable upon declaration of acceleration of the
maturity thereof;
. if other than United States dollars, the currency of payment, including
composite currencies, of the principal of, any premium or interest on or
any additional amounts with respect to any of such ACE debt securities;
. whether the principal of, any premium or interest on or any additional
amounts with respect to such ACE debt securities will be payable, at the
election of ACE or a holder, in a currency other than that in which such
ACE debt securities are stated to be payable and the date or dates on
which, the period or periods within which, and the other terms and
conditions upon which such election may be made;
22
. any index, formula or other method used to determine the amount of
payments of principal of, any premium or interest on or any additional
amounts with respect to such ACE debt securities;
. whether such ACE debt securities are to be issued in the form of one or
more global securities and, if so, the identity of the depositary for
such global security or securities;
. whether such ACE debt securities are ACE senior debt securities or
subordinated debt securities and, if ACE subordinated debt securities,
the specific subordination provisions applicable thereto;
. in the case of ACE subordinated debt securities, the relative degree, if
any, to which such ACE subordinated debt securities of the series will be
senior to or be subordinated to other series of ACE subordinated debt
securities or other indebtedness of ACE in right of payment, whether such
other series of ACE subordinated debt securities or other indebtedness is
outstanding or not;
. any deletions from, modifications of or additions to the Events of
Default or covenants of ACE with respect to such ACE debt securities;
. whether the provisions described below under "Discharge, Defeasance and
Covenant Defeasance" will be applicable to such ACE debt securities;
. whether any of such ACE debt securities are to be issued upon the
exercise of warrants, and the time, manner and place for such ACE debt
securities to be authenticated and delivered; and
. any other terms of such ACE debt securities and any other deletions from
or modifications or additions to the applicable ACE indenture in respect
of such ACE debt securities. (Section 3.1)
ACE will have the ability under the ACE indentures to "reopen" a previously
issued series of ACE debt securities and issue additional ACE debt securities
of that series or establish additional terms of that series. ACE is also
permitted to issue ACE debt securities with the same terms as previously issued
ACE debt securities. (Section 3.1)
Unless otherwise provided in the related prospectus supplement, principal,
premium, interest and additional amounts, if any, with respect to any ACE debt
securities will be payable at the office or agency maintained by ACE for such
purposes (initially the corporate trust office of the trustee). In the case of
ACE debt securities issued in registered form, interest may be paid by check
mailed to the persons entitled thereto at their addresses appearing on the
security register or by transfer to an account maintained by the payee with a
bank located in the United States. Interest on ACE debt securities issued in
registered form will be payable on any interest payment date to the persons in
whose names the ACE debt securities are registered at the close of business on
the regular record date with respect to such interest payment date. All paying
agents initially designated by ACE for the ACE debt securities will be named in
the related prospectus supplement. ACE may at any time designate additional
paying agents or rescind the designation of any paying agent or approve a
change in the office through which any paying agent acts, except that ACE will
be required to maintain a paying agent in each place where the principal of,
any premium or interest on or any additional amounts with respect to the ACE
debt securities are payable. (Sections 3.7 and 10.2)
Unless otherwise provided in the related prospectus supplement, the ACE debt
securities may be presented for transfer (duly endorsed or accompanied by a
written instrument of transfer, if so required by ACE or the security
registrar) or exchanged for other ACE debt securities of the same series
(containing identical terms and provisions, in any authorized denominations,
and of a like aggregate principal amount) at the office or agency maintained by
ACE for such purposes (initially the corporate trust office of the trustee).
Such transfer or exchange will be made without service charge, but ACE may
require payment of a sum sufficient to cover any tax or other governmental
charge and any other expenses then payable. ACE will not be required to (1)
issue, register the transfer of, or exchange, ACE debt securities during a
period beginning at the opening of business 15 days before the day of mailing
of a notice of redemption of any such ACE debt securities and ending at the
close of business on the day of such mailing or (2) register the transfer of or
exchange any ACE debt security so
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selected for redemption in whole or in part, except the unredeemed portion of
any ACE debt security being redeemed in part. (Section 3.5) ACE has appointed
the trustee as security registrar. Any transfer agent (in addition to the
security registrar) initially designated by ACE for any ACE debt securities
will be named in the related prospectus supplement. ACE may at any time
designate additional transfer agents or rescind the designation of any transfer
agent or approve a change in the office through which any transfer agent acts,
except that ACE will be required to maintain a transfer agent in each place
where the principal of, any premium or interest on or any additional amounts
with respect to the ACE debt securities are payable. (Section 10.2)
Unless otherwise provided in the related prospectus supplement, the ACE debt
securities will be issued only in fully registered form without coupons in
minimum denominations of $1,000 and any integral multiple thereof. (Section
3.2) The ACE debt securities may be represented in whole or in part by one or
more global ACE debt securities registered in the name of a depositary or its
nominee and, if so represented, interests in such global ACE debt security will
be shown on, and transfers thereof will be effected only through, records
maintained by the designated depositary and its participants as described
below. Where ACE debt securities of any series are issued in bearer form, the
special restrictions and considerations, including special offering
restrictions and special United States Federal income tax considerations
applicable to such ACE debt securities and to payment on and transfer and
exchange of such ACE debt securities, will be described in the related
prospectus supplement.
The ACE debt securities may be issued as original issue discount securities
(bearing no interest or bearing interest at a rate which at the time of
issuance is below market rates) to be sold at a substantial discount below
their principal amount. Special United States Federal income tax and other
considerations applicable to original issue discount securities will be
described in the related prospectus supplement.
If the purchase price of any ACE debt securities is payable in one or more
foreign currencies or currency units or if any ACE debt securities are
denominated in one or more foreign currencies or currency units or if the
principal of, or any premium or interest on, or any additional amounts with
respect to, any ACE debt securities is payable in one or more foreign
currencies or currency units, the restrictions, elections, certain United
States Federal income tax considerations, specific terms and other information
with respect to such ACE debt securities and such foreign currency or currency
units will be set forth in the related prospectus supplement.
ACE will comply with Section 14(e) under the Exchange Act, and any other
tender offer rules under the Exchange Act which may then be applicable, in
connection with any obligation of ACE to purchase ACE debt securities at the
option of the holders. Any such obligation applicable to a series of ACE debt
securities will be described in the related prospectus supplement.
Unless otherwise described in a prospectus supplement relating to any ACE
debt securities, other than as described below under "--Covenants Applicable to
ACE Senior Debt Securities--Limitation on Liens on Stock of Designated
Subsidiaries," the ACE indentures do not contain any provisions that would
limit ACE's ability to incur indebtedness or that would afford holders of ACE
debt securities protection in the event of a sudden and significant decline in
the credit quality of ACE or a takeover, recapitalization or highly leveraged
or similar transaction involving ACE. Accordingly, ACE could in the future
enter into transactions that could increase the amount of indebtedness
outstanding at that time or otherwise affect ACE's capital structure or credit
rating. You should refer to the prospectus supplement relating to a particular
series of ACE debt securities for information regarding to any deletions from,
modifications of or additions to the Events of Defaults described below or
covenants of ACE contained in the ACE indentures, including any addition of a
covenant or other provisions providing event risk or similar protection.
Conversion and Exchange
The terms, if any, on which ACE debt securities of any series are
convertible into or exchangeable for ordinary shares, preferred shares or other
securities, whether or not issued by ACE, property or cash, or a combination of
any of the foregoing, will be set forth in the related prospectus supplement.
Such terms may
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include provisions for conversion or exchange, either mandatory, at the option
of the holder, or at the option of ACE, in which the securities, property or
cash to be received by the holders of the ACE debt securities would be
calculated according to the factors and at such time as described in the
related prospectus supplement.
Global Securities
The ACE debt securities of a series may be issued in whole or in part in the
form of one or more global ACE debt securities that will be deposited with, or
on behalf of, a depositary identified in the prospectus supplement relating to
such series.
The specific terms of the depositary arrangement with respect to a series of
ACE debt securities will be described in the prospectus supplement relating to
such series. ACE anticipates that the following provisions will apply to all
depositary arrangements.
Upon the issuance of a global security, the depositary for such global
security or its nominee will credit, on its book-entry registration and
transfer system, the respective principal amounts of the ACE debt securities
represented by such global security. Such accounts will be designated by the
underwriters or agents with respect to such ACE debt securities or by ACE if
such ACE debt securities are offered and sold directly by ACE. Ownership of
beneficial interests in a global security will be limited to persons that may
hold interests through participants. Ownership of beneficial interests in such
global security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the depositary or its nominee
(with respect to interests of participants) and on the records of participants
(with respect to interests of persons other than participants). The laws of
some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a global security.
So long as the depositary for a global security, or its nominee, is the
registered owner of such global security, such depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the ACE debt
securities represented by such global security for all purposes under the
applicable ACE indenture. Except as described below, owners of beneficial
interests in a global security will not be entitled to have ACE debt securities
of the series represented by such global security registered in their names and
will not receive or be entitled to receive physical delivery of ACE debt
securities of that series in definitive form.
Principal of, any premium and interest on, and any additional amounts with
respect to, ACE debt securities registered in the name of a depositary or its
nominee will be made to the depositary or its nominee, as the case may be, as
the registered owner of the global security representing such ACE debt
securities. None of ACE, the trustee, any paying agent or the security
registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the global security for such ACE debt securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
ACE expects that the depositary for a series of ACE debt securities or its
nominee, upon receipt of any payment with respect to such ACE debt securities,
will credit immediately participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the principal amount
of the global security for such ACE debt securities as shown on the records of
such depositary or its nominee. ACE also expects that payments by participants
to owners of beneficial interests in such global security held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers
registered in street name, and will be the responsibility of such participants.
The ACE indentures provide that if (1) the depositary for a series of ACE
debt securities notifies ACE that it is unwilling or unable to continue as
depositary or if such depositary ceases to be eligible under the applicable ACE
indenture and a successor depositary is not appointed by ACE within 90 days of
written notice, (2) ACE
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determines that ACE debt securities of a particular series will no longer be
represented by global securities and executes and delivers to the trustee a
company order to such effect or (3) an Event of Default with respect to a
series of ACE debt securities has occurred and is continuing, the global
securities will be exchanged for ACE debt securities of such series in
definitive form of like tenor and of an equal aggregate principal amount, in
authorized denominations. Such definitive ACE debt securities will be
registered in such name or names as the depositary shall instruct the trustee.
(Section 3.5) It is expected that such instructions may be based upon
directions received by the depositary from participants with respect to
ownership of beneficial interests in global securities.
Payment of Additional Amounts
ACE will make all payments of principal of and premium, if any, interest and
any other amounts on, or in respect of, the ACE debt securities of any series
without withholding or deduction at source for, or on account of, any present
or future taxes, fees, duties, assessments or governmental charges of whatever
nature imposed or levied by or on behalf of the Cayman Islands or Bermuda,
each, referred to as a taxing jurisdiction, or any political subdivision or
taxing authority thereof or therein, unless such taxes, fees, duties,
assessments or governmental charges are required to be withheld or deducted by
(x) the laws (or any regulations or rulings promulgated thereunder) of a taxing
jurisdiction or any political subdivision or taxing authority thereof or
therein or (y) an official position regarding the application, administration,
interpretation or enforcement of any such laws, regulations or rulings,
including, without limitation, a holding by a court of competent jurisdiction
or by a taxing authority in a taxing jurisdiction or any political subdivision
thereof. If a withholding or deduction at source is required, ACE will, subject
to certain limitations and exceptions described below, pay to the holder of any
such ACE debt security such additional amounts as may be necessary so that
every net payment of principal, premium, if any, interest or any other amount
made to such holder, after the withholding or deduction, will not be less than
the amount provided for in such ACE debt security and the applicable ACE
indenture to be then due and payable.
ACE will not be required to pay any additional amounts for or on account of:
1. any tax, fee, duty, assessment or governmental charge of whatever nature
which would not have been imposed but for the fact that such holder (a)
was a resident, domiciliary or national of, or engaged in business or
maintained a permanent establishment or was physically present in, the
relevant taxing jurisdiction or any political subdivision thereof or
otherwise had some connection with the relevant taxing jurisdiction
other than by reason of the mere ownership of, or receipt of payment
under, such ACE debt security, (b) presented such ACE debt security for
payment in the relevant taxing jurisdiction or any political subdivision
thereof, unless such ACE debt security could not have been presented for
payment elsewhere, or (c) presented such ACE debt security for payment
more than 30 days after the date on which the payment in respect of such
ACE debt security became due and payable or provided for, whichever is
later, except to the extent that the holder would have been entitled to
such additional amounts if it had presented such ACE debt security for
payment on any day within that 30-day period;
2. any estate, inheritance, gift, sale, transfer, personal property or
similar tax, assessment or other governmental charge;
3. any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure by the holder or the beneficial owner
of such ACE debt security to comply with any reasonable request by ACE
addressed to the holder within 90 days of such request (a) to provide
information concerning the nationality, residence or identity of the
holder or such beneficial owner or (b) to make any declaration or other
similar claim or satisfy any information or reporting requirement, which
in either case is required or imposed by statute, treaty, regulation or
administrative practice of the relevant taxing jurisdiction or any
political subdivision thereof as a precondition to exemption from all or
part of such tax, assessment or other governmental charge; or
4. any combination of items (1), (2) and (3).
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In addition, ACE will not pay additional amounts with respect to any payment
of principal of, or premium, if any, interest or any other amounts on, any such
ACE debt security to any holder who is a fiduciary or partnership or other than
the sole beneficial owner of such ACE debt security to the extent such payment
would be required by the laws of the relevant taxing jurisdiction (or any
political subdivision or relevant taxing authority thereof or therein) to be
included in the income for tax purposes of a beneficiary or partner or settlor
with respect to such fiduciary or a member of such partnership or a beneficial
owner who would not have been entitled to such additional amounts had it been
the holder of the ACE debt security. (Section 10.4)
Covenants Applicable to ACE Senior Debt Securities
Limitation on Liens on Stock of Designated Subsidiaries
Under the ACE senior indenture, ACE will covenant that, so long as any ACE
senior debt securities are outstanding, it will not, nor will it permit any
Subsidiary to, create, assume, incur, guarantee or otherwise permit to exist
any Indebtedness secured by any mortgage, pledge, lien, security interest or
other encumbrance upon any shares of capital stock of any Designated Subsidiary
(whether such shares of stock are now owned or hereafter acquired) without
effectively providing concurrently that the ACE senior debt securities (and, if
ACE so elects, any other Indebtedness of ACE that is not subordinate to the ACE
senior debt securities and with respect to which the governing instruments
require, or pursuant to which ACE is otherwise obligated, to provide such
security) will be secured equally and ratably with such Indebtedness for at
least the time period such other Indebtedness is so secured. (Section 10.5 of
the ACE senior indenture)
For purposes of the ACE senior indenture, "capital stock" of any Person
means any and all shares, interests, rights to purchase, warrants, options,
participations or other equivalents of or interests in, however designated,
equity of such Person, including preferred stock, but excluding any debt
securities convertible into such equity. (Section 1.1 of the ACE senior
indenture)
The term "Designated Subsidiary" means any present or future consolidated
Subsidiary of ACE, the Consolidated Net Worth of which constitutes at least 5%
of ACE's Consolidated Net Worth. (Section 1.1 of the ACE senior indenture) As
of April 30, 2002, ACE's Designated Subsidiaries were ACE Bermuda, Tempest, ACE
INA and ACE USA.
For purposes of the ACE indentures, the term "Indebtedness" means, with
respect to any Person, (1) the principal of and any premium and interest on (a)
indebtedness of such Person for money borrowed and (b) indebtedness evidenced
by notes, debentures, bonds or other similar instruments for the payment of
which such Person is responsible or liable; (2) all Capitalized Lease
Obligations of such Person; (3) all obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations and all obligations under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business);
(4) all obligations of such Person for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (1) through (3) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (5) all
obligations of the type referred to in clauses (1) through (4) of other Persons
and all dividends of other Persons for the payment of which, in either case,
such Person is responsible or liable as obligor, guarantor or otherwise; (6)
all obligations of the type referred to in clauses (1) through (5) of other
Persons secured by any mortgage, pledge, lien, security interest or other
encumbrance on any property or asset of such Person (whether or not such
obligation is assumed by such Person), the amount of such obligation being
deemed to be the lesser of the value of such property or assets or the amount
of the obligation so secured; and (7) any amendments, modifications,
refundings, renewals or extensions of any indebtedness or obligation described
as Indebtedness in clauses (1) through (6) above. (Section 1.1)
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Limitations on Disposition of Stock of Designated Subsidiaries
The ACE senior indenture also provides that, so long as any ACE senior debt
securities are outstanding and except in a transaction otherwise governed by
such ACE indenture, ACE will not issue, sell, assign, transfer or otherwise
dispose of any shares of, securities convertible into, or warrants, rights or
options to subscribe for or purchase shares of, capital stock (other than
preferred stock having no voting rights of any kind) of any Designated
Subsidiary, and will not permit any Designated Subsidiary to issue (other than
to ACE) any shares (other than director's qualifying shares) of, or securities
convertible into, or warrants, rights or options to subscribe for or purchase
shares of, capital stock (other than preferred stock having no voting rights of
any kind) of any Designated Subsidiary, if, after giving effect to any such
transaction and the issuance of the maximum number of shares issuable upon the
conversion or exercise of all such convertible securities, warrants, rights or
options, ACE would own, directly or indirectly, less than 80% of the shares of
capital stock of such Designated Subsidiary (other than preferred stock having
no voting rights of any kind); provided, however, that (1) any issuance, sale,
assignment, transfer or other disposition permitted by ACE may only be made for
at least a fair market value consideration as determined by ACE's board of
directors pursuant to a resolution adopted in good faith and (2) the foregoing
will not prohibit any such issuance or disposition of securities if required by
any law or any regulation or order of any governmental or insurance regulatory
authority. Notwithstanding the foregoing, (1) ACE may merge or consolidate any
Designated Subsidiary into or with another direct or indirect Subsidiary of
ACE, the shares of capital stock of which ACE owns at least 80%, and (2) ACE
may, subject to the provisions described under "--Consolidation, Amalgamation,
Merger and Sale of Assets" below, sell, assign, transfer or otherwise dispose
of the entire capital stock of any Designated Subsidiary at one time for at
least a fair market value consideration as determined by ACE's board of
directors pursuant to a resolution adopted in good faith. (Section 10.6 of the
ACE senior indenture)
Consolidation, Amalgamation, Merger and Sale of Assets
Each ACE indenture provides that ACE may not (1) consolidate or amalgamate
with or merge into any Person or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to any Person, or (2)
permit any Person to consolidate or amalgamate with or merge into ACE, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to ACE, unless (a) in the case of (1) above, such
Person is a Corporation organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia, Bermuda or
the Cayman Islands and will expressly assume, by supplemental indenture
satisfactory in form to the trustee, the due and punctual payment of the
principal of, any premium and interest on and any additional amounts with
respect to all of the ACE debt securities issued thereunder, and the
performance of ACE's obligations under such ACE indenture and the ACE debt
securities issued thereunder, and provides for conversion or exchange rights in
accordance with the provisions of the ACE debt securities of any series that
are convertible or exchangeable into ordinary shares or other securities; (b)
immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of ACE or a Subsidiary as a result of
such transaction as having been incurred by ACE or such Subsidiary at the time
of such transaction, no Event of Default, and no event which after notice or
lapse of time or both would become an Event of Default, will have happened and
be continuing; and (c) certain other conditions are met. (Section 8.1)
Events of Default
Each of the following events will constitute an Event of Default under the
applicable ACE indenture with respect to any series of ACE debt securities
issued thereunder (whatever the reason for such Event of Default and whether it
will 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 on any ACE debt security of such
series, or any additional amounts payable with respect thereto, when
such interest becomes or such additional amounts become due and payable,
and continuance of such default for a period of 30 days;
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(2) default in the payment of the principal of or any premium on any ACE
debt security of such series, or any additional amounts payable with
respect thereto, when such principal or premium becomes or such
additional amounts become due and payable either at maturity, upon any
redemption, by declaration of acceleration or otherwise;
(3) default in the deposit of any sinking fund payment, when and as due by
the terms of any ACE debt security of such series;
(4) default in the performance, or breach, of any covenant or warranty of
ACE contained in the applicable ACE indenture for the benefit of such
series or in the ACE debt securities of such series, and the continuance
of such default or breach for a period of 60 days after there has been
given written notice as provided in such ACE indenture;
(5) if any event of default as defined in any mortgage, indenture or
instrument under which there may be issued, or by which there may be
secured or evidenced, any Indebtedness of ACE (including an Event of
Default under any other series of ACE debt securities), whether such
Indebtedness now exists or is hereafter created or incurred, happens and
consists of default in the payment of more than $50,000,000 in principal
amount of such Indebtedness at the maturity thereof (after giving effect
to any applicable grace period) or results in such Indebtedness in
principal amount in excess of $50,000,000 becoming or being declared due
and payable prior to the date on which it would otherwise become due and
payable, and such default is not cured or such acceleration is not
rescinded or annulled within a period of 30 days after there has been
given written notice as provided in the applicable ACE indenture;
(6) ACE shall fail within 60 days to pay, bond or otherwise discharge any
uninsured judgment or court order for the payment of money in excess of
$50,000,000, which is not stayed on appeal or is not otherwise being
appropriately contested in good faith;
(7) certain events in bankruptcy, insolvency or reorganization of ACE; and
(8) any other Event of Default provided in or pursuant to the applicable ACE
indenture with respect to ACE debt securities of such series. (Section
5.1)
If an Event of Default with respect to the ACE debt securities of any series
(other than an Event of Default described in (7) of the preceding paragraph)
occurs and is continuing, either the trustee or the holders of not less than
25% in principal amount of the outstanding ACE debt securities of such series
by written notice as provided in the applicable ACE indenture may declare the
principal amount (or such lesser amount as may be provided for in the ACE debt
securities of such series) of all outstanding ACE debt securities of such
series to be due and payable immediately. At any time after a declaration of
acceleration has been made, but before a judgment or decree for payment of
money has been obtained by the trustee, and subject to applicable law and
certain other provisions of the applicable ACE indenture, the holders of not
less than a majority in principal amount of the ACE debt securities of such
series may, under certain circumstances, rescind and annul such declaration of
acceleration. An Event of Default described in (7) of the preceding paragraph
will cause the principal amount and accrued interest (or such lesser amount as
provided for in the ACE debt securities of such series) to become immediately
due and payable without any declaration or other act by the trustee or any
holder. (Section 5.2)
Each ACE indenture provides that, within 90 days after the occurrence of any
event which is, or after notice or lapse of time or both would become, an Event
of Default with respect to the ACE debt securities of any series, each referred
to in this prospectus as a default, the trustee will transmit, in the manner
set forth in such ACE indenture, notice of such default to the holders of the
ACE debt securities of such series unless such default has been cured or
waived; provided, however, that except in the case of a default in the payment
of principal of, or premium, if any, or interest, if any, on, or additional
amounts or any sinking fund or purchase fund installment with respect to, any
ACE debt security of such series, the trustee may withhold 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 determine
that the withholding of such notice is in the best interest of the holders of
ACE debt securities of such series; and provided, further, that in the case of
any default of the character described in (5) of the second preceding
paragraph, no such notice to holders will be given until at least 30 days after
the default occurs. (Section 6.2)
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If an Event of Default occurs and is continuing with respect to the ACE debt
securities of any series, the trustee may in its discretion proceed to protect
and enforce its rights and the rights of the holders of ACE debt securities of
such series by all appropriate judicial proceedings. (Section 5.3) Each ACE
indenture provides that, subject to the duty of the trustee during any default
to act with the required standard of care, the trustee will be under no
obligation to exercise any of its rights or powers under such ACE indenture at
the request or direction of any of the holders of ACE debt securities, unless
such holders shall have offered to the trustee reasonable indemnity. (Section
6.1) Subject to such provisions for the indemnification of the trustee, and
subject to applicable law and certain other provisions of the applicable ACE
indenture, the holders of a majority in principal amount of the outstanding ACE
debt securities of any series will 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
ACE debt securities of such series. (Section 5.12)
Modification and Waiver
ACE and the trustee may modify or amend either ACE indenture with the
consent of the holders of not less than a majority in principal amount of the
outstanding ACE debt securities of each series affected thereby; provided,
however, that no such modification or amendment may, without the consent of the
holder of each outstanding ACE debt security affected thereby,
. change the stated maturity of the principal of, or any premium or
installment of interest on, or any additional amounts with respect to,
any ACE debt security,
. reduce the principal amount of, or the rate (or modify the calculation of
such rate) of interest on, or any additional amounts with respect to, or
any premium payable upon the redemption of, any ACE debt security,
. change the obligation of ACE to pay additional amounts with respect to
any ACE debt security,
. reduce the amount of the principal of an original issue discount security
that would be due and payable upon a declaration of acceleration of the
maturity thereof or the amount thereof provable in bankruptcy,
. change the redemption provisions of any ACE debt security or adversely
affect the right of repayment at the option of any holder of any ACE debt
security,
. change the place of payment or the coin or currency in which the
principal of, any premium or interest on or any additional amounts with
respect to any ACE debt security is payable,
. impair the right to institute suit for the enforcement of any payment on
or after the stated maturity of any ACE debt security (or, in the case of
redemption, on or after the redemption date or, in the case of repayment
at the option of any holder, on or after the repayment date),
. reduce the percentage in principal amount of the outstanding ACE debt
securities, the consent of whose holders is required in order to take
specific actions,
. reduce the requirements for quorum or voting by holders of ACE debt
securities in Section 15.4 of each ACE indenture,
. modify any of the provisions in the applicable ACE indenture regarding
the waiver of past defaults and the waiver of certain covenants by the
holders of ACE debt securities except to increase any percentage vote
required or to provide that other provisions of such ACE indenture cannot
be modified or waived without the consent of the holder of each ACE debt
security affected thereby,
. make any change that adversely affects the right to convert or exchange
any ACE debt security into or for ordinary shares of ACE or other
securities (whether or not issued by ACE), cash or property in accordance
with its terms,
. modify any of the provisions of the ACE subordinated indenture relating
to the subordination of the ACE subordinated debt securities in a manner
adverse to holders of ACE subordinated debt securities, or
. modify any of the above provisions. (Section 9.2)
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In addition, no supplemental indenture may directly or indirectly modify or
eliminate the subordination provisions of the ACE subordinated indenture in any
manner which might terminate or impair the subordination of the ACE
subordinated debt securities of any series to Senior Indebtedness with respect
to such series without the prior written consent of the holders of such Senior
Indebtedness. (Section 9.7 of the ACE subordinated indenture)
ACE and the trustee may modify or amend either ACE indenture and the ACE
debt securities of any series without the consent of any holder in order to,
among other things:
. provide for a successor to ACE pursuant to a consolidation, amalgamation,
merger or sale of assets;
. add to the covenants of ACE for the benefit of the holders of all or any
series of ACE debt securities or to surrender any right or power
conferred upon ACE by the applicable ACE indenture;
. provide for a successor trustee with respect to the ACE debt securities
of all or any series;
. cure any ambiguity or correct or supplement any provision in either ACE
indenture which may be defective or inconsistent with any other
provision, or to make any other provisions with respect to matters or
questions arising under either ACE indenture which will not adversely
affect the interests of the holders of ACE debt securities of any series;
. change the conditions, limitations and restrictions on the authorized
amount, terms or purposes of issue, authentication and delivery of ACE
debt securities under either ACE indenture;
. add any additional Events of Default with respect to all or any series of
ACE debt securities;
. secure the ACE debt securities;
. provide for conversion or exchange rights of the holders of any series of
ACE debt securities; or
. make any other change that does not materially adversely affect the
interests of the holders of any ACE debt securities then outstanding
under the applicable ACE indenture. (Section 9.1)
The holders of at least a majority in principal amount of the outstanding
ACE debt securities of any series may, on behalf of the holders of all ACE debt
securities of that series, waive compliance by ACE with certain covenants of
the applicable ACE indenture. (Section 10.8 of the ACE senior indenture;
Section 10.6 of the ACE subordinated indenture) The holders of not less than a
majority in principal amount of the outstanding ACE debt securities of any
series may, on behalf of the holders of all ACE debt securities that series,
waive any past default and its consequences under the applicable ACE indenture
with respect to the ACE debt securities of that series, except a default (1) in
the payment of principal of, any premium or interest on or any additional
amounts with respect to ACE debt securities of that series or (2) in respect of
a covenant or provision of the applicable ACE indenture that cannot be modified
or amended without the consent of the holder of each outstanding ACE debt
security of any series affected. (Section 5.13)
Under each ACE indenture, ACE is required to furnish the trustee annually a
statement as to performance by ACE of certain of its obligations under that ACE
indenture and as to any default in such performance. ACE is also required to
deliver to the trustee, within five days after occurrence thereof, written
notice of any Event of Default, or any event which after notice or lapse of
time or both would constitute an Event of Default, resulting from the failure
to perform or breach of any covenant or warranty contained in the applicable
ACE indenture or the ACE debt securities of any series. (Section 10.9 of the
ACE senior indenture; Section 10.7 of the ACE subordinated indenture)
Discharge, Defeasance and Covenant Defeasance
ACE may discharge certain obligations to holders of any series of ACE debt
securities that have not already been delivered to the trustee for cancellation
and that either have become due and payable or will become due and payable
within one year (or scheduled for redemption within one year) by depositing
with the trustee, in
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trust, funds in U.S. dollars or in the Foreign Currency (as defined below) in
which such ACE debt securities are payable in an amount sufficient to pay the
entire indebtedness on such ACE debt securities with respect to principal and
any premium, interest and additional amounts to the date of such deposit (if
such ACE debt securities have become due and payable) or to the maturity
thereof, as the case may be. (Section 4.1)
Each ACE indenture provides that, unless the provisions of Section 4.2
thereof are made inapplicable to the ACE debt securities of or within any
series pursuant to Section 3.1 thereof, ACE may elect either (1) to defease and
be discharged from any and all obligations with respect to such ACE debt
securities (except for, among other things, the obligation to pay additional
amounts, if any, upon the occurrence of certain events of taxation, assessment
or governmental charge with respect to payments on such ACE debt securities and
other obligations to register the transfer or exchange of such ACE debt
securities, to replace temporary or mutilated, destroyed, lost or stolen ACE
debt securities, to maintain an office or agency with respect to such ACE debt
securities and to hold moneys for payment in trust), referred to in this
prospectus as defeasance, or (2) to be released from its obligations with
respect to such ACE debt securities under certain covenants as described in the
related prospectus supplement, and any omission to comply with such obligations
will not constitute a default or an Event of Default with respect to such ACE
debt securities, referred to in this prospectus as covenant defeasance.
