Exhibit 10.37
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ACE US HOLDINGS, INC.
Credit Sensitive Senior Notes due 2008
__________
INDENTURE
Dated as of October 27, 1998
__________
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
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TABLE OF CONTENTS
PAGE
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ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE 1
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SECTION 1.01. Definitions.....................................................................................1
SECTION 1.02. Other Definitions..............................................................................21
SECTION 1.03. Trust Indenture Act............................................................................21
SECTION 1.04. Rules of Construction..........................................................................21
ARTICLE 2 THE SECURITIES 22
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SECTION 2.01. Form and Dating................................................................................22
SECTION 2.02. Execution and Authentication...................................................................22
SECTION 2.03. Registrar and Paying Agent.....................................................................23
SECTION 2.04. Paying Agent To Hold Money in Trust............................................................23
SECTION 2.05. Securityholder Lists...........................................................................24
SECTION 2.06. Transfer and Exchange..........................................................................24
SECTION 2.07. Replacement Securities.........................................................................25
SECTION 2.08. Outstanding Securities.........................................................................25
SECTION 2.09. Temporary Securities...........................................................................25
SECTION 2.10. Cancellation...................................................................................26
SECTION 2.11. Defaulted Interest.............................................................................26
SECTION 2.12. CUSIP Numbers..................................................................................26
ARTICLE 3 REDEMPTION 26
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SECTION 3.01. Notices to Trustee.............................................................................26
SECTION 3.02. Selection of Securities To Be Redeemed.........................................................27
SECTION 3.03. Notice of Redemption...........................................................................27
SECTION 3.04. Effect of Notice of Redemption.................................................................28
SECTION 3.05. Deposit of Redemption Price....................................................................28
SECTION 3.06. Securities Redeemed in Part....................................................................28
ARTICLE 4 COVENANTS 28
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SECTION 4.01. Payment of Securities..........................................................................28
SECTION 4.02. Certain Reports and Certificates...............................................................28
SECTION 4.03. Limitation on Indebtedness.....................................................................30
SECTION 4.04. Limitation on Restricted Payments..............................................................32
SECTION 4.05. Limitation on Restrictions on Distributions from Restricted Subsidiaries.......................34
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.............................................35
SECTION 4.07. Limitation on Transactions with Affiliates.....................................................38
SECTION 4.08. Change of Control..............................................................................39
SECTION 4.09. Compliance Certificate.........................................................................40
SECTION 4.10. Further Instruments and Acts...................................................................40
SECTION 4.11. Future Subsidiary Guarantors...................................................................40
SECTION 4.12. Limitation on Lines of Business................................................................41
SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock or Restricted Subsidiaries.................41
SECTION 4.14. Limitation on Liens............................................................................41
SECTION 4.15. USE OF PROCEEDS................................................................................41
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SECTION 4.16. FINANCIAL STRENGTH RATING......................................................................41
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SECTION 4.17. MAINTENANCE OF SUBORDINATED LOAN AGREEMENT.....................................................41
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ARTICLE 5 SUCCESSOR COMPANY, ETC. 42
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SECTION 5.01. When Company AND SUBSIDIARY GUARANTORS May Merge or Transfer Assets............................42
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ARTICLE 6 DEFAULTS AND REMEDIES 43
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SECTION 6.01. Events of Default..............................................................................43
SECTION 6.02. Acceleration...................................................................................45
SECTION 6.03. Other Remedies.................................................................................46
SECTION 6.04. Waiver of Past Defaults........................................................................46
SECTION 6.05. Control by Majority............................................................................46
SECTION 6.06. Limitation on Suits............................................................................46
SECTION 6.07. Rights of Holders to Receive Payment...........................................................47
SECTION 6.08. Collection Suit by Trustee.....................................................................47
SECTION 6.09. Trustee May File Proofs of Claim...............................................................47
SECTION 6.10. Priorities.....................................................................................47
SECTION 6.11. Undertaking for Costs..........................................................................48
SECTION 6.12. Waiver of Stay or Extension Laws...............................................................48
ARTICLE 7 TRUSTEE 48
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SECTION 7.01. Duties of Trustee..............................................................................48
SECTION 7.02. Rights of Trustee..............................................................................49
SECTION 7.03. Individual Rights of Trustee...................................................................50
SECTION 7.04. Trustee's Disclaimer...........................................................................50
SECTION 7.05. Notice of Defaults.............................................................................51
SECTION 7.06. Reports by Trustee to Holders..................................................................51
SECTION 7.07. Compensation and Indemnity.....................................................................51
SECTION 7.08. Replacement of Trustee.........................................................................52
SECTION 7.09. Successor Trustee by Merger....................................................................52
SECTION 7.10. Eligibility; Disqualification..................................................................53
ii
SECTION 7.11. Preferential Collection of Claims Against Company..............................................53
ARTICLE 8 DISCHARGE OF INDENTURE; DEFEASANCE 53
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SECTION 8.01. Discharge of Liability on Securities; Defeasance...............................................53
SECTION 8.02. Conditions to Defeasance.......................................................................54
SECTION 8.03. Application of Trust Money.....................................................................55
SECTION 8.04. Repayment to Company...........................................................................55
SECTION 8.05. Indemnity for Government Obligations...........................................................56
SECTION 8.06. Reinstatement..................................................................................56
ARTICLE 9 AMENDMENTS 56
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SECTION 9.01. Without Consent of Holders.....................................................................56
SECTION 9.02. With Consent of Holders........................................................................57
SECTION 9.03. Revocation and Effect of Consents and Waivers..................................................57
SECTION 9.04. Notation on or Exchange of Securities..........................................................58
SECTION 9.06. Trustee to Sign Amendments.....................................................................58
SECTION 9.06. Payment for Consent............................................................................58
ARTICLE 10 SUBSIDIARY GUARANTEES 59
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ARTICLE 11 MISCELLANEOUS 59
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SECTION 11.01. Trust Indenture Act Controls..................................................................59
SECTION 11.02. Notices.......................................................................................59
SECTION 11.03. Communication by Holders with Other Holders...................................................59
SECTION 11.04. Certificate and Opinion as to Conditions Precedent............................................60
SECTION 11.05. Statements Required in Certificate or Opinion.................................................60
SECTION 11.06. When Securities Disregarded...................................................................60
SECTION 11.07. Rules by Trustee, Paying Agent, Registrar and Calculation Agent...............................60
SECTION 11.08. Legal Holidays................................................................................60
SECTION 11.09. Governing Law.................................................................................61
SECTION 11.10. No Recourse Against Others....................................................................61
SECTION 11.11. Successors....................................................................................61
SECTION 11.12. Multiple Originals............................................................................61
SECTION 11.13. Table of Contents; Headings...................................................................61
Appendix A - Provisions Relating to Securities
Exhibit A - Form of Security
iii
Exhibit B - Form of Supplemental Indenture
Exhibit C - Reference Swap Transaction
Exhibit D - Form of Quarterly Certificate
Exhibit E - Form of Ratings Certificate
iv
INDENTURE, dated as of October 27, 1998, between ACE US Holdings, Inc., a
Delaware corporation (the "Company"), and United States Trust Company of New
York, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Company's Credit Sensitive
Senior Notes due 2008 issued on the date hereof (the "Securities"). Except as
otherwise provided herein, the Securities will be limited to $250,000,000 in
aggregate principal amount outstanding, all of which $250,000,000 aggregate
principal amount will be initially issued on the date hereof.
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
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SECTION 1.01. Definitions.
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"ACE Insurance" means A.C.E. Insurance Company, Ltd., a Bermuda limited
liability company.
"ACE USA Insurance Group" means any group of two or more Insurance
Subsidiaries of the Company that are rated in the aggregate as a group, by
Moody's or S&P, provided that if no such group exists, but one or more Insurance
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Subsidiaries of the Company is rated individually by Moody's or S&P, "ACE USA
Insurance Group" shall refer to each such Insurance Subsidiary that is Material.
"Material" means, with respect to any Subsidiary, that such Subsidiary would be
a "significant subsidiary" as defined in Article I, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such regulation is in effect on
the Closing Date.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business including Investments by Insurance Subsidiaries
in Investment Securities; (ii) the Capital Stock of a Person that becomes a
Restricted Subsidiary as a result of the acquisition of such Capital Stock by
the Company or another Restricted Subsidiary; or (iii) Capital Stock
constituting a minority interest in any Person that at such time is a Restricted
Subsidiary; provided, however, that any such Restricted Subsidiary described in
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clauses (ii) or (iii) above is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of shares representing 10% or more of the total voting power of
the Voting Stock (on a fully diluted basis) of the Company or of rights or
warrants to purchase such Voting Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary), (ii) all or substantially all the assets of any division
or line of business of the Company or any Restricted Subsidiary or (iii) any
other assets of the Company or any Restricted Subsidiary outside of the ordinary
course of business of the Company or such Restricted Subsidiary (other than, in
the case of (i), (ii) and (iii) above, (u) a disposition of property of the
Company or any of its Subsidiaries that, in the reasonable judgment of the
Company, has become uneconomic, obsolete or worn out, (v) the sale of Temporary
Cash Equivalents or Investment Securities or any disposition of cash, (w) a
disposition by a Restricted Subsidiary to the Company or by the Company or a
Restricted Subsidiary to a Wholly Owned Subsidiary, (x) for purposes of Section
4.06 only, a disposition that constitutes a Restricted Payment or Permitted
Investment permitted by Section 4.04, (y) any reinsurance or retrocession
arrangements (other than bulk reinsurance or retrocession arrangements) and (z)
any disposition of assets, or one or more related dispositions of assets, with a
fair market value in the aggregate of less than $2,500,000).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Balance Sheet Indebtedness" means Indebtedness that is reflected on the
face of the Consolidated balance sheet of the Company and the Restricted
Subsidiaries.
"Bank Indebtedness" means any and all amounts payable under or in respect
of Credit Facilities and any Refinancing Indebtedness with respect thereto, as
amended from time to time, including principal, premium (if any), interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for post-filing interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof.
"Base Redemption Price" has the meaning set forth in paragraph 5 of the
Securities.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or, except for purposes of the definition of "Change of
Control", any committee thereof duly authorized to act on behalf of such Board.
Unless otherwise specified, "Board of Directors" means the Board of Directors of
the Company.
"Business Day" means each day which is not a Legal Holiday.
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"Calculation Agent" means the calculation agent who will determine the
applicable interest rate pursuant to paragraph 1 of the Securities, or any
successor person thereto, who shall initially be the Trustee.
"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 any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be prepaid by the lessee without payment of a
penalty.
"Change of Control" means the occurrence of any of the following events:
(i) Parent ceases to be the direct or indirect beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act) of 70% of the
total voting power of the Voting Stock of the Company, whether as a result
of issuance of securities of the Company, any merger, consolidation,
liquidation or dissolution of Parent or the Company, or otherwise; or
(ii) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the beneficial owner (as defined in
clause (i) above, except that for purposes of this clause (ii) such person
shall be deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
more than 30% of the total voting power of the Voting Stock of Parent; or
(iii) during any one year period, individuals who at the beginning of
such period constituted the Board of Directors of Parent or the Company
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the shareholders of Parent or the
Company was approved by a vote of 66-2/3% of the directors of Parent or the
Company then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of Parent or the Company then in office; or
(iv) the adoption of a plan relating to the liquidation or
dissolution of the Company; or
(v) the merger or consolidation of Parent with or into another
Person and the securities of Parent that are outstanding immediately prior
to such transaction and which represent 100% of the aggregate voting power
of the Voting Stock of Parent are changed
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into or exchanged for cash, securities or property, unless pursuant to such
transaction such securities are changed into or exchanged for, in addition
to any other consideration, securities of the surviving Person or
transferee that represent immediately after such transaction, at least a
majority of the aggregate voting power of the Voting Stock of the surviving
Person or transferee.
"Closing Date" means October 27, 1998.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending prior to the date of such determination
for which financial statements are available to (ii) Consolidated Interest
Expense for such four fiscal quarters; provided, however, that (A) if the
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Company or any Restricted Subsidiary has Incurred any Indebtedness since the
beginning of such period that remains outstanding on such date of determination
or if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the proceeds of such
new Indebtedness as if such discharge had occurred on the first day of such
period, (B) if the Company or any Restricted Subsidiary has repaid, repurchased,
defeased or otherwise discharged any Indebtedness since the beginning of such
period or if any Indebtedness is to be repaid, repurchased, defeased or
otherwise discharged (in each case other than Indebtedness Incurred under any
revolving credit facility unless such Indebtedness has been permanently repaid
and has not been replaced) on the date of the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated
Interest Expense for such period shall be calculated on a pro forma basis as if
such discharge had occurred on the first day of such period, (C) if since the
beginning of such period the Company or any Restricted Subsidiary shall have
made any Asset Disposition, the EBITDA for such period shall be reduced by an
amount equal to the EBITDA (if positive) directly attributable to the assets
that are the subject of such Asset Disposition for such period or increased by
an amount equal to the EBITDA (if negative) directly attributable thereto for
such period and Consolidated Interest Expense for such period shall be reduced
by an amount equal to the Consolidated Interest Expense directly attributable to
any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset Disposition
for such period (or, if the Capital Stock of any Restricted Subsidiary is sold,
the Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (D) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary)
or an
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acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness)
as if such Investment or acquisition occurred on the first day of such period
and (E) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall have made any
Asset Disposition or any Investment or acquisition of assets that would have
required an adjustment pursuant to clause (C) or (D) above if made by the
Company or a Restricted Subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or acquisition of assets
occurred on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting Officer of the Company. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term as at the date of determination in
excess of 12 months). Interest on Indebtedness that may optionally be determined
at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rate, shall be deemed to have been
based upon the rate actually chosen, or, if none, then based upon such optional
rate chosen as the Company may designate.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent Incurred by the Company and its Subsidiaries in such period but not
included in such interest expense, (i) interest expense attributable to
Capitalized Lease Obligations, (ii) amortization of debt discount and debt
issuance cost, (iii) capitalized interest, (iv) non-cash interest expense, (v)
commissions, discounts and other fees and charges attributable to letters of
credit and bankers' acceptance financing, (vi) interest actually paid on any
Indebtedness of any other Person pursuant to a Guarantee by the Company or any
Restricted Subsidiary; (vii) net costs associated with Hedging Obligations
(including amortization of fees but excluding any net costs associated with
"marking to market" of such Hedging Obligations), and (viii) dividends in
respect of (A) all Preferred Stock of the Company and any of the Subsidiaries of
the Company and (B) Disqualified Stock of the Company, in the case of each of
(A) and (B) to the extent held by Persons other than the Company or a Wholly
Owned Subsidiary.
"Consolidated Net Income" means, for any period, the net income of the
Company and its Consolidated Subsidiaries for such period; provided, however,
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that there shall not be included in such Consolidated Net Income:
(i) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that subject to the
limitations contained in clause (iv)
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below, the Company's equity in the net income of any such Person for such
period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such
period to the Company or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution made
to a Restricted Subsidiary, to the limitations contained in clause (iii)
below);
(ii) any net income (or loss) of any Person acquired by the Company
or a Subsidiary in a pooling of interests transaction for any period prior
to the date of such acquisition;
(iii) any net income of any Restricted Subsidiary:
(A) for purposes of determining limitations on Indebtedness
under Section 4.03 only, to the extent that such net income exceeds
the sum (without duplication) of (v) the maximum aggregate amount of
cash that such Restricted Subsidiary is permitted to pay as a dividend
or other distribution to the Company or another Restricted Subsidiary
at the date of determination without any prior governmental approval
(which has not been obtained) and payment which is not prohibited,
directly or indirectly, by the terms of such Restricted Subsidiary's
charter or any agreement, instrument, judgment, decree, order, writ,
injunction, certificate, statute, rule, law, code, ordinance or
governmental regulation applicable to such Restricted Subsidiary or
its shareholders (each such restriction or prohibition, a "Payment
Restriction"); (w) the amount of any dividend or distribution declared
or paid during such period by such Restricted Subsidiary to the
Company or another Restricted Subsidiary to the extent that such
dividend or distribution reduces the amount described in clause (w)
that could be distributed at the date of determination; (x) the
maximum aggregate amount of cash that the Company is permitted to draw
under the Subordinated Loan Agreement during such period at the date
of determination; (y) the amount actually drawn by the Company under
the Subordinated Loan Agreement to the extent that such amount drawn
reduces the amount described in clause (x) that could be drawn at the
date of determination; and (z) the amount of cash payments made by
such Restricted Subsidiary to the Company or another Restricted
Subsidiary during such period under tax sharing agreements, surplus
debentures or other intercompany agreements, but only without
duplication and only to the extent that the making of such payment
when made was permitted by the Payment Restrictions, subject, in the
case of dividends, distributions or payments to another Restricted
Subsidiary under any of clause (v), (w) or (z), to the limitations in
this clause (iii); provided, however, that the Company's equity in net
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loss of any such Restricted Subsidiary for such period to the extent
of any contributions or advances made by the Company or any Restricted
Subsidiary to such Restricted Subsidiary shall be included in
determining such Consolidated Net Income; and
(B) for all other purposes of this Indenture (including
determining limitations on Restricted Payments under Section 4.04), to
the extent that such net income exceeds the amount of any dividend or
distribution declared and paid
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during such period by such Restricted Subsidiary to the Company or,
subject to this clause (iii), another Restricted Subsidiary;
(iv) any gain (or loss) realized upon the sale or other disposition
of any asset of the Company or its Consolidated Subsidiaries (including
pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise
disposed of in the ordinary course of business and any gain (or loss)
realized upon the sale or other disposition of any Capital Stock of any
Person;
(v) any extraordinary or non-recurring gain or loss as well as the
tax effects thereof;
(vi) any restoration to income of any contingency reserve (not
including insurance and reinsurance reserves and reserves for reinsurance
recoverables), except to the extent that provision for such reserve reduced
Consolidated Net Income for any period following the first day of the four
fiscal quarter period ending prior to the Closing Date;
(vii) the cumulative effect of a change in accounting principles;
and
(viii) any unrealized gains and losses on Investment Securities to
the extent such gains and losses affect such net income (loss); provided,
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further, however, that the net income (loss) shall include upon any
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disposition of any Investment Security referred to in this clause (viii),
the then realized gain or loss on any such Investment Security (after
excluding the effect of any unrealized gains and losses on such Investment
Security which affected such net income (loss)).
Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries to
the Company or a Restricted Subsidiary to the extent such dividends, repayments
or transfers increase the amount of Restricted Payments permitted under such
Section pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of the
Company ending prior to the taking of any action for the purpose of which the
determination is being made for which financial statements are available, as (i)
the par or stated value of all outstanding Capital Stock of the Company plus
(ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any accumulated deficit
and (B) any amounts attributable to Disqualified Stock.
"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" shall not include
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consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in an
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Unrestricted Subsidiary shall be accounted for as an investment. The term
"Consolidated" has a correlative meaning.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered which
office at the date of the execution of this agreement is located at 114 West
47th Street - 25th floor, New York, New York 10036-1532, Attention: Corporate
Trust Office or at any other time at such other address as the Trustee may
designate from time to time by notice to the Company.
"Credit Facilities" means, with respect to the Company or its Restricted
Subsidiaries, one or more debt facilities or commercial paper facilities with
banks, insurance companies or other institutional lenders providing for
revolving credit loans, term loans, synthetic lease financing, notes or other
financing (including through the sale of receivables to such lenders or to
special purpose entities formed to borrow from or issue securities to such
lenders against such receivables) or letters of credit or other credit
facilities, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement to which the Company or any
Restricted Subsidiary is a party or of which it is a beneficiary.
"Current Maturities of Funded Indebtedness" means, at any time and with
respect to any item of Funded Indebtedness, the portion of such Funded
Indebtedness outstanding at such time which by the terms of such Funded
Indebtedness or the terms of any instrument or agreement relating thereto is due
on demand or within one year from such time (whether by sinking fund, other
required prepayment or final payment at maturity) and is not directly or
indirectly renewable, extendible or refundable at the option of the obligor
under an agreement or firm commitment in effect at such time to a date one year
or more from such time.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable or exercisable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the Stated Maturity of the
Securities provided, however, that any Capital Stock that would not constitute
-------- -------
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
Stated Maturity of the Securities shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are not more favorable to the holders of such Capital Stock than the provisions
of Sections 4.06 and 4.08.
8
"EBITDA" for any period means the Consolidated Net Income for such period,
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) income tax expense of the Company and its Consolidated Restricted
Subsidiaries, (ii) Consolidated Interest Expense, (iii) depreciation expense of
the Company and its Consolidated Restricted Subsidiaries and (iv) amortization
expense of the Company and its Consolidated Restricted Subsidiaries including
amortization of debt issuance costs (excluding amortization expense attributable
to a prepaid cash item that was paid in a prior period) and (v) all other non-
cash charges of the Company and its Consolidated Restricted Subsidiaries
(excluding any such non-cash charge to the extent that it represents an accrual
of or reserve for cash expenditures in any future period), in each case for such
period. Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization and non-cash charges
of, a Restricted Subsidiary of the Company shall be added to Consolidated Net
Income to compute EBITDA only to the extent (and in the same proportion) that
the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Funded Indebtedness" means, with respect to any Person, all Indebtedness
of such Person that is reflected on the face of the Consolidated balance sheet
of the Company and the Restricted Subsidiaries which by its terms or by the
terms of any instrument or agreement relating thereto matures, or which is
otherwise payable or unpaid, one year or more from, or is directly or indirectly
renewable or extendible at the option of the obligor in respect thereof to a
date one year or more (including, without limitation, an option of such obligor
under a revolving credit or similar agreement obligating the lender or lenders
to extend credit over a period of one year or more) from, the date of the
creation thereof, provided, however, that Funded Indebtedness shall include, as
-------- -------
at any date of determination, Current Maturities of Funded Indebtedness.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, including those set forth in (i) the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, (ii) statements and pronouncements of
the Financial Accounting Standards Board, (iii) such other statements by such
other entity as approved by a significant segment of the accounting profession
and (iv) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and similar
written statements from the accounting staff of the SEC. All ratios and
computations based on GAAP contained in this Indenture shall be computed in
conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply
9
funds for the purchase or payment of) such Indebtedness of such other Person
(whether arising by virtue of partnership arrangements, or by agreement to keep-
well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions or otherwise) or (ii) entered into for
purposes of assuring in any other manner the obligee of such Indebtedness of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "Guarantee" shall not
-------- -------
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning. The
term "Guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
under any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a Security is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
-------- -------
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. Neither the accretion of principal
of a non-interest bearing or other discount security nor the accrual of interest
(or the addition of accrued interest to principal) shall be deemed to be an
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication),
(i) the principal of and premium (if any) in respect of
indebtedness of such Person for borrowed money;
(ii) the principal of and premium (if any) in respect of obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments;
(iii) all obligations of such Person in respect of letters of credit
or other similar instruments (including reimbursement obligations with
respect thereto);
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which
purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion
of such services;
(v) all Capitalized Lease Obligations;
(vi) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, any Preferred Stock (but
excluding, in each case, any accrued dividends);
10
(vii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person;
(viii) all obligations of the type referred to in clauses (i) through
(ii) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee; or
(ix) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that the amount of Indebtedness of such Person
-------- -------
shall be the lesser of (A) the fair market value of such asset at such date
of determination and (B) the amount of such Indebtedness of such other
Persons;
provided, however, that Indebtedness shall not include obligations arising from
- -------- -------
the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently (except in the case of day-light overdrafts)
drawn against insufficient funds in the ordinary course of business unless such
obligations are not extinguished within three Business Days of incurrence. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"Indebtedness/Total Capital Ratio" means, as of any date, the quotient
expressed as a percentage of (i) Balance Sheet Indebtedness divided by (ii) the
sum of Funded Indebtedness plus Consolidated Net Worth, in each case determined
on a Consolidated basis in accordance with GAAP.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Insurance Subsidiary" means any Restricted Subsidiary, whether now owned
or hereafter acquired, that is authorized or admitted to carry on or transact
the business of selling, issuing or underwriting insurance or reinsurance, in
any state.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or is a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by
11
such Person. For purposes of the definition of "Unrestricted Subsidiary" and
Section 4.04, (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
-------- -------
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Investment Securities" means securities invested in by the Insurance
Subsidiaries in the ordinary course of their insurance business.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Moody's" means Moody's Investor Service, Inc. and its successors.
"Moody's Rating" means, as at any date, the financial strength rating of a
specific Person or group of Persons as most recently published by Moody's.
"NAIC" means the National Association of Insurance Commissioners or any
successor.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise and proceeds from the
sale or other disposition of any securities received as consideration, but only
as and when received, but excluding any other consideration received in the form
of assumption by the acquiring Person of Indebtedness or other obligations
relating to the properties or assets that are the subject of such Asset
Disposition or received in any other non-cash form) therefrom, in each case net
of (i) all legal, title and recording tax expenses, commissions and other fees
and expenses incurred, and all Federal, state, provincial, foreign and local
taxes required to be paid or accrued as a liability under GAAP, as a consequence
of such Asset Disposition, (ii) all payments made on any Indebtedness which is
secured by any assets subject to such Asset Disposition, in accordance with the
terms of any Lien upon or other security agreement of any kind with respect to
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law be repaid out of the
proceeds from such Asset Disposition, (iii) all distributions and other payments
required to be made to minority interest holders in Subsidiaries or joint
ventures as a result of such Asset Disposition and (iv) appropriate amounts to
be provided by the seller as a reserve, in accordance with GAAP, against any
liabilities associated with the property or other assets disposed of in such
Asset Disposition and retained by the Company or any Restricted Subsidiary after
such Asset Disposition.
12
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-Recourse Debt" shall mean Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a Guarantor
or otherwise) or (c) constitutes the lender; (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Securities) of the Company or any of its Restricted Subsidiaries to declare
a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.
"Officer" means the Chairman of the Board, the Chief Executive Officer, the
Chief Financial Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Parent" means ACE Limited, a limited liability company formed under the
laws of the Cayman Islands.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) the Company, a Restricted Subsidiary or a Person that will,
upon the making of such Investment, become a Restricted Subsidiary; provided,
--------
however, that the primary business of such Restricted Subsidiary is a Related
- -------
Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
- -------- -------
(iii) Temporary Cash Investments; (iv) receivables (other than receivables
referred to in any other clauses of this definition) owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
--------
however, that such trade terms may include such concessionary trade terms as the
- -------
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary;
(vii) stock, obligations or securities
13
received in settlement of debts created in the ordinary course of business and
owing to the Company or any Restricted Subsidiary or in satisfaction of
judgments or in bankruptcy proceedings, (viii) any Person to the extent such
Investment represents the non-cash portion of the consideration received for an
Asset Disposition or other disposition of assets that was made pursuant to and
in compliance with Section 4.06, (ix) Investments by the Insurance Subsidiaries
in Investment Securities made in accordance with applicable insurance investment
laws and the investment guidelines established by the Company's Board of
Directors from time to time, (x) any Investment (other than Investments by
Insurance Subsidiaries) existing on the Closing Date or made pursuant to legally
binding written commitments in existence on the Closing Date; (xi) Investments
in Interest Rate Agreements or Currency Agreements otherwise permitted under the
Indenture; (xii) receivables (including, but not limited to, accrued investment
income, premiums in process of collection and reinsurance recoverables on paid
and unpaid losses) owing to the Company or any Restricted Subsidiary, if created
or acquired in the ordinary course of business; (xiii) deposits established in
connection or under insurance and reinsurance contracts; (xiv) Strategic
Investments having an aggregate fair market value, taken together with all other
Investments made pursuant to this clause (xiv) that are at that time
outstanding, not to exceed 15% of Total Assets at the time of such Investment
(with the fair market value of each Investment being measured at the time made
and without giving effect to subsequent changes in value); and (xv) additional
Investments having an aggregate fair market value, taken together with all other
Investments made pursuant to this clause (xv) that are at that time outstanding,
not to exceed 10% of Total Assets at the time of such Investment (with the fair
market value of each Investment being measured at the time made and without
giving effect to subsequent changes in value).
"Permitted Liens" means, with respect to any Person, (a) pledges or
deposits by such Person under worker's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness), including
insurance and reinsurance contracts, or with or for the benefit of regulatory
authorities, insureds or reinsureds, or leases to which such Person is a party,
or deposits to secure public or statutory obligations of such Person or deposits
of cash or United States government bonds to secure surety or appeal bonds to
which such Person is a party, or deposits as security for contested taxes or
import duties or for the payment of rent, in each case Incurred in the ordinary
course of business; (b) Liens imposed by law, such as carriers', warehousemen's
and mechanics' Liens, in each case for sums not yet due or being contested in
good faith by appropriate proceedings or other Liens arising out of judgments or
awards against such Person with respect to which such Person shall then be
proceeding with an appeal or other proceedings for review; (c) Liens for taxes
or other governmental charges not yet due or payable or subject to penalties for
non-payment or which are being contested in good faith by appropriate
proceedings; (d) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business; provided, however, that such letters of credit
-------- -------
do not constitute Indebtedness; (e) minor survey exceptions, minor encumbrances,
easements or reservations of, or rights of others for, licenses, rights-of-way,
sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning or other restrictions as to the use of real property or
Liens incidental to the conduct of the business of such Person or to the
ownership of its properties which were not Incurred in connection with
14
Indebtedness and which do not in the aggregate materially adversely affect the
value of said properties or materially impair their use in the operation of the
business of such Person; (f) Liens securing Indebtedness Incurred to finance the
construction, purchase or lease of, or repairs, improvements or additions to,
property of such Person; provided, however, that the Lien may not extend to any
-------- -------
other property owned by such Person or any of its Subsidiaries at the time the
Lien is Incurred, and the Indebtedness (other than any interest thereon) secured
by the Lien may not be Incurred more than 180 days after the later of the
acquisition, completion of construction, repair, improvement, addition or
commencement of full operation of the property subject to the Lien; (g) Liens
existing on the Closing Date; (h) Liens on property or shares of Capital Stock
of another Person at the time such other Person becomes a Subsidiary of such
Person; provided, however, that such Liens are not created, Incurred or assumed
-------- -------
in connection with, or in contemplation of, such other Person becoming such a
Subsidiary; provided further, however, that such Liens may not extend to any
---------------- -------
other property owned by such Person or any of its Subsidiaries; (i) Liens on
property at the time such Person or any of its Subsidiaries acquires the
property, including any acquisition by means of a merger or consolidation with
or into such Person or a Subsidiary of such Person; provided, however, that such
-------- -------
Liens are not created, Incurred or assumed in connection with, or in
contemplation of, such acquisition; provided further, however, that the Liens
-------- ------- --------
may not extend to any other property owned by such Person or any of its
Subsidiaries; (j) Liens securing Indebtedness or other obligations of a
Subsidiary of such Person owing to such Person or a wholly owned Subsidiary of
such Person; (k) Liens securing Hedging Obligations so long as such Hedging
Obligations relate to Indebtedness that is, and is permitted to be under this
Indenture, secured by a Lien on the same property securing such Hedging
Obligations; (l) Liens to secure any Refinancing (or successive Refinancings) as
a whole, or in part, of any Indebtedness secured by any Lien referred to in the
foregoing clauses (f), (g), (h) and (i); provided, however , that (x) such new
--------- -------
Lien shall be limited to all or part of the same property that secured the
original Lien (plus improvements to or on such property) and (y) the
Indebtedness secured by such Lien at such time is not increased to any amount
greater than the sum of (A) the outstanding principal amount or, if greater,
committed amount of the Indebtedness described under clauses (f), (g), (h) or
(i) at the time the original Lien became a Permitted Lien under this Indenture
and (B) an amount necessary to pay any fees and expenses, including premiums,
related to such Refinancing; and (m) Liens Incurred in the ordinary course of
business of such Person with respect to obligations that do not exceed
$5,000,000 at any one time outstanding and that (a) do not secure Indebtedness,
(b) are not Incurred in connection with the borrowing of money or the obtaining
of advances or credit, and (c) do not in the aggregate materially detract from
the value of the property or materially impair the use thereof in the operation
of business by such Person. For purposes of this definition, the term
"Indebtedness" shall be deemed to include interest on such Indebtedness.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) that is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
15
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security that is due or overdue or is to become
due at the relevant time.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of an asset, conditional sale obligations, obligations
under any title retention agreement and other purchase money obligations, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such asset,
including additions and improvements; provided, however, that such Indebtedness
-------- -------
is incurred within 180 days after the acquisition by the Company or such
Restricted Subsidiary of such asset.