Defeasance or covenant defeasance, as the case may be, will be conditioned upon
the irrevocable deposit by ACE with the Trustee, in trust, of an amount in U.S.
dollars or in the Foreign Currency in which such ACE debt securities are
payable at stated maturity, or Government Obligations (as defined below), or
both, applicable to such ACE debt securities which through the scheduled
payment of principal and interest in accordance with their terms will provide
money in an amount sufficient to pay the principal of, any premium and interest
on, and any additional amounts with respect to, such ACE debt securities on the
scheduled due dates. (Section 4.2)
Such a trust may only be established if, among other things, (1) the
applicable defeasance or covenant defeasance does not result in a breach or
violation of, or constitute a default under, the applicable ACE indenture or
any other material agreement or instrument to which ACE is a party or by which
it is bound, (2) no Event of Default or event which with notice or lapse of
time or both would become an Event of Default with respect to the ACE debt
securities to be defeased will have occurred and be continuing on the date of
establishment of such a trust and, with respect to defeasance only, at any time
during the period ending on the 123rd day after such date and (3) ACE has
delivered to the trustee an opinion of counsel (as specified in the ACE
indenture) to the effect that the holders of such ACE debt securities will not
recognize income, gain or loss for United States Federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to
United States Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such opinion of counsel, in the case of
defeasance, must refer to and be based upon a letter ruling of the Internal
Revenue Service received by ACE, a Revenue Ruling published by the Internal
Revenue Service or a change in applicable United States Federal income tax law
occurring after the date of the applicable ACE indenture. (Section 4.2)
"Foreign Currency" means any currency, currency unit or composite currency,
including, without limitation, the euro, issued by the government of one or
more countries other than the United States of America or by any recognized
confederation or association of such governments. (Section 1.1)
"Government Obligations" means debt securities which are (1) direct
obligations of the United States of America or the government or the
governments which issued the Foreign Currency in which the ACE debt securities
of a particular series are payable, for the payment of which its full faith and
credit is pledged or (2) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America or
such government or governments which issued the Foreign Currency in which the
ACE debt securities of such series are payable, the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America or such other government or governments, and which, in the
case of clauses (1) and (2), are not callable or redeemable at the option of
the issuer or issuers thereof, and will also include a depository receipt
issued by a bank or trust company as custodian with respect to any such
Government Obligation or a specific payment of interest on or principal of or
any other amount with respect to
32
any such Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian with respect to the Government Obligation or the specific payment of
interest on or principal of or any other amount with respect to the Government
Obligation evidenced by such depository receipt. (Section 1.1)
If after ACE has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to ACE debt securities of any
series, (1) the holder of an ACE debt security of that series is entitled to,
and does, elect pursuant to Section 3.1 of the applicable ACE indenture or the
terms of such ACE debt security to receive payment in a currency other than
that in which such deposit has been made in respect of such ACE debt security,
or (2) a Conversion Event (as defined below) occurs in respect of the Foreign
Currency in which such deposit has been made, the indebtedness represented by
such ACE debt security will be deemed to have been, and will be, fully
discharged and satisfied through the payment of the principal of, any premium
and interest on, and any additional amounts with respect to, such ACE debt
security as such ACE debt security becomes due out of the proceeds yielded by
converting the amount or other properties so deposited in respect of such ACE
debt security into the currency in which such ACE debt security becomes payable
as a result of such election or such Conversion Event based on (a) in the case
of payments made pursuant to clause (1) above, the applicable market exchange
rate for such currency in effect on the second business day prior to such
payment date, or (b) with respect to a Conversion Event, the applicable market
exchange rate for such Foreign Currency in effect (as nearly as feasible) at
the time of the Conversion Event. (Section 4.2)
"Conversion Event" means the cessation of use of (1) a Foreign Currency both
by the government of the country or countries which issued such Foreign
Currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community or (2) any
currency unit or composite currency for the purposes for which it was
established. All payments of principal of, any premium and interest on, and any
additional amounts with respect to, any ACE debt security that are payable in a
Foreign Currency that ceases to be used by the government or governments of
issuance will be made in U.S. dollars. (Section 1.1)
In the event ACE effects covenant defeasance with respect to any ACE debt
securities and such ACE debt securities are declared due and payable because of
the occurrence of any Event of Default other than an Event of Default with
respect to any covenant as to which there has been covenant defeasance, the
amount in such Foreign Currency in which such ACE debt securities are payable,
and Government Obligations on deposit with the trustee, will be sufficient to
pay amounts due on such ACE debt securities at the time of the stated maturity
but may not be sufficient to pay amounts due on such ACE debt securities at the
time of the acceleration resulting from such Event of Default. However, ACE
would remain liable to make payment of such amounts due at the time of
acceleration.
Subordination of ACE Subordinated Debt Securities
The ACE subordinated debt securities of each series will, to the extent set
forth in the ACE subordinated indenture, be subordinate in right of payment to
the prior payment in full of all Senior Indebtedness with respect to such
series. (Section 16.1 of the ACE subordinated indenture) Upon any payment or
distribution of assets of ACE of any kind or character, whether in cash,
property or securities, to creditors upon any dissolution, winding-up,
liquidation or reorganization of ACE, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due upon
all Senior Indebtedness with respect to the ACE subordinated debt securities of
any series will first be paid in full, or payment thereof provided for in money
in accordance with its terms, before the holders of ACE subordinated debt
securities of such series are entitled to receive or retain any payment on
account of principal of, or any premium or interest on, or any additional
amounts with respect to, the ACE subordinated debt securities of such series,
and to that end the holders of such
33
Senior Indebtedness will be entitled to receive, for application to the payment
thereof, any payment or distribution of any kind or character, whether in cash,
property or securities, including any such payment or distribution which may be
payable or deliverable by reason of the payment of any other Indebtedness of
ACE being subordinated to the payment of ACE subordinated debt securities of
such series, which may be payable or deliverable in respect of the ACE
subordinated debt securities of such series upon any such dissolution,
winding-up, liquidation or reorganization or in any such bankruptcy,
insolvency, receivership or other proceeding. (Section 16.3 of the ACE
subordinated indenture)
By reason of such subordination, in the event of liquidation or insolvency
of ACE, holders of Senior Indebtedness with respect to the ACE subordinated
debt securities of any series and holders of other obligations of ACE that are
not subordinated to such Senior Indebtedness may recover more ratably than the
holders of the ACE subordinated debt securities of such series.
Subject to the payment in full of all Senior Indebtedness with respect to
the ACE subordinated debt securities of any series, the rights of the holders
of the ACE subordinated debt securities of such series will be subrogated to
the rights of the holders of such Senior Indebtedness to receive payments or
distributions of cash, property or securities of ACE applicable to such Senior
Indebtedness until the principal of, any premium and interest on, and any
additional amounts with respect to, the ACE subordinated debt securities of
such series have been paid in full. (Section 16.4 of the ACE subordinated
indenture)
No payment of principal (including redemption and sinking fund payments) of
or any premium or interest on or any additional amounts with respect to the ACE
subordinated debt securities of any series may be made (1) if any Senior
Indebtedness with respect to such series is not paid when due and any
applicable grace period with respect to such default has ended and such default
has not been cured or waived or ceased to exist, or (2) if the maturity of any
Senior Indebtedness with respect to such series has been accelerated because of
a default. (Section 16.2 of the ACE subordinated indenture)
The ACE subordinated indenture does not limit or prohibit ACE from incurring
additional Senior Indebtedness, which may include Indebtedness that is senior
to the ACE subordinated debt securities of any series, but subordinate to other
obligations of ACE. The ACE senior debt securities will constitute Senior
Indebtedness with respect to the ACE subordinated debt securities of each
series under the ACE subordinated indenture.
The term "Senior Indebtedness" means, with respect to the ACE subordinated
debt securities of any particular series, all Indebtedness of ACE outstanding
at any time, except (1) the ACE subordinated debt securities of such series,
(2) Indebtedness as to which, by the terms of the instrument creating or
evidencing the same, it is provided that such Indebtedness is subordinated to
or ranks equally with the ACE subordinated debt securities of such series, (3)
Indebtedness of ACE to an Affiliate of ACE, (4) interest accruing after the
filing of a petition initiating any bankruptcy, insolvency or other similar
proceeding unless such interest is an allowed claim enforceable against ACE in
a proceeding under federal or state bankruptcy laws and (5) trade accounts
payable. Senior Indebtedness with respect to the ACE subordinated debt
securities of any particular series will continue to be Senior Indebtedness
with respect to the ACE subordinated debt securities of such series and be
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
(Sections 1.1 and 16.8 of the ACE subordinated indenture)
The ACE subordinated indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular series of ACE subordinated
debt securities, may be changed prior to such issuance. Any such change would
be described in the related prospectus supplement.
34
New York Law to Govern
The ACE indentures and the ACE debt securities will be governed by, and
construed in accordance with, the laws of the State of New York applicable to
agreements made or instruments entered into and, in each case, performed in
that state. (Section 1.13)
Information Concerning the Trustee
ACE may from time to time borrow from, maintain deposit accounts with and
conduct other banking transactions with Bank One Trust Company, N.A. and its
affiliates in the ordinary course of business.
Under each ACE indenture, Bank One Trust Company, N.A. is required to
transmit annual reports to all holders regarding its eligibility and
qualifications as trustee under the applicable ACE indenture and related
matters. (Section 7.3)
35
DESCRIPTION OF ACE INA DEBT SECURITIES AND ACE GUARANTEE
The following description of the ACE INA debt securities and the ACE
guarantee sets forth the material terms and provisions of the ACE INA debt
securities and the ACE guarantee to which any prospectus supplement may relate.
The ACE INA senior debt securities are to be issued under an indenture,
referred to in this prospectus as the ACE INA senior indenture, among ACE INA,
ACE and Bank One Trust Company, N.A., as trustee, dated as of August 1, 1999, a
copy of which is incorporated by reference as an exhibit to the registration
statement of which this prospectus forms a part. The ACE INA subordinated debt
securities are to be issued under an indenture, referred to in this prospectus
as the ACE INA subordinated indenture, among ACE INA, ACE and Bank One Trust
Company, N.A., as trustee, the form of which is filed as an exhibit to the
registration statement of which this prospectus forms a part. The ACE INA
senior indenture and the ACE INA subordinated indenture are sometimes referred
to herein collectively as the "ACE INA indentures" and each individually as an
"ACE INA indenture." The particular terms of the ACE INA debt securities
offered by any prospectus supplement, and the extent to which the general
provisions described below may apply to the offered ACE INA debt securities,
will be described in the prospectus supplement.
Because the following summaries of the material terms and provisions of the
ACE INA indentures, the ACE INA debt securities and the ACE guarantee are not
complete, you should refer to the forms of the ACE INA indentures and the ACE
INA debt securities for complete information regarding the terms and provisions
of the ACE INA indentures, including the definitions of some of the terms used
below, the ACE INA debt securities and the ACE guarantee. Wherever particular
articles, sections or defined terms of an ACE INA indenture are referred to,
such articles, sections or defined terms are incorporated herein by reference,
and the statement in connection with which such reference is made is qualified
in its entirety by such reference. The ACE INA indentures are substantially
identical, except for certain covenants of ACE INA and ACE and provisions
relating to subordination.
General
The ACE INA indentures do not limit the aggregate principal amount of ACE
INA debt securities which ACE INA may issue thereunder and provide that ACE INA
may issue ACE INA debt securities thereunder from time to time in one or more
series. (Section 3.1) The ACE INA indentures do not limit the amount of other
Indebtedness (as defined below) or ACE INA debt securities, other than certain
secured Indebtedness as described below, which ACE, ACE INA or their respective
subsidiaries may issue.
Unless otherwise provided in a prospectus supplement, the ACE INA senior
debt securities will be unsecured obligations of ACE INA and will rank equally
with all of its other unsecured and unsubordinated indebtedness. The ACE INA
subordinated debt securities of each series will be unsecured obligations of
ACE INA, subordinated in right of payment to the prior payment in full of all
Senior Indebtedness (which term includes ACE INA senior debt securities) of ACE
INA with respect to such series, as described below under "Subordination of ACE
INA Subordinated Debt Securities" and in the related prospectus supplement. The
ACE INA subordinated debt securities of any series issued to an ACE Trust will
rank equally with each other series of ACE INA subordinated debt securities
issued to other ACE Trusts.
Because ACE INA is a holding company, its rights and the rights of its
creditors (including the holders of ACE INA debt securities) and shareholders
to participate in any distribution of assets of any subsidiary upon that
subsidiary's liquidation or reorganization or otherwise would be subject to the
prior claims of the subsidiary's creditors, except to the extent that ACE INA
may itself be a creditor with recognized claims against the subsidiary. The
rights of creditors of ACE INA (including the holders of ACE INA debt
securities) to participate in the distribution of stock owned by ACE INA in
certain of its subsidiaries, including ACE INA's insurance subsidiaries, may
also be subject to the approval of certain insurance regulatory authorities
having jurisdiction over such subsidiaries.
36
In the event ACE INA subordinated debt securities are issued to an ACE Trust
in connection with the issuance of preferred securities and common securities
by that ACE Trust, such ACE INA subordinated debt securities subsequently may
be distributed pro rata to the holders of such preferred securities and common
securities in connection with the dissolution of that ACE Trust upon the
occurrence of certain events described in the prospectus supplement relating to
such preferred securities and common securities. Only one series of ACE INA
subordinated debt securities will be issued to an ACE Trust in connection with
the issuance of preferred securities and common securities by that ACE Trust.