"Qualified Subordinated Debt'' means any subordinated loan made to the
Company or any Restricted Subsidiary by, and at all time held by, the Parent or
ACE Insurance that
(i) by its terms (A) does not (including upon the happening of any
event) mature and is not (including upon the happening of any event)
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or redeemable at the option of the holder, in whole or in part, and does
not include any provision requiring prepayment or repurchase by the Company
or any of its Restricted Subsidiaries (including upon the happening of any
event), in each case prior to the date that is 91 days after the final
maturity date of the Securities, (B) does not (including upon the happening
of any event) require or provide for the payment, in cash or otherwise, of
interest or any other amounts prior to its stated maturity (provided that
interest may accrue while such loan is outstanding and any interest may be
satisfied at any time by the issue to the holders thereof of further
Qualified Subordinated Debt or by adding accrued interest to principal),
(C) does not provide (including upon the happening of any event) for the
acceleration of its maturity (other than following the winding up or
bankruptcy of the Company, but only if the maturity of the Securities has
been accelerated) or the exercise of remedies prior to the date that is 91
days after the final maturity date of the Securities, (D) is not secured by
a Lien on any assets of the Company or any of its Restricted Subsidiaries
and is not Guaranteed by any Subsidiary of the Company, (E) is not
transferable by the holder thereof except to the Company, (F) does not
(including upon the happening of any event) restrict the payment of amounts
due in respect of the Securities or compliance by the Company with its
obligations under the Securities and the Indenture, and (G) is not
(including upon the happening of any event) mandatorily convertible or
exchangeable, or convertible or exchangeable at the option of the holder,
in whole or in part, prior to the date that is 91 days after the final
maturity date of the Securities other than into or for common equity of the
Company, and
(ii) is contractually subordinated (pursuant to a binding agreement
with the Trustee for the benefit of the Holders) and junior in right of
payment to the prior payment in full in cash of all obligations of the
Company under the Securities and the Indenture (including principal,
interest, and premium (if any)) such that (A) the Company shall make no
payment in respect of such loan (whether in cash, securities or otherwise,
except as permitted by clause (i) (B)) and may not acquire, purchase,
prepay or redeem such loan, except as permitted by Section 4.04(a) until
the prior payment in full in cash of all
16
obligations in respect of the Securities and the Indenture, (B) upon any
total or partial liquidation, dissolution or winding up of the Company or
in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property, the Securityholders
will be entitled to receive payment in full in cash of the obligations
under the Indenture and the Securities before the holder of such loan will
be entitled to receive any payment in respect of such loan, (C) such loan
may not be amended such that it would cease to qualify as Qualified
Subordinated Debt until the date that is 91 days after the prior payment in
full in cash of all obligations in respect of the Securities and the
Indenture, and (D) the holder of such loan shall assign any rights to vote,
including by way of proxy, in a bankruptcy, insolvency or similar
proceeding to the Trustee.
"Redemption Price" has the meaning set forth in paragraph 5 of the
Securities.
"Reference Swap Transaction" means the transaction described in Exhibit C
attached hereto.
"Reference Swap Transaction Value" means, as of any day, (i) an amount
(which may be positive or negative) determined in good faith on such day by The
Chase Manhattan Bank to be the present mark-to-market value of the Reference
Swap Transaction, based on its mid-market quotation for transactions on
substantially the same terms as the Reference Swap Transaction, (ii) divided by
the aggregate principal amount of all Securities outstanding on such day,
expressed as a percentage. If the amount in clause (i) in the preceding sentence
is (a) a positive number, it is subtracted from the Base Redemption Price or (b)
a negative number, it is added to the Base Redemption Price. Mark-to-market
value shall be determined from the perspective of the Fixed Rate Payer (as
defined in Exhibit C).
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced"
and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) any Indebtedness of the Company or any Restricted
Subsidiary existing on the date of this Indenture or Incurred in compliance with
this Indenture including Indebtedness of the Company that Refinances Refinancing
Indebtedness; provided, however, that (i) the Refinancing Indebtedness has a
-------- -------
Stated Maturity no earlier than the Stated Maturity of the Indebtedness being
Refinanced, (ii) the Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being Refinanced, (iii) such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or less than
the aggregate principal amount (or if issued with original issue discount, the
aggregate accreted value) then outstanding of the Indebtedness being Refinanced
(plus any premiums, accrued interest, fees and expenses) and (iv) if the
Indebtedness being refinanced is subordinated in right of payment to the
Securities, such Refinancing Indebtedness is subordinated in right of payment to
the Securities at least to the same extent as the Indebtedness being Refinanced;
17
provided further, however, that Refinancing Indebtedness shall not include (x)
- -------- ------- -------
Indebtedness of a Restricted Subsidiary that Refinances Indebtedness of the
Company or (y) Indebtedness of the Company or a Restricted Subsidiary that
Refinances Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary
to the businesses of the Company and the Restricted Subsidiaries on the Closing
Date.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired by the Company or a Restricted Subsidiary whereby
the Company or a Restricted Subsidiary transfers such property to a Person and
the Company or such Restricted Subsidiary leases it from such Person, other than
leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien. "Secured Indebtedness" of a Subsidiary Guarantor has a correlative
meaning.
"Securities" means the Securities issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"S&P" means Standard & Poor's Ratings Service, a division of the McGraw
Hill Companies, Inc., and its successors.
"S&P Rating" means, as at any date, the financial strength rating of a
specific Person or group of Persons as most recently published by S&P.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Strategic Investment" means an Investment in any Person (other than an
Unrestricted Subsidiary of the Company) whose primary business is a Related
Business and such Investment is determined in good faith by the Board of
Directors (or senior officers of the Company to whom the Board of Directors has
delegated the authority to make such a determination), whose determination shall
be conclusive and evidenced by a Board resolution (or Officer's Certificate
delivered to the Trustee), to promote or significantly benefit the business of
the Company and its Restricted Subsidiaries on the date of such Investment.
18
"Subordinated Loan Agreement" means the subordinated loan agreement dated
as of the Closing Date among the Company, ACE Insurance, and the Trustee.
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Closing Date or thereafter Incurred), including Qualified
Subordinated Debt, that is subordinate or junior in right of payment to the
Securities pursuant to a written agreement. "Subordinated Obligation" of a
Subsidiary Guarantor has a correlative meaning.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and one
or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such
Person.
"Subsidiary Guarantee" means each Guarantee of the obligations with respect
to the Securities issued by a Subsidiary of the Company pursuant to the terms of
this Indenture.
"Subsidiary Guarantor" means any Subsidiary that has issued a Subsidiary
Guarantee. As of the date hereof, there are no Subsidiary Guarantors.
"Temporary Cash Investments" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
Guaranteed by the United States of America or any agency thereof maturing within
360 days of the date of acquisition thereof, (ii) time deposit accounts,
certificates of deposit and money market deposits maturing within 360 days of
the date of acquisition thereof issued by a bank or trust company that is
organized under the laws of the United States of America, any state thereof or
any foreign country recognized by the United States of America having capital,
surplus and undivided profits aggregating in excess of $50,000,000 (or the
foreign currency equivalent thereof) and whose long-term debt is rated "A" (or
such similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act), (iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered into
with a bank meeting the qualifications described in clause (ii) above, (iv)
commercial paper, maturing not more than 270 days after the date of acquisition,
issued by a corporation (other than an Affiliate of the Company) organized and
in existence under the laws of the United States of America or any foreign
country recognized by the United States of America with a rating at the time as
of which any investment therein is made of "P-1" (or higher) according to
Moody's or "A-1" (or higher) according to S&P, (vi) investments in securities
with maturities of 360 days or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or "A" by Moody's Investors Service, Inc. and (vi) funds
that do not utilize Indebtedness in order to make investments and that invest
solely in any of the Investments described in clauses (i) through (v) above.
"Total Assets" means, at any time, the total Consolidated assets of the
Company and its Restricted Subsidiaries at such time.
19
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Trustee" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor.
"Trust Officer" means when used with respect to the Trustee any officer
within the Corporate Trust Office, including any Vice President, Managing
Director, Assistant Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer, Senior Trust Officer, Trust Officer or any other officer of
the Trustee customarily performing functions similar to those performed by any
of the above designated officers and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such officer's
knowledge and familiarity with the particular subject.
"Uniform Commercial Code" means the New York Uniform Commercial Code as in
effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Subsidiary of the Company that
is not a Subsidiary of the Subsidiary to be so designated; provided, however,
-------- -------
that either (A) the Subsidiary to be so designated has total consolidated assets
of $1,000 or less or (B) if such Subsidiary has Consolidated assets greater than
$1,000, then such designation would be permitted under Section 4.04. The Board
of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
-------- -------
designation (x) the Company could Incur $1.00 of additional Indebtedness under
Section 4.03(a) and (y) no Default shall have occurred and be continuing. Any
such designation of a Subsidiary as a Restricted Subsidiary or Unrestricted
Subsidiary by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to
20
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or another Wholly Owned Subsidiary.
SECTION 1.02. Other Definitions.
-----------------
Term Defined in Section
---- ------------------
"Affiliate Transaction"................................................. 4.07
"Bankruptcy Law"........................................................ 6.01
"covenant defeasance option"............................................ 8.01(b)
"Custodian"............................................................. 6.01
"Definitive Securities"................................................. 2.09
"Event of Default"...................................................... 6.01
"legal defeasance option"............................................... 8.01(b)
"Legal Holiday"......................................................... 11.08
"Offer"................................................................. 4.06(b)
"Offer Amount".......................................................... 4.06(c)(2)
"Offer Period".......................................................... 4.06(c)(2)
"Notice of Default"..................................................... 6.01
"Paying Agent".......................................................... 2.03
"protected purchaser"................................................... 2.07
"Registrar"............................................................. 2.03
"Successor Company"..................................................... 5.01
SECTION 1.03. Trust Indenture Act. On the date hereof, the parties agree
-------------------
that this Indenture is not subject to the mandatory provisions of the TIA and
that each provision of the TIA which imposes obligations on the Company under
the TIA are not applicable.
SECTION 1.04. Rules of Construction. Unless the context otherwise
---------------------
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
21
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any non-interest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE 2
THE SECURITIES
--------------
SECTION 2.01. Form and Dating. Provisions relating to the Securities are
---------------
set forth in Appendix A which is hereby incorporated in and expressly made a
part of this Indenture. The Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto, which is
hereby incorporated in and expressly made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company or any Subsidiary Guarantor is
subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Company). Each Security shall be
dated the date of its authentication. The Securities shall be issuable only in
registered form without interest coupons and only in denominations of $1,000 and
integral multiples thereof.
SECTION 2.02. Execution and Authentication. One or more Officers shall
----------------------------
sign the Securities for the Company by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds that office
at the time the Trustee authenticates the Security, the Security shall be valid
nevertheless.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate and make available for delivery Securities
as set forth in Appendix A.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Company to authenticate the Securities. Any such appointment shall be
evidenced by an instrument signed by a Trust Officer, a copy of which shall be
furnished to the Company. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as
any Registrar, Paying Agent or agent for service of notices and demands.
22
SECTION 2.03. Registrar, Paying Agent and Calculation Agent. The Company
---------------------------------------------
shall maintain an office or agency where Securities may be presented for
registration of transfer or for exchange (the "Registrar") and an office or
agency where Securities may be presented for payment (the "Paying Agent"). The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may have one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional
paying agent, and the term "Registrar" includes any co-registrars. The Company
initially appoints the Trustee as (i) Registrar and Paying Agent in connection
with the Securities and (ii) the Securities Custodian (as defined in Appendix A)
with respect to any Global Securities (as defined in Appendix A).
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent and Calculation Agent not a party to this Indenture.
The agreement shall implement the provisions of this Indenture that relate to
such agent. The Company shall notify in writing the Trustee of the name and
address of any such agent. If the Company fails to maintain a Registrar, Paying
Agent or Calculation Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation therefor pursuant to Section 7.07. The Company or
any of its domestically organized Wholly Owned Subsidiaries may act as Paying
Agent or Registrar. Any Calculation Agent shall either be the Trustee or any
U.S. bank, trust company or investment bank with combined capital and surplus of
at least $100,000,000 as set forth in its most recent published annual report of
condition.
The Company may remove any Registrar or Paying Agent upon written notice to
such Registrar or Paying Agent and to the Trustee; provided, however, that no
-------- -------
such removal shall become effective until (1) acceptance of an appointment by a
successor as evidenced by an appropriate agreement entered into by the Company
and such successor Registrar or Paying Agent, as the case may be, and delivered
to the Trustee or (2) notification to the Trustee that the Trustee shall serve
as Registrar or Paying Agent until the appointment of a successor in accordance
with clause (1) above. The Registrar, Paying Agent or Calculation Agent may
resign at any time upon written notice; provided, however, that no such
-------- -------
resignation shall become effective until (1) acceptance of an appointment by a
successor as evidenced by an appropriate agreement entered into by the Company
and such successor agent, as the case may be, and delivered to the Trustee or
(2) notification to the Trustee that the Trustee shall serve as Registrar,
Paying Agent or Calculation Agent until the appointment of a successor in
accordance with clause (1) above.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due date
-----------------------------------
of the principal and interest on any Security, the Company shall deposit with
the Paying Agent (or if the Company or a Subsidiary is acting as Paying Agent,
segregate and hold in trust for the benefit of the Persons entitled thereto) a
sum sufficient to pay such principal and interest when so becoming due. The
Company shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities and shall notify the
Trustee of any Default by the Company in making any such payment. If the
Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate
the money held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed
23
by the Paying Agent. Upon complying with this Section, the Paying Agent shall
have no further liability for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
--------------------
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish, or cause the Registrar to furnish, to the
Trustee, in writing at least five Business Days before each interest payment
date and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably require of the names
and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be issued in
---------------------
registered form and shall be transferable only upon the surrender of a Security
for registration of transfer and in compliance with Appendix A. When a Security
is presented to the Registrar with a request to register a transfer, the
Registrar shall register the transfer as requested if the requirements of
Section 8-401(a)(1) of the Uniform Commercial Code are met. When Securities are
presented to the Registrar with a request to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall make
the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Securities at the Registrar's request. The Company
may require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer or exchange pursuant to
this Section. The Company shall not be required to make and the Registrar need
not register transfers or exchanges of Securities selected for redemption
(except, in the case of Securities to be redeemed in part, the portion thereof
not to be redeemed) or any Securities for a period of 15 days before a selection
of Securities to be redeemed.
Prior to the due presentation for registration of transfer of any Security,
the Company, the Subsidiary Guarantors, the Trustee, the Paying Agent, and the
Registrar may deem and treat the Person in whose name a Security is registered
as the absolute owner of such Security for the purpose of receiving payment of
principal of and interest, if any, on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company,
any Subsidiary Guarantor, the Trustee, the Paying Agent, or the Registrar shall
be affected by notice to the contrary.
Any Holder of a Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interest in such Global Security
may be effected only through a book-entry system maintained by (i) the Holder of
such Global Security (or its agent) or (ii) any Holder of a beneficial interest
in such Global Security, and that ownership of a beneficial interest in such
Global Security shall be required to be reflected in a book entry.
All Securities issued upon any transfer or exchange pursuant to the terms
of this Indenture will evidence the same debt and will be entitled to the same
benefits under this Indenture as the Securities surrendered upon such transfer
or exchange.
24
SECTION 2.07. Replacement Securities. If a mutilated Security is
----------------------
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met, such that the Holder (i)
satisfies the Company or the Trustee within a reasonable time after he has
notice of such loss, destruction or wrongful taking and the Registrar does not
register a transfer prior to receiving such notification, (ii) makes such
request to the Company or the Trustee prior to the Security being acquired by a
protected purchaser as defined in Section 8-303 of the Uniform Commercial Code
(a "protected purchaser") and (iii) satisfies any other reasonable requirements
of the Trustee. If required by the Trustee or the Company, such Holder shall
furnish an indemnity bond sufficient, in their respective judgment, to protect
the Company, the Trustee, the Paying Agent and the Registrar from any loss that
any of them may suffer if a Security is replaced. The Company and the Trustee
may charge the Holder for their expenses in replacing a Security. In the event
any such mutilated, lost, destroyed or wrongfully taken Security has become or
is about to become due and payable, the Company in its discretion may pay such
Security instead of issuing a new Security in replacement thereof.
Every replacement Security is an additional obligation of the Company.
The provisions of this Section 2.07 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, lost, destroyed or wrongfully taken Securities.
SECTION 2.08. Outstanding Securities. Securities outstanding at any time
----------------------
are all Securities authenticated by the Trustee except for those canceled by it,
those delivered to it for cancellation and those described in this Section as
not outstanding. Subject to Section 11.06, a Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in accordance with this
Indenture, on a redemption date or maturity date money sufficient to pay all
principal and interest payable on that date with respect to the Securities (or
portions thereof) to be redeemed or maturing, as the case may be, then on and
after that date such Securities (or portions thereof) cease to be outstanding
and interest on them ceases to accrue.
SECTION 2.09. Temporary Securities. In the event that Definitive
--------------------
Securities (as defined in Appendix A) are to be issued under the terms of this
Indenture, until such Definitive Securities are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of Definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate Definitive
25
Securities and deliver them in exchange for temporary Securities upon surrender
of such temporary Securities at the office or agency of the Company, without
charge to the Holder.
SECTION 2.10. Cancellation. The Company at any time may deliver Securities
------------
to the Trustee for cancellation. The Registrar and the Paying Agent shall
forward to the Trustee any Securities surrendered to them for registration of
transfer, exchange or payment. The Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment or
cancellation and deliver canceled Securities to the Company pursuant to written
direction by an Officer. The Company may not issue new Securities to replace
Securities it has redeemed, paid or delivered to the Trustee for cancellation.
The Trustee shall not authenticate Securities in place of canceled Securities
other than pursuant to the terms of this Indenture.
SECTION 2.11. Defaulted Interest. If the Company defaults in a payment of
------------------
interest on the Securities, the Company shall pay the defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Company may pay the defaulted interest to the Persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail or cause to be
mailed to each Securityholder a notice that states the special record date, the
payment date and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities may
-------------
use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided,
--------
however, that any such notice may state that no representation is made as to the
- -------
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
ARTICLE 3
REDEMPTION
----------
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
------------------
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date and the principal amount of Securities
to be redeemed.
The Company shall give each notice to the Trustee provided for in this
Section at least 60 days before the redemption date unless the Trustee consents
to a shorter period (which consent shall not be unreasonably withheld). Such
notice shall be accompanied by an Officers' Certificate and an Opinion of
Counsel from the Company to the effect that such redemption will comply with the
conditions herein. If fewer than all the Securities are to be redeemed, the
record date relating to such redemption shall be selected by the Company and
given to the Trustee, which record date shall be not fewer than 15 days after
the date of notice to the Trustee. Any such notice may be canceled at any time
prior to notice of such redemption being mailed to any Holder and shall thereby
be void and of no effect.
26
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all
--------------------------------------
the Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed pro rata or by lot or by a method that complies with applicable legal
and securities exchange requirements, if any, and that the Trustee in its sole
discretion shall deem to be fair and appropriate and in accordance with methods
generally used at the time of selection by fiduciaries in similar circumstances.
The Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them the Trustee selects shall be in amounts of $1,000 or a
whole multiple of $1,000. Provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 10 days but not more than 60
--------------------
days before a date for redemption of Securities, the Company shall mail a notice
of redemption by first-class mail to each Holder of Securities to be redeemed at
such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price and the amount of accrued interest to the
redemption date;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the certificate numbers and principal amounts of the particular Securities
to be redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the redemption date;
(7) the CUSIP number, if any, printed on the Securities being
redeemed; and
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
27
SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption
------------------------------
is mailed, Securities called for redemption become due and payable on the
redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest, if any, to the redemption
date; provided, however, that if the redemption date is after a regular record
-------- -------
date and on or prior to the interest payment date, the accrued interest shall be
payable to the Securityholder of the redeemed Securities registered on the
relevant record date. Failure to give notice or any defect in the notice to any
Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m. on the
---------------------------
redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption that have been delivered by the Company to the
Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security
---------------------------
that is redeemed in part, the Company shall execute and the Trustee shall
authenticate for the Holder (at the Company's expense) a new Security equal in
principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
COVENANTS
---------
SECTION 4.01. Payment of Securities. The Company shall promptly pay the
---------------------
principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate specified
therefor in the Securities, and it shall pay interest on overdue installments of
interest at the same rate to the extent lawful.
SECTION 4.02. Certain Reports and Certificates. At any time while any
--------------------------------
Securities are outstanding:
(a) Within 90 days after the end of each fiscal year, the Company shall
provide to the Trustee and Securityholders a Consolidated balance sheet of the
Company and the Restricted Subsidiaries as of the end of such fiscal year and
the related Consolidated statements of income, stockholders' equity and cash
flow of the Company and the Restricted Subsidiaries for such fiscal year,
setting forth in each case in comparative form the Consolidated figures for the
previous
28
fiscal year, all in reasonable detail and accompanied by (i) a report thereon of
independent certified public accountants of recognized national standing
selected by the Company stating that such Consolidated financial statements
fairly present the Consolidated financial position of the Company and the
Restricted Subsidiaries as of the date indicated and their results of operations
and cash flows for the periods indicated in conformity with GAAP (except as
otherwise stated therein) and that the examination by such accountants in
connection with such Consolidated financial statements has been made in
accordance with generally accepted auditing standards and (ii) a management's
discussion and analysis of financial condition and results of operations
substantially as would be required to be included in an annual report on Form
10-K if the Company were subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act;
(b) within 45 days after the end of each fiscal quarter (other than the
last fiscal quarter of any fiscal year) the Company shall provide to the Trustee
and Securityholders an unaudited Consolidated balance sheet of the Company and
the Restricted Subsidiaries as of the end of such quarter and the related
unaudited Consolidated statements of income, stockholders' equity and cash flow
for such quarter and the portion of the fiscal year ended at the end of such
quarter, setting forth in each case in comparative form the Consolidated figures
for the corresponding periods of the prior fiscal year, all in reasonable detail
and certified by the Company's chief financial officer as fairly presenting the
Consolidated financial condition of the Company and the Restricted Subsidiaries
as of the dates indicated, and their Consolidated results of operations and cash
flows for the periods indicated, in conformity with GAAP, subject to normal
year-end adjustments and the absence of footnotes;
(c) The Company and the Subsidiary Guarantors shall furnish to the Holders
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act;
(d) The Company shall deliver to the Trustee, the Calculation Agent and
the Securityholders, no later than the 45th day following the last day of each
fiscal quarter, a certificate signed by two Officers of the Company (the
"Quarterly Certificate") in the form attached hereto as Exhibit D setting forth
the following information: (i) the calculation of the Company's
Indebtedness/Total Capital Ratio as of the last day of such preceding fiscal
quarter, measured in accordance with GAAP on a Consolidated basis, (ii) the
current S&P Rating or Moody's Rating for each ACE USA Insurance Group as of the
date of such Quarterly Certificate, and (iii) based upon the calculation and
rating set forth respectively in (i) and (ii) above, the applicable interest
rate in effect for the next Pricing Period; and
(e) If, following delivery of a Quarterly Certificate during any fiscal
quarter pursuant to Section 4.02(d) and before the last day of such fiscal
quarter, any ACE USA Insurance Group is notified of any change in its S&P Rating
or Moody's Rating, the Company shall deliver to the Trustee, the Calculation
Agent and the Securityholders a certificate signed by two Officers of the
Company notifying the Trustee of such change in the S&P Rating or Moody's Rating
for such ACE USA Insurance Group (the "Ratings Certificate"), which certificate
shall be in the form of Exhibit E attached hereto and shall be delivered within
3 days of such ACE USA Insurance Group being notified by S&P or Moody's of the
same. Such Ratings Certificate shall set forth the
29
applicable interest rate in effect for the next Pricing Period taking into
account such change in the S&P Rating or Moody's Rating.
SECTION 4.03. Limitation on Indebtedness.
--------------------------
(a) The Company shall not, and shall not permit any Restricted Subsidiary
to, Incur, directly or indirectly, any Indebtedness; provided, however, that the
-------- -------
Company may Incur Indebtedness if after giving pro forma effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
therefrom, the Consolidated Coverage Ratio would be greater than 1.2 to 1.
(b) Notwithstanding Section 4.03(a), the Company and its Restricted
Subsidiaries may Incur the following Indebtedness:
(i) working capital Indebtedness of the Company or any Restricted
Subsidiary under any revolving credit facility in an aggregate principal
amount not to exceed $10,000,000 at any time outstanding;
(ii) Indebtedness of the Company owed to and held by any Restricted
Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by
the Company or any Restricted Subsidiary; provided, however, that (i) any
-------- -------
subsequent issuance or transfer of any Capital Stock or any other event
that results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any subsequent transfer of any such Indebtedness (except to
the Company or a Restricted Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer thereof and
(ii) if the Company is the obligor on such Indebtedness, such Indebtedness
is expressly subordinated to the prior payment in full of all obligations
with respect to the Securities;
(iii) Indebtedness (A) represented by the Securities and the
Subsidiary Guarantees (if any), (B) consisting of Refinancing Indebtedness
Incurred in respect of any Indebtedness described in this clause (iii)
(including Indebtedness Refinancing Refinancing Indebtedness) or Section
4.03(a) and (C) of the Company under the terms of the Subordinated Loan
Agreement, as in effect on the date hereof (without regard to any
amendments, supplements or other modifications not permitted by Section
4.17);
(iv) (A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted Subsidiary was
acquired by the Company (other than Indebtedness Incurred as consideration
in, or to provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related transactions
pursuant to which such Restricted Subsidiary became a Subsidiary or was
otherwise acquired by the Company); provided, however, that on the date
-------- -------
that such Restricted Subsidiary is acquired by the Company, the Company
would have been able to Incur $1.00 of additional Indebtedness pursuant to
Section 4.03(a) after giving effect to the Incurrence of such Indebtedness
pursuant to this clause (iv) and (B) Refinancing Indebtedness Incurred by a
Restricted Subsidiary in respect of Indebtedness Incurred by such
Restricted Subsidiary pursuant to this clause (iv);
30
(v) Indebtedness (A) of any Restricted Subsidiary evidenced by
letters of credit or performance, surety or appeal bonds (and related
reimbursement obligations) provided in the ordinary course of such
Restricted Subsidiary's insurance and reinsurance business, and (B) under
Interest Rate Agreements or Currency Agreements entered into for bona fide
hedging purposes of the Company in the ordinary course of business;
provided, however, that any such Interest Rate Agreements or Currency
-------- -------
Agreements do not increase the Indebtedness of the Company outstanding at
any time other than as a result of fluctuations in interest rates or by
reason of fees, indemnities and compensation payable thereunder;
(vi) Purchase Money Indebtedness and Capitalized Lease Obligations,
and Refinancing Indebtedness with respect thereto, in an aggregate
principal amount not in excess of $3,000,000 at any time outstanding;
(vii) Indebtedness of the Company (other than Indebtedness permitted
to be Incurred pursuant to Section 4.03(a) or any other clause of this
Section 4.03(b)) in an aggregate principal amount at any time outstanding
not to exceed $3,000,000;
(viii) Indebtedness of the Company, to the extent that the net
proceeds thereof are promptly deposited to defease all of the Securities as
provided in Article 8;
(ix)(A) Guarantees of the Securities and (B) Guarantees of
Indebtedness of the Company by any Restricted Subsidiary, in the case of
(B) if the Restricted Subsidiary or the Company, respectively, is permitted
to Incur such Indebtedness hereunder, provided that simultaneously with any
such Guarantee of Indebtedness by any Restricted Subsidiary, a Subsidiary
Guarantee shall be made to each Holder and to the Trustee in accordance
with Section 4.11 and Article 10 hereof;
(x) Non-Recourse Debt of any Unrestricted Subsidiary; provided,
--------
however, that if any such Non-Recourse Debt ceases to be Non-Recourse Debt
-------
of an Unrestricted Subsidiary, such event shall be deemed to constitute an
Incurrence of Indebtedness by a Restricted Subsidiary of the Company that
was not permitted by this clause (x); and
(xi) Qualified Subordinated Debt of the Company; provided, however,
-------- -------
that if any such Indebtedness ceases to be Qualified Subordinated Debt,
such event shall be deemed to constitute an Incurrence of Indebtedness by
the Company that was not permitted by this clause (xi).
(c) Notwithstanding the foregoing, the Company shall not, and shall not
permit any Restricted Subsidiary to Incur any Indebtedness pursuant to Section
4.03(b) above if the proceeds thereof are used, directly or indirectly, to
repay, prepay, redeem, defease, retire, refund or refinance any Subordinated
Obligations unless such Indebtedness shall be subordinated to the Securities to
at least the same extent as such Subordinated Obligations.
(d) Notwithstanding any other provision of this Section 4.03, the maximum
amount of Indebtedness that the Company or any Restricted Subsidiary may Incur
pursuant to this
31
Section shall not be deemed to be exceeded solely as a result of fluctuations in
the exchange rates of currencies. For purposes of determining the outstanding
principal amount of any particular Indebtedness Incurred pursuant to this
Section 4.03, (i) Indebtedness permitted by this Section 4.03 need not be
permitted solely by reference to one provision permitting such Indebtedness but
may be permitted in part by one such provision and in part by one or more other
provisions of this Section permitting such Indebtedness and (ii) in the event
that Indebtedness meets the criteria of more than one of the types of
Indebtedness described in this Section, the Company, in its sole discretion,
shall classify such Indebtedness and only be required to include the amount of
such Indebtedness in one of such clauses.
SECTION 4.04. Limitation on Restricted Payments. (a) The Company shall
---------------------------------
not, and shall not permit any Restricted Subsidiary, directly or indirectly, to
(i) declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving the Company) or similar payment to the direct or
indirect holders of its Capital Stock except dividends or distributions payable
solely in its Capital Stock (other than Disqualified Stock) and except dividends
or distributions payable to the Company or another Restricted Subsidiary (and,
if such Restricted Subsidiary has shareholders other than the Company or other
Restricted Subsidiaries, to its other shareholders on a pro rata basis), (ii)
purchase, redeem, retire or otherwise acquire for value any Capital Stock of the
Company or any Restricted Subsidiary held by Persons other than the Company or
another Restricted Subsidiary (except in the case of the Company or any
Restricted Subsidiary acquiring (1) all of the remaining Capital Stock of any
Restricted Subsidiary listed on Schedule 4.04 not owned by the Company or any
Restricted Subsidiary or (2) Capital Stock of a Restricted Subsidiary pursuant
to an agreement listed on Schedule 4.04), (iii) purchase, repurchase, redeem,
defease or otherwise acquire or retire for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment any Subordinated
Obligations (other than the purchase, repurchase or other acquisition of
Subordinated Obligations (other than Qualified Subordinated Debt) purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition), or
(iv) make any Investment (other than a Permitted Investment) in any Person (any
such dividend, distribution, purchase, redemption, repurchase, defeasance, other
acquisition, retirement or Investment being herein referred to as a "Restricted
Payment") if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company could not Incur at least $1.00 of additional
Indebtedness under Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a resolution of the Board of
Directors) declared or made subsequent to the Closing Date would exceed the
sum of:
32
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter during which the Closing Date occurs to the end of the most
recent fiscal quarter ending at least 45 days prior to the date of
such Restricted Payment and for which financial statements are
available (or, in case such Consolidated Net Income shall be a
deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from
the issue or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Closing Date (other than an issuance or sale to (x)
a Subsidiary of the Company or (y) an employee stock ownership plan or
other trust established by the Company or any of its Subsidiaries);
(C) the amount by which Indebtedness of the Company or its
Restricted Subsidiaries is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary of the Company
subsequent to the Closing Date) of any Indebtedness of the Company or
its Restricted Subsidiaries convertible or exchangeable for Capital
Stock (other than Disqualified Stock) of the Company (less the amount
of any cash or the fair market value of other property distributed by
the Company or any Restricted Subsidiary upon such conversion or
exchange); and
(D) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (i) payments of dividends,
repayments of the principal of loans or advances or other transfers of
assets to the Company or any Restricted Subsidiary from Unrestricted
Subsidiaries or (ii) the redesignation of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the
definition of "Investment") not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made by
the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary, which amount was included in the calculation of the amount
of Restricted Payments.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any Restricted Payment made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of the
Company (other than Disqualified Stock and other than Capital Stock issued
or sold to a Subsidiary of the Company or an employee stock ownership plan
or other trust established by the Company or any of its Subsidiaries);
provided, however, that (A) such Restricted Payment shall be excluded in
-------- -------
the calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale applied in the manner set forth in this clause (i)
shall be excluded from the calculation of amounts under clause (3)(B) of
Section 4.04(a);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations (other than
Qualified Subordinated Debt) of the Company made by exchange for, or out of
the proceeds of the substantially
33
concurrent sale of, Indebtedness of the Company that is permitted to be
Incurred pursuant to Section 4.03; provided, however, that such purchase
-------- -------
repurchase, redemption, defeasance or other acquisition or retirement for
value shall be excluded in the calculation of the amount of Restricted
Payments;
(iii) any purchase or redemption of Subordinated Obligations (other
than Qualified Subordinated Debt) from Net Available Cash to the extent
permitted by Section 4.06; provided, however, that such purchase or
-------- -------
redemption shall be excluded in the calculation of the amount of Restricted
Payments;
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 4.04(a); provided, however, that such dividend shall be
-------- -------
included (without duplication) in the calculation of the amount of
Restricted Payments;
(v) the repurchase or other acquisition of shares of, or options to
purchase shares of, common stock of the Company or any of its Subsidiaries
from employees, former employees, directors or former directors of the
Company or any of its Subsidiaries (or permitted transferees of such
employees, former employees, directors or former directors), pursuant to
the terms of the agreements (including employment agreements) or plans (or
amendments thereto) approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to purchase or sell,
shares of such common stock; provided, however, that the aggregate amount
-------- -------
of such repurchases shall not exceed $500,000 in any calendar year;
provided further, however, that such repurchases and other acquisitions
---------------- -------
shall be excluded in the calculation of the amount of Restricted Payments;
or
(vi) Restricted Payments in an aggregate amount not in excess of
$5,000,000.