The prospectus supplement relating to the particular ACE INA debt securities
offered thereby will describe the following terms of the offered ACE INA debt
securities:
. the title of such ACE INA debt securities and the series in which such
ACE INA debt securities will be included, which may include medium-term
notes;
. any limit upon the aggregate principal amount of such ACE INA debt
securities;
. the date or dates, or the method or methods, if any, by which such date
or dates will be determined, on which the principal of such ACE INA debt
securities will be payable;
. the rate or rates at which such ACE INA debt securities will bear
interest, if any, which rate may be zero in the case of certain ACE INA
debt securities issued at an issue price representing a discount from the
principal amount payable at maturity, or the method by which such rate or
rates will be determined (including, if applicable, any remarketing
option or similar method), and the date or dates from which such
interest, if any, will accrue or the method by which such date or dates
will be determined;
. the date or dates on which interest, if any, on such ACE INA debt
securities will be payable and any regular record dates applicable to the
date or dates on which interest will be so payable;
. whether and under what circumstances additional amounts in respect of
certain taxes, fees, duties, assessments or governmental charges that
might be imposed on holders of such ACE INA debt securities will be
payable and, if so, whether and on what terms ACE INA will have the
option to redeem such ACE INA debt securities in lieu of paying such
additional amounts (and the terms of such option);
. the place or places where the principal of, any premium or interest on or
any additional amounts with respect to such ACE INA debt securities will
be payable, any of such ACE INA debt securities that are issued in
registered form may be surrendered for registration of transfer or
exchange, and any such ACE INA debt securities may be surrendered for
conversion or exchange;
. whether any of such ACE INA debt securities are to be redeemable at the
option of ACE INA and, if so, the date or dates on which, the period or
periods within which, the price or prices at which and the other terms
and conditions upon which such ACE INA debt securities may be redeemed,
in whole or in part, at the option of ACE INA;
. whether ACE INA will be obligated to redeem or purchase any of such ACE
INA debt securities pursuant to any sinking fund or analogous provision
or at the option of any holder thereof and, if so, the date or dates on
which the period or periods within which, the price or prices at which
and the other terms and conditions upon which such ACE INA debt
securities will be redeemed or purchased, in whole or in part, pursuant
to such obligation, and any provisions for the remarketing of such ACE
INA debt securities so redeemed or purchased;
. if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which any ACE INA debt securities to be issued in
registered form will be issuable and, if other than a denomination of
$5,000, the denominations in which any ACE INA debt securities to be
issued in bearer form will be issuable;
. whether the ACE INA debt securities will be convertible into other
securities of ACE INA and/or exchangeable for securities of ACE or other
issuers and, if so, the terms and conditions upon which such ACE INA debt
securities will be so convertible or exchangeable;
37
. if other than the principal amount, the portion of the principal amount
(or the method by which such portion will be determined) of such ACE INA
debt securities that will be payable upon declaration of acceleration of
the maturity thereof;
. if other than United States dollars, the currency of payment, including
composite currencies, of the principal of, any premium or interest on or
any additional amounts with respect to any of such ACE INA debt
securities;
. whether the principal of, any premium or interest on or any additional
amounts with respect to such ACE INA debt securities will be payable, at
the election of ACE INA or a holder, in a currency other than that in
which such ACE INA debt securities are stated to be payable and the date
or dates on which, the period or periods within which, and the other
terms and conditions upon which, such election may be made;
. any index, formula or other method used to determine the amount of
payments of principal of, any premium or interest on or any additional
amounts with respect to such ACE INA debt securities;
. whether such ACE INA debt securities are to be issued in the form of one
or more global securities and, if so, the identity of the depositary for
such global security or securities;
. whether such ACE INA debt securities are ACE INA senior debt securities
or ACE INA subordinated debt securities and, if ACE INA subordinated debt
securities, the specific subordination provisions applicable thereto;
. in the case of ACE INA subordinated debt securities issued to an ACE
Trust, the terms and conditions of any obligation or right of ACE INA or
a holder to convert or exchange such ACE INA subordinated debt securities
into preferred securities of that ACE Trust;
. in the case of ACE INA subordinated debt securities issued to an ACE
Trust, the form of restated trust agreement and, if applicable, the
agreement relating to ACE's guarantee of the preferred securities of that
ACE Trust;
. in the case of ACE INA subordinated debt securities, the relative degree,
if any, to which such ACE INA subordinated debt securities of the series
and the ACE guarantee in respect thereof will be senior to or be
subordinated to other series of ACE INA subordinated debt securities and
the ACE guarantee in respect thereof or other indebtedness of ACE INA or
ACE, as the case may be, in right of payment, whether such other series
of ACE INA subordinated debt securities or other indebtedness is
outstanding or not;
. any deletions from, modifications of or additions to the Events of
Default or covenants of ACE INA or ACE with respect to such ACE INA debt
securities;
. whether the provisions described below under "Discharge, Defeasance and
Covenant Defeasance" will be applicable to such ACE INA debt securities;
. whether any of such ACE INA debt securities are to be issued upon the
exercise of warrants, and the time, manner and place for such ACE INA
debt securities to be authenticated and delivered; and
. any other terms of such ACE INA debt securities and any other deletions
from or modifications or additions to the applicable ACE INA indenture in
respect of such ACE INA debt securities. (Section 3.1)
ACE INA will have the ability under the ACE INA indentures to "reopen" a
previously issued series of ACE INA debt securities and issue additional ACE
INA debt securities of that series or establish additional terms of that
series. ACE INA is also permitted to issue ACE INA debt securities with the
same terms as previously issued ACE INA debt securities. (Section 3.1)
Unless otherwise provided in the related prospectus supplement, principal,
premium, interest and additional amounts, if any, with respect to any ACE INA
debt securities will be payable at the office or agency maintained
38
by ACE INA and ACE for such purposes (initially the corporate trust office of
the trustee). In the case of ACE INA debt securities issued in registered form,
interest may be paid by check mailed to the persons entitled thereto at their
addresses appearing on the security register or by transfer to an account
maintained by the payee with a bank located in the United States. Interest on
ACE INA debt securities issued in registered form will be payable on any
interest payment date to the persons in whose names the ACE INA debt securities
are registered at the close of business on the regular record date with respect
to such interest payment date. All paying agents initially designated by ACE
INA for the ACE INA debt securities will be named in the related prospectus
supplement. ACE INA may at any time designate additional paying agents or
rescind the designation of any paying agent or approve a change in the office
through which any paying agent acts, except that ACE INA and ACE will be
required to maintain a paying agent in each place where the principal of, any
premium or interest on or any additional amounts with respect to the ACE INA
debt securities are payable. (Sections 3.7 and 10.2)
Unless otherwise provided in the related prospectus supplement, the ACE INA
debt securities may be presented for transfer (duly endorsed or accompanied by
a written instrument of transfer, if so required by ACE INA or the security
registrar) or exchanged for other ACE INA debt securities of the same series
(containing identical terms and provisions, in any authorized denominations,
and of a like aggregate principal amount) at the office or agency maintained by
ACE INA for such purposes (initially the corporate trust office of the
trustee). Such transfer or exchange will be made without service charge, but
ACE INA may require payment of a sum sufficient to cover any tax or other
governmental charge and any other expenses then payable. ACE INA will not be
required to (1) issue, register the transfer of, or exchange, ACE INA debt
securities during a period beginning at the opening of business 15 days before
the day of mailing of a notice of redemption of any such ACE INA debt
securities and ending at the close of business on the day of such mailing or
(2) register the transfer of or exchange any ACE INA debt security so selected
for redemption in whole or in part, except the unredeemed portion of any ACE
INA debt security being redeemed in part. (Section 3.5) ACE INA has appointed
the trustee as security registrar. Any transfer agent (in addition to the
security registrar) initially designated by ACE INA for any ACE INA debt
securities will be named in the related prospectus supplement. ACE INA may at
any time designate additional transfer agents or rescind the designation of any
transfer agent or approve a change in the office through which any transfer
agent acts, except that ACE INA and ACE will be required to maintain a transfer
agent in each place where the principal of, any premium or interest on or any
additional amounts with respect to the ACE INA debt securities are payable.
(Section 10.2)
Unless otherwise provided in the related prospectus supplement, the ACE INA
debt securities will be issued only in fully registered form without coupons in
minimum denominations of $1,000 and any integral multiple thereof. (Section
3.2) The ACE INA debt securities may be represented in whole or in part by one
or more global ACE INA debt securities registered in the name of a depositary
or its nominee and, if so represented, interests in such global ACE INA debt
security will be shown on, and transfers thereof will be effected only through,
records maintained by the designated depositary and its participants as
described below. Where ACE INA debt securities of any series are issued in
bearer form, the special restrictions and considerations, including special
offering restrictions and special United States Federal income tax
considerations, applicable to such ACE INA debt securities and to payment on
and transfer and exchange of such ACE INA debt securities will be described in
the related prospectus supplement.
The ACE INA debt securities may be issued as original issue discount
securities (bearing no interest or bearing interest at a rate which at the time
of issuance is below market rates) to be sold at a substantial discount below
their principal amount. Special United States Federal income tax and other
considerations applicable to original issue discount securities will be
described in the related prospectus supplement.
If the purchase price of any ACE INA debt securities is payable in one or
more foreign currencies or currency units or if any ACE INA debt securities are
denominated in one or more foreign currencies or currency units or if the
principal of, or any premium or interest on, or any additional amounts with
respect to, any ACE INA debt securities is payable in one or more foreign
currencies or currency units, the restrictions, elections, certain United
States Federal income tax considerations, specific terms and other information
with respect to such ACE INA debt securities and such foreign currency or
currency units will be set forth in the related prospectus supplement.
39
ACE INA will comply with Section 14(e) under the Exchange Act, and any other
tender offer rules under the Exchange Act which may then be applicable, in
connection with any obligation of ACE INA to purchase ACE INA debt securities
at the option of the holders. Any such obligation applicable to a series of ACE
INA debt securities will be described in the related prospectus supplement.
Unless otherwise described in a prospectus supplement relating to any ACE
INA debt securities, other than as described below under "--Covenants
Applicable to ACE INA Senior Debt Securities--Limitation on Liens on Stock of
Designated Subsidiaries," the ACE INA indentures do not contain any provisions
that would limit the ability of ACE INA or ACE to incur indebtedness or that
would afford holders of ACE INA debt securities protection in the event of a
sudden and significant decline in the credit quality of ACE INA or ACE or a
takeover, recapitalization or highly leveraged or similar transaction involving
ACE INA or ACE. Accordingly, ACE INA or ACE could in the future enter into
transactions that could increase the amount of indebtedness outstanding at that
time or otherwise affect ACE INA's or ACE's capital structure or credit rating.
You should refer to the prospectus supplement relating to a particular series
of ACE INA debt securities for information regarding any deletions from,
modifications of or additions to the Events of Defaults described below or
covenants of ACE INA or ACE contained in the ACE INA indentures, including any
addition of a covenant or other provisions providing event risk or similar
protection.
ACE Guarantee
ACE will fully and unconditionally guarantee all payments with respect to
the ACE INA debt securities. Unless otherwise provided in a prospectus
supplement, the ACE guarantee of the ACE INA senior debt securities will be an
unsecured obligation of ACE and will rank equally with all of its other
unsecured and unsubordinated indebtedness (including the ACE senior debt
securities). The ACE guarantee of the ACE INA subordinated debt securities of
any particular series will be an unsecured obligation of ACE, subordinated in
right of payment to the prior payment in full of all ACE Senior Indebtedness
(which term includes ACE senior debt securities and the ACE guarantee of the
ACE INA senior debt securities) with respect to such series as described below
under "Subordination of ACE Guarantee" and in the related prospectus
supplement. The ACE guarantee of the ACE INA subordinated debt securities of
any series issued to an ACE Trust will rank equally with the ACE guarantee of
each other series of ACE subordinated debt securities issued to other ACE
Trusts.
Since ACE is a holding company, its rights and the rights of its creditors
(including the holders of the ACE INA debt securities who are creditors of ACE
by virtue of the ACE guarantee) and shareholders to participate in any
distribution of the assets of any subsidiary upon such subsidiary's liquidation
or reorganization or otherwise would be subject to prior claims of the
subsidiary's creditors, except to the extent that ACE may itself be a creditor
with recognized claims against the subsidiary. The right of creditors of ACE
(including the holders of the ACE INA debt securities who are creditors of ACE
by virtue of the ACE guarantee) to participate in the distribution of the stock
owned by ACE in certain of its subsidiaries, including ACE's insurance
subsidiaries, may also be subject to approval by certain insurance regulatory
authorities having jurisdiction over such subsidiaries.
ACE will make all payments of principal of and premium, if any, interest and
any other amounts on, or in respect of, the ACE INA debt securities of any
series without withholding or deduction at source for, or on account of, any
present or future taxes, fees, duties, assessments or governmental charges of
whatever nature imposed or levied by or on behalf of the Cayman Islands or
Bermuda, each, referred to in this prospectus as a taxing jurisdiction, or any
political subdivision or taxing authority thereof or therein, unless such
taxes, fees, duties, assessments or governmental charges are required to be
withheld or deducted by (x) the laws (or any regulations or rulings promulgated
thereunder) of a taxing jurisdiction or any political subdivision or taxing
authority thereof or therein or (y) an official position regarding the
application, administration, interpretation or enforcement of any such laws,
regulations or rulings (including, without limitation, a holding by a court of
competent jurisdiction or by a taxing authority in a taxing jurisdiction or any
political subdivision thereof). If a withholding or deduction at source is
required, ACE will, subject to certain limitations and exceptions described
below, pay to the holder of any such ACE INA debt security such additional
amounts as may be necessary so that
40
every net payment of principal, premium, if any, interest or any other amount
made to such holder, after the withholding or deduction, will not be less than
the amount provided for in such ACE INA debt security and the applicable ACE
INA indenture to be then due and payable.
ACE will not be required to pay any additional amounts for or on account of:
1. any tax, fee, duty, assessment or governmental charge of whatever
nature which would not have been imposed but for the fact that such holder
(a) was a resident, domiciliary or national of, or engaged in business or
maintained a permanent establishment or was physically present in, the
relevant taxing jurisdiction or any political subdivision thereof or
otherwise had some connection with the relevant taxing jurisdiction other
than by reason of the mere ownership of, or receipt of payment under, such
ACE INA debt security, (b) presented such ACE INA debt security for payment
in the relevant taxing jurisdiction or any political subdivision thereof,
unless such ACE INA debt security could not have been presented for payment
elsewhere, or (c) presented such ACE INA debt security for payment more than
30 days after the date on which the payment in respect of such ACE INA debt
security became due and payable or provided for, whichever is later, except
to the extent that the holder would have been entitled to such additional
amounts if it had presented such ACE INA debt security for payment on any
day within that 30-day period;
2. any estate, inheritance, gift, sale, transfer, personal property or
similar tax, assessment or other governmental charge;
3. any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure by the holder or the beneficial owner of
such ACE INA debt security to comply with any reasonable request by ACE
addressed to the holder within 90 days of such request (a) to provide
information concerning the nationality, residence or identity of the holder
or such beneficial owner or (b) to make any declaration or other similar
claim or satisfy any information or reporting requirement, which in either
case is required or imposed by statute, treaty, regulation or administrative
practice of the relevant taxing jurisdiction or any political subdivision
thereof as a precondition to exemption from all or part of such tax,
assessment or other governmental charge; or
4. any combination of items (1), (2) and (3).
In addition, ACE will not pay additional amounts with respect to any payment
of principal of, or premium, if any, interest or any other amounts on, any such
ACE INA debt security to any holder who is a fiduciary or partnership or other
than the sole beneficial owner of such ACE INA debt security to the extent such
payment would be required by the laws of the relevant taxing jurisdiction (or
any political subdivision or relevant taxing authority thereof or therein) to
be included in the income for tax purposes of a beneficiary or partner or
settlor with respect to such fiduciary or a member of such partnership or a
beneficial owner who would not have been entitled to such additional amounts
had it been the holder of the ACE INA debt security. (Section 10.4)
Conversion and Exchange
The terms, if any, on which ACE INA debt securities of any series are
convertible into or exchangeable for other securities, whether or not issued by
ACE INA, property or cash, or a combination of any of the foregoing, will be
set forth in the related prospectus supplement. Such terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holder, or at the option of ACE INA, in which the securities, property or cash
to be received by the holders of the ACE INA debt securities would be
calculated according to the factors and at such time as described in the
related prospectus supplement.
Global Securities
The ACE INA debt securities of a series may be issued in whole or in part in
the form of one or more global ACE INA debt securities that will be deposited
with, or on behalf of, a depositary identified in the prospectus supplement
relating to such series.
The specific terms of the depositary arrangement with respect to a series of
ACE INA debt securities will be described in the prospectus supplement relating
to such series. ACE INA anticipates that the following provisions will apply to
all depositary arrangements.
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Upon the issuance of a global security, the depositary for such global
security or its nominee will credit, on its book-entry registration and
transfer system, the respective principal amounts of the ACE INA debt
securities represented by such global security. Such accounts will be
designated by the underwriters or agents with respect to such ACE INA debt
securities or by ACE INA if such ACE INA debt securities are offered and sold
directly by ACE INA. Ownership of beneficial interests in a global security
will be limited to persons that may hold interests through participants.
Ownership of beneficial interests in such global security will be shown on, and
the transfer of that ownership will be effected only through, records
maintained by the depositary or its nominee (with respect to interests of
participants) and on the records of participants (with respect to interests of
persons other than participants). The laws of some states require that certain
purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a global security.
So long as the depositary for a global security, or its nominee, is the
registered owner of such global security, such depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the ACE INA
debt securities represented by such global security for all purposes under the
applicable ACE INA indenture. Except as described below, owners of beneficial
interests in a global security will not be entitled to have ACE INA debt
securities of the series represented by such global security registered in
their names and will not receive or be entitled to receive physical delivery of
ACE INA debt securities of that series in definitive form.
Principal of, any premium and interest on, and any additional amounts with
respect to, ACE INA debt securities registered in the name of a depositary or
its nominee will be made to the depositary or its nominee, as the case may be,
as the registered owner of the global security representing such ACE INA debt
securities. None of ACE INA, ACE, the trustee, any paying agent or the security
registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the global security for such ACE INA debt securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
ACE INA expects that the depositary for a series of ACE INA debt securities
or its nominee, upon receipt of any payment with respect to such ACE INA debt
securities, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the principal
amount of the global security for such ACE INA debt securities as shown on the
records of such depositary or its nominee. ACE INA also expects that payments
by participants to owners of beneficial interests in such global security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers registered in street name, and will be the responsibility of such
participants.
The ACE INA indentures provide that if (1) the depositary for a series of
ACE INA debt securities notifies ACE INA that it is unwilling or unable to
continue as depositary or if such depositary ceases to be eligible under the
applicable ACE INA Indenture and a successor depositary is not appointed by ACE
INA within 90 days of written notice, (2) ACE INA determines that ACE INA debt
securities of a particular series will no longer be represented by global
securities and executes and delivers to the trustee a company order to such
effect or (3) an Event of Default with respect to a series of ACE INA debt
securities will have occurred and be continuing, the global securities will be
exchanged for ACE INA debt securities of such series in definitive form of like
tenor and of an equal aggregate principal amount, in authorized denominations.
Such definitive ACE INA debt securities will be registered in such name or
names as the depositary shall instruct the trustee. (Section 3.5) It is
expected that such instructions may be based upon directions received by the
depositary from participants with respect to ownership of beneficial interests
in global securities.
Option to Extend Interest Payment Date
If provided in the related prospectus supplement, ACE INA will have the
right at any time and from time to time during the term of any series of ACE
INA subordinated debt securities issued to an ACE Trust to defer payment of
interest for such number of consecutive interest payment periods as may be
specified in the related prospectus supplement, each, referred to as an
Extension Period, subject to the terms, conditions and covenants,
42
if any, specified in such prospectus supplement, provided that such Extension
Period may not extend beyond the stated maturity of such series of ACE INA
subordinated debt securities. Certain United States Federal income tax
consequences and special considerations applicable to such ACE INA subordinated
debt securities will be described in the related prospectus supplement.
(Section 3.11 of the ACE INA subordinated indenture)
Option to Extend Maturity Date
If provided in the related prospectus supplement, ACE INA will have the
right to (x) change the stated maturity of the principal of the ACE INA
subordinated debt securities of any series issued to an ACE Trust upon the
liquidation of that ACE Trust and the exchange of the ACE INA subordinated debt
securities for the preferred securities of that ACE Trust or (y) extend the
stated maturity of the principal of the ACE INA subordinated debt securities of
any series, provided that (1) neither ACE INA nor ACE is in bankruptcy,
otherwise insolvent or in liquidation; (2) neither ACE INA nor ACE has
defaulted on any payment on such ACE INA subordinated debt securities or under
ACE's guarantee in respect thereof, as the case may be, and no deferred
interest payments have accrued, (3) the applicable ACE Trust is not in arrears
on payments of distributions on its preferred securities and no deferred
distributions have accumulated, (4) the ACE INA subordinated debt securities of
such series are rated investment grade by Standard & Poor's Ratings Services,
Moody's Investors Service, Inc. or another nationally recognized statistical
rating organization and (5) the extended stated maturity is no later than the
49th anniversary of the initial issuance of the preferred securities of the
applicable ACE Trust. If ACE INA exercises its right to liquidate the
applicable ACE Trust and exchange the ACE INA subordinated debt securities for
the preferred securities of the ACE Trust as described above, any changed
stated maturity of the principal of the ACE INA subordinated debt securities
shall be no earlier than the date that is five years after the initial issue
date of the preferred securities and no later than the date 30 years (plus an
extended term of up to an additional 19 years if the conditions described above
are satisfied) after the initial issue date of the preferred securities of the
applicable ACE Trust. (Section 3.14 of the ACE INA subordinated indenture)
Redemption
Except as otherwise provided in the related prospectus supplement, in the
case of any series of ACE INA subordinated debt securities issued to an ACE
Trust, if an Investment Company Event or a Tax Event, each, referred to as a
Special Event, shall occur and be continuing, ACE INA may, at its option,
redeem such series of ACE INA subordinated debt securities, in whole but not in
part, at any time within 90 days of the occurrence of the Special Event, at a
redemption price equal to 100% of the principal amount of such ACE INA
subordinated debt securities then outstanding plus accrued and unpaid interest
to the date fixed for redemption. (Section 11.8 of the ACE INA subordinated
indenture)
For purposes of the ACE INA subordinated indenture, "Investment Company
Event" means, in respect of an ACE Trust, the receipt by such ACE Trust of an
opinion of independent counsel experienced in such matters to the effect that,
as a result of the occurrence of a change in law or regulation or a change in
the interpretation or application of law or regulation by any legislative body,
court or governmental agency or regulatory authority, such ACE Trust is or will
be considered an investment company that is required to be registered under the
Investment Company Act, which change becomes effective on or after the date of
original issuance of the preferred securities of such ACE Trust. (Section 1.1
of the ACE INA subordinated indenture)
"Tax Event" means, in respect of an ACE Trust, the receipt by such ACE Trust
or ACE INA of an opinion of independent 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 regulation 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 preferred securities
of such ACE Trust, there is more than an insubstantial risk that (i) such ACE
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 corresponding series of ACE INA subordinated debt securities, (ii) interest
payable by ACE INA on such ACE INA subordinated debt securities is not, or
within 90 days of the date of such opinion will not be, deductible by ACE INA,
in whole or in part, for United States Federal income tax purposes
43
or (iii) such ACE Trust is, or will be within 90 days of the date of such
opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges. (Section 1.1 of the ACE INA subordinated indenture)
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of ACE INA subordinated debt
securities to be redeemed at its registered address. Unless ACE INA and ACE, as
guarantor, default in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the ACE INA subordinated debt
securities or portions thereof called for redemption.
Covenants Applicable to ACE INA Senior Debt Securities
Limitation on Liens on Stock of Designated Subsidiaries
Under the ACE INA senior indenture, each of ACE INA and ACE will covenant
that, so long as any ACE INA senior debt securities are outstanding, it will
not, nor will it permit any of its Subsidiaries to, create, assume, incur,
guarantee or otherwise permit to exist any Indebtedness secured by any
mortgage, pledge, lien, security interest or other encumbrance upon any shares
of capital stock of any Designated Subsidiary (whether such shares are now
owned or hereafter acquired) without effectively providing concurrently that
the ACE INA senior debt securities (and, if ACE INA and ACE so elect, any other
Indebtedness of ACE INA that is not subordinate to the ACE INA senior debt
securities and with respect to which the governing instruments require, or
pursuant to which ACE INA is otherwise obligated, to provide such security)
will be secured equally and ratably with such Indebtedness for at least the
time period such other Indebtedness is so secured. (Section 10.5 of the ACE INA
senior indenture)
For purposes of the ACE INA senior indenture, "capital stock" of any Person
means any and all shares, interests, rights to purchase, warrants, options,
participations or other equivalents of or interests in (however designated)
equity of such Person, including preferred stock, but excluding any debt
securities convertible into such equity. (Section 1.1 of the ACE INA senior
indenture)
The term "Designated Subsidiary" means any present or future consolidated
Subsidiary of ACE, the Consolidated Net Worth of which constitutes at least 5%
of ACE's Consolidated Net Worth. (Section 1.1 of the ACE INA senior indenture)
As of April 30, 2002, ACE's Designated Subsidiaries were ACE Bermuda, Tempest,
ACE INA and ACE USA.