SECTION 4.05. Limitation on Restrictions on Distributions from Restricted
-----------------------------------------------------------
Subsidiaries. The Company shall not, and shall not permit any Restricted
- ------------
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligations owed to the Company, (ii)
make any loans or advances to the Company or (iii) transfer any of its property
or assets to the Company, except:
(1) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Closing Date;
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness Incurred as
consideration in, in contemplation of, or to provide all or any portion of
the funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted Subsidiary
34
became a Restricted Subsidiary or was otherwise acquired by the Company)
and outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement effecting
a Refinancing of Indebtedness Incurred pursuant to an agreement referred to
in clause (1) or (2) of this Section 4.05 or this clause (3) or contained
in any amendment to an agreement referred to in clause (1) or (2) of this
Section 4.05 or this clause (3); provided, however, that the encumbrances
-------- -------
and restrictions contained in any such refinancing agreement or amendment
are no less favorable to the Securityholders than the encumbrances and
restrictions contained in such predecessor agreements;
(4) in the case of clause (iii), any encumbrance or restriction (A)
that restricts in a customary manner the subletting, assignment or transfer
of any property or asset that is subject to a lease, license or similar
contract, (B) that is or was created by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any
property or assets of the Company or any Restricted Subsidiary not
otherwise prohibited by this Indenture or (C) contained in security
agreements securing Indebtedness of a Restricted Subsidiary to the extent
such encumbrance or restriction restricts the transfer of the property
subject to such security agreements;
(5) with respect to a Restricted Subsidiary, any restriction imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and
(6) any encumbrance or restriction imposed after the Closing Date by
any applicable insurance or any other law or regulation or imposed by order
of or agreement with any governmental authority; provided, however, that
-------- -------
the Company and its Subsidiaries have used all reasonable efforts to have
any such order or agreement diminished or removed by the relevant
governmental authority with authority to effect such diminishing or removal
and to obtain any exemptive order from the relevant governmental authority
with authority to issue, or effect the issuance of, such an exemptive order
with respect to any such encumbrance or restriction to the extent such an
exemptive order is reasonably suitable under applicable laws and
regulations.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. (a) The
--------------------------------------------------
Company shall not, and shall not permit any Restricted Subsidiary to, make any
Asset Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person assuming
sole responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the fair market value (as determined
in good faith by the Company's Board of Directors) of the shares and assets
subject to such Asset Disposition, (ii) at least 75% of the consideration
thereof received by the Company or such Restricted Subsidiary is in the form of
cash and (iii) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted Subsidiary, as the
case may be) (A) first, within 360 days after the later of the date of such
-----
Asset Disposition or the receipt of such Net Available Cash, to, at the
Company's or such Restricted
35
subsidiary's option, (1) prepay, repay, redeem or purchase unsubordinated
Indebtedness of the Company or Indebtedness (other than any Disqualified Stock)
of a Restricted Subsidiary (in each case other than Indebtedness owed to the
Company or an Affiliate of the Company) or (2) reinvest in Additional Assets
(including by means of an Investment in Additional Assets by a Restricted
Subsidiary with Net Available Cash received by the Company or another Restricted
Subsidiary); (B) second, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B), to make an Offer to
purchase Securities pursuant to and subject to the conditions of Section
4.06(b), provided, however, that if the Company elects (or is required by the
-------- -------
terms of any unsubordinated Indebtedness), such Offer may be made ratably to
purchase the Securities and other unsubordinated Indebtedness of the Company,
and (C) third, to the extent of the balance of such Net Available Cash after
-----
application in accordance with clauses (A), (B) and (C), to (x) acquire
Additional Assets (other than Indebtedness and Capital Stock) or (y) prepay,
repay or purchase Indebtedness of the Company (other than Indebtedness owed to
an Affiliate of the Company and other than Disqualified Stock of the Company) or
Indebtedness of any Restricted Subsidiary (other than Indebtedness owed to the
Company or an Affiliate of the Company), in each case described in this clause
(C) within 450 days from the receipt of such Net Available Cash or, if the
Company has made an Offer pursuant to Section 4.06(b), six months from the date
such Offer is consummated; provided, however, that in connection with any
-------- -------
prepayment, repayment or purchase of Indebtedness pursuant to clause (A), (B) or
(C) above, the Company or such Restricted Subsidiary shall permanently retire
such Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions of this Section
4.06, the Company and the Restricted Subsidiaries shall not be required to apply
any Net Available Cash in accordance with this Section 4.06(a) except to the
extent that the aggregate Net Available Cash from all Asset Dispositions that is
not applied in accordance with this Section 4.06(a) exceeds $10,000,000. For the
purposes of this Section 4.06, the following are deemed to be cash: (x) the
assumption of unsubordinated Indebtedness of the Company (other than
Disqualified Stock of the Company) or any Restricted Subsidiary and the release
of the Company or such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition and (y) securities
received by the Company or any Restricted Subsidiary from the transferee that
are converted by the Company or such Restricted Subsidiary into cash within 60
days of the issuance thereof.
(b) In the event of an Asset Disposition that requires the purchase of
Securities (and other unsubordinated Indebtedness) pursuant to Section
4.06(a)(iii)(B), the Company shall be required to purchase Securities (and other
unsubordinated Indebtedness) tendered pursuant to an offer by the Company for
the Securities (and other unsubordinated Indebtedness) (the "Offer") at a
purchase price of 100% of their principal amount plus accrued and unpaid
interest, if any, to the date of purchase in accordance with the procedures
(including prorationing in the event of oversubscription) set forth in Section
4.06(c). If the aggregate purchase price of Securities (and other
unsubordinated Indebtedness) tendered pursuant to the Offer is less than the
Net Available Cash allotted to the purchase of the Securities (and other
unsubordinated Indebtedness), the Company shall apply the remaining Net
Available Cash in accordance with Section 4.06(a)(iii)(C). The Company shall
not be required to make an Offer for Securities (and other unsubordinated
Indebtedness) pursuant to this Section 4.06 if the Net Available Cash
36
available therefor (after application of the proceeds as provided in clause (A)
of Section 4.06(a)(iii)) is less than $2,500,000 for any particular Asset
Disposition (which lesser amount shall be carried forward for purposes of
determining whether an Offer is required with respect to the Net Available Cash
from any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within 10 days after the Company
becomes obligated to make an Offer, the Company shall be obligated to deliver to
the Trustee and send, by first-class mail to each Holder, a written notice
stating that the Holder may elect to have his Securities purchased by the
Company either in whole or in part (subject to prorationing as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The notice shall
specify a purchase date not less than 30 days nor more than 60 days after the
date of such notice (the "Purchase Date") and shall contain such information
concerning the business of the Company which the Company in good faith believes
will enable such Holders to make an informed decision (which at a minimum shall
include (i) the most recent annual and quarterly financial statements and
management's discussion and analysis of financial condition and results of
operation required to be delivered to the Securityholders pursuant to Section
4.02, (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements, and (iii) if
material, appropriate pro forma financial information) and all instructions and
materials necessary to tender Securities pursuant to the Offer, together with
the address referred to in clause (3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, the Company shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer
Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the compliance
of such allocation with the provisions of Section 4.06(a). On such date, the
Company shall also irrevocably deposit with the Trustee or with a paying agent
(or, if the Company is acting as its own paying agent, segregate and hold in
trust) an amount equal to the Offer Amount to be invested in Temporary Cash
Investments and to be held for payment in accordance with the provisions of this
Section. Upon the expiration of the period for which the Offer remains open (the
"Offer Period"), the Company shall deliver to the Trustee for cancellation the
Securities or portions thereof that have been properly tendered to and are to be
accepted by the Company. The Trustee (or the Paying Agent, if not the Trustee)
shall, on the date of purchase, mail or deliver payment to each tendering Holder
in the amount of the purchase price. In the event that the aggregate purchase
price of the Securities (and other unsubordinated Indebtedness) delivered by the
Company to the Trustee is less than the Offer Amount applicable to the
Securities (and other unsubordinated Indebtedness), the Trustee shall deliver
the excess to the Company immediately after the expiration of the Offer Period
for application in accordance with this Section 4.06.
(3) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders shall be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the Purchase Date, a telegram, telex, facsimile transmission or letter setting
37
forth the name of the Holder, the principal amount of the Security which was
delivered by the Holder for purchase and a statement that such Holder is
withdrawing his election to have such Security purchased. If at the expiration
of the Offer Period the aggregate principal amount of Securities (and other
unsubordinated Indebtedness) included in the Offer surrendered by holders
thereof exceeds the Offer Amount, the Company shall select the Securities (and
other unsubordinated Indebtedness) to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only
Securities (and other unsubordinated Indebtedness) in denominations of $1,000,
or integral multiples thereof, shall be purchased). Holders whose Securities are
purchased only in part will be issued new Securities equal in principal amount
to the unpurchased portion of the Securities surrendered.
(4) At the time the Company delivers Securities to the Trustee which
are to be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Security shall
be deemed to have been accepted for purchase at the time the Trustee, directly
or through an agent, mails or delivers payment therefor to the surrendering
Holder.
(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.07. Limitation on Transactions with Affiliates.
------------------------------------------
(a) The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into or conduct any transaction (including,
the purchase, sale, lease or exchange of any property employee compensation
arrangements or the rendering of any service) with any Affiliate of the Company
(an "Affiliate Transaction") on terms (i) that are less favorable to the Company
or such Restricted Subsidiary, as the case may be, than those that could be
obtained at the time of such transaction in arm's-length dealings with a Person
who is not such an Affiliate, (ii) if such Affiliate Transaction involves an
aggregate amount in excess of $3,000,000, (1) are set forth in writing and (2)
have been approved by a majority of the members of the Board of Directors having
no personal stake in such Affiliate Transaction and (iii) if such Affiliate
Transaction involves an amount in excess of $15,000,000 have been determined by
a nationally recognized appraisal or investment banking firm to be fair, from a
financial standpoint, to the Company and its Restricted Subsidiaries; provided
that clause (iii) shall not apply to reinsurance transactions with any Affiliate
of the Company in the ordinary course of business.
(b) The provisions of Section 4.07(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors, (iii) the
grant of stock options or similar rights to employees and directors of the
Company
38
pursuant to plans approved by the Board of Directors, (iv) loans or advances to
employees in the ordinary course of business in accordance with past practices
of the Company, (v) the payment of reasonable fees to directors of the Company
and its Subsidiaries who are not employees of the Company or its Subsidiaries or
(vi) any transaction between the Company and a Restricted Subsidiary or between
Restricted Subsidiaries.
SECTION 4.08. Change of Control.
-----------------
(a) Upon a Change of Control, each Holder shall have the right to require
that the Company repurchase all or any part of such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date), in accordance with the terms
contemplated in Section 4.08(b); provided, however, that notwithstanding the
-------- -------
occurrence of a Change in Control, the Company shall not be obligated to
purchase the Securities pursuant to this Section 4.08 in the event that it has
exercised its right to redeem all the Securities under paragraph 5 of the
Securities. In the event that at the time of such Change of Control the terms
of any Bank Indebtedness restrict or prohibit the repurchase of Securities
pursuant to this Section 4.08, then prior to the mailing of the notice to
Holders provided for in Section 4.08(b) below but in any event within 30 days
following any Change of Control, the Company shall (i) repay in full all Bank
Indebtedness or offer to repay in full all Bank Indebtedness and repay the Bank
Indebtedness of each lender who has accepted such offer or (ii) obtain the
requisite consent under the agreements governing the Bank Indebtedness to permit
the repurchase of the Securities as provided for in Section 4.08(b).
(b) Within 30 days following any Change of Control (except as provided in
the proviso to the first sentence of Section 4.08(a)), the Company shall mail a
notice to each Holder with a copy to the Trustee (the "Change of Control Offer")
stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase (subject to
the right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date);
(2) the circumstances and relevant facts and financial information
regarding such Change of Control;
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with this
Section, that a Holder must follow in order to have its Securities
purchased.
(c) Holders electing to have a Security purchased shall be required to
surrender the Security, with an appropriate form duly completed, to the Company
at the address specified in
39
the notice at least three Business Days prior to the purchase date. Holders
shall be entitled to withdraw their election if the Trustee or the Company
receives not later than one Business Day prior to the purchase date a telegram,
telex, facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Security which was delivered for purchase by the
Holder and a statement that such Holder is withdrawing his election to have such
Security purchased.
(d) On the purchase date, all Securities purchased by the Company under
this Section shall be delivered to the Trustee for cancellation, and the Company
shall pay the purchase price plus accrued and unpaid interest, if any, to the
Holders entitled thereto.
(e) Notwithstanding the foregoing provisions of this Section, the Company
will not be required to make a Change of Control Offer upon a Change of Control
if a third party makes the Change of Control Offer in the manner, at the times
and otherwise in compliance with the requirements set forth in Section 4.08(b)
applicable to a Change of Control Offer made by the Company and purchases all
Securities validly tendered and not withdrawn under such Change of Control
Offer.
(f) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 4.09. Compliance Certificate. The Company shall deliver to the
----------------------
Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto.
SECTION 4.10. Further Instruments and Acts. Upon request of the Trustee,
----------------------------
the Company shall execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.11. Future Subsidiary Guarantors. The Company shall cause each
----------------------------
Restricted Subsidiary (other than a Subsidiary Guarantor) not to Guarantee any
Indebtedness of the Company, unless such Restricted Subsidiary, simultaneously
therewith, becomes a Subsidiary Guarantor, and executes and delivers to the
Trustee a supplemental indenture substantially in the form of Exhibit B pursuant
to which such Restricted Subsidiary will Guarantee payment of the Securities.