For purposes of the ACE INA indentures, the term "Indebtedness" means, with
respect to any Person, (1) the principal of and any premium and interest on (a)
indebtedness of such Person for money borrowed and (b) indebtedness evidenced
by notes, debentures, bonds or other similar instruments for the payment of
which such Person is responsible or liable; (2) all Capitalized Lease
Obligations of such Person; (3) all obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations and all obligations under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business);
(4) all obligations of such Person for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (1) through (3) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (5) all
obligations of the type referred to in clauses (1) through (4) of other Persons
and all dividends of other Persons for the payment of which, in either case,
such Person is responsible or liable as obligor, guarantor or otherwise; (6)
all obligations of the type referred to in clauses (1) through (5) of other
Persons secured by any mortgage, pledge, lien, security interest or other
encumbrance on any property or asset of such Person (whether or not such
obligation is assumed by such Person), the amount of such obligation being
deemed to be the lesser of the value of such property or assets or the amount
of the obligation so secured; and (7) any amendments, modifications,
refundings, renewals or extensions of any indebtedness or obligation described
as Indebtedness in clauses (1) through (6) above. (Section 1.1)
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Limitations on Disposition of Stock of Designated Subsidiaries
The ACE INA senior indenture also provides that, so long as any ACE INA
senior debt securities are outstanding and except in a transaction otherwise
governed by such indenture, neither ACE INA nor ACE will issue, sell, assign,
transfer or otherwise dispose of any shares of, securities convertible into, or
warrants, rights or options to subscribe for or purchase shares of, capital
stock (other than preferred stock having no voting rights of any kind) of any
Designated Subsidiary, and will not permit any Designated Subsidiary to issue
(other than to ACE INA or ACE) any shares (other than director's qualifying
shares) of, or securities convertible into, or warrants, rights or options to
subscribe for or purchase shares of, capital stock (other than preferred stock
having no voting rights of any kind) of any Designated Subsidiary, if, after
giving effect to any such transaction and the issuance of the maximum number of
shares issuable upon the conversion or exercise of all such convertible
securities, warrants, rights or options, ACE would own, directly or indirectly,
less than 80% of the shares of capital stock of such Designated Subsidiary
(other than preferred stock having no voting rights of any kind); provided,
however, that (1) any issuance, sale, assignment, transfer or other disposition
permitted by ACE INA or ACE may only be made for at least a fair market value
consideration as determined by the board of directors of ACE INA or ACE, as the
case may be, pursuant to a resolution adopted in good faith and (2) the
foregoing shall not prohibit any such issuance or disposition of securities if
required by any law or any regulation or order of any governmental or insurance
regulatory authority. Notwithstanding the foregoing, (1) ACE INA or ACE, as the
case may be, may merge or consolidate any Designated Subsidiary into or with
another direct or indirect Subsidiary of ACE, the shares of capital stock of
which ACE owns at least 80%, and (2) ACE INA or ACE, as the case may be, may,
subject to the provisions described under "--Consolidation, Amalgamation,
Merger and Sale of Assets" below, sell, assign, transfer or otherwise dispose
of the entire capital stock of any Designated Subsidiary at one time for at
least a fair market value consideration as determined by the board of directors
of ACE INA or ACE, as the case may be, pursuant to a resolution adopted in good
faith. (Section 10.6 of the ACE INA senior indenture)
Covenants Applicable to ACE INA Subordinated Debt Securities Issued to an ACE
Trust
Each of ACE INA and ACE will also covenant, as to each series of ACE INA
subordinated debt securities issued to an ACE Trust in connection with the
issuance of preferred securities and common securities by that ACE Trust, that
it will not, and will not permit any of its Subsidiaries to, (1) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the outstanding capital stock of
ACE INA or ACE, as the case may be, or (2) make any payment of principal of, or
interest or premium, if any, on or repay, repurchase or redeem any debt
security of ACE INA or ACE that ranks junior in interest to the ACE INA
subordinated debt securities of such series or the ACE guarantee in respect
thereof, as the case may be, or make any guarantee payments with respect to any
guarantee by ACE INA or ACE, as the case may be, of the debt securities of any
Subsidiary of ACE INA or ACE, as the case may be, if such guarantee ranks
junior in interest to the ACE INA subordinated debt securities of such series
or the ACE guarantee in respect thereof, as the case may be (other than (a)
dividends or distributions on the capital stock of ACE INA paid or made to ACE
and dividends or distributions in common stock of ACE INA or ordinary shares of
ACE, as the case may be, (b) redemptions or purchases of any rights outstanding
under a shareholder rights plan of ACE INA or ACE, as the case may be, or the
declaration of a dividend of such rights or the issuance of stock under such
plans in the future, (c) payments under any preferred securities guarantee and
(d) purchases of common stock or ordinary shares related to the issuance of
common stock or ordinary shares under any of ACE INA's or ACE's benefit plans
for its directors, officers or employees) if at such time (i) there shall have
occurred any event of which ACE INA or ACE has actual knowledge that (A) with
the giving of notice or lapse of time or both would constitute an Event of
Default and (B) in respect of which ACE INA or ACE, as the case may be, shall
not have taken reasonable steps to cure, (ii) ACE shall be in default with
respect to its payment of any obligations under the preferred securities
guarantee relating to such related preferred securities or (iii) ACE INA shall
have given notice of its election to begin an Extension Period as provided in
the ACE INA subordinated indenture with respect to the ACE INA subordinated
debt securities of such series and shall not have rescinded such notice, or
such Extension Period, or any extension thereof, shall be continuing. (Section
10.9 of the ACE INA subordinated indenture)
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In the event ACE INA subordinated debt securities are issued to an ACE Trust
in connection with the issuance of preferred securities and common securities
of such ACE Trust, for so long as such ACE INA subordinated debt securities
remain outstanding, ACE INA will also covenant (1) to maintain directly or
indirectly 100% ownership of the common securities of such ACE Trust; provided,
however, that any permitted successor of ACE INA under the ACE INA subordinated
indenture may succeed to ACE INA's ownership of such common securities, (2) not
to voluntarily dissolve, wind-up or liquidate such ACE Trust, except in
connection with the distribution of ACE INA subordinated debt securities to the
holders of preferred securities and common securities in liquidation of such
ACE Trust, the redemption of all of the preferred securities and common
securities of such ACE Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the restated trust agreement of such ACE
Trust, and (3) to use its reasonable efforts, consistent with the terms of the
related trust agreement, to cause such ACE Trust to remain classified as a
grantor trust for United States Federal income tax purposes. (Section 10.9 of
the ACE INA subordinated indenture)
Consolidation, Amalgamation, Merger and Sale of Assets
Each ACE INA indenture provides that ACE INA may not (1) consolidate or
amalgamate with or merge into any Person or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to any
Person, or (2) permit any Person to consolidate or amalgamate with or merge
into ACE INA, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to ACE INA, unless (a) in the case of
(1) above, such Person is a Corporation organized and existing under the laws
of the United States of America, any State thereof or the District of Columbia
and will expressly assume, by supplemental indenture satisfactory in form to
the trustee, the due and punctual payment of the principal of, any premium and
interest on and any additional amounts with respect to all of the ACE INA debt
securities issued thereunder, and the performance of ACE INA's obligations
under such ACE INA indenture and the ACE INA debt securities issued thereunder,
and provides for conversion or exchange rights in accordance with the
provisions of the ACE INA debt securities of any series that are convertible or
exchangeable into ordinary shares or other securities; (b) immediately after
giving effect to such transaction and treating any indebtedness which becomes
an obligation of ACE INA or a Subsidiary as a result of such transaction as
having been incurred by ACE INA or such Subsidiary at the time of 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; and (c) certain other conditions are met. (Section 8.1)
Each ACE INA indenture provides that ACE may not (1) consolidate or
amalgamate with or merge into any Person or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to any
Person, or (2) permit any Person to consolidate or amalgamate with or merge
into ACE, or convey, transfer or lease its properties and assets as an entirety
or substantially as an entirety to ACE, unless (a) in the case of (1) above,
such Person is a Corporation organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia,
Bermuda or the Cayman Islands and will expressly assume, by supplemental
indenture satisfactory in form to the trustee, the due and punctual payment of
the principal of, any premium and interest on and any additional amounts with
respect to all of the ACE INA debt securities issued thereunder, and the
performance of ACE's obligations under such ACE INA indenture and the ACE INA
debt securities issued thereunder; (b) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of ACE or
a Subsidiary as a result of such transaction as having been incurred by ACE or
such Subsidiary at the time of 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; and (c) certain other
conditions are met. (Section 8.3)
Events of Default
Each of the following events will constitute an Event of Default under the
applicable ACE INA indenture with respect to any series of ACE INA debt
securities issued thereunder (whatever the reason for such Event of
46
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 on any ACE INA debt security of
such series, or any additional amounts payable with respect thereto,
when such interest becomes or such additional amounts become due and
payable, and continuance of such default for a period of 30 days;
(2) default in the payment of the principal of or any premium on any ACE INA
debt security of such series, or any additional amounts payable with
respect thereto, when such principal or premium becomes or such
additional amounts become due and payable either at maturity, upon any
redemption, by declaration of acceleration or otherwise;
(3) default in the deposit of any sinking fund payment, when and as due by
the terms of any ACE INA debt security of such series;
(4) default in the performance, or breach, of any covenant or warranty of
ACE INA or ACE contained in the applicable ACE INA indenture for the
benefit of such series or in the ACE INA debt securities of such series,
and the continuance of such default or breach for a period of 60 days
after there has been given written notice as provided in such ACE INA
indenture;
(5) if any event of default as defined in any mortgage, indenture or
instrument under which there may be issued, or by which there may be
secured or evidenced, any Indebtedness of ACE INA or ACE (including an
Event of Default under any other series of ACE INA debt securities),
whether such Indebtedness now exists or is hereafter created or
incurred, happens and consists of default in the payment of more than
$50,000,000 in principal amount of such Indebtedness at the maturity
thereof (after giving effect to any applicable grace period) or results
in such Indebtedness in principal amount in excess of $50,000,000
becoming or being declared due and payable prior to the date on which it
would otherwise become due and payable, and such default is not cured or
such acceleration is not rescinded or annulled within a period of 30
days after there has been given written notice as provided in the
applicable ACE INA indenture;
(6) ACE INA or ACE shall fail within 60 days to pay, bond or otherwise
discharge any uninsured judgment or court order for the payment of money
in excess of $50,000,000, which is not stayed on appeal or is not
otherwise being appropriately contested in good faith;
(7) certain events in bankruptcy, insolvency or reorganization of ACE INA or
ACE; and
(8) any other Event of Default provided in or pursuant to the applicable ACE
INA indenture with respect to ACE INA debt securities of such series.
(Section 5.1)
If an Event of Default with respect to the ACE INA debt securities of any
series (other than an Event of Default described in (7) of the preceding
paragraph) occurs and is continuing, either the trustee or the holders of not
less than 25% in principal amount of the outstanding ACE INA debt securities of
such series by written notice as provided in the applicable ACE INA indenture
may declare the principal amount (or such lesser amount as may be provided for
in the ACE INA debt securities of such series) of all outstanding ACE INA debt
securities of such series to be due and payable immediately. In the case of an
Event of Default with respect to a series of ACE INA subordinated debt
securities issued to an ACE Trust, if the trustee or such holders fail to
declare such principal amount (or lesser amount) to be due and payable
immediately, the holders of at least 25% in liquidation amount of the
outstanding preferred securities of the ACE Trust may do so by written notice
as provided in the ACE INA subordinated indenture. At any time after a
declaration of acceleration has been made, but before a judgment or decree for
payment of money has been obtained by the trustee, and subject to applicable
law and certain other provisions of the applicable ACE INA indenture, the
holders of not less than a majority in principal amount of the outstanding ACE
INA debt securities of such series may, under certain circumstances, rescind
and annul such declaration of acceleration. In the case of a series of ACE INA
subordinated debt securities issued to an ACE Trust, if such holders fail to
rescind and annul such declaration, the holders of a
47
majority in liquidation amount of the outstanding preferred securities of such
ACE Trust may, subject to satisfaction of certain conditions, rescind and annul
such declaration by written notice as provided in the ACE INA subordinated
indenture. An Event of Default described in (7) of the preceding paragraph
shall cause the principal amount and accrued interest (or such lesser amount as
provided for in the ACE INA debt securities of such series) to become
immediately due and payable without any declaration or other act by the trustee
or any holder. (Section 5.2)
Each ACE INA indenture provides that, within 90 days after the occurrence of
any event which is, or after notice or lapse of time or both would become, an
Event of Default with respect to the ACE INA debt securities of any series,
each referred to in this prospecuts as a default, the trustee must transmit, in
the manner set forth in such ACE INA indenture, notice of such default to the
holders of the ACE INA debt securities of such series unless such default has
been cured or waived; provided, however, that except in the case of a default
in the payment of principal of, or premium, if any, or interest, if any, on, or
additional amounts or any sinking fund or purchase fund installment with
respect to, any ACE INA debt security of such series, the trustee may withhold
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 determine that the withholding of such notice is in the best
interest of the holders of ACE INA debt securities of such series; and
provided, further, that in the case of any default of the character described
in (5) of the second preceding paragraph, no such notice to holders will be
given until at least 30 days after the default occurs. (Section 6.2)
If an Event of Default occurs and is continuing with respect to the ACE INA
debt securities of any series, the trustee may in its discretion proceed to
protect and enforce its rights and the rights of the holders of ACE INA debt
securities of such series by all appropriate judicial proceedings. (Section
5.3) Each ACE INA indenture provides that, subject to the duty of the trustee
during any default to act with the required standard of care, the trustee will
be under no obligation to exercise any of its rights or powers under such ACE
INA indenture at the request or direction of any of the holders of ACE INA debt
securities, unless such holders shall have offered to the trustee reasonable
indemnity. (Section 6.1) Subject to such provisions for the indemnification of
the trustee, and subject to applicable law and certain other provisions of the
applicable ACE INA indenture, the holders of a majority in principal amount of
the outstanding ACE INA debt securities of any series will 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 ACE INA debt securities of such series. (Section
5.12)
If an Event of Default with respect to a series of ACE INA subordinated debt
securities issued to an ACE Trust has occurred and is continuing and such event
is attributable to a default in the payment of principal of, any premium or
interest on, or additional amounts with respect to, the related ACE INA
subordinated debt securities on the date such principal, premium, interest or
additional amounts are otherwise payable, a holder of preferred securities of
such ACE Trust may institute directly a legal proceeding against ACE INA or ACE
(pursuant to the ACE guarantee) for enforcement of payment to such holder of
the principal of, any premium and interest on, and additional amounts with
respect to, such related ACE INA subordinated debt securities having a
principal amount equal to the liquidation amount of the related preferred
securities of such holder (a "Direct Action"). (Section 5.8 of the ACE INA
subordinated indenture) ACE INA and ACE may not amend the ACE INA subordinated
indenture to remove the foregoing right to bring a Direct Action without the
prior consent of the holders of all of the outstanding preferred securities of
such ACE Trust. (Section 9.2 of the ACE INA subordinated indenture) If the
right to bring a Direct Action is removed, the applicable ACE Trust may become
subject to the reporting obligations under the Exchange Act. Each of ACE INA
and ACE will have the right under the ACE INA subordinated indenture to set-off
any payment made to such holder of preferred securities by ACE INA or ACE, as
the case may be, in connection with a Direct Action. (Section 3.12 of the ACE
INA subordinated indenture)
The holders of the preferred securities will not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the related ACE INA subordinated debt securities.
48
Modification and Waiver
ACE INA, ACE and the trustee may modify or amend either ACE INA indenture
with the consent of the holders of not less than a majority in principal amount
of the outstanding ACE INA debt securities of each series affected thereby;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding ACE INA debt security affected
thereby,
. change the stated maturity of the principal of, or any premium or
installment of interest on, or any additional amounts with respect to,
any ACE INA debt security,
. reduce the principal amount of, or the rate (or modify the calculation of
such rate) of interest on, or any additional amounts with respect to, or
any premium payable upon the redemption of, any ACE INA debt security,
. change the obligation of ACE INA or ACE to pay additional amounts with
respect to any ACE INA debt security,
. reduce the amount of the principal of an original issue discount security
that would be due and payable upon a declaration of acceleration of the
maturity thereof or the amount thereof provable in bankruptcy,
. change the redemption provisions of any ACE INA debt security or
adversely affect the right of repayment at the option of any holder of
any ACE INA debt security,
. change the place of payment or the coin or currency in which the
principal of, any premium or interest on or any additional amounts with
respect to any ACE INA debt security is payable,
. impair the right to institute suit for the enforcement of any payment on
or after the stated maturity of any ACE INA debt security (or, in the
case of redemption, on or after the redemption date or, in the case of
repayment at the option of any holder, on or after the repayment date),
. reduce the percentage in principal amount of the outstanding ACE INA debt
securities, the consent of whose holders is required in order to take
specific actions,
. reduce the requirements for quorum or voting by holders of ACE INA debt
securities in Section 15.4 of each ACE INA indenture,
. modify any of the provisions of the ACE subordinated indenture relating
to the subordination of the ACE INA debt securities or the ACE guarantee
in a manner adverse to the holders of ACE INA subordinated debt
securities,
. modify or effect in any manner adverse to the holders of ACE INA debt
securities the terms and conditions of the obligations of ACE in respect
of the due and punctual payment of principal of, or any premium or
interest on, or any sinking fund requirements or additional amounts with
respect to, the ACE INA debt securities,
. modify any of the provisions in the applicable ACE INA indenture
regarding the waiver of past defaults and the waiver of certain covenants
by the holders of ACE INA debt securities except to increase any
percentage vote required or to provide that other provisions of such ACE
INA indenture cannot be modified or waived without the consent of the
holder of each ACE INA debt security affected thereby,
. make any change that adversely affects the right to convert or exchange
any ACE INA debt security into or for other securities of ACE INA, ACE or
other securities, cash or property in accordance with its terms, or
. modify any of the above provisions. (Section 9.2)
49
In addition, no supplemental indenture may directly or indirectly modify or
eliminate the subordination provisions of the ACE INA subordinated indenture in
any manner which might terminate or impair the subordination of the ACE INA
subordinated debt securities of any series to Senior Indebtedness with respect
to such series or the subordination of the ACE guarantee with respect to the
ACE INA subordinated debt securities of any series to ACE Senior Indebtedness
with respect to such series, without the prior written consent of the holders
of such Senior Indebtedness or such ACE Senior Indebtedness, respectively.
(Section 9.7 of the ACE INA subordinated indenture)
ACE INA, ACE and the trustee may modify or amend either ACE INA indenture
and the ACE INA debt securities of any series without the consent of any holder
in order to, among other things:
. provide for a successor to ACE INA or ACE pursuant to a consolidation,
amalgamation, merger or sale of assets;
. add to the covenants of ACE INA or ACE for the benefit of the holders of
all or any series of ACE INA debt securities or to surrender any right or
power conferred upon ACE INA or ACE by the applicable ACE INA indenture;
. provide for a successor trustee with respect to the ACE INA debt
securities of all or any series;
. cure any ambiguity or correct or supplement any provision in either ACE
INA indenture which may be defective or inconsistent with any other
provision, or to make any other provisions with respect to matters or
questions arising under either ACE INA indenture which will not adversely
affect the interests of the holders of ACE INA debt securities of any
series;
. change the conditions, limitations and restrictions on the authorized
amount, terms or purposes of issue, authentication and delivery of ACE
INA debt securities under either ACE INA indenture;
. add any additional Events of Default with respect to all or any series of
ACE INA debt securities;
. secure the ACE INA debt securities;
. provide for conversion or exchange rights of the holders of any series of
ACE INA debt securities; or
. make any other change that does not materially adversely affect the
interests of the holders of any ACE INA debt securities then outstanding
under the applicable ACE INA indenture. (Section 9.1)
The holders of at least a majority in principal amount of the outstanding
ACE INA debt securities of any series may, on behalf of the holders of all ACE
INA debt securities of that series, waive compliance by ACE INA and ACE with
certain covenants of the applicable ACE INA indenture. (Section 10.8 of the ACE
INA senior indenture; Section 10.6 of the ACE INA subordinated indenture) The
holders of not less than a majority in principal amount of the outstanding ACE
INA debt securities of any series on behalf of the holders of all ACE INA debt
securities of that series and, in the case of any ACE INA subordinated debt
securities issued to an ACE Trust, the holders of not less than a majority in
liquidation amount of the outstanding preferred securities of the ACE Trust,
may waive any past default and its consequences under the applicable ACE INA
indenture with respect to the ACE INA debt securities of that series, except a
default (1) in the payment of principal, any premium or interest on or any
additional amounts with respect to ACE INA debt securities of such series or
(2) in respect of a covenant or provision of the applicable ACE INA indenture
that cannot be modified or amended without the consent of the holder of each
outstanding ACE INA debt security of any series affected. (Section 5.13)
Under each ACE INA indenture, each of ACE INA and ACE is required to furnish
the trustee annually a statement as to its performance of certain of its
obligations under that ACE INA indenture and as to any default in such
performance. Each of ACE INA and ACE is also required to deliver to the
trustee, within five days after occurrence thereof, written notice of any Event
of Default, or any event which after notice or lapse of time or both would
constitute an Event of Default, resulting from the failure to perform or breach
of any covenant or warranty contained in the applicable ACE INA indenture or
the ACE INA debt securities of any series. (Sections 10.9 and 10.10 of the ACE
INA senior indenture; Sections 10.7 and 10.8 of the ACE INA subordinated
indenture)
50
Discharge, Defeasance and Covenant Defeasance
ACE INA or ACE may discharge certain obligations to holders of any series of
ACE INA debt securities that have not already been delivered to the trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
depositing with the trustee, in trust, funds in U.S. dollars or in the Foreign
Currency in which such ACE INA debt securities are payable in an amount
sufficient to pay the entire indebtedness on such ACE INA debt securities with
respect to principal and any premium, interest and additional amounts to the
date of such deposit (if such ACE INA debt securities have become due and
payable) or to the maturity thereof, as the case may be. (Section 4.1)
Each ACE INA indenture provides that, unless the provisions of Section 4.2
thereof are made inapplicable to the ACE INA debt securities of or within any
series pursuant to Section 3.1 thereof, ACE INA may elect either (1) to defease
and discharge itself and ACE from any and all obligations with respect to such
ACE INA debt securities (except for, among other things, the obligation of ACE
to pay additional amounts upon the occurrence of certain events of taxation,
assessment or governmental charge with respect to payments on such ACE INA debt
securities and other obligations to register the transfer or exchange of such
ACE INA debt securities, to replace temporary or mutilated, destroyed, lost or
stolen ACE INA debt securities, to maintain an office or agency with respect to
such ACE INA debt securities and to hold moneys for payment in trust), referred
to in this prospectus as defeasance, or (2) to release itself and ACE from
their respective obligations with respect to such ACE INA debt securities under
certain covenants as described in the related prospectus supplement, and any
omission to comply with such obligations shall not constitute a default or an
Event of Default with respect to such ACE INA debt securities, referred to in
this prospectus as covenant defeasance,. Defeasance or covenant defeasance, as
the case may be, shall be conditioned upon the irrevocable deposit by ACE INA
or ACE with the Trustee, in trust, of an amount in U.S. dollars or in the
Foreign Currency in which such ACE INA debt securities are payable at stated
maturity, or Government Obligations (as defined below), or both, applicable to
such ACE INA debt securities which through the scheduled payment of principal
and interest in accordance with their terms will provide money in an amount
sufficient to pay the principal of, any premium and interest on, and any
additional amounts with respect to, such ACE INA debt securities on the
scheduled due dates. (Section 4.2)
Such a trust may only be established if, among other things, (1) the
applicable defeasance or covenant defeasance does not result in a breach or
violation of, or constitute a default under, the applicable ACE INA indenture
or any other material agreement or instrument to which ACE INA or ACE is a
party or by which either of them is bound, (2) no Event of Default or event
which with notice or lapse of time or both would become an Event of Default
with respect to the ACE INA debt securities to be defeased shall have occurred
and be continuing on the date of establishment of such a trust and, with
respect to defeasance only, at any time during the period ending on the 123rd
day after such date and (3) ACE INA or ACE has delivered to the trustee an
opinion of counsel (as specified in the ACE INA indenture) to the effect that
the holders of such ACE INA debt securities will not recognize income, gain or
loss for United States Federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to United States Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance or covenant defeasance had not
occurred, and such opinion of counsel, in the case of defeasance, must refer to
and be based upon a letter ruling of the Internal Revenue Service received by
ACE INA or ACE, a Revenue Ruling published by the Internal Revenue Service or a
change in applicable United States Federal income tax law occurring after the
date of the applicable ACE INA indenture. (Section 4.2)
"Foreign Currency" means any currency, currency unit or composite currency,
including, without limitation, the euro, issued by the government of one or
more countries other than the United States of America or by any recognized
confederation or association of such governments. (Section 1.1)
"Government Obligations" means debt securities which are (1) direct
obligations of the United States of America or the government or the
governments which issued the Foreign Currency in which the ACE INA debt
securities of a particular series are payable, for the payment of which its
full faith and credit is pledged or (2)
51
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government or
governments which issued the Foreign Currency in which the ACE INA debt
securities of such series are payable, the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America or such other government or governments, and which, in the
case of clauses (1) and (2), are not callable or redeemable at the option of
the issuer or issuers thereof, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such
Government Obligation or a specific payment of interest on or principal of or
any other amount with respect to any such Government Obligation held by such
custodian for the account of the holder of such depository receipt, provided
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian with respect to the Government Obligation
or the specific payment of interest on or principal of or any other amount with
respect to the Government Obligation evidenced by such depository receipt.
(Section 1.1)
If after ACE INA or ACE has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance with respect to ACE INA debt
securities of any series, (1) the holder of an ACE INA debt security of that
series is entitled to, and does, elect pursuant to Section 3.1 of the
applicable ACE INA indenture or the terms of such ACE INA debt security to
receive payment in a currency other than that in which such deposit has been
made in respect of such debt security, or (2) a Conversion Event occurs in
respect of the Foreign Currency in which such deposit has been made, the
indebtedness represented by such ACE INA debt security shall be deemed to have
been, and will be, fully discharged and satisfied through the payment of the
principal of, any premium and interest on, and any additional amounts with
respect to, such ACE INA debt security as such ACE INA debt security becomes
due out of the proceeds yielded by converting the amount or other properties so
deposited in respect of such ACE INA debt security into the currency in which
such ACE INA debt security becomes payable as a result of such election or such
Conversion Event based on (a) in the case of payments made pursuant to clause
(1) above, the applicable market exchange rate for such currency in effect on
the second business day prior to such payment date, or (b) with respect to a
Conversion Event, the applicable market exchange rate for such Foreign Currency
in effect (as nearly as feasible) at the time of the Conversion Event. (Section
4.2)
"Conversion Event" means the cessation of use of (1) a Foreign Currency both
by the government of the country or countries which issued such Foreign
Currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community or (2) any
currency unit or composite currency for the purposes for which it was
established. All payments of principal of, any premium and interest on, and any
additional amounts with respect to, any ACE INA debt security that are payable
in a Foreign Currency that ceases to be used by the government or governments
of issuance shall be made in U.S. dollars. (Section 1.1)
In the event ACE INA effects covenant defeasance with respect to any ACE INA
debt securities and such ACE INA debt securities are declared due and payable
because of the occurrence of any Event of Default other than an Event of
Default with respect to any covenant as to which there has been covenant
defeasance, the amount in such Foreign Currency in which such ACE INA debt
securities are payable, and Government Obligations on deposit with the trustee,
will be sufficient to pay amounts due on such ACE INA debt securities at the
time of the stated maturity but may not be sufficient to pay amounts due on
such ACE INA debt securities at the time of the acceleration resulting from
such Event of Default. However, ACE INA and ACE would remain liable to make
payment of such amounts due at the time of acceleration.
Subordination of ACE INA Subordinated Debt Securities
The ACE INA subordinated debt securities of each series will, to the extent
set forth in the ACE INA subordinated indenture, be subordinate in right of
payment to the prior payment in full of all Senior Indebtedness with respect to
such series. (Section 16.1 of the ACE INA subordinated indenture) Upon any
payment or distribution of assets of ACE INA of any kind or character, whether
in cash, property or securities, to creditors
52
upon any dissolution, winding-up, liquidation or reorganization of ACE INA,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or
other proceedings, all amounts due upon all Senior Indebtedness with respect to
the ACE INA subordinated debt securities of any series will first be paid in
full, or payment thereof provided for in money in accordance with its terms,
before the holders of ACE INA subordinated debt securities of such series are
entitled to receive or retain any payment on account of principal of, or any
premium or interest on, or any additional amounts with respect to, the ACE INA
subordinated debt securities of such series, and to that end the holders of
such Senior Indebtedness shall be entitled to receive, for application to the
payment thereof, any payment or distribution of any kind or character, whether
in cash, property or securities, including any such payment or distribution
which may be payable or deliverable by reason of the payment of any other
Indebtedness of ACE INA being subordinated to the payment of ACE INA
subordinated debt securities of such series, which may be payable or
deliverable in respect of the ACE INA subordinated debt securities of such
series upon any such dissolution, winding-up, liquidation or reorganization or
in any such bankruptcy, insolvency, receivership or other proceeding. (Section
16.3 of the ACE INA subordinated indenture)
By reason of such subordination, in the event of liquidation or insolvency
of ACE INA, holders of Senior Indebtedness with respect to the ACE INA
subordinated debt securities of any series and holders of other obligations of
ACE INA that are not subordinated to such Senior Indebtedness may recover more,
ratably, than the holders of the ACE INA subordinated debt securities of such
series.
Subject to the payment in full of all Senior Indebtedness with respect to
the ACE INA subordinated debt securities of any series, the rights of the
holders of the ACE INA subordinated debt securities of such series will be
subrogated to the rights of the holders of such Senior Indebtedness to receive
payments or distributions of cash, property or securities of ACE INA applicable
to such Senior Indebtedness until the principal of, any premium and interest
on, and any additional amounts with respect to, the ACE INA subordinated debt
securities of such series have been paid in full. (Section 16.4 of the ACE INA
subordinated indenture)
No payment of principal (including redemption and sinking fund payments) of
or any premium or interest on or any additional amounts with respect to the ACE
INA subordinated debt securities of any series may be made by ACE INA (1) if
any Senior Indebtedness with respect to such series is not paid when due and
any applicable grace period with respect to such default has ended and such
default has not been cured or waived or ceased to exist, or (2) if the maturity
of any Senior Indebtedness with respect to such series has been accelerated
because of a default. (Section 16.2 of the ACE INA subordinated indenture)
The ACE INA subordinated indenture does not limit or prohibit ACE INA from
incurring additional Senior Indebtedness, which may include Indebtedness that
is senior to the ACE INA subordinated debt securities of any series, but
subordinate to other obligations of ACE INA. The ACE INA senior debt securities
will constitute Senior Indebtedness with respect to the ACE INA subordinated
debt securities of each series under the ACE INA subordinated indenture.
The term "Senior Indebtedness" means, with respect to the ACE INA
subordinated debt securities of any particular series, all Indebtedness of ACE
INA outstanding at any time, except (1) the ACE INA subordinated debt
securities of such series, (2) Indebtedness as to which, by the terms of the
instrument creating or evidencing the same, it is provided that such
Indebtedness is subordinated to or ranks equally with the ACE INA subordinated
debt securities of such series, (3) Indebtedness of ACE INA to an Affiliate of
ACE INA, (4) interest accruing after the filing of a petition initiating any
bankruptcy, insolvency or other similar proceeding unless such interest is an
allowed claim enforceable against ACE INA in a proceeding under federal or
state bankruptcy laws, (5) trade accounts payable and (6) any Indebtedness,
including all other debt securities and guarantees in respect of those debt
securities, initially issued to (x) any ACE Trust or (y) any trust, partnership
or other entity affiliated with ACE which is a financing vehicle of ACE or any
Affiliate of ACE in connection with an issuance by such entity of preferred
securities or other securities which are similar to the preferred securities
described under "Description of Preferred Securities" below that are guaranteed
by ACE pursuant to an instrument that ranks equally with or junior in right of
payment to the preferred securities guarantees described under
53
"Description of the Preferred Securities Guarantees" below. Senior Indebtedness
with respect to the ACE INA subordinated debt securities of any particular
series shall continue to be Senior Indebtedness with respect to the ACE INA
subordinated debt securities of such series and be entitled to the benefits of
the subordination provisions irrespective of any amendment, modification or
waiver of any term of such Senior Indebtedness. (Sections 1.1 and 16.8 of the
ACE INA subordinated indenture)
The ACE INA subordinated indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular series of ACE INA
subordinated debt securities, may be changed prior to such issuance. Any such
change would be described in the related prospectus supplement.
Subordination of ACE Guarantee of ACE INA Subordinated Debt Securities
The ACE guarantee of ACE INA subordinated debt securities of each series
will, to the extent set forth in the ACE INA subordinated indenture, be
subordinate in right of payment to the prior payment in full of all ACE Senior
Indebtedness with respect to such series. (Section 18.1 of the ACE INA
subordinated indenture) Upon any payment or distribution of assets of ACE of
any kind or character, whether in cash, property or securities, to creditors
upon any dissolution, winding-up, liquidation or reorganization of ACE, whether
voluntary or involuntary, or in bankruptcy, insolvency, receivership or other
proceedings, all amounts due upon all ACE Senior Indebtedness with respect to
the ACE INA subordinated debt securities of any series will first be paid in
full, or payment thereof provided for in money in accordance with its terms,
before the holders of ACE INA subordinated debt securities of such series are
entitled to receive or retain any payment from ACE on account of principal of,
or any premium or interest on, or any additional amounts with respect to, the
ACE INA subordinated debt securities of such series, and to that end the
holders of such ACE Senior Indebtedness shall be entitled to receive, for
application to the payment thereof, any payment or distribution by ACE of any
kind or character, whether in cash, property or securities, including any such
payment or distribution which may be payable or deliverable by ACE by reason of
the payment of any other Indebtedness of ACE being subordinated to the payment
of ACE INA subordinated debt securities of such series, which may be payable or
deliverable by ACE in respect of the ACE INA subordinated debt securities of
such series upon any such dissolution, winding-up, liquidation or
reorganization or in any such bankruptcy, insolvency, receivership or other
proceeding. (Section 18.3 of the ACE INA subordinated indenture)
By reason of such subordination, in the event of liquidation or insolvency
of ACE, holders of ACE Senior Indebtedness with respect to the ACE INA
subordinated debt securities of any series and holders of other obligations of
ACE that are not subordinated to such ACE Senior Indebtedness may recover more,
ratably, than the holders of the ACE INA subordinated debt securities of such
series.
Subject to the payment in full of all ACE Senior Indebtedness with respect
to the ACE INA subordinated debt securities of any series, the rights of the
holders of the ACE INA subordinated debt securities of such series under the
ACE guarantee will be subrogated to the rights of the holders of such ACE
Senior Indebtedness to receive payments or distributions of cash, property or
securities of ACE applicable to such ACE Senior Indebtedness until the
principal of, any premium and interest on, and any additional amounts with
respect to, the ACE INA subordinated debt securities of such series have been
paid in full. (Section 18.4 of the ACE INA subordinated indenture)
No payment of principal (including redemption and sinking fund payments) of
or any premium or interest on or any additional amounts with respect to the ACE
INA subordinated debt securities of any series may be made by ACE (i) if any
ACE Senior Indebtedness with respect to such series is not paid when due and
any applicable grace period with respect to such default has ended and such
default has not been cured or waived or ceased to exist, or (ii) if the
maturity of any ACE Senior Indebtedness with respect to such series has been
accelerated because of a default. (Section 18.2 of the ACE INA subordinated
indenture)
The ACE INA subordinated indenture does not limit or prohibit ACE from
incurring additional ACE Senior Indebtedness, which may include Indebtedness
that is senior to the ACE guarantee of the ACE INA subordinated
54
debt securities of any series, but subordinate to other obligations of ACE. The
ACE senior debt securities will constitute ACE Senior Indebtedness with respect
to the ACE INA subordinated debt securities of each series under the ACE INA
subordinated indenture.
The term "ACE Senior Indebtedness" means, with respect to the ACE INA
subordinated debt securities of any particular series, all Indebtedness of ACE
outstanding at any time, except (1) ACE's obligations under the ACE guarantee
in respect of the ACE INA subordinated debt securities of such series, (2)
Indebtedness as to which, by the terms of the instrument creating or evidencing
the same, it is provided that such Indebtedness is subordinated to or ranks
equally with ACE's obligations under the ACE guarantee in respect of the ACE
subordinated debt securities of such series, (3) Indebtedness of ACE to an
Affiliate of ACE, (4) interest accruing after the filing of a petition
initiating any bankruptcy, insolvency or other similar proceeding unless such
interest is an allowed claim enforceable against ACE in a proceeding under
federal or state bankruptcy laws, (5) trade accounts payable, (6) ACE's
obligations under the ACE guarantee in respect of the ACE INA subordinated debt
securities of any series initially issued to (x) any ACE Trust or (y) any
trust, partnership or other entity affiliated with ACE which is a financing
vehicle of ACE or any Affiliate of ACE in connection with an issuance by such
entity of preferred securities or other securities which are similar to the
preferred securities described under "Description of Preferred Securities"
below that are guaranteed by ACE pursuant to an instrument that ranks equally
with a junior in right of payment to the preferred securities guarantees
described under "Description of Preferred Securities Guarantees" below and (7)
all preferred securities guarantees and all similar guarantees issued by ACE on
behalf of holders of preferred securities of an ACE Trust or other similar
preferred securities issued by any trust, partnership or other entity
affiliated with ACE which is a financing vehicle for ACE or any affiliate of
ACE.
The ACE INA subordinated indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular series of ACE INA
subordinated debt securities, may be changed prior to such issuance. Any such
change would be described in the applicable prospectus supplement.
New York Law to Govern
The ACE INA indentures, the ACE INA debt securities and the ACE guarantee
will be governed by, and construed in accordance with, the laws of the State of
New York applicable to agreements made or instruments entered into and, in each
case, performed in that state. (Section 1.13)
55
DESCRIPTION OF THE WARRANTS TO PURCHASE
ORDINARY SHARES OR PREFERRED SHARES
The following statements with respect to the ordinary share warrants and
preferred share warrants are summaries of, and subject to, the detailed
provisions of a stock warrant agreement to be entered into by ACE and a stock
warrant agent to be selected at the time of issue. The stock warrant agreement
may include or incorporate by reference standard warrant provisions
substantially in the form of the Standard Stock Warrant Provisions filed as an
exhibit to the registration statement of which this prospectus forms a part.
General
The stock warrants, evidenced by stock warrant certificates, may be issued
under the stock warrant agreement independently or together with any other
securities offered by any prospectus supplement and may be attached to or
separate from such other offered securities. If stock warrants are offered, the
related prospectus supplement will describe the designation and terms of the
stock warrants, including without limitation the following:
. the offering price, if any;
. the designation and terms of the ordinary shares or preferred shares
purchasable upon exercise of the stock warrants;
. if applicable, the date on and after which the stock warrants and the
related offered securities will be separately transferable;
. the number of ordinary shares or preferred shares purchasable upon
exercise of one stock warrant and the initial price at which such shares
may be purchased upon exercise;
. the date on which the right to exercise the stock warrants shall commence
and the date on which such rightshall expire;
. a discussion of certain United States Federal income tax considerations;
. the call provisions, if any;
. the currency, currencies or currency units in which the offering price,
if any, and exercise price are payable;
. the antidilution provisions of the stock warrants; and
. any other terms of the stock warrants.
The ordinary shares or preferred shares issuable upon exercise of the stock
warrants will, when issued in accordance with the stock warrant agreement, be
fully paid and nonassessable.
Exercise of Stock Warrants
Stock warrants may be exercised by surrendering to the stock warrant agent
the stock warrant certificate with the form of election to purchase on the
reverse thereof duly completed and signed by the warrantholder, or its duly
authorized agent (such signature to be guaranteed by a bank or trust company,
by a broker or dealer which is a member of the National Association of
Securities Dealers, Inc. or by a member of a national securities exchange),
indicating the warrantholder's election to exercise all or a portion of the
stock warrants evidenced by the certificate. Surrendered stock warrant
certificates shall be accompanied by payment of the aggregate exercise price of
the stock warrants to be exercised, as set forth in the related prospectus
supplement, in lawful money of the United States, unless otherwise provided in
the related prospectus supplement. Upon receipt thereof by the stock warrant
agent, the stock warrant agent will requisition from the transfer agent for the
ordinary shares or the preferred shares, as the case may be, for issuance and
delivery to or upon the written order of the exercising
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warrantholder, a certificate representing the number of ordinary shares or
preferred shares purchased. If less than all of the stock warrants evidenced by
any stock warrant certificate are exercised, the stock warrant agent shall
deliver to the exercising warrantholder a new stock warrant certificate
representing the unexercised stock warrants.
Antidilution and Other Provisions
The exercise price payable and the number of ordinary shares or preferred
shares purchasable upon the exercise of each stock warrant and the number of
stock warrants outstanding will be subject to adjustment in certain events,
including the issuance of a stock dividend to holders of ordinary shares or
preferred shares, respectively, or a combination, subdivision or
reclassification of ordinary shares or preferred shares, respectively. In lieu
of adjusting the number of ordinary shares or preferred shares purchasable upon
exercise of each stock warrant, ACE may elect to adjust the number of stock
warrants. No adjustment in the number of shares purchasable upon exercise of
the stock warrants will be required until cumulative adjustments require an
adjustment of at least 1% thereof. ACE may, at its option, reduce the exercise
price at any time. No fractional shares will be issued upon exercise of stock
warrants, but ACE will pay the cash value of any fractional shares otherwise
issuable. Notwithstanding the foregoing, in case of any consolidation, merger,
or sale or conveyance of the property of ACE as an entirety or substantially as
an entirety, the holder of each outstanding stock warrant shall have the right
to the kind and amount of shares of stock and other securities and property
(including cash) receivable by a holder of the number of ordinary shares or
preferred shares into which such stock warrants were exercisable immediately
prior thereto.
No Rights as Shareholders
Holders of stock warrants will not be entitled, by virtue of being such
holders, to vote, to consent, to receive dividends, to receive notice as
shareholders with respect to any meeting of shareholders for the election of
directors of ACE or any other matter, or to exercise any rights whatsoever as
shareholders of ACE.
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DESCRIPTION OF THE WARRANTS TO PURCHASE DEBT SECURITIES
The following statements with respect to the debt warrants are summaries of,
and subject to, the detailed provisions of a debt warrant agreement to be
entered into by ACE and a debt warrant agent to be selected at the time of
issue. The debt warrant agreement may include or incorporate by reference
standard warrant provisions substantially in the form of the Standard Debt
Securities Warrant Provisions filed as an exhibit to the registration statement
of which this prospectus forms a part.
General
The debt warrants, evidenced by debt warrant certificates, may be issued
under the debt warrant agreement independently or together with any other
securities offered by any prospectus supplement and may be attached to or
separate from such other offered securities. If debt warrants are offered, the
related prospectus supplement will describe the designation and terms of the
debt warrants, including without limitation the following:
. the offering price, if any;
. the designation, aggregate principal amount and terms of the ACE debt
securities purchasable upon exercise of the debt warrants;
. if applicable, the date on and after which the debt warrants and the
related offered securities will be separately transferable;
. the principal amount of ACE debt securities purchasable upon exercise of
one debt warrant and the price at which such principal amount of ACE debt
securities may be purchased upon exercise;
. the date on which the right to exercise the debt warrants shall commence
and the date on which such right shall expire;
. a discussion of certain United States Federal income tax considerations;
. whether the warrants represented by the debt warrant certificates will be
issued in registered or bearer form;
. the currency, currencies or currency units in which the offering price,
if any, and exercise price are payable;
. the antidilution provisions of the debt warrants; and
. any other terms of the debt warrants.
Warrantholders will not have any of the rights of holders of ACE debt
securities, including the right to receive the payment of principal of, any
premium or interest on, or any additional amounts with respect to, the ACE debt
securities or to enforce any of the covenants of the ACE debt securities or the
applicable ACE indenture, except as otherwise provided in the applicable ACE
indenture.
Exercise of Debt Warrants
Debt warrants may be exercised by surrendering the debt warrant certificate
at the office of the debt warrant agent, with the form of election to purchase
on the reverse side of the debt warrant certificate properly completed and
executed (with signature(s) guaranteed by a bank or trust company, by a broker
or dealer which is a member of the National Association of Securities Dealers,
Inc. or by a member of a national securities exchange), and by payment in full
of the exercise price, as set forth in the related prospectus supplement. Upon
the exercise of debt warrants, ACE will issue the ACE debt securities in
authorized denominations in accordance with the instructions of the exercising
warrantholder. If less than all of the debt warrants evidenced by the debt
warrant certificate are exercised, a new debt warrant certificate will be
issued for the remaining number of debt warrants.
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DESCRIPTION OF PREFERRED SECURITIES
Each ACE Trust will be governed by the terms of the applicable restated
trust agreement. Under the restated trust agreement of an ACE Trust, the ACE
Trust may issue, from time to time, only one series of preferred securities.
The preferred securities will have the terms set forth in the restated trust
agreement or made a part of the restated trust agreement by the Trust Indenture
Act, and described in the related prospectus supplement. These terms will
mirror the terms of the ACE INA subordinated debt securities purchased by the
ACE Trust using the proceeds from the sale of its preferred securities and its
common securities. The ACE INA subordinated debt securities issued to an ACE
Trust will be guaranteed by ACE on a subordinated basis and are referred to as
the "corresponding ACE INA subordinated debt securities" relating to that ACE
Trust. See "Use of Proceeds."
The following summary sets forth the material terms and provisions of each
restated trust agreement and the preferred securities to which any prospectus
supplement relates. Because this summary is not complete, you should refer to
the form of restated trust agreement and to the Trust Indenture Act for
complete information regarding the terms and provisions of that agreement and
of the preferred securities, including the definitions of some of the terms
used below. The form of restated trust agreement filed as an exhibit to the
registration statement of which this prospectus forms a part is incorporated by
reference in this summary. Whenever particular sections or defined terms of a
restated trust agreement are referred to, such sections or defined terms are
incorporated herein by reference, and the statements in connection with which
such reference is made is qualified in its entirety by such reference.
Issuance, Status and Guarantee of Preferred Securities
Under the terms of the restated trust agreement for each ACE Trust, the
Administrative Trustees will issue the preferred securities on behalf of that
ACE Trust. The preferred securities will represent preferred beneficial
interests in the ACE Trust and the holders of the preferred securities will be
entitled to a preference in certain circumstances as regards distributions and
amounts payable on redemption or liquidation over the common securities of such
ACE Trust, as well as other benefits under the corresponding restated trust
agreement. The preferred securities of an ACE Trust will rank equally, and
payments will be made on the preferred securities pro rata, with the common
securities of that ACE Trust except as described under "--Subordination of
Common Securities." The Property Trustee will hold legal title to the
corresponding ACE INA subordinated debt securities in trust for the benefit of
the holders of the related preferred securities and common securities. The
common securities and the preferred securities of an ACE Trust are collectively
referred to as the "trust securities" of that ACE Trust.
ACE will issue a guarantee agreement for the benefit of the holders of each
ACE Trust's preferred securities (the "preferred securities guarantee" for
those preferred securities). Under each preferred securities guarantee, ACE
will guarantee on a subordinated basis payment of distributions on the related
preferred securities and amounts payable on redemption or liquidation of such
preferred securities, but only to the extent that the related ACE Trust has
funds on hand to make such payments. See "Description of Preferred Securities
Guarantees."
Distributions
Distributions on the preferred securities will be cumulative, will
accumulate from the original issue date and will be payable on the dates as
specified in the related prospectus supplement. In the event that any date on
which distributions are payable on the preferred securities is not a Business
Day, payment of the distribution 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, 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 the date such payment was originally payable
(each date on which distributions are payable in accordance with the foregoing,
a "distribution date"). (Section
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4.1). A "Business Day" is any day other than a Saturday or a Sunday, or 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 a day on which the
corporate trust office of the Property Trustee or the trustee for the
corresponding ACE INA subordinated debt securities is closed for business.
(Section 1.1).
Distributions on each preferred security will be payable at a rate specified
in the related prospectus supplement. The amount of distributions payable for
any period will be computed on the basis of a 360-day year of twelve 30-day
months unless otherwise specified in the related prospectus supplement.
Distributions to which holders of preferred securities are entitled will
accumulate additional distributions at the rate per annum if and as specified
in the related prospectus supplement. References to "distributions" include any
accumulated or additional distributions unless otherwise stated. (Section 4.1).