Concurrently with the execution and delivery of such supplemental indenture, the
Company shall deliver to the Trustee an Opinion of Counsel and an Officers'
Certificate to the effect that such supplemental indenture has been duly
authorized, executed and delivered by such Subsidiary and that, subject to the
application of bankruptcy, insolvency, moratorium, fraudulent conveyance or
transfer and other similar laws relating to creditors' rights generally and to
the
40
principles of equity, whether considered in a proceeding at law or in equity,
the Subsidiary Guarantee of such Subsidiary Guarantor is a legal, valid and
binding obligation of such Subsidiary Guarantor, enforceable against such
Subsidiary Guarantor in accordance with its terms. Each Subsidiary Guarantee
shall be limited to an amount not to exceed the maximum amount that can be
Guaranteed by that Restricted Subsidiary without rendering the Subsidiary
Guarantee, as it relates to such Restricted Subsidiary, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
SECTION 4.12. Limitation on Lines of Business. The Company shall not, and
-------------------------------
shall not permit any Restricted Subsidiary to, engage in any business, other
than a Related Business.
SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of
------------------------------------------------------
Restricted Subsidiaries. The Company shall not sell or otherwise dispose of any
- -----------------------
shares of Capital Stock of a Restricted Subsidiary, and shall not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any shares of its Capital Stock except: (i) to the Company or a
Wholly Owned Subsidiary; (ii) if, immediately after giving effect to such
issuance, sale or other disposition, neither the Company nor any of its
Subsidiaries own any Capital Stock of such Restricted Subsidiary or (iii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any Investment
in such Person remaining after giving effect thereto would have been permitted
to be made under Section 4.04 if made on the date of such issuance, sale or
other disposition. The proceeds of any sale of such Capital Stock permitted
hereby shall be treated as Net Available Cash from an Asset Disposition and
shall be applied in accordance with Section 4.06.
SECTION 4.14. Limitation on Liens. The Company shall not, and shall not
-------------------
permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to
exist any Lien of any nature whatsoever on any of its property or assets
(including Capital Stock of a Restricted Subsidiary), whether owned at the
Closing Date or thereafter acquired, other than Permitted Liens, without
effectively providing that the Securities shall be secured equally and ratably
with (or prior to) the obligations so secured equally and ratably with (or prior
to) the obligations so secured for so long as such obligations are so secured.
SECTION 4.15. Use of Proceeds. On the Closing Date, the Company shall
---------------
apply the net proceeds from the issuance of the Securities to the repayment of
all amounts outstanding under the credit agreement dated as of December 11, 1997
among the Company, Parent, the Banks listed therein and Morgan Guaranty Trust
Company of New York, as administrative agent, and J.P. Morgan Securities, Inc.
and Mellon Bank N.A. acting as co-arrangers.
SECTION 4.16. Financial Strength Rating. The Company shall cause the ACE
--------------------------
USA Insurance Group to maintain at all times either a S&P Rating or a Moody's
Rating.
SECTION 4.17. Maintenance of Subordinated Loan Agreement. (a) The
-------------------------------------------
Company shall maintain in full force and effect at all times the Subordinated
Loan Agreement, and shall not amend, supplement or otherwise modify (i) Section
2 of the Subordinated Loan Agreement or (ii) any other provision of the
Subordinated Loan Agreement in any manner that has the effect of
41
decreasing the amount of the Commitment (as defined in the Subordinated Loan
Agreement), increasing the interest rate or cash payment portion of the
interest, changing the terms of subordination, advancing the time for payment of
any payment owing under the Subordinated Loan Agreement including without
limitation any principal or interest due thereunder, shortening the term of the
Commitment or the Subordinated Loan Agreement or is otherwise adverse to
Securityholders in any material respect.
(b) The Company shall not make any payment of principal of or interest on
any loans under the Subordinated Loan Agreement, except as permitted by Section
4 thereof.
ARTICLE 5
Successor Company, Etc.
-----------------------
SECTION 5.01. When Company and Subsidiary Guarantors May Merge or Transfer
------------------------------------------------------------
Assets.
- ------
(a) The Company shall not consolidate with or merge with or into, or
convey, transfer or lease all or substantially all its assets to, any Person,
unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia
and the Successor Company (if not the Company) shall expressly assume, by
an indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the Company under
the Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Restricted Subsidiary as a result of such transaction as
having been Incurred by the Successor Company or such Restricted Subsidiary
at the time of such transaction), no Default shall have occurred and be
continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction; and
(v) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
The Successor Company shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture, but the
predecessor Company in the case
42
of a conveyance, transfer or lease of all or substantially all its assets shall
not be released from the obligation to pay the principal of and interest on the
Securities.
(b) The Company shall not permit any Subsidiary Guarantor to consolidate
with or merge with or into, or convey, transfer or lease, in one transaction or
series of transactions, all or substantially all of its assets to any Person
unless: (i) the resulting, surviving or transferee Person (if not such
Subsidiary Guarantor) shall be a Person organized and existing under the laws of
the jurisdiction under which such Subsidiary was organized or under the laws of
the United States of America, or any State hereof or the District of Columbia,
and such Person shall expressly assume, by an amendment to this Indenture, in a
form acceptable to the Trustee, all the obligations of such Subsidiary
Guarantor, if any, under its Subsidiary Guarantee; (ii) immediately after giving
effect to such transaction or transactions on a pro forma basis (and treating
any Indebtedness which becomes an obligation of the resulting, surviving or
transferee Person as a result of such transaction as having been issued by such
Person at the time of such transaction), no Default shall have occurred and be
continuing; and (iii) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such amendment to this Indenture, if any, complies with
this Indenture.
(c) Notwithstanding the foregoing clauses (iii) and (iv) of paragraph (a)
above, (i) any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Company and (ii) the
Company may merge with an Affiliate incorporated solely for the purpose of
reincorporating the Company in another jurisdiction to realize tax or other
benefits.
ARTICLE 6
Defaults And Remedies
---------------------
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
-----------------
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, and such default continues for a
period of 30 days;
(2) the Company (i) defaults in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration or otherwise, or (ii) fails to redeem or
purchase Securities when required pursuant to this Indenture or the
Securities;
(3) the Company or any Subsidiary Guarantor fails to comply with
Section 5.01;
(4) the Company or any Subsidiary Guarantor fails to comply with
Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14,
4.15 or 4.17 (other than a failure to purchase Securities when required
under Section 4.06 or 4.08) and such failure continues for 30 days after
the notice specified below;
43
(5) the Company or any Subsidiary Guarantor fails to comply with any
of its agreements in the Securities or this Indenture (other than those
referred to in (1), (2), (3) or (4) above) and such failure continues for
60 days after the notice specified below;
(6) Indebtedness of the Company or any Restricted Subsidiary is not
paid within any applicable grace period after final maturity or the
acceleration by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $10.0 million or
its foreign currency equivalent at the time and such failure continues for
10 days after the notice specified below;
(7) the Company or any Restricted Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to insolvency;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Restricted
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Restricted Subsidiary;
or any similar relief is granted under any foreign laws and the order or decree
remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in excess of
$10.0 million or its foreign currency equivalent at the time is entered
against the Company or any Restricted Subsidiary and is not discharged,
waived or stayed and either (A) an enforcement proceeding has been
commenced by any creditor upon such judgment or decree or (B) there is a
period of 60 days following the entry of such judgment or decree during
which such judgment or decree is not discharged, waived or the execution
thereof stayed;
44
(10) any Subsidiary Guarantee shall cease to be in full force and
effect (except as contemplated by the terms thereof) or any Subsidiary
Guarantor or Person acting by or on behalf of such Subsidiary Guarantor
shall deny or disaffirm its obligations under this Indenture or any
Subsidiary Guarantee and such Default continues for 10 days after the
notice specified below; or
(11) any failure of the Company to comply with its covenants and
obligations under the Subordinated Loan Agreement and such failure
continues for 30 days after the notice specified below.
The foregoing shall constitute Events of Default whatever the reason for
any such Event of Default and whether it is voluntary or involuntary or is
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.
The term "Bankruptcy Law" means Title 11, United States Code, or any
------------------
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (4), (5), (6) or (11) above is not an Event of
Default until the Trustee or the Holders of at least 25% in principal amount of
the outstanding Securities notify the Company of the Default and the Company
does not cure such Default within the time specified after receipt of such
notice. Such notice must specify the Default, demand that it be remedied and
state that such notice is a "Notice of Default" (a "Notice of Default"). Upon
receipt by the Trustee of written notice of a Default under clause (4), (5), (6)
or (11) above from the Company or any Securityholder, or upon any Trust Officer
obtaining actual knowledge of such event, the Trustee shall send a Notice of
Default to the Company.
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (3), (7) or (8) and any event which with the
giving of notice or the lapse of time would become an Event of Default under any
other clause of this Section 6.01, its status and what action the Company is
taking or proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an Event
------------
of Default specified in Section 6.01(7) or (8) with respect to the Company)
occurs and is continuing, the Trustee by notice to the Company, or the Holders
of at least 25% in principal amount of the outstanding Securities by notice to
the Company, may declare the principal of and accrued but unpaid interest on all
the Securities to be due and payable. Upon such a declaration, such principal
and interest shall be due and payable immediately. If an Event of Default
specified in Section 6.01(7) or (8) with respect to the Company occurs, the
principal of and interest on all the Securities shall ipso facto become and be
---- -----
immediately due and payable without any declaration or other act on the part of
the Trustee or any Securityholders. The Holders of a majority in principal
amount of the Securities by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest
45
that has become due solely because of acceleration. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture. In addition, if an Event of
Default occurs and is continuing, the Trustee will, unless otherwise directed by
written request by the Holders of a majority in principal amount of the
outstanding Securities, request subordinated loans to made by the lender under
the Subordinated Loan Agreement to be applied as specified in Section 6.10.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
-----------------------
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
principal of or interest on a Security, (ii) a Default arising from the failure
to redeem or purchase any Security when required pursuant to the terms of this
Indenture or (iii) a Default in respect of a provision that under Section 9.02
cannot be amended without the consent of each Securityholder affected. When a
Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in principal
-------------------
amount of the Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture or, subject to Section 7.01,
that the Trustee or any Trust Officer determines is unduly prejudicial to the
rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
-------- -------
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right to receive
-------------------
payment of principal, premium (if any) or interest when due, no Securityholder
may pursue any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the Securities
make a written request to the Trustee to pursue the remedy;
46
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities
do not give the Trustee a direction inconsistent with the request during
such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any
------------------------------------
other provision of this Indenture, the right of any Holder to receive payment of
principal of and liquidated damages and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
--------------------------
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such
--------------------------------
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and the Securityholders allowed in
any judicial proceedings relative to the Company, any Subsidiary or Subsidiary
Guarantor, their creditors or their property and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or property
----------
pursuant to this Article 6, it shall pay out the money or property in the
following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, and any liquidated damages
without preference or priority of any kind, according to the amounts due
and payable on the Securities for principal, any liquidated damages and
interest, respectively; and
47
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Trustee shall mail to each Securityholder and the Company a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of
---------------------
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Company nor
--------------------------------
any Subsidiary Guarantor (to the extent it may lawfully do so) shall at any time
insist upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company and each Subsidiary Guarantor (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and shall not hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE 7
Trustee
-------
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred
-----------------
and is continuing of which a Trust Officer has actual knowledge, the Trustee
shall exercise the rights and powers vested in it by this Indenture and use the
same degree of care and skill in their exercise as a prudent Person would
exercise or use under the circumstances in the conduct of such Person's own
affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements
48
of this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b)and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that repayment of such funds or
indemnity satisfactory to it against such risk or liability is not reasonably
assured to it.
(h) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section.
(i) In the event that the Trustee is also acting as Calculation Agent,
Paying Agent, Transfer Agent, Registrar or Securities Custodian hereunder, the
protections of this Article 7 shall also be afforded to the Paying Agent,
Transfer Agent, Registrar or Securities Custodian hereunder.
SECTION 7.02. Rights of Trustee.
-----------------
(a) The Trustee may conclusively rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require and
shall be entitled to receive an Officers' Certificate or an Opinion of Counsel.
The Trustee shall not be liable for
49
any action it takes or omits to take in good faith in reliance on the Officers'
Certificate or Opinion of Counsel.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties either directly or by or through agents, attorneys,
custodians or nominees and shall not be responsible for the misconduct or
negligence of any agent, attorney, custodian or nominee appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute
-------- -------
willful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, debenture,
note or other paper or document unless requested in writing to do so by the
Holders of not less than a majority in principal amount of the Securities at the
time outstanding, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney.
(g) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Securityholders pursuant to this Indenture, unless such Securityholders
shall have offered to the Trustee security or indemnity satisfactory to it
against the cost, expenses (including reasonable legal fees and expenses) and
liabilities that might be incurred by it in compliance with such request or
direction.
(h) The Trustee shall not be charged with knowledge of an Event of Default
unless a Trust Officer obtains actual knowledge of such event or the Trustee
receives written notice of such event from the Company or any Securityholder.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual
----------------------------
or any other capacity may become the owner or pledgee of Securities and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not Trustee. Any Paying Agent, Registrar or co-paying agent may
do the same with like rights. However, the Trustee must comply with Sections
7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible
--------------------
for and makes no representation as to the validity or adequacy of this Indenture
or the Securities, it shall not be accountable for the Company's use of the
proceeds from the Securities, and it shall not be responsible for any statement
of the Company in this Indenture or in any document issued in
50
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication. The Trustee shall have no obligation
or liability on respect of monitoring the compliance by the Company of the
provisions of this Indenture.
SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing
------------------
and if it is actually known to any Trust Officer or the Trustee has received
written notice of such event from the Company or any Securityholder, the Trustee
shall mail to each Securityholder notice of the Default within the earlier of 90
days after it occurs or 30 days after it is known to a Trust Officer or the
receipt of such notice, as the case may be. Except in the case of a Default in
payment of principal of or interest on any Security (including payments pursuant
to the mandatory redemption provisions of such Security, if any), the Trustee
may withhold the notice if and so long as a committee of its Trust Officers in
good faith determines that withholding the notice is in the interests of
Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable
-----------------------------
after receipt, the Trustee shall mail to each Securityholder a copy of any
Quarterly Certificate or Ratings Certificate which has been received by the
Trustee.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to the
--------------------------
Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company and each Subsidiary Guarantor, jointly and severally shall
indemnify the Trustee against any and all loss, liability or expense (including
reasonable attorneys' fees and expenses) incurred by or in connection with the
administration of this trust and the performance of its their duties hereunder.
The Trustee shall notify the Company of any claim for which it may seek
indemnity promptly upon obtaining actual knowledge thereof, provided, however,
-------- -------
that any failure so to notify the Company shall not relieve the Company or any
Subsidiary Guarantor of its indemnity obligations hereunder. The Company shall
defend the claim and the indemnified party shall provide reasonable cooperation
at the Company's expense in the defense. Such indemnified parties may have
separate counsel and the Company and the Subsidiary Guarantors, as applicable
shall pay the reasonable fees and expenses of such counsel; provided, however,
-------- -------
that the Company shall not be required to pay such fees and expenses if it
assumes such indemnified parties' defense and, in such indemnified parties'
reasonable judgment, there is no conflict of interest between the Company and
the Subsidiary Guarantors, as applicable, and such parties in connection with
such defense. The Company need not reimburse any expense or indemnify against
any loss, liability or expense incurred by an indemnified party (including the
Trustee) through such party's own willful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the Trustee
shall have a lien prior to the Securities on all money or property held or
collected by the Trustee other than money or property held in trust to pay
principal of and interest and any liquidated damages on particular Securities.