If provided in the applicable prospectus supplement, ACE INA has the right
under the ACE INA subordinated indenture to defer the payment of interest at
any time or from time to time on any series of corresponding ACE INA
subordinated debt securities for an Extension Period which will be specified in
the related prospectus supplement. No Extension Period may extend beyond the
stated maturity of the corresponding ACE INA subordinated debt securities. See
"Description of ACE INA Debt Securities and ACE Guarantee--Option to Extend
Interest Payment Date." As a consequence of any such extension, distributions
on the corresponding preferred securities would be deferred (but would continue
to accumulate additional distributions at the rate per annum set forth in the
prospectus supplement for such preferred securities, which will match the
interest rate payable on the corresponding ACE INA subordinated debt securities
during the Extension Period) by the ACE Trust which issued such preferred
securities during any such Extension Period. (Section 4.1)
The funds of each ACE Trust available for distribution to holders of its
preferred securities will be limited to payments under the corresponding ACE
INA subordinated debt securities in which the ACE Trust will invest the
proceeds from the issuance and sale of its trust securities. If ACE INA or ACE
does not make interest payments on those corresponding ACE INA subordinated
debt securities, the Property Trustee will not have funds available to pay
distributions on the related preferred securities. The payment of distributions
(if and to the extent the ACE Trust has funds legally available for the payment
of such distributions and cash sufficient to make such payments) is guaranteed
by ACE on a limited basis as set forth herein under "Description of Preferred
Securities Guarantees."
Distributions on the preferred securities will be payable to the holders
thereof as they appear on the register of such ACE Trust on the relevant record
dates. As long as the preferred securities remain in book-entry form, the
record dates will be one Business Day prior to the relevant distribution dates.
Subject to any applicable laws and regulations and the provisions of the
applicable restated trust agreement, each distribution payment will be made as
described under "Global Preferred Securities." In the event any preferred
securities are not in book-entry form, the relevant record date for such
preferred securities will be the date at least 15 days prior to the relevant
distribution date, as specified in the related prospectus supplement. (Section
4.1)
Redemption or Exchange
Mandatory Redemption. Upon any repayment or redemption, in whole or in
part, of any corresponding ACE INA subordinated debt securities held by an ACE
Trust, whether at stated maturity, upon earlier redemption or otherwise, the
proceeds from such repayment or redemption shall simultaneously be applied by
the Property Trustee, upon not less than 30 nor more than 60 days, notice to
holders of trust securities, to redeem, on a pro rata basis, preferred
securities and common securities having an aggregate stated liquidation amount
equal to the aggregate principal amount of the corresponding ACE INA
subordinated debt securities so repaid or redeemed. The redemption price per
trust security will be equal to the stated liquidation amount thereof plus
accumulated and unpaid distributions thereon to the date of redemption, plus
the related amount of premium, if any, and any additional amounts paid by ACE
INA or ACE upon the concurrent repayment or redemption of the corresponding ACE
INA subordinated debt securities, referred to as the redemption price. (Section
4.2) If less than all of any series of corresponding ACE INA subordinated debt
securities are to be repaid or redeemed on a redemption date, then the proceeds
from such repayment or redemption shall be allocated to the redemption pro rata
of the related preferred securities and the common securities. (Section 4.2)
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ACE INA will have the right to redeem any series of corresponding ACE INA
subordinated debt securities (1) at any time, in whole but not in part, upon
the occurrence of a Special Event (as defined in the ACE indentures) and
subject to the further conditions described under "Description of ACE INA Debt
Securities and ACE Guarantee--Redemption," or (2) as may be otherwise specified
in the applicable prospectus supplement.
Special Event Redemption or Distribution of Corresponding ACE INA
Subordinated Debt Securities. If a Special Event relating to the preferred
securities and common securities of an ACE Trust shall occur and be continuing,
ACE INA has the right to redeem the corresponding ACE INA subordinated debt
securities, in whole but not in part, and thereby cause a mandatory redemption
of such preferred securities and common securities, in whole but not in part,
at the redemption price within 90 days following the occurrence of the Special
Event. At any time, ACE INA has the right to dissolve the related ACE Trust and
after satisfaction of the liabilities of creditors of such ACE Trust as
provided by applicable law, cause such corresponding ACE INA subordinated debt
securities to be distributed to the holders of such preferred securities and
common securities in liquidation of the ACE Trust. If ACE INA does not elect to
redeem the corresponding ACE INA subordinated debt securities upon the
occurrence of a Special Event, the applicable preferred securities will remain
outstanding, and in the event a Tax Event has occurred and is continuing,
Additional Sums may be payable on the corresponding ACE INA subordinated debt
securities. "Additional Sums" means the additional amounts as may be necessary
in order that the amount of distributions then due and payable by an ACE Trust
on the outstanding preferred securities and common securities of the ACE Trust
shall not be reduced as a result of any additional taxes, duties and other
governmental charges to which such ACE Trust has become subject as a result of
a Tax Event. (Section 1.1)
On and from the date fixed for any distribution of corresponding ACE INA
subordinated debt securities upon dissolution of an ACE Trust (1) the trust
securities will no longer be deemed to be outstanding, (2) the depositary or
its nominee, as the record holder of the applicable preferred securities, will
receive a registered global certificate or certificates representing the
corresponding ACE INA subordinated debt securities to be delivered upon such
distribution, upon surrender of the related preferred securities certificates
for exchange and (3) any certificates representing such preferred securities
not so surrendered for exchange will be deemed to represent beneficial
interests in the corresponding ACE INA subordinated debt securities having an
aggregate principal amount equal to the aggregate stated liquidation amount of
such preferred securities, and accruing interest at the rate provided for in
such debt securities (which will equal the distribution rate on the preferred
securities) until such certificates are presented to the Administrative
Trustees or their agent for exchange. (Section 9.4)
There can be no assurance as to the market prices for the preferred
securities or the corresponding ACE INA subordinated debt securities that may
be distributed in exchange for preferred securities if a dissolution and
liquidation of an ACE Trust were to occur. Accordingly, the preferred
securities that you may purchase, or the corresponding ACE INA subordinated
debt securities that you may receive on dissolution and liquidation of an ACE
Trust, may trade at a discount to the price that you paid to purchase the
preferred securities.
Redemption Procedures
Preferred securities redeemed on each redemption date shall be redeemed at
the redemption price with the applicable proceeds from the contemporaneous
redemption of the corresponding ACE INA subordinated debt securities.
Redemptions of the preferred securities shall be made and the redemption price
shall be payable on each redemption date only to the extent that the related
ACE Trust has funds on hand available for the payment of such redemption price.
See also "--Subordination of Common Securities."
If an ACE Trust gives a notice of redemption (which notice will be
irrevocable) in respect of its preferred securities, then, by 12:00 noon, New
York City time, on the redemption date, to the extent funds are available, the
Property Trustee will deposit irrevocably with the depositary for the preferred
securities funds sufficient to pay the applicable redemption price and will
give the depositary irrevocable instructions and authority to pay the
redemption price to the holders of such preferred securities. If such preferred
securities are no longer in book-entry form, the Property Trustee, to the
extent funds are available, will irrevocably deposit with the paying agent
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for such preferred securities 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 such preferred securities. Notwithstanding the
foregoing, distributions payable on or prior to the redemption date for any
preferred securities called for redemption shall be payable to the holders of
such preferred 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 immediately prior to the close of business on the
date of such deposit, all rights of the holders of such preferred securities so
called for redemption will cease, except the right of the holders of such
preferred securities to receive the redemption price, but without interest, and
such preferred 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 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
preferred securities called for redemption is improperly withheld or refused
and not paid either by the ACE Trust or by ACE pursuant to the preferred
securities guarantee as described under "Description of Preferred Securities
Guarantees," distributions on such preferred securities will continue to
accumulate at the then applicable rate, from the redemption date originally
established by the ACE Trust for such preferred 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.
Subject to applicable law (including, without limitation, United States
Federal securities law), ACE or its subsidiaries, including ACE INA, may at any
time and from time to time purchase outstanding preferred securities by tender,
in the open market or by private agreement.
Payment of the redemption price on the preferred securities shall be made to
the applicable recordholders as they appear on the register for such preferred
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
preferred securities are not in book-entry form, the relevant record date for
such preferred securities shall be a date at least 15 days prior to the
redemption date, as specified in the applicable prospectus supplement.
If less than all of the preferred securities and common securities issued by
an ACE Trust are to be redeemed on a redemption date, then the aggregate
liquidation amount of such preferred securities and common securities to be
redeemed shall be allocated pro rata to the preferred securities and the common
securities based upon the relative liquidation amounts of such classes. The
particular preferred 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 preferred securities not previously called for
redemption, by such method (including without limitation by lot) as the
Property Trustee shall deem fair and appropriate. The Property Trustee shall
promptly notify the trust registrar in writing of the preferred securities
selected for redemption and, in the case of any preferred securities selected
for partial redemption, the liquidation amount thereof to be redeemed. For all
purposes of each restated trust agreement, unless the context otherwise
requires, all provisions relating to the redemption of preferred securities
shall relate, in the case of any preferred securities redeemed or to be
redeemed only in part, to the portion of the liquidation amount of preferred
securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of trust securities to be
redeemed at its registered address. Unless each of ACE INA and ACE defaults in
payment of the redemption price on the corresponding ACE INA subordinated debt
securities, on and after the redemption date interest will cease to accrue on
such ACE INA subordinated debt securities or portions thereof (and
distributions will cease to accrue on the related preferred securities or
portions thereof) called for redemption. (Section 4.2)
Subordination of Common Securities
Payment of distributions on, and the redemption price of, each ACE Trust's
preferred securities and common securities, as applicable, shall be made pro
rata based on the liquidation amount of such preferred
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securities and common securities; provided, however, that if on any
distribution date or redemption date an event of default under the
corresponding ACE INA subordinated debt securities shall have occurred and be
continuing, no payment of any distribution on, or redemption price of, any of
the ACE Trust's 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 ACE Trust's outstanding preferred 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 ACE Trust's outstanding preferred securities then called for redemption,
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 ACE Trust's preferred securities
then due and payable.
In the case of any Event of Default under the restated trust agreement
resulting from a event of default under the corresponding ACE INA subordinated
debt securities, the holder of such ACE Trust's common securities will be
deemed to have waived any right to act with respect to any such Event of
Default under the applicable restated trust agreement until the effect of all
such Events of Default with respect to such preferred securities have been
cured, waived or otherwise eliminated. Until any such Events of Default under
the applicable restated trust agreement with respect to the preferred
securities have been so cured, waived or otherwise eliminated, the Property
Trustee shall act solely on behalf of the holders of such preferred securities
and not on behalf of the holder of the ACE Trust's common securities, and only
the holders of such preferred securities will have the right to direct the
Property Trustee to act on their behalf. (Section 4.3)
Liquidation Distribution Upon Dissolution of ACE Trust
Pursuant to each restated trust agreement, each ACE Trust shall
automatically dissolve upon expiration of its term and shall dissolve on the
first to occur of:
1. certain events of bankruptcy, dissolution or liquidation of ACE INA
or ACE;
2. the written direction to the Property Trustee from ACE INA, as
Depositor, at any time (which direction is optional and wholly within the
discretion of ACE INA, as Depositor) to dissolve the ACE Trust and
distribute corresponding ACE INA subordinated debt securities having an
aggregate principal amount equal to the aggregate stated liquidation amount
of the trust securities to the holders of the trust securities in exchange
for the trust securities;
3. the redemption of all of the ACE Trust's trust securities following a
Special Event;
4. the redemption of all of the ACE Trust's preferred securities as
described under "Description of Preferred Securities--Redemption or
Exchange--Mandatory Redemption"; and
5. the entry of an order for the dissolution of the ACE Trust by a court
of competent jurisdiction. (Section 9.2)
If an early dissolution occurs as described in clause (1), (2) or (5) above
or upon the date designated for automatic dissolution of the ACE Trust, the ACE
Trust shall be liquidated by the ACE Trustees as expeditiously as the ACE
Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of such ACE Trust as provided by applicable law, to
the holders of such trust securities corresponding ACE INA subordinated debt
securities having an aggregate principal amount equal to the aggregate stated
liquidation amount of the trust securities. However, if such distribution is
determined by the Property Trustee not to be practical, such holders will be
entitled to receive out of the assets of the ACE Trust available for
distribution to holders, after satisfaction of liabilities to creditors of such
ACE Trust as provided by applicable law, an amount equal to, in the case of
holders of preferred securities, the aggregate of the liquidation amount plus
accumulated and unpaid distributions thereon to the date of payment, this
amount being referred to as the Liquidation Distribution. If such Liquidation
Distribution can be paid only in part because such ACE Trust has insufficient
assets available to pay in full the aggregate Liquidation Distribution, then
the amounts payable directly by such
63
ACE Trust on its preferred securities shall be paid on a pro rata basis. The
Holder of such ACE Trust's common securities will be entitled to receive
distributions upon any such liquidation pro rata with the holders of its
preferred securities, except that if an event of default under the
corresponding ACE INA subordinated debt securities has occurred and is
continuing, the preferred securities shall have a priority over the common
securities. (Section 9.4)
Events of Default; Notice
Any one of the following events constitutes an "Event of Default" under each
restated trust agreement with respect to the applicable preferred 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):
(1) the occurrence of an event of default in respect of the corresponding
ACE INA subordinated debt securities (see "Description of ACE INA Debt
Securities and ACE Guarantee--Events of Default"); or
(2) 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
(3) default by the Property Trustee in the payment of any redemption price
of any trust security when it becomes due and payable; or
(4) default in the performance, or breach, in any material respect, of any
covenant or warranty of the ACE Trustees in such restated 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 (2)
or (3) above), and continuation of such default or breach for a period
of 60 days after there has been given, by registered or certified mail,
to the defaulting ACE Trustee or Trustees by the holders of at least 25%
in aggregate liquidation preference of the outstanding preferred
securities of the applicable ACE Trust, 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 such restated trust agreement; or
(5) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by ACE INA, as
Depositor, to appoint a successor Property Trustee within 60 days
thereof. (Section 1.1)
Within five 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 such ACE Trust's preferred
securities, the Administrative Trustees and ACE INA, as Depositor, unless such
Event of Default shall have been cured or waived. (Section 8.2) ACE INA, as
Depositor, and the Administrative Trustees are required to file annually with
the Property Trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under each restated
trust agreement. (Sections 8.15 and 8.16)
If an event of default under the corresponding ACE INA subordinated debt
securities has occurred and is continuing, the preferred securities shall have
a preference over the common securities upon dissolution of each ACE Trust as
described above. See "--Liquidation Distribution Upon Dissolution of ACE
Trust." The existence of an Event of Default under the restated trust agreement
does not entitle the holders of preferred securities to accelerate the maturity
thereof.
Removal of ACE Trustees
Unless an event of default under the corresponding ACE INA subordinated debt
securities shall have occurred and be continuing, any ACE Trustee may be
removed at any time by the holder of the common securities. If an event of
default under the corresponding ACE INA subordinated debt securities has
occurred and is continuing, the Property Trustee and the Delaware Trustee may
be removed at such time by the holders of a
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majority in liquidation amount of the outstanding preferred securities. In no
event will the holders of the preferred securities have the right to vote to
appoint, remove or replace the Administrative Trustees, which voting rights are
vested exclusively in the holder of the common securities. No resignation or
removal of an ACE 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 applicable restated trust agreement.
(Section 8.10)
Co-Trustees and Separate Property 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 property of any
ACE Trust may at the time be located, ACE INA, as Depositor, and the
Administrative Trustees shall have power to appoint one or more persons either
to act as a co-trustee, jointly with the Property Trustee, of all or any part
of the property of such ACE Trust, or 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 such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the applicable restated trust agreement. In case an event of
default under the corresponding ACE INA subordinated debt securities has
occurred and is continuing, the Property Trustee alone shall have power to make
such appointment. (Section 8.9)
Merger or Consolidation of ACE Trustees
Any corporation into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person 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 ACE Trustee shall be a party,
shall be the successor of such ACE Trustee under each restated trust agreement,
provided such corporation shall be otherwise qualified and eligible. (Section
8.12)
Mergers, Consolidations, Amalgamations or Replacements of the ACE Trusts
An ACE Trust may not merge with or into, convert 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 entity, except
as described below or as described in "Liquidation Distribution Upon
Dissolution of ACE Trust." An ACE Trust may, at the request of ACE INA, with
the consent of only the Administrative Trustees and without the consent of the
holders of the preferred securities, merge with or into, convert 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
1. such successor entity either (a) expressly assumes all of the
obligations of such ACE Trust with respect to the preferred securities or
(b) substitutes for the preferred securities other securities having
substantially the same terms as the preferred securities, referred to as the
Successor Securities, so long as the Successor Securities rank the same as
the preferred securities rank in priority with respect to distributions and
payments upon liquidation, redemption and otherwise,
2. ACE expressly appoints a trustee of such successor entity possessing
the same powers and duties as the Property Trustee as the holder of the
corresponding ACE INA subordinated debt securities,
3. 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 preferred securities
are then listed or traded, if any,
4. such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the preferred securities
(including any Successor Securities) to be downgraded by any nationally
recognized statistical rating organization,
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5. such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the preferred securities
(including any Successor Securities) in any material respect,
6. such successor entity has a purpose substantially identical to that
of the ACE Trust,
7. prior to such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, ACE INA has received an opinion
from independent counsel to the ACE Trust experienced in such matters to the
effect that (a) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the holders of the preferred
securities (including any Successor Securities) in any material respect, and
(b) following such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the ACE Trust nor any
successor entity will be required to register as an "investment company"
under the Investment Company Act, and
8. ACE INA 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 preferred securities guarantee.
Notwithstanding the foregoing, an ACE Trust shall not, except with the
consent of holders of 100% in liquidation amount of the preferred securities,
consolidate, amalgamate, merge with or into, convert 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, convert into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the ACE Trust or the successor entity to be classified as other
than a grantor trust for United States Federal income tax purposes. (Section
9.5)
Voting and Preemptive Rights
Except as provided below and under "--Removal of ACE Trustees," "Description
of ACE INA Debt Securities and ACE Guarantee--Events of Default," "Description
of Preferred Securities Guarantees--Amendments and Assignment" and as otherwise
required by law and the applicable restated trust agreement, the holders of the
preferred securities will have no voting rights. Holders of the preferred
securities have no preemptive or similar rights. (Sections 5.14 and 6.1)
Amendment of Restated Trust Agreements
Each restated trust agreement may be amended from time to time by ACE INA
and the ACE Trustees, without the consent of the holders of the trust
securities:
1. to cure any ambiguity, correct or supplement any provisions in such
restated trust agreement that may be inconsistent with any other provision,
or to make any other provisions with respect to matters or questions arising
under such restated trust agreement, which shall not be inconsistent with
the other provisions of such restated trust agreement, or
2. to modify, eliminate or add to any provisions of such restated trust
agreement to such extent as shall be necessary to ensure that the ACE Trust
will be classified for United States Federal income tax purposes as a
grantor trust at all times that any trust securities are outstanding or to
ensure that the ACE Trust will not be required to register as an "investment
company" under the Investment Company Act;
provided, however, that in the case of clause (1), such action shall not
adversely affect in any material respect the interests of any holder of trust
securities. Any such amendments of a restated trust agreement shall become
effective when notice thereof is given to the holders of trust securities of
the applicable ACE Trust.
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Each restated trust agreement may be amended by the ACE Trustees and ACE INA
with the consent of holders representing not less than a majority (based upon
liquidation amounts) of the outstanding trust securities, and receipt by the
ACE Trustees of an opinion of counsel to the effect that such amendment or the
exercise of any power granted to the ACE Trustees in accordance with such
amendment will not affect the ACE Trust's status as a grantor trust for United
States Federal income tax purposes or the ACE Trust's exemption from status as
an "investment company" under the Investment Company Act. However, without the
consent of each holder of trust securities, such restated trust agreement may
not be amended to:
1. 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
2. restrict the right of a holder of trust securities to institute suit
for the enforcement of any such payment on or after such date. (Section 10.2)
So long as any corresponding ACE INA subordinated debt securities are held
by the Property Trustee, the ACE Trustees shall not:
1. direct the time, method and place of conducting any proceeding for
any remedy available to the trustee under the ACE INA subordinated
indenture, or executing any trust or power conferred on that trustee with
respect to such corresponding ACE INA subordinated debt securities,
2. waive any past default that is waivable under Section 5.13 of the ACE
INA subordinated indenture (as described in "Description of the ACE INA Debt
Securities and ACE Guarantee-- Modification and Waiver"),
3. exercise any right to rescind or annul a declaration that the
principal of all the ACE INA subordinated debt securities shall be due and
payable, or
4. consent to any amendment, modification or termination of the ACE INA
subordinated indenture or such corresponding ACE INA subordinated debt
securities, where such consent shall be required,
without, in each case, obtaining the prior approval of the holders of a
majority in aggregate liquidation amount of all outstanding preferred
securities.
However, where a consent under the ACE INA subordinated indenture would
require the consent of each holder of corresponding ACE INA subordinated debt
securities affected thereby, no such consent shall be given by the Property
Trustee without the prior consent of each holder of the corresponding preferred
securities. The ACE Trustees shall not revoke any action previously authorized
or approved by a vote of the holders of the preferred securities except by
subsequent vote of the holders of the preferred securities. The Property
Trustee shall notify each holder of preferred securities of any notice of
default with respect to the corresponding ACE INA subordinated debt securities.
In addition to obtaining the foregoing approvals of the holders of the
preferred securities, prior to taking any of the foregoing actions, the ACE
Trustees shall obtain an opinion of counsel experienced in such matters to the
effect that the ACE Trust will not be classified as an association taxable as a
corporation for United States Federal income tax purposes on account of such
action. (Section 6.1)
Any required approval or action of holders of preferred securities may be
given or taken at a meeting of holders of preferred securities convened for
such purpose or pursuant to written consent. The Property Trustee will cause a
notice of any meeting at which holders of preferred securities are entitled to
vote to be given to each holder of record of preferred securities in the manner
set forth in each restated trust agreement. (Sections 6.2, 6.3 and 6.6)
No vote or consent of the holders of preferred securities will be required
for an ACE Trust to redeem and cancel its preferred securities in accordance
with the applicable restated trust agreement.
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Notwithstanding that holders of preferred securities are entitled to vote or
consent under any of the circumstances described above, any of the preferred
securities that are owned by ACE INA, the ACE Trustees or any affiliate of ACE
INA or any ACE Trustees, shall, for purposes of such vote or consent, be
treated as if they were not outstanding.
Global Preferred Securities
The preferred securities of an ACE Trust may be issued in whole or in part
in the form of one or more global preferred securities that will be deposited
with, or on behalf of, the depositary identified in the prospectus supplement.
The specific terms of the depositary arrangement with respect to the
preferred securities of an ACE Trust will be described in the related
prospectus supplement. ACE INA anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a global preferred security, and the deposit of such
global preferred security with or on behalf of the depositary, the depositary
for such global preferred security or its nominee will credit, on its
book-entry registration and transfer system, the respective aggregate
liquidation amounts of the individual preferred securities represented by such
global preferred securities to the accounts of participants. Such accounts
shall be designated by the underwriters or agents with respect to such
preferred securities or by ACE INA if such preferred securities are offered and
sold directly by ACE INA. Ownership of beneficial interests in a global
preferred security will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests in such
global preferred security will be shown on, and the transfer of that ownership
will be effected only through, records maintained by the depositary or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons who hold through
participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a global preferred security.
So long as the depositary for a global preferred security, or its nominee,
is the registered owner of such global preferred security, such depositary or
such nominee, as the case may be, will be considered the sole owner or holder
of the preferred securities represented by such global preferred security for
all purposes under the restated trust agreement governing such preferred
securities. Except as provided below, owners of beneficial interests in a
global preferred security will not be entitled to have any of the individual
preferred securities represented by such global preferred security registered
in their names, will not receive or be entitled to receive physical delivery of
any such preferred securities in definitive form and will not be considered the
owners or holders thereof under the restated trust agreement.
Payments of any liquidation amount, premium or distributions in respect of
individual preferred securities registered in the name of a depositary or its
nominee will be made to the depositary or its nominee, as the case may be, as
the registered owner of the global preferred security representing such
preferred securities. None of ACE, ACE INA, the Property Trustee, any paying
agent, or the securities registrar for such preferred securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the global
preferred security representing such preferred securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
ACE INA expects that the depositary or its nominee, upon receipt of any
payment in respect of a global preferred security representing any ACE Trust's
preferred securities, will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interest in
the aggregate liquidation amount of such global preferred security for such
preferred securities as shown on the records of such depositary or its nominee.
ACE INA also expects that payments by participants to owners of beneficial
interests in such global preferred security held through such participants will
be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers in bearer form or
registered in street name and will be the responsibility of such participants.
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Unless otherwise specified in the applicable prospectus supplement, the
restated trust agreement of each ACE Trust will provide that (1) if ACE INA
advises the ACE Trustees in writing that the depositary is no longer willing or
able to act as depositary and ACE fails to appoint a qualified successor within
90 days, (2) ACE INA at its option advises the ACE Trustees in writing that it
elects to terminate the book-entry system through the depositary or (3) after
the occurrence of an event of default under the corresponding ACE INA
subordinated debt securities, owners of preferred securities representing at
least a majority of liquidation amount of such preferred securities advise the
Property Trustee in writing that the continuation of a book-entry system
through the depositary is no longer in their best interests, then the global
preferred securities will be exchanged for preferred securities in definitive
form in accordance with the instructions of the depositary. It is expected that
such instructions may be based upon directions received by the depositary from
participants with respect to ownership of beneficial interests in global
preferred securities. Individual preferred securities so issued will be issued
in authorized denominations.
Payment and Paying Agency
Payments of distributions in respect of the preferred securities shall be
made to the depositary, which shall credit the relevant accounts at the
depositary on the applicable distribution dates or, if any ACE Trust's
preferred securities are not held by the depositary, such payments shall be
made by check mailed to the address of the holder entitled thereto as such
address shall appear on the register that ACE Trust. (Section 4.4) Unless
otherwise specified in the applicable prospectus supplement, the paying agent
shall initially be Bank One Trust Company, N.A. and any co-paying agent chosen
by Bank One Trust Company, N.A. and acceptable to the Administrative Trustees
and ACE. The paying agent shall be permitted to resign as paying agent upon 30
days' written notice to the Administrative Trustees, the Property Trustee and
ACE INA. In the event Bank One Trust Company, N.A. shall no longer be the
paying agent, the Administrative Trustees shall appoint a successor (which
shall be a bank or trust company acceptable to the Administrative Trustees and
ACE INA) to act as paying agent. (Section 5.9)
Registrar and Transfer Agent
Unless otherwise specified in the applicable prospectus supplement, Bank One
Trust Company, N.A. will act as registrar and transfer agent for the preferred
securities.
Registration of transfers and exchanges of preferred securities will be
effected without charge by or on behalf of each ACE Trust, but upon payment of
any tax or other governmental charges that may be imposed in connection with
any transfer or exchange. The ACE Trusts will not be required to register or
cause to be registered the transfer of their preferred securities after such
preferred securities have been called for redemption. (Section 5.4)
Information Concerning the Property Trustee
The Property Trustee undertakes to perform only those duties specifically
set forth in each restated trust agreement, provided that it must exercise the
same degree of care as a prudent person would exercise 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 applicable
restated trust agreement at the request of any holder of preferred securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby. If in performing its duties under
the restated trust agreement, the Property Trustee is required to decide
between alternative causes of action, construe ambiguous provisions in the
applicable restated trust agreement or is unsure of the application of any
provision of the applicable restated trust agreement, and the matter is not one
on which holders of preferred securities are entitled under such restated trust
agreement to vote, then the Property Trustee shall take such action as is
directed by ACE INA. If it is not so directed, the Property Trustee 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. (Sections 8.1 and 8.3)
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Administrative Trustees
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the ACE Trusts in such a way that no ACE Trust will
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 corresponding ACE
INA subordinated debt securities will be treated as indebtedness of ACE INA for
United States Federal income tax purposes. In this connection, ACE INA and the
Administrative Trustees are authorized to take any action not inconsistent with
applicable law, the certificate of trust of each ACE Trust or each restated
trust agreement, that ACE INA and the Administrative Trustees 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 related preferred securities.
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DESCRIPTION OF PREFERRED SECURITIES GUARANTEES
Concurrently with the issuance by each ACE Trust of its preferred
securities, ACE will execute and deliver a preferred securities guarantee for
the benefit of the holders from time to time of such preferred securities. The
Bank One Trust Company, N.A. will act as indenture trustee, referred to as the
Guarantee Trustee, under each preferred securities guarantee for the purposes
of compliance with the Trust Indenture Act, and each preferred securities
guarantee will be qualified as an indenture under the Trust Indenture Act.
Because the following summary of certain provisions of the preferred securities
guarantees is not complete, you should refer to the form of preferred
securities guarantee and the Trust Indenture Act for more complete information
regarding the provisions of each preferred securities guarantee, including the
definitions of some of the terms used below. The form of the preferred
securities guarantee has been filed as an exhibit to the registration statement
of which this prospectus forms a part. Reference in this summary to preferred
securities means that ACE Trust's preferred securities to which a preferred
securities guarantee relates. The Guarantee Trustee will hold each preferred
securities guarantee for the benefit of the holders of the related ACE Trust's
preferred securities.
General
ACE will irrevocably agree to pay in full on a subordinated basis, to the
extent described herein, the Guarantee Payments (as defined below) (without
duplication of amounts theretofore paid by or on behalf of the ACE Trust) to
the holders of the preferred securities, as and when due, regardless of any
defense, right of setoff or counterclaim that such ACE Trust may have or assert
other than the defense of payment. The following payments with respect to the
preferred securities, to the extent not paid by or on behalf of the related ACE
Trust, referred to as the Guarantee Payments, will be subject to the preferred
securities guarantee:
1. any accrued and unpaid distributions required to be paid on such
preferred securities, to the extent that the ACE Trust has funds on hand
available for payment at such time,
2. the redemption price, including all accrued and unpaid distributions
to the redemption date, with respect to any preferred securities called for
redemption, to the extent that the ACE Trust has funds on hand available for
payment at such time, and
3. upon a voluntary or involuntary dissolution, winding up or
liquidation of the ACE Trust (unless the corresponding ACE INA subordinated
debt securities are distributed to holders of such preferred securities),
the lesser of (a) the Liquidation Distribution, to the extent such ACE Trust
has funds available for payment at such time and (b) the amount of assets of
such ACE Trust remaining available for distribution to holders of preferred
securities.
ACE's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by ACE to the holders of the applicable
preferred securities or by causing the ACE Trust to pay such amounts to such
holders. (Section 5.1)
Each preferred securities guarantee will be an irrevocable guarantee on a
subordinated basis of the related ACE Trust's payment obligations under the
preferred securities, but will apply only to the extent that such related ACE
Trust has funds sufficient to make such payments. Each preferred securities
guarantee is, to that extent, a guarantee of payment and not a guarantee of
collection. See "--Status of the Preferred Securities Guarantees."
If ACE INA or ACE does not make interest payments on the corresponding ACE
INA subordinated debt securities held by an ACE Trust, the ACE Trust will not
be able to pay distributions on the preferred securities and will not have
funds legally available for payment. Each preferred securities guarantee will
rank subordinate and junior in right of payment to all Senior Indebtedness of
ACE, including all ACE debt securities and ACE's obligations as guarantor under
the ACE INA subordinated indenture, as described below under "--Status of the
Preferred Securities Guarantees" and in the related prospectus supplement.
Because ACE is a holding company, its rights and the rights of its creditors,
including the holders of preferred securities who are creditors of ACE by
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virtue of a preferred securities guarantee, and shareholders, to participate in
any distribution of assets of any subsidiary upon such subsidiary's liquidation
or reorganization or otherwise would be subject to the prior claims of the
subsidiary's creditors, except to the extent that ACE may itself be a creditor
with recognized claims against the subsidiary. The right of creditors of ACE
(including the holders of preferred securities who are creditors of ACE by
virtue of a preferred securities guarantee) to participate in the distribution
of stock owned by ACE in certain of its subsidiaries, including ACE's insurance
subsidiaries, may also be subject to approval by certain insurance regulatory
authorities having jurisdiction over such subsidiaries. Except as otherwise
provided in the applicable prospectus supplement, the preferred securities
guarantees do not limit the ability of ACE or ACE INA to incur or issue other
secured or unsecured debt, whether under an indenture or otherwise.
ACE's obligations described herein and in any accompanying prospectus
supplement, through the applicable preferred securities guarantee, the ACE INA
subordinated indenture (including the ACE guarantee of the ACE INA subordinated
debt securities) and any supplemental indentures thereto and the expense
agreement described below, taken together, constitute a full, irrevocable and
unconditional guarantee by ACE of payments due on the preferred 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 ACE Trust's obligations under
the preferred securities. See "The ACE Trusts," "Description of Preferred
Securities," and "Description of ACE INA Debt Securities and ACE Guarantee."
ACE will also agree to guarantee the obligations of each ACE Trust with
respect to the common securities issued by the ACE Trust to the same extent as
under the preferred securities guarantee, except that if an Event of Default
under the ACE INA subordinated indenture has occurred and is continuing, the
holders of preferred securities under the preferred securities guarantee will
have priority over the holders of the common securities under the common
securities guarantee with respect to distributions and payments on liquidation,
redemption or otherwise.
Status of the Preferred Securities Guarantees
Each preferred securities guarantee will constitute an unsecured obligation
of ACE and will rank subordinate and junior in right of payment to all Senior
Indebtedness of ACE (including all ACE debt securities and ACE's obligations as
guarantor under the ACE INA subordinate indenture). (Section 6.2) For purposes
of any preferred securities guarantee, "Senior Indebtedness" means all
Indebtedness of ACE (including its obligations as guarantor under the ACE INA
subordinated indenture) outstanding at any time, except (a) the Indebtedness
under the preferred securities guarantee, (b) Indebtedness as to which, by the
terms of the instrument creating or evidencing the same, it is provided that
such Indebtedness is subordinated to or ranks equally with the preferred
securities guarantee or to other Indebtedness of ACE which is subordinated to
or ranks equally with the preferred securities guarantee, (c) Indebtedness of
ACE to an affiliate of ACE, (d) interest accruing after the filing of a
petition initiating any bankruptcy, insolvency or other similar proceeding
unless such interest is an allowed claim enforceable against ACE in a
proceeding under federal or state bankruptcy laws, (e) trade accounts payable
and (f) similar preferred securities guarantees issued by ACE on behalf of
holders of preferred securities of any other ACE Trust or any trust,
partnership or other entity affiliated with ACE which is a financing vehicle of
ACE or any affiliate of ACE in connection with the issuance by such entity of
preferred securities or other similar securities that are guaranteed by ACE
pursuant to an instrument that ranks equally with or junior in right of payment
to the preferred securities guarantee. "Indebtedness" has the same meaning
given to that term under the ACE indentures. (Section 1.1).
Each preferred securities guarantee will rank equally with all other similar
preferred securities guarantees issued by ACE on behalf of holders of preferred
securities of any other ACE Trust or any trust, partnership or other entity
affiliated with ACE which is a financing vehicle of ACE or any affiliate of ACE
in connection with the issuance by such entity of preferred securities or other
similar securities that are guaranteed by ACE pursuant to an instrument that
ranks equally with or junior in right of payment to the preferred securities
guarantee.
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(Section 6.3). Each preferred securities guarantee will constitute a guarantee
of payment and not of collection. This means that the guaranteed party may, to
the extent permitted by law, institute a legal proceeding directly against ACE
to enforce its rights under the preferred securities guarantee without first
instituting a legal proceeding against any other person or entity (including
the applicable ACE Trust) (Section 5.4). Each preferred securities guarantee
will not be discharged except by payment of the Guarantee Payments in full to
the extent not paid by the ACE Trust or upon distribution to the holders of the
preferred securities of the corresponding ACE INA subordinated debt securities.
None of the preferred securities guarantees places a limitation on the amount
of additional Indebtedness that may be incurred by ACE or ACE INA. ACE expects
from time to time to incur additional Indebtedness that will rank senior to the
preferred securities guarantees.
Payment of Additional Amounts
ACE will make all Guarantee Payments pursuant to the preferred securities
guarantee without withholding or deduction at source for, or on account of, any
present or future taxes, fees, duties, assessments or governmental charges of
whatever nature imposed or levied by or on behalf of the Cayman Islands or
Bermuda, each, referred to as a taxing jurisdiction, or any political
subdivision or taxing authority thereof or therein, unless such taxes, fees,
duties, assessments or governmental charges are required to be withheld or
deducted by (x) the laws (or any regulations or rulings promulgated thereunder)
of a taxing jurisdiction or any political subdivision or taxing authority
thereof or therein or (y) an official position regarding the application,
administration, interpretation or enforcement of any such laws, regulations or
rulings, including, without limitation, a holding by a court of competent
jurisdiction or by a taxing authority in a taxing jurisdiction or any political
subdivision thereof. If a withholding or deduction at source is required, ACE
will, subject to certain limitations and exceptions described below, pay to the
holder of any related preferred securities such additional amounts as may be
necessary so that every Guarantee Payment pursuant to the preferred securities
guarantee made to such holder, after such withholding or deduction, will not be
less than the amount provided for in such preferred securities guarantee to be
then due and payable.
ACE will not be required to pay any additional amounts for or on account of:
1. any tax, fee, duty, assessment or governmental charge of whatever
nature which would not have been imposed but for the fact that such holder
(a) was a resident, domiciliary or national of, or engaged in business or
maintained a permanent establishment or was physically present in, the
relevant taxing jurisdiction or any political subdivision thereof or
otherwise had some connection with the relevant taxing jurisdiction other
than by reason of the mere ownership of preferred securities, or receipt of
payment under such preferred securities, (b) presented such preferred
security for payment in the relevant taxing jurisdiction or any political
subdivision thereof, unless such preferred security could not have been
presented for payment elsewhere, or (c) presented such preferred security
for payment more than 30 days after the date on which the payment in respect
of such preferred security first became due and payable or provided for,
whichever is later, except to the extent that the holder would have been
entitled to such additional amounts if it had presented such preferred
security for payment on any day within that 30-day period;
2. any estate, inheritance, gift, sale, transfer, personal property or
similar tax, assessment or other governmental charge;
3. any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure by the holder or the beneficial owner of
such preferred security to comply with any reasonable request by ACE or the
applicable ACE Trust addressed to the holder within 90 days of such request
(a) to provide information concerning the nationality, residence or identity
of the holder or such beneficial owner or (b) to make any declaration or
other similar claim or satisfy any information or reporting requirement,
which in either case is required or imposed by statute, treaty, regulation
or administrative practice of the relevant taxing jurisdiction or any
political subdivision thereof as a precondition to exemption from all or
part of such tax, assessment or other governmental charge; or
4. any combination of items (1), (2) and (3).
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In addition, ACE will not pay any additional amounts with respect to any
Guarantee Payment to any holder who is a fiduciary or partnership or other than
the sole beneficial owner of the related preferred security to the extent such
payment would be required by the laws of the relevant taxing jurisdiction (or
any political subdivision or relevant taxing authority thereof or therein) to
be included in the income for tax purposes of a beneficiary or partner or
settlor with respect to such fiduciary or a member of such partnership or a
beneficial owner who would not have been entitled to such additional amounts
had it been the holder of such preferred security. (Section 5.8)
Amendments and Assignment
Except with respect to any changes which do not materially adversely affect
the rights of holders of the related preferred securities (in which case no
consent will be required), no preferred securities guarantee may be amended
without the prior approval of the holders of not less than a majority of the
aggregate liquidation amount of such outstanding preferred securities. (Section
8.2). All guarantees and agreements contained in each preferred securities
guarantee shall bind the successors, assigns, receivers, trustees and
representatives of ACE and shall inure to the benefit of the holders of the
related preferred securities then outstanding. (Section 8.1) Except in
connection with a consolidation, amalgamation or merger or conveyance, transfer
or lease involving ACE that is permitted under the ACE INA subordinated
indenture and under which the person formed by such consolidation or
amalgamation or into which ACE is merged or which acquires or leases the
properties and assets of ACE agrees in writing to perform ACE's obligations
under the preferred securities guarantee, ACE may not assign its obligations
thereunder.
Events of Default
An event of default under each preferred securities guarantee will occur
upon the failure of ACE to perform any of its payment or other obligations
thereunder. The holders of not less than a majority in aggregate liquidation
amount of the related preferred securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of such preferred securities guarantee or to
direct the exercise of any trust or power conferred upon the Guarantee Trustee
under such preferred securities guarantee. (Section 5.4)
Any holder of the preferred securities may institute a legal proceeding
directly against ACE to enforce its rights under such preferred securities
guarantee without first instituting a legal proceeding against the ACE Trust,
the Guarantee Trustee or any other person or entity. (Section 5.4)
ACE, as guarantor, is required to file annually with the Guarantee Trustee a
certificate as to whether or not ACE is in compliance with all the conditions
and covenants applicable to it under the preferred securities guarantee.
(Section 2.4)
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance of a
default by ACE in performance of any preferred securities guarantee, undertakes
to perform only such duties as are specifically set forth in each preferred
securities guarantee and, after default with respect to any preferred
securities guarantee, 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.
(Section 3.1). Subject to this provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by any preferred
securities guarantee at the request of any holder of any preferred securities
unless it is offered reasonable indemnity against the costs, expenses, and
liabilities that might be incurred thereby. (Section 3.2)
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Termination of the Preferred Securities Guarantees
Each preferred securities guarantee will terminate and be of no further
force and effect upon (1) full payment of the redemption price of the related
preferred securities, (2) the distribution of the corresponding ACE INA
subordinated debt securities to the holders of the related preferred securities
or (3) upon full payment of the amounts payable upon liquidation of the related
ACE Trust. Each preferred securities guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of the
related preferred securities must restore payment of any sums paid with respect
to such preferred securities or such preferred securities guarantee. (Section
7.1)
New York Law to Govern
Each preferred securities guarantee will be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and performed in that state. (Section 8.5)
The Expense Agreement
Pursuant to the expense agreement entered into by ACE under the restated
trust agreement, ACE will irrevocably and unconditionally guarantee to each
person or entity to whom an ACE Trust becomes indebted or liable, the full
payment of any costs, expenses or liabilities of the ACE Trust, other than
obligations of the ACE Trust to pay to the holders of the preferred securities
or other similar interests in the ACE Trust of the amounts due such holders
pursuant to the terms of the preferred securities or such other similar
interests, as the case may be.
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DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
ACE may issue stock purchase contracts, representing contracts obligating
holders to purchase from ACE, and obligating ACE to sell to the holders, a
specified number of ordinary shares at a future date or dates. The price per
ordinary share may be fixed at the time the stock purchase contracts are issued
or may be determined by reference to a specific formula set forth in the stock
purchase contracts. The stock purchase contracts may be issued separately or as
a part of stock purchase units consisting of a stock purchase contract and, as
security for the holder's obligations to purchase the ordinary shares under the
stock purchase contracts, either (1) senior debt securities or subordinated
debt securities of ACE INA, fully and unconditionally guaranteed by ACE, (2)
debt obligations of third parties, including U.S. Treasury securities or (3)
preferred securities of an ACE Trust. The stock purchase contracts may require
us to make periodic payments to the holders of the stock purchase units or vice
versa, and such payments may be unsecured or prefunded on some basis. The stock
purchase contracts may require holders to secure their obligations in a
specified manner and in certain circumstances we may deliver newly issued
prepaid stock purchase contracts upon release to a holder of any collateral
securing such holder's obligations under the original stock purchase contract.
The applicable prospectus supplement will describe the terms of any stock
purchase contracts or stock purchase units and, if applicable, prepaid stock
purchase contracts. The description in the prospectus supplement will not
purport to be complete and will be qualified in its entirety by reference to
(1) the stock purchase contracts, (2) the collateral arrangements and
depositary arrangements, if applicable, relating to such stock purchase
contracts or stock purchase units and (3) if applicable, the prepaid stock
purchase contracts and the document pursuant to which such prepaid stock
purchase contracts will be issued.
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PLAN OF DISTRIBUTION
ACE, ACE INA and/or any ACE Trust may sell offered securities in any one or
more of the following ways from time to time: (1) through agents; (2) to or
through underwriters; (3) through dealers; or (4) directly to purchasers. The
prospectus supplement with respect to the offered securities will set forth the
terms of the offering of the offered securities, including the name or names of
any underwriters, dealers or agents; the purchase price of the offered
securities and the proceeds to ACE, ACE INA and/or an ACE Trust from such sale;
any underwriting discounts and commissions or agency fees and other items
constituting underwriters' or agents' compensation; any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
and any securities exchange on which such offered securities may be listed. Any
initial public offering price, discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
The distribution of the offered securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
Offers to purchase offered securities may be solicited by agents designated
by ACE from time to time. Any such agent involved in the offer or sale of the
offered securities in respect of which this prospectus is delivered will be
named, and any commissions payable by ACE, ACE INA and/or the applicable ACE
Trust to such agent will be set forth, in the applicable prospectus supplement.
Unless otherwise indicated in such prospectus supplement, any such agent will
be acting on a reasonable best efforts basis for the period of its appointment.
Any such agent may be deemed to be an underwriter, as that term is defined in
the Securities Act, of the offered securities so offered and sold.
If offered securities are sold by means of an underwritten offering, ACE,
ACE INA and/or the applicable ACE Trust will execute an underwriting agreement
with an underwriter or underwriters, and the names of the specific managing
underwriter or underwriters, as well as any other underwriters, and the terms
of the transaction, including commissions, discounts and any other compensation
of the underwriters and dealers, if any, will be set forth in the prospectus
supplement which will be used by the underwriters to make resales of the
offered securities. If underwriters are utilized in the sale of the offered
securities, the offered securities will be acquired by the underwriters for
their own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at fixed public offering
prices or at varying prices determined by the underwriters at the time of sale.
Offered securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by the managing
underwriters. If any underwriter or underwriters are utilized in the sale of
the offered securities, unless otherwise indicated in the prospectus
supplement, the underwriting agreement will provide that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters with respect to a sale of offered securities will be obligated to
purchase all such offered securities of a series if any are purchased.
ACE, ACE INA and/or the applicable ACE Trust may grant to the underwriters
options to purchase additional offered securities, to cover over-allotments, if
any, at the public offering price (with additional underwriting discounts or
commissions), as may be set forth in the prospectus supplement relating
thereto. If ACE, ACE INA and/or the applicable ACE Trust grants any
over-allotment option, the terms of such over-allotment option will be set
forth in the prospectus supplement relating to such offered securities.
If a dealer is utilized in the sales of offered securities in respect of
which this prospectus is delivered, ACE, ACE INA and/or the applicable ACE
Trust will sell such offered securities to the dealer as principal. The dealer
may then resell such offered securities to the public at varying prices to be
determined by such dealer at the time of resale. Any such dealer may be deemed
to be an underwriter, as such term is defined in the Securities Act, of the
offered securities so offered and sold. The name of the dealer and the terms of
the transaction will be set forth in the related prospectus supplement.
Offers to purchase offered securities may be solicited directly by ACE, ACE
INA and/or the applicable ACE Trust and the sale thereof may be made by ACE,
ACE INA and/or the applicable ACE Trust directly to
77
institutional investors or others, who may be deemed to be underwriters within
the meaning of the Securities Act with respect to any resale thereof. The terms
of any such sales will be described in the related prospectus supplement.