51
The Company's payment obligations pursuant to this Section shall survive
the satisfaction or discharge of this Indenture, any rejection or termination of
this Indenture under any bankruptcy law or the resignation or removal of the
Trustee. When the Trustee incurs expenses after the occurrence of a Default
specified in Section 6.01(7) or (8) with respect to the Company, the expenses
are intended to constitute expenses of administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time
----------------------
by so notifying the Company. The Holders of a majority in principal amount of
the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of a
majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Securityholders. The retiring Trustee shall promptly transfer all property held
by it as Trustee to the successor Trustee, subject to the lien provided for in
Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section,
the Company's obligations under Section 7.07 shall continue for the benefit of
the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates
---------------------------
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to,
52
another corporation or banking association, the resulting, surviving or
transferee corporation without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. Notwithstanding that the TIA
-----------------------------
does not apply to this Indenture, the Trustee shall have a combined capital and
surplus of at least $100,000,000 as set forth in its most recent published
annual report of condition. Notwithstanding that the TIA does not apply to this
Indenture, the Trustee shall comply with TIA Section 310(b); provided, however,
-------- -------
that there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities or certificates of interest
or participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company
-------------------------------------------------
Notwithstanding that the TIA does not apply to this Indenture, the Trustee shall
comply with TIA Section 311(a), excluding any creditor relationship listed in
TIA 311(b). A Trustee who has resigned or been removed shall be subject to TIA
Section 311(a) to the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) When
------------------------------------------------
(i) the Company delivers to the Trustee all outstanding Securities (other than
Securities replaced pursuant to Section 2.08) for cancellation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 3 hereof,
and the Company irrevocably deposits with the Trustee funds or U.S. Government
Obligations on which payment of principal and interest when due will be
sufficient to pay at maturity or upon redemption all outstanding Securities,
including interest thereon to maturity or such redemption date (other than
Securities replaced pursuant to Section 2.08), and if in either case the Company
pays all other sums payable hereunder by the Company, then this Indenture shall,
subject to Section 8.01(c), cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the
Company accompanied by an Officers' Certificate and an Opinion of Counsel
stating that all conditions precedent to such satisfaction and discharge have
been complied with and at the cost and expense of the Company.
53
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time may
terminate (i) all of its and any Subsidiary Guarantor's obligations under the
Securities, the Subsidiary Guarantee and this Indenture ("legal defeasance
option") or (ii) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, and 4.17 and the
operation of Section 5.01(a)(iii), 5.01(a)(iv), 6.01(4), 6.01(6), 6.01(7) (with
respect to Subsidiaries of the Company only), 6.01(8) (with respect to
Subsidiaries of the Company only), 6.01(9), 6.01(10) and 6.01(11) ("covenant
defeasance option"). The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option. In the
event that the Company terminates all of its obligations under the Securities
and this Indenture by exercising its legal defeasance option, the obligations
under the Subsidiary Guarantees shall each be terminated simultaneously with the
termination of such obligations.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Section 6.01(4),
6.01(6), 6.01(7) (with respect to Subsidiaries of the Company only), 6.01(8)
(with respect to Subsidiaries of the Company only), 6.01(9), 6.01(10) and
6.01(11) or because of the failure of the Company to comply with clauses (iii)
and (iv) of Section 5.01 (a).
Upon satisfaction of the conditions set forth herein and upon request of
the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's obligations
in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07, 7.08 and in this Article 8
shall survive until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company may exercise its
------------------------
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal, premium (if
any) and interest on the Securities to maturity or redemption, as the case
may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
(3) 91 days pass after the deposit is made and during the 91-day
period no Default specified in Section 6.01(7) or (8) with respect to the
Company occurs which is continuing at the end of the period;
54
(4) the deposit does not constitute a default under any other
agreement binding on the Company;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(6) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there
has been a change in the applicable Federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such defeasance and will be
subject to 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 had not
occurred;
(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(8) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
8 have been complied with.
Before or after a deposit, the Company may make arrangements satisfactory
to the Trustee for the redemption of Securities at a future date in accordance
with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust
--------------------------
money or U.S. Government Obligations deposited with it pursuant to this Article
8. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of and interest on the Securities.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent
--------------------
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general creditors.
55
SECTION 8.05. Indemnity for Government Obligations. The Company shall pay
------------------------------------
and shall indemnify the Trustee against any tax, fee or other charge imposed on
or assessed against deposited U.S. Government Obligations or the principal and
interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to
-------------
apply any money or U.S. Government Obligations in accordance with this Article 8
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's and the Subsidiary Guarantors' obligations under
this Indenture, the Subsidiary Guarantee and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to this Article 8 until
such time as the Trustee or Paying Agent is permitted to apply all such money or
U.S. Government Obligations in accordance with this Article 8; provided,
--------
however, that, if the Company has made any payment of interest on or principal
- -------
of any Securities because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent.
ARTICLE 9
Amendments
----------
SECTION 9.01. Without Consent of Holders. The Company, the Subsidiary
--------------------------
Guarantors and the Trustee may amend this Indenture or the Securities without
notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or
in place of certif icated Securities; provided, however, that the
-------- -------
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to enter into a supplemental indenture substantially in the
form of Exhibit B hereto, add additional Guarantees with respect to the
Securities or to secure the Securities;
(5) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon the
Company;
(6) to comply with any requirements of the SEC in connection
with qualifying, or maintaining the qualification of, this Indenture under
the TIA; or
(7) to make any change that does not adversely affect the rights
of any Securityholder.
56
After an amendment under this Section becomes effective, the Company shall
mail to Securityholders a notice briefly describing such amendment. The failure
to give such notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Company, the Subsidiary
-----------------------
Guarantors and the Trustee may amend this Indenture or the Securities without
notice to any Securityholder but with the written consent of the Holders of at
least a majority in principal amount of the Securities then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Securities). However, without the consent of each Securityholder affected,
an amendment may not:
(1) reduce the amount of Securities whose Holders must consent
to an amendment;
(2) reduce the rate of or extend the time for payment of
interest or any liquidated damages on any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any
Security or change the time at which any Security may be redeemed in
accordance with Article 3;
(5) make any Security payable in money other than that stated in
the Security;
(6) make any change in Section 6.04 or 6.07 or the second
sentence of this Section 9.02; or
(7) modify or affect in any manner adverse to the Holders the
terms and conditions of the obligation of any Subsidiary Guarantor for the
due and punctual payment of the principal of or interest on the Securities.
It shall not be necessary for the consent of the Holders under this Section
to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company shall
mail to Securityholders a notice briefly describing such amendment. The failure
to give such notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 9.03. Revocation and Effect of Consents and Waivers. A consent to
---------------------------------------------
an amendment or a waiver by a Holder of a Security shall bind the Holder and
every subsequent Holder of that Security or portion of the Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent or waiver is not made on the Security. However, any such Holder or
subsequent Holder may revoke the consent or waiver as to such Holder's Security
or portion of the Security if the Trustee receives the notice of revocation
before
57
the date the amendment or waiver becomes effective. After an amendment or
waiver becomes effective, it shall bind every Securityholder. An amendment or
waiver becomes effective once both (i) the requisite number of consents have
been received by the Company or the Trustee and (ii) such amendment or waiver
has been executed by the Company and the Trustee.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.04. Notation on or Exchange of Securities. If an amendment
-------------------------------------
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee to Sign Amendments. The Trustee shall sign any
--------------------------
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that (a) such
amendment is authorized or permitted by this Indenture, (b) all conditions
precedent to such amendment have been complied with, (c) in the case of
amendment pursuant to Section 9.01 hereof that such amendment will not adversely
affect the rights of any Holders, and (d) that such amendment is the legal,
valid and binding obligation of the Company and the Subsidiary Guarantors
enforceable against them in accordance with its terms, subject to customary
exceptions, and complies with the provisions hereof.
SECTION 9.06. Payment for Consent. Neither the Company nor any Affiliate
-------------------
of the Company shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
58
ARTICLE 10
Subsidiary Guarantees
---------------------
[Intentionally omitted unless and until added pursuant to a supplemental
indenture substantially in the form of Exhibit B]
ARTICLE 11
Miscellaneous
-------------
SECTION 11.01. Trust Indenture Act Controls [Intentionally Omitted.]
----------------------------
SECTION 11.02. Notices. Any notice, direction, order, demand or
-------
communication shall be in writing and delivered in person or mailed by first-
class mail or courier addressed as follows:
if to the Company:
ACE US Holdings, Inc.
Six Concourse Parkway
Suite 2500
Atlanta, Georgia 30328
Attn: Chief Financial Officer
if to the Trustee, the address set forth in the definition of
Corporate Trust Office.
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed to
the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any defect
in it shall not affect its sufficiency with respect to other Securityholders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 11.03. Communication by Holders with Other Holders. Whether or
-------------------------------------------
not this Indenture is subject to the TIA, (a) Securityholders may communicate
pursuant to TIA (S) 311(b) with other Securityholders with respect to their
rights under this Indenture or the Securities, and (b) the Company, the Trustee,
the Registrar and anyone else shall have the protection of TIA (S) 311(c).
59
SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon
--------------------------------------------------
any written request or application by the Company to the Trustee to take or
refrain from taking any action under this Indenture, the Company shall furnish
to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.06. When Securities Disregarded. In determining whether the
---------------------------
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company, any Subsidiary
Guarantor or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any Subsidiary
Guarantor shall be disregarded and deemed not to be outstanding, except that,
for the purpose of determining whether the Trustee shall be protected in relying
on any such direction, waiver or consent, only Securities which the Trustee
knows are so owned shall be so disregarded. Subject to the foregoing, only
Securities outstanding at the time shall be considered in any such
determination.
SECTION 11.07. Rules by Trustee, Paying Agent, Registrar and Calculation
---------------------------------------------------------
Agent. The Trustee may make reasonable rules for action by or a meeting of
- -----
Securityholders. The Registrar, the Paying Agent and the Calculation Agent may
make reasonable rules for their functions.
SECTION 11.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday
--------------
or a day on which banking institutions are not required to be open in the State
of New York, United States of
60
America or London, United Kingdom. If a payment date is a Legal Holiday,
payment shall be made on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period. If a regular record
date is a Legal Holiday, the record date shall not be affected.
SECTION 11.09. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE
-------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF THAT WOULD REQUIRE THE
APPLICATION OF ANY OTHER LAWS).
SECTION 11.10. NO RECOURSE AGAINST OTHERS. A director, officer, employee
--------------------------
or stockholder, as such, of the Company or any Subsidiary Guarantor shall not
have any liability for any obligations of the Company under the Securities or
this Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability. The waiver and release shall be
part of the consideration for the issue of the Securities.
SECTION 11.11. Successors. All agreements of the Company and each
----------
Subsidiary Guarantor in this Indenture and the Securities shall bind its
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 11.12. Multiple Originals. The parties may sign any number of
------------------
copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 11.13. Table of Contents; Headings. The table of contents, cross-
---------------------------
reference sheet and headings of the Articles and Sections of this Indenture have
been inserted for convenience of reference only, are not intended to be
considered a part hereof and shall not modify or restrict any of the terms or
provisions hereof.
61
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
ACE US HOLDINGS, INC.
by ________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
by ________________________
Name:
Title:
APPENDIX A
PROVISIONS RELATING TO SECURITIES
---------------------------------
1.0 Definitions
1.1 Definitions
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Definitive Security" means a certificated Security (bearing the
Restricted Securities Legend if the transfer of such Security is restricted by
applicable law) that does not include the Global Securities Legend.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Global Securities Legend" means the legend set forth under that
caption in Exhibit A to this Indenture.
"Initial Purchaser" means Woodbourne LLC.
"Purchase Agreement" means the Purchase Agreement dated October 27,
1998, among the Company and the Initial Purchaser
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Restricted Securities Legend" means the legend set forth in Section
2.3(e)(i) herein.
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depositary) or any successor person thereto, who
shall initially be the Trustee.
"Transfer Restricted Securities" means Definitive Securities and any
other Securities that bear or are required to bear the Restricted Securities
Legend.
1.2 Other Definitions
-----------------
Term: Defined in Section:
----- -------------------
1
"Agent Members".................................... 2.1(b)
"Global Security".................................. 2.1(a)
2.0 The Securities
--------------
2.1 Form and Dating
---------------
The Securities issued on the date hereof will be offered and sold to the
Initial Purchaser by the Company pursuant to the Purchase Agreement.
Notwithstanding anything herein to the contrary, the Initial Purchaser may
resell the Securities from time to time after the Closing Date only to QIBS in
reliance on Rule 144A, unless the Company otherwise agrees.
(a) Definitive Securities. The Securities shall be issued initially
---------------------
in the form of one or more Definitive Securities in fully registered form
without interest coupons.
(b) Global Securities. At the request and option of the Holder of a
-----------------
Definitive Security, the Securities may be exchanged for one or more permanent
global Securities in definitive, fully registered form (collectively, the
"Global Security") without interest coupons and bearing the Global Securities
Legend and Restricted Securities Legend, which shall be deposited on behalf of
the Holders of the Securities represented thereby with the Securities Custodian,
and registered in the name of the Depositary or a nominee of the Depositary,
duly executed by the Company and authenticated by the Trustee as provided in
this Indenture. The aggregate principal amount of the Global Securities may
from time to time be increased or decreased by adjustments made on the records
of the Trustee and the Depositary or its nominee as hereinafter provided.
Except as provided in Section 2.3 or 2.4, owners of beneficial interests in
Global Securities will not be entitled to receive physical delivery of
certificated Securities.
(c) Book-Entry Provisions. This Section 2.1(c) shall apply only to a
---------------------
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(c) and pursuant to an order of the Company, authenticate and
deliver initially one or more Global Securities that (a) shall be registered in
the name of the Depositary for such Global Security or Global Securities or the
nominee of such Depositary and (b) shall be delivered by the Trustee to such
Depositary or pursuant to such Depositary's instructions or held by the Trustee
as Securities Custodian.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary or by the Trustee as Securities Custodian or
under such Global Security, and the Depositary may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or impair, as between
the Depositary and its Agent
2
Members, the operation of customary practices of such Depositary governing the
exercise of the rights of a holder of a beneficial interest in any Global
Security.
2.2 Authentication. The Trustee shall authenticate and make available for
--------------
delivery, upon a written order of the Company signed by two Officers, Securities
for original issue on the date hereof in an aggregate principal amount of
$250,000,000. Such order shall specify the amount of the Securities to be
authenticated and the date on which the original issue of Securities is to be
authenticated. The aggregate principal amount of Securities outstanding at any
time may not exceed $250,000,000.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
--------------------- -----------------------------------
Securities. When Definitive Securities are presented to the Registrar with a
- ----------
request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
-------- -------
that the Definitive Securities surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar,
duly executed by the Holder thereof or his attorney duly authorized in
writing; and
(ii) are accompanied by the following additional information and
documents, as applicable:
(A) if such Definitive Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse side of the Security); or
(B) if such Definitive Securities are being transferred to the
Company, a certification to that effect (in the form set forth on the
reverse side of the Security); or
(C) if such Definitive Securities are being transferred pursuant
to an exemption from registration in accordance with Rule 144 under
the Securities Act or in reliance upon another exemption from the
registration requirements of the Securities Act, (i) a certification
to that effect (in the form set forth on the reverse side of the
Security) and (ii) except if such certification states that such
transfer is being made pursuant to Rule 144A, if the Company so
requests, an opinion of counsel or other evidence reasonably
satisfactory to it as to the compliance with the restrictions set
forth in the legend set forth in Section 2.3(e)(i).
3
(b) Restrictions on Transfer of a Definitive Security for a
-------------------------------------------------------
Beneficial Interest in a Global Security. A Definitive Security may not be
- ----------------------------------------
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar,
together with:
(i) certification (in the form set forth on the reverse side of
the Security) that such Definitive Security is being exchanged for a
Global Security by or transferred to a QIB in accordance with Rule
144A; and
(ii) written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an adjustment on its books
and records with respect to such Global Security to reflect an
increase in the aggregate principal amount of the Securities
represented by the Global Security, such instructions to contain
information regarding the Depositary account to be credited with such
increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so canceled. If no
Global Securities are then outstanding and the Global Security has not been
previously exchanged for certificated securities pursuant to Section 2.4, the
Company shall issue and the Trustee shall authenticate, upon written order of
the Company in the form of an Officers' Certificate, a new Global Security in
the appropriate principal amount.
(c) Transfer and Exchange of Global Securities.
------------------------------------------
(i) The transfer and exchange of Global Securities or beneficial
interests therein shall be effected through the Depositary, in
accordance with this Indenture (including applicable restrictions on
transfer set forth herein, if any) and the procedures of the
Depositary therefor. A transferor of a beneficial interest in a
Global Security shall deliver a written order given in accordance with
the Depositary's procedures containing information regarding the
participant account of the Depositary to be credited with a beneficial
interest in such Global Security or another Global Security and such
account shall be credited in accordance with such order with a
beneficial interest in the applicable Global Security and the account
of the Person making the transfer shall be debited by an amount equal
to the beneficial interest in the Global Security being transferred.