Offered securities may also be offered and sold, if so indicated in the
applicable prospectus supplement, in connection with a remarketing upon their
purchase, in accordance with a redemption or repayment pursuant to their terms,
or otherwise, by one or more remarketing firms, acting as principals for their
own accounts or as agents for ACE, ACE INA and/or the applicable ACE Trust. Any
remarketing firm will be identified and the terms of its agreements, if any,
with ACE, ACE INA and/or an ACE Trust and its compensation will be described in
the applicable prospectus supplement. Remarketing firms may be deemed to be
underwriters, as such term is defined in the Securities Act, in connection with
the offered securities remarketed thereby.
Agents, underwriters, dealers and remarketing firms may be entitled under
relevant agreements entered into with ACE, ACE INA and/or the applicable ACE
Trust to indemnification by ACE, ACE INA and/or the applicable ACE Trust
against some civil liabilities, including liabilities under the Securities Act
that may arise from any untrue statement or alleged untrue statement of a
material fact or any omission or alleged omission to state a material fact in
this prospectus, any supplement or amendment hereto, or in the registration
statement of which this prospectus forms a part, or to contribution with
respect to payments which the agents, underwriters or dealers may be required
to make.
If so indicated in the prospectus supplement, ACE, ACE INA and/or the
applicable ACE Trust will authorize underwriters or other persons acting as
ACE's, ACE INA's and/or the applicable ACE Trust's agents to solicit offers by
certain institutions to purchase offered securities from ACE, ACE INA and/or
the applicable ACE Trust, pursuant to contracts providing for payments and
delivery on a future date. Institutions with which such contracts may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and others, but
in all cases such institutions must be approved by ACE, ACE INA and/or the
applicable ACE Trust. The obligations of any purchaser under any such contract
will be subject to the condition that the purchase of the offered securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject. The underwriters and such
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
Each series of offered securities will be a new issue and, other than the
ordinary shares, which are listed on the NYSE, will have no established trading
market. ACE, ACE INA and/or the applicable ACE Trust may elect to list any
series of offered securities on an exchange, and in the case of the ordinary
shares, on any additional exchange, but, unless otherwise specified in the
applicable prospectus supplement, none of ACE, ACE INA or any ACE Trust shall
be obligated to do so. No assurance can be given as to the liquidity of the
trading market for any of the offered securities.
Underwriters, dealers, agents and remarketing firms may be customers of,
engage in transactions with, or perform services for, ACE and its subsidiaries
in the ordinary course of business.
LEGAL OPINIONS
Legal matters with respect to United States and New York law will be passed
upon for ACE, ACE INA and the ACE Trusts by Mayer, Brown, Rowe & Maw, Chicago,
Illinois. The validity of the preferred securities under Delaware law will be
passed upon on behalf of ACE, ACE INA and the ACE Trusts by Richards, Layton &
Finger, P.A., Wilmington, Delaware. Legal matters with respect to Cayman
Islands law will be passed upon for ACE by Maples and Calder, George Town,
Grand Cayman, Cayman Islands, British West Indies. Legal matters with respect
to Bermuda law will be passed upon for ACE by Conyers Dill & Pearman, Hamilton,
Bermuda. Legal matters will be passed upon for the underwriters, dealers or
agents, if any, by Sidley, Austin, Brown & Wood LLP, New York, New York. Mayer,
Brown, Rowe & Maw and Sidley, Austin, Brown & Wood LLP will rely on the opinion
of Maples and Calder with respect to Cayman Islands law and the opinion of
Conyers Dill & Pearman with respect to Bermuda law.
78
EXPERTS
The consolidated financial statements and financial statement schedules
incorporated in this prospectus by reference to ACE's Annual Report on Form
10-K for the year ended December 31, 2001 have been so incorporated in reliance
on the reports of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in accounting and auditing. Any audited
financial statements and schedules that are incorporated or that are deemed to
be incorporated by reference into this prospectus that are the subject of a
report by independent accountants will be so incorporated by reference in
reliance upon such reports and upon the authority of such firms as experts in
accounting and auditing to the extent covered by consents of these accountants
filed with the SEC.
ENFORCEMENT OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS
ACE is a Cayman Islands company. In addition, some of its officers and
directors, as well as some of the experts named in this prospectus, reside
outside the United States, and all or much of its assets and their assets are
or may be located in jurisdictions outside the United States. Therefore,
investors may have difficulty effecting service of process within the United
States upon those persons or recovering against ACE or them on judgments of
U.S. courts, including judgments based upon the civil liability provisions of
the U.S. Federal securities laws. However, investors may serve ACE with process
in the United States with respect to actions against it arising out of or in
connection with violations of U.S. Federal securities laws relating to offers
and sales of the securities covered by this prospectus by serving ACE INA
Holdings, its United States agent irrevocably appointed for that purpose.
ACE has been advised by Maples and Calder, its Cayman Islands counsel, that
there is doubt as to whether the courts of the Cayman Islands would enforce (i)
judgments of U.S. courts based upon the civil liability provisions of the U.S.
Federal securities laws obtained in actions against it or its directors and
officers, as well as experts named in this prospectus, who reside outside the
United States or (ii) original actions brought in the Cayman Islands against
such persons or ACE predicated solely upon U.S. Federal securities laws. ACE
has also been advised by Maples and Calder that there is no treaty in effect
between the United States and the Cayman Islands providing for such
enforcement, and there are grounds upon which Cayman Islands courts may not
enforce judgments of United States courts. Some remedies available under the
laws of United States jurisdictions, including certain remedies available under
the U.S. Federal securities laws, would not be allowed in Cayman Islands courts
as contrary to that nation's public policy.
WHERE YOU CAN FIND MORE INFORMATION
ACE
ACE files annual, quarterly and special reports, proxy statements and other
information with the SEC. ACE's SEC filings are available to the public over
the Internet at the SEC's web site at http://www.sec.gov. You may read and copy
any document ACE files in the SEC's Public Reference Room, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. You may also obtain copies of this
information by mail from the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. You may
obtain information on the operation of the SEC's Public Reference Room in
Washington, D.C. by calling the SEC at 1-800-SEC-0330. ACE's SEC filings are
also available at the office of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005. For further information on obtaining copies of ACE's
public filings at the NYSE, you should call (212) 656-5060.
The SEC also maintains an Internet web site that contains reports, proxy
statements and other information about issuers, like Everest Group and Everest
Holdings, that file electronically with the SEC. The address of that site is
http://www.sec.gov. The SEC file number for documents filed by ACE Limited
under the Exchange Act is 1-11778.
79
Incorporation by Reference
ACE is allowed to "incorporate by reference" the information it files with
the SEC, which means that ACE can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that ACE files
subsequently with the SEC will automatically update and supersede the
information included and/or incorporated by reference in this prospectus. ACE
incorporates by reference the documents listed below and any future filings
made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, after the initial filing of the registration
statement that contains this prospectus and prior to the time that ACE, ACE INA
and the ACE Trusts sell all of the securities offered by this prospectus:
. ACE's Annual Report on Form 10-K for the fiscal year ended December 31,
2001; and
. ACE's Current Reports on Form 8-K filed January 9, 2002 and March 22,
2002.
You may request a copy of these filings (other than exhibits, unless that
exhibit is specifically incorporated by reference into that filing) at no cost,
by writing or telephoning ACE at the following address:
Investor Relations
ACE Limited
ACE Global Headquarters
17 Woodbourne Avenue
Hamilton, HM 08, Bermuda
Telephone: (441) 299-9283
ACE INA
ACE INA has no direct operations. ACE INA is directly and indirectly wholly
owned by ACE. The obligations of ACE INA under its debt securities will be
fully and unconditionally guaranteed by ACE. See "Description of ACE INA Debt
Securities and ACE Guarantee." ACE INA is not currently subject to the
information reporting requirements under the Exchange Act. ACE INA will become
subject to the reporting requirements upon the effectiveness of the
registration statement that contains this prospectus, although ACE INA intends
to seek and expects to receive an exemption from those requirements. So long as
any guaranteed debt securities of ACE INA are outstanding, ACE will include in
the footnotes to its audited consolidated financial statements summarized
consolidated financial information concerning ACE INA.
The ACE Trusts
There are no separate financial statements of the ACE Trusts in this
prospectus. ACE does not believe the financial statements would be helpful to
the holders of the preferred securities of the ACE Trusts because:
. ACE, a reporting company under the Exchange Act, will directly or
indirectly own all of the voting securities of each ACE Trust;
. Neither of the ACE Trusts has any independent operations or proposes to
engage in any activity other than issuing securities representing
undivided beneficial interests in the assets of the ACE Trust and
investing the proceeds in subordinated debt securities issued by ACE INA
and fully and unconditionally guaranteed by ACE; and
. The obligations of each ACE Trust under the preferred securities will be
fully and unconditionally guaranteed by ACE. See "Description of ACE INA
Debt Securities and ACE Guarantee" and "Description of Preferred
Securities Guarantees."
Neither of the ACE Trusts is currently subject to the information reporting
requirements of the Exchange Act. Each ACE Trust will become subject to the
requirements upon the effectiveness of the registration statement that contains
this prospectus, although each ACE Trust intends to seek and expects to receive
an exemption from those requirements. If the ACE Trusts did not receive such an
exemption, the expenses of operating the ACE Trusts would increase, as would
the likelihood that ACE would exercise its option to dissolve and liquidate the
ACE Trusts early.
80
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities registered hereby, other than
underwriting discounts and commissions:
Securities and Exchange Commission registration fee $ 138,000
Trustee's fees and expenses........................ 15,000
Printing and engraving expenses.................... 150,000
Rating agency fees................................. 412,500
Accounting fees and expenses....................... 150,000
Legal fees and expenses............................ 250,000
Blue Sky fees and expenses......................... 10,000
Miscellaneous...................................... 124,500
----------
Total........................................... $1,250,000
==========
Item 15. Indemnification of Officers and Directors.
ACE
Section 100 of ACE's Articles of Association, filed as Exhibit 4.2 to its
registration statement (File No. 333-78841), contains provisions with respect
to indemnification of ACE's officers and directors. This provision provides
that ACE shall indemnify, in accordance with and to the full extent now or
hereafter permitted by law, any person who was or is a party or is 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 ACE), by reason
of his acting as a director, officer, employee or agent of, or his acting in
any other capacity for or on behalf of, ACE against any liability or expense
actually and reasonably incurred by such person in respect thereof. ACE may
also advance the expenses of defending any such act, suit or proceeding in
accordance with and to the full extent now or hereafter permitted by law. This
indemnification and advancement of expenses are not exclusive of any other
right to indemnification or advancement of expenses provided by law or
otherwise.
The Companies Law (Revised) of the Cayman Islands does not set out any
specific restrictions on the ability of a company to indemnify officers or
directors. However, the application of basic principles and certain
Commonwealth case law which is likely to be persuasive in the Cayman Islands
would indicate that indemnification is generally permissible except in the
event that there had been fraud or willful default on the part of the officer
or director or reckless disregard of his duties and obligations to the company.
Directors and officers of ACE are also provided with indemnification against
certain liabilities pursuant to a directors and officers liability insurance
policy. Coverage is afforded for any loss that the insureds become legally
obligated to pay by reason of any claim or claims first made against the
insureds or any of them during the policy period from any wrongful acts that
are actually or allegedly caused, committed or attempted by the insureds prior
to the end of the policy period. Wrongful acts are defined as any actual or
alleged error, misstatement, misleading statement or act, omission, neglect or
breach of duty by the insureds while acting in their individual or collective
capacities as directors or officers of ACE, or any other matter claimed against
them by reason of their being directors or officers of ACE. Certain of ACE's
directors are provided by their employer with indemnification against certain
liabilities incurred as directors of ACE.
II-1
Reference is made to the forms of Underwriting Agreement filed as Exhibits
1.1 though 1.5 of ACE's registration statement (File No. 333-78841). The
Underwriting Agreements provide, among other things, that the underwriters are
obligated, under some circumstances, to indemnify directors, specified officers
and controlling persons of ACE against specified liabilities, including
liabilities under the Securities Act of 1933, as amended.
ACE INA
Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts of omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for payments of unlawful dividends or unlawful stock repurchases or
redemptions or (iv) for any transaction from which the director derived an
improper personal benefit. ACE INA's Certificate of Incorporation contains such
a provision.
Under Article VI of ACE INA's By-laws as currently in effect, as well as
under Section 10 of ACE INA's Certificate of Incorporation, each person who is
or was a director or officer of ACE INA, or who serves or served any other
enterprise or organization at the request of ACE INA, shall be indemnified by
ACE INA to the full extent permitted by the Delaware General Corporation Law.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any person who, by reason of the fact that the person
is or was a director, officer, employee or agent of the corporation, is made
(or threatened to be made) a party to an action other than one brought by or on
behalf of the corporation, against reasonable expenses (including attorneys'
fees), judgments, fines and settlement payments, if the person acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of such corporation and, with respect to any criminal actions,
also had no reasonable cause to believe his conduct was unlawful. In the case
of actions on behalf of the corporation, indemnification may extend only to
reasonable expenses (including attorneys' fees) and only if such person acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, provided that no such indemnification is
permitted in respect of any claim as to which such person is adjudged liable to
the corporation for negligence or misconduct in the performance of his duty to
the corporation unless and only to the extent that a court otherwise provides.
To the extent that a person has been successful in defending any action (even
one on behalf of the corporation), he is entitled to indemnification for
reasonable expenses (including attorneys' fees).
The indemnification provided for by the Delaware General Corporation Law is
not exclusive of any other rights of indemnification, and a corporation may
maintain insurance against liabilities for which indemnification is not
expressly provided by the Delaware General Corporation Law. ACE INA maintains a
liability insurance policy providing coverage for its directors and officers.
Item 16. Exhibits and Financial Statement Schedules.
See Exhibit Index included herewith which is incorporated herein by
reference.
Item 17. Undertakings.
The undersigned registrants hereby undertake:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
II-2
(if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrants pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(b) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment 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.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
ACE's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrants hereby undertake that:
(a) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrants pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective; and
(b) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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 provisions set forth or described in Item 15 of
this registration statement, or otherwise, the registrants have been informed
that in the opinion of the 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 a registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrants will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by them is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ACE Limited
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Hamilton, Bermuda, on the 15th day of May, 2002.
ACE LIMITED
By: /S/ PHILIP V. BANCROFT
-----------------------------
Name: Philip V. Bancroft
Title: Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 15th day of May, 2002.
Signature Title
--------- -----------------------------
/S/ BRIAN DUPERREAULT Chairman and Chief Executive
- ----------------------------- Officer; Director
Brian Duperreault
/S/ PHILIP V. BANCROFT Chief Financial Officer
- ----------------------------- (Principal Financial
Philip V. Bancroft Officer)
/S/ ROBERT A. BLEE Chief Accounting Officer
- ----------------------------- (Principal Accounting
Robert A. Blee Officer)
* Vice Chairman; Director
- -----------------------------
Donald Kramer
* President and Chief Operating
- ----------------------------- Officer; Director
Dominic J. Frederico
* Director
- -----------------------------
Michael G. Atieh
* Director
- -----------------------------
Bruce L. Crockett
- ----------------------------- Director
Robert G. Mendoza
* Director
- -----------------------------
Robert M. Hernandez
Signature Title
--------- -----------------------------
* Director
- -----------------------------
Peter Menikoff
* Director
- -----------------------------
Thomas J. Neff
* Director
- -----------------------------
John A. Krol
* Director
- -----------------------------
Robert Ripp
* Director
- -----------------------------
Walter A. Scott
* Director
- -----------------------------
Dermot F. Smurfit
* Director
- -----------------------------
Robert W. Staley
* Director
- -----------------------------
Gary M. Stuart
* Director
- -----------------------------
Sidney F. Wentz
BY: /S/ PETER N. MEAR
- -----------------------------
Attorney-in-Fact
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the undersigned as the duly
authorized representative of ACE Limited in the United States.
/S/ BRIAN DUPERREAULT
--------------------------------------
Brian Duperreault
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ACE INA Holdings
Inc. certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Hamilton, Bermuda, on the 15th day of May, 2002.
ACE INA HOLDINGS INC.
By: /S/ ROBERT B. JEFFERSON
-----------------------------
Robert B. Jefferson
Treasurer and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 15th day of May, 2002.
Signature Title
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/S/ BRIAN DUPERREAULT Director
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Brian Duperreault
/S/ DOMINIC J. FREDERICO
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Dominic J. Frederico Chairman and Director
/S/ PHILIP V. BANCROFT
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Philip V. Bancroft Director
/S/ SUSAN RIVERA
- ----------------------------- President and Director
Susan Rivera (Principal Executive Officer)
Treasurer and Chief Financial
/S/ ROBERT B. JEFFERSON Officer
- ----------------------------- (Principal Financial and
Robert B. Jefferson Accounting Officer)
/S/ DONALD KRAMER
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Donald Kramer Director
/S/ TIMOTHY A. BOROUGHS
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Timothy A. Boroughs Director
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ACE Capital
Trust III certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Hamilton, Bermuda, on the 15th day of May, 2002.
ACE CAPITAL TRUST III
By: ACE INA Holdings Inc., as
Depositor
By: /S/ ROBERT B. JEFFERSON
-----------------------------
Treasurer and Chief Financial
Officer
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ACE Capital
Trust IV certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Hamilton, Bermuda, on the 15th day of May, 2002.
ACE CAPITAL TRUST IV
BY: ACE INA Holdings Inc., as
Depositor
By: /S/ ROBERT B. JEFFERSON
-----------------------------
Treasurer and Chief Financial
Officer
EXHIBIT INDEX
* 1.1 Form of Underwriting Agreement relating to ordinary shares, preferred shares, depositary shares,
debt securities and warrants of ACE Limited.
1.2 Form of Underwriting Agreement relating to debt securities of ACE INA Holdings Inc., fully and
unconditionally guaranteed by ACE Limited (incorporated by reference to Exhibit 1.2 to
Amendment No. 2 to Registration Statement on Form S-3 (No. 333-78841) filed August 12, 1999).
* 1.3 Form of Underwriting Agreement relating to preferred securities issued of ACE Capital Trust III and
ACE Capital Trust IV and preferred securities guarantees of ACE Limited.
* 1.4 Form of Underwriting Agreement relating to stock purchase contracts of ACE Limited.
* 1.5 Form of Underwriting Agreement relating to stock purchase units of ACE Limited.
4.1 Memorandum of Association of ACE Limited (incorporated by reference to Exhibit 3.1 to the
Registration Statement on Form S-1 of ACE Limited (No. 33-57206)).
4.2 Articles of Association of the ACE Limited (incorporated by reference to Exhibit 3.1 to the
Registration Statement on Form S-1 of ACE Limited (No. 33-57206)).
4.3 Special Resolutions adopted January 22, 2002 increasing the number of authorized Ordinary Shares
and Other Shares (incorporated by reference to Exhibit 3.3 to Form 10-K of ACE Limited for the
year ended December 31, 2001).
4.4 Senior Indenture between ACE Limited and Bank One Trust Company, N.A., as trustee, dated March
15, 2002, (incorporated by reference to Exhibit 4.1 to Form 8-K filed March 19, 2002).
4.5 Form of Subordinated Indenture between ACE Limited and Bank One Trust Company, N.A.
(formerly, The First National Bank of Chicago), as trustee (incorporated by reference to Exhibit
4.4 to Amendment No. 2 to Registration Statement on Form S-3 (No. 333-78841) filed August 12,
1999).
4.6 Form of Senior Indenture between ACE INA Holdings Inc., ACE Limited and Bank One Trust
Company, N.A., as trustee, dated August 1, 1999 (incorporated by reference to Exhibit 4.5 to
Amendment No. 2 to Registration Statement on Form S-3 (No. 333-78841) filed August 12, 1999).
4.7 Form of Subordinated Indenture between ACE INA Holdings, Inc., ACE Limited and Bank One
Trust Company, N.A. (formerly, The First National Bank of Chicago), as trustee (incorporated by
reference to Exhibit 4.6 to Amendment No. 2 to Registration Statement on Form S-3 (No. 333-
78841) filed August 12, 1999).
(Yen)4.8 Form of Standard Stock Warrant Provisions.
(Yen)4.9 Form of Standard Debt Warrant Provisions.
4.10 Certificate of Trust of ACE Capital Trust III (incorporated by reference to Exhibit 4.11 to
Amendment No. 2 to Registration Statement on Form S-3 (No. 333-78841) filed August 12, 1999).
* *4.11 Certificate of Trust of ACE Capital Trust IV.
4.12 Trust Agreement of ACE Capital Trust III (incorporated by reference to Exhibit 4.14 to Amendment
No. 2 to Registration Statement on Form S-3 (No. 333-78841) filed August 12, 1999).
* *4.13 Assignment and Assumption Agreement and First Amendment to the Trust Agreement of ACE
Capital Trust III.
* *4.14 Amendment No. 2 to the Trust Agreement of ACE Capital Trust III.
**4.15 Trust Agreement of ACE Capital Trust IV.
4.16 Form of Amended and Restated Trust Agreement of ACE Capital Trust III (incorporated by reference
to Exhibit 4.17 to Amendment No. 2 to Registration Statement on Form S-3 (No. 333-78841) filed
August 12, 1999).
**4.17 Form of Amended and Restated Trust Agreement of ACE Capital Trust IV.
4.18 Form of Preferred Securities Guarantee Agreement with respect to the preferred securities issued by
ACE Capital Trust III (incorporated by reference to Exhibit 4.20 to Amendment No. 2 to
Registration Statement on Form S-3 (No. 333-78841) filed August 12, 1999).
**4.19 Form of Preferred Securities Guarantee Agreement with respect to the preferred securities issued by
ACE Capital Trust IV.
* 5.1 Opinion of Maples and Calder as to the legality of the ordinary shares and preferred shares.
* 5.2 Opinion of Mayer, Brown, Rowe & Maw as to the legality of the debt securities, stock warrants, debt
warrants, depositary shares, preferred securities, preferred securities guarantees, stock purchase
contracts and stock purchase units.
5.3A Opinion of Richards, Layton & Finger, P.A. relating to ACE Capital Trust III (incorporated by
reference to Exhibit 5.3C to Amendment No. 2 to Registration Statement on Form S-3 (No. 333-
78841) filed August 12, 1999).
* 5.3B Opinion of Richards, Layton & Finger, P.A. relating to ACE Capital Trust IV.
* 12.1 Statement regarding the computation of ratio of combined fixed charges and preference dividends to
earnings.
* 23.1 Consent of Maples and Calder (included in Exhibit 5.1).
* 23.2 Consent of Mayer, Brown, Rowe & Maw (included in Exhibit 5.2).
23.3 Consent of Richards, Layton & Finger, P.A. (incorporated by reference to Exhibit 23.4 to
Amendment No. 2 to Registration Statement on Form S-3 (No. 333-78841) filed August 12, 1999).
**23.4 Consent of PricewaterhouseCoopers LLP.
**24.1 Powers of Attorney.
**25.1 Statement of Eligibility of Bank One Trust Company, N.A.) on Form T-1, as trustee for the ACE
Limited Debt Securities and as preferred securities guarantee trustee under the Preferred Securities
Guarantee Agreement of ACE Limited for the benefit of the holders of Preferred Securities of
ACE Capital Trust III and ACE Capital Trust IV
**25.2 Statement of Eligibility of Bank One Trust Company, N.A. on Form T-1, as trustee for the ACE INA
Debt Securities.
**25.3 Statement of Eligibility of Bank One Trust Company, N.A. on Form T-1, as property trustee for the
Preferred Securities of ACE Capital Trust III.
**25.4 Statement of Eligibility of Bank One Trust Company, N.A. on Form T-1, as property trustee for the
Preferred Securities of ACE Capital Trust IV.
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* To be filed by amendment.
** Filed herewith.
(Yen) To be filed, if necessary, subsequent to the effectiveness of this
registration statement by an amendment to this registration statement or
incorporated by reference pursuant to a Current Report on Form 8-K in
connection with an offering of securities.