(ii) If the proposed transfer is a transfer of a beneficial
interest in one Global Security to a beneficial interest in another
Global Security, the Registrar shall reflect on its books and records
the date and an increase in the principal amount of the Global
Security to which such interest is being transferred in an
4
amount equal to the principal amount of the interest to be so
transferred, and the Registrar shall reflect on its books and records
the date and a corresponding decrease in the principal amount of
Global Security from which such interest is being transferred.
(iii) Notwithstanding any other provisions of this Appendix
(other than the provisions set forth in Section 2.4), a Global
Security may not be transferred as a whole except by the Depositary to
a nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary
or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
(iv) In the event that a Global Security is exchanged for
Definitive Securities pursuant to Section 2.4, such Securities may be
exchanged only in accordance with such procedures as are substantially
consistent with the provisions of this Section 2.3 (including the
certification requirements set forth on the reverse of the Securities
intended to ensure that such transfers comply with Rule 144A or such
other applicable exemption from registration under the Securities Act,
as the case may be) and such other procedures as may from time to time
be adopted by the Company.
(e) Legend.
------
(i) Except as permitted by the following paragraphs (ii), (iii)
or (iv), each Security certificate evidencing the Global Securities
and the Definitive Securities (and all Securities issued in exchange
therefor or in substitution thereof) shall bear a legend in
substantially the following form (each defined term in the legend
being defined as such for purposes of the legend only):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION
DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR
ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR
5
ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG
AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE
ON RULE 144A, OR (D) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSE (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN,
THE INITIAL PURCHASER (AS DEFINED IN THE INDENTURE) MAY
TRANSFER THIS SECURITY ONLY PURSUANT TO CLAUSE (C), UNLESS
THE COMPANY OTHERWISE AGREES. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
Each Definitive Security shall bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted
Security that is a Definitive Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legends set forth above and
rescind any restriction on the transfer of such Transfer Restricted
Security if the Holder certifies in writing to the Registrar that its
request for such exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse of the
Security).
(iii) Upon the lapsing of the two-year period under Rule 144(k)
of a Transfer Restricted Security that is a Definitive Security, the
Registrar shall permit the Holder thereof to exchange such Transfer
Restricted Security for a Definitive Security that does not bear the
legends set forth above.
6
(f) Cancellation or Adjustment of Global Security. At such time as
---------------------------------------------
all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, transferred, redeemed, repurchased or canceled, such
Global Security shall be returned by the Depositary to the Trustee for
cancellation or retained and canceled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in a Global Security is exchanged for
Definitive Securities, transferred in exchange for an interest in another Global
Security, redeemed, repurchased or canceled, the principal amount of Securities
represented by such Global Security shall be reduced and an adjustment shall be
made on the books and records of the Trustee (if it is then the Securities
Custodian for such Global Security) with respect to such Global Security, by the
Trustee or the Securities Custodian, to reflect such reduction.
(g) Obligations with Respect to Transfers and Exchanges of Securities.
-----------------------------------------------------------------
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate, Definitive
Securities and Global Securities at the Registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any
such transfer taxes, assessments or similar governmental charge
payable upon exchange or transfer pursuant to Sections 3.06, 4.06,
4.08 and 9.05 of this Indenture).
(iii) Prior to the due presentation for registration of transfer
of any Security, the Company, the Trustee, the Paying Agent or the
Registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and
for all other purposes whatsoever, whether or not such Security is
overdue, and none of the Company, the Trustee, the Paying Agent or the
Registrar shall be affected by notice to the contrary.
(iv) All Securities issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt
and shall be entitled to the same benefits under this Indenture as the
Securities surrendered upon such transfer or exchange.
(h) No Obligation of the Trustee.
----------------------------
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant
in the Depositary or any other Person with respect to the accuracy of
the records of the Depositary or its nominee or of any participant or
member thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depositary) of any
notice (including any notice of redemption or repurchase) or the
payment
7
of any amount, under or with respect to such Securities. All notices
and communications to be given to the Holders and all payments to be
made to Holders under the Securities shall be given or made only to
the registered Holders (which shall be the Depositary or its nominee
in the case of a Global Security). The rights of beneficial owners in
any Global Security shall be exercised only through the Depositary
subject to the applicable rules and procedures of the Depositary. The
Trustee may rely and shall be fully protected in relying upon
information furnished by the Depositary with respect to its members,
participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on
transfer imposed under this Indenture or under applicable law with
respect to any transfer of any interest in any Security (including any
transfers between or among Depositary participants, members or
beneficial owners in any Global Security) other than to require
delivery of such certificates and other documentation or evidence as
are expressly required by, and to do so if and when expressly required
by, the terms of this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements
hereof.
2.4 Definitive Securities
---------------------
(a) A Global Security deposited with the Depositary or with the
Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred to
the beneficial owners thereof in the form of Definitive Securities in an
aggregate principal amount equal to the principal amount of such Global
Security, in exchange for such Global Security, only if such transfer complies
with Section 2.3 and (i) the Depositary notifies the Company that it is
unwilling or unable to continue as a Depositary for such Global Security or if
at any time the Depositary ceases to be a "clearing agency" registered under the
Exchange Act, and a successor depositary is not appointed by the Company within
90 days of such notice, or (ii) an Event of Default has occurred and is
continuing or (iii) the Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of certificated Securities under
this Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section 2.4 shall be surrendered by the Depositary to
the Trustee, to be so transferred, in whole or from time to time in part,
without charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Security, an equal aggregate principal
amount of Definitive Securities of authorized denominations. Any portion of a
Global Security transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and registered in such names as the Depositary shall direct.
Any certificated Initial Security in the form of a Definitive Security delivered
in exchange for an interest in the Global Security shall, except as otherwise
provided by Section 2.3(e), bear the Restricted Securities Legend.
(c) Subject to the provisions of Section 2.4(b), the registered Holder
of a Global Security may grant proxies and otherwise authorize any Person,
including Agent
8
Members and Persons that may hold interests through Agent Members, to take any
action which a Holder is entitled to take under this Indenture or the
Securities.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to
the Trustee a reasonable supply of Definitive Securities in fully registered
form without interest coupons.
9
EXHIBIT A
FORM OF FACE OF SECURITY
[Global Securities Legend, if applicable]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend, if applicable]
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY
1
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE
(D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. NOTWITHSTANDING ANYTHING TO THE
CONTRARY HEREIN, THE INITIAL PURCHASER (AS DEFINED IN THE INDENTURE) MAY
TRANSFER THIS SECURITY ONLY PURSUANT TO CLAUSE (C), UNLESS THE COMPANY OTHERWISE
AGREES. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
Each Definitive Security shall bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
2
No. $__________
CREDIT SENSITIVE SENIOR NOTE DUE 2008
CUSIP No. _____
ACE US Holdings, Inc., a Delaware corporation, promises to pay to
___________, or registered assigns, the principal sum of _______________ Dollars
[listed on the Schedule of Increases or Decreases in Global Security attached
hereto]/1/ on October 1, 2008.
Interest Payment Dates: April 1 and October 1.
Record Dates: March 15 and September 15.
Additional provisions of this Security are set forth on the other side of
this Security.
__________________
/1/ Use the Schedule of Increases and Decreases language if Security is in
Global Form.
1
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
ACE US HOLDINGS, INC.,
by
_______________________________________
Name:
Title:
by
_______________________________________
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
UNITED STATES TRUST COMPANY OF
NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By:__________________________________
Authorized Signatory
2
FORM OF REVERSE SIDE OF SECURITY
CREDIT SENSITIVE SENIOR NOTE DUE 2008
1. Interest
--------
ACE US Holdings, Inc., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum equal to the rate set forth below in the
applicable row under the applicable column for each Pricing Period:
============================================================================================================
INDEBTEDNESS/TOTAL CAPITAL S&P RATING HIGHER THAN OR S&P Rating lower than "A-"
RATIO OF THE COMPANY AS OF EQUAL TO "A-" OR
THE END OF THE SECOND OR MOODY'S RATING LOWER THAN
PRECEDING PRICING PERIOD MOODY'S RATING HIGHER THAN "A3",
OR EQUAL TO "A3", EACH AS OF THE LAST DAY OF THE
EACH AS OF THE LAST DAY OF THE IMMEDIATELY PRECEDING PRICING
IMMEDIATELY PRECEDING PERIOD
PRICING PERIOD
- ------------------------------------------------------------------------------------------------------------
Less than 50% 8.13% 8.63%
- ------------------------------------------------------------------------------------------------------------
Greater than or equal to 50% 8.63% 9.13%
and less than 80%
- ------------------------------------------------------------------------------------------------------------
Greater than or equal to 80% 9.13% 9.63%
============================================================================================================
For purposes of determining the interest rate applicable under the chart
above, in the event that any ACE USA Insurance Group is rated by both S&P and
Moody's, then the lower of the S&P Rating or the Moody's Rating will apply. In
the event that more than one ACE USA Insurance Group is rated by S&P and/or
Moody's, then the lowest rating received by any such ACE USA Insurance Group
will apply.
"Pricing Period" means any period from and including the first day of a
fiscal quarter to and including the last day of such fiscal quarter.
The applicable row and applicable column for calculating the interest rate
in effect for each Pricing Period will be determined by the Calculation Agent
according to (i) the actual Indebtedness/Total Capital Ratio of the Company as
of the end of the second preceding Pricing Period, as set forth in the Quarterly
Certificate required to be delivered pursuant to Section 4.02(d) of the
Indenture during the immediately preceding Pricing Period, and (ii) the S&P
Rating or Moody's Rating as of the last day of the immediately preceding Pricing
Period, which shall be determined based upon the ratings set forth in such
Quarterly Certificate or, if delivered after such Quarterly Certificate, the
last Rating Certificate delivered during such immediately preceding Pricing
Period. The Calculation Agent may assume that the ratings as of the last day
3
of any Pricing Period are equal to those set forth in the Quarterly Certificate
or in the most recent Rating Certificate delivered during such period, as the
case may be.
Notwithstanding the foregoing, (i) the interest rate applicable during the
period from the Closing Date until the end of the Pricing Period during which
the Closing Date occurs shall be equal to 8.63% per annum, and (ii) if no
Quarterly Certificate is delivered to the Trustee during any Pricing Period
showing the Indebtedness/Total Capital Ratio of the Company and either the S&P
Rating or Moody's Rating for the ACE USA Insurance Group, the interest rate
applicable during the immediately succeeding Pricing Period shall be equal to
that rate set forth in the box corresponding to the row for Indebtedness/Total
Capital Ratio greater than or equal to 80% and the column corresponding to the
S&P Rating less than "A-" or the Moody's Rating less than "A3".
In the absence of manifest error, all calculations made by the Calculation
Agent shall be conclusive for all purposes and binding on the Company, the
Subsidiary Guarantor and the Securityholders. The Calculation Agent shall cause
the applicable rate of interest determined by it to be notified to the Paying
Agent as soon as practicable after such determination, but in no event later
than the second Business Day of each Calculation Period. Upon request of any
Securityholder, the Calculation Agent shall provide the interest rate in effect
with respect to the Securities from time to time.
The Company shall pay interest semiannually on April 1 and October 1 of
each year, commencing April 1, 1999. Interest on the Securities shall accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the Closing Date. Interest shall be computed on the basis of a
360-day year of twelve 30-day months; accordingly, interest for each Pricing
Period shall be computed on the basis of three 30-day months. The Company shall
pay interest on overdue principal at the rate borne by the Securities plus 1%
per annum, and it shall pay interest on overdue installments of interest at the
same rate to the extent lawful.
2. Method of Payment
-----------------
The Company shall pay interest on the Securities (except defaulted
interest) to the Persons who are registered Holders of Securities at the close
of business on the March 15 or September 15 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company shall pay principal, premium,
liquidated damages and interest in money of the United States of America that at
the time of payment is legal tender for payment of public and private debts.
Payments in respect of the Securities represented by a Global Security
(including principal, premium, liquidated damages and interest) shall be made by
wire transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Company will make all payments in respect of a
certificated Security (including principal, premium and interest), by mailing a
check to the registered address of each Holder thereof; provided, however, that
-------- -------
payments on the Securities may also be made, in the case of a Holder of at least
$5,000,000 aggregate principal amount of Securities, by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by giving written notice to the
4
Trustee or the Paying Agent to such effect designating such account no later
than 30 days immediately preceding the relevant due date for payment (or such
other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
--------------------------
Initially, United States Trust Company of New York (the "Trustee"), will
act as Paying Agent and Registrar. The Company may appoint and change any
Paying Agent, Registrar or co-registrar without notice. The Company or any of
its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent,
Registrar or co-registrar.
4. Indenture
---------
The Company issued the Securities under an Indenture dated as of October
27, 1998 (the "Indenture"), among the Company and the Trustee. The terms of the
Securities include those stated in the Indenture. Terms defined in the
Indenture and not defined herein have the meanings ascribed thereto in the
Indenture. The Securities are subject to all terms and provisions of the
Indenture, and Securityholders are referred to the Indenture for a statement of
such terms and provisions.
The Securities are senior unsecured obligations of the Company limited to
$250,000,000 aggregate principal amount at any one time outstanding (subject to
Sections 2.01 and 2.08 of the Indenture). This Security is one of the
Securities referred to in the Indenture issued in an aggregate principal amount
of $250,000,000. The Indenture imposes certain limitations on the ability of
the Company and its Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
issue or sell shares of capital stock of such Restricted Subsidiaries, enter
into or permit certain transactions with Affiliates, create or incur Liens and
make asset sales. The Indenture also imposes limitations on the ability of the
Company to consolidate or merge with or into any other Person or convey,
transfer or lease all or substantially all of the property of the Company.
Under the circumstances set forth in Section 4.11 of the Indenture, certain
Restricted Subsidiaries of the Company will be required to become Subsidiary
Guarantors and jointly and severally unconditionally guarantee the Guaranteed
Obligations pursuant to the terms of the Indenture.
5. Optional Redemption
-------------------
The Securities shall be redeemable at the option of the Company, at any
time and from time to time, in whole or in part, on not less than 10 nor more
than 60 days prior notice, at the following base redemption prices (expressed as
percentages of principal amount) (the "Base Redemption Price"), plus accrued and
unpaid interest (if any) to the redemption date (subject to the right of holders
of record on the relevant record date to receive interest due on the relevant
interest payment date), plus the Reference Swap Transaction Value allocable to
such Securities
5
(collectively, the "Redemption Price"), if redeemed during the 12-month period
commencing on October 1 (or, with respect to 1998, the Closing Date) of the
years set forth below:
BASE
YEAR REDEMPTION
PRICE
----------------------------------------------------------------
1998 107.10%
1999 106.30%
2000 105.70%
2001 105.20%
2002 104.50%
2003 104.00%
2004 103.20%
2005 102.50%
2006 101.70%
2007 100.90%
6. Sinking Fund
------------
The Securities are not subject to any sinking fund.
7. Notice of Redemption
--------------------
Notice of redemption will be mailed by first-class mail at least 10 days
but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued and unpaid interest on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
8. Repurchase of Securities at the Option of Holders upon Change of Control
------------------------------------------------------------------------
Upon a Change of Control, any Holder of Securities will have the right,
subject to certain conditions specified in the Indenture, to cause the Company
to repurchase all or any part of the Securities of such Holder at a purchase
price equal to 101% of the principal amount of the Securities to be repurchased
plus accrued and unpaid interest, if any, to the date of repurchase (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant interest payment date that is on or prior to the date of
purchase) as provided in, and subject to the terms of, the Indenture.
9. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the
6
Indenture. Upon any transfer or exchange, the Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or to transfer
or exchange any Securities for a period of 15 days prior to a selection of
Securities to be redeemed.
10. Persons Deemed Owners
---------------------
The registered Holder of this Security may be treated as the owner of it
for all purposes.
11. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed for two
years, the Trustee or Paying Agent shall pay the money back to the Company at
its written request unless an abandoned property law designates another Person.
After any such payment, Holders entitled to the money must look only to the
Company and not to the Trustee for payment.
12. Discharge and Defeasance
------------------------
Subject to certain conditions, the Company at any time may terminate some
of or all its obligations under the Securities and the Indenture if the Company
deposits with the Trustee money or U.S. Government Obligations for the payment
of principal and interest on the Securities to redemption or maturity, as the
case may be.
13. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the Indenture
or the Securities may be amended without prior notice to any Securityholder but
with the written consent of the Holders of at least a majority in aggregate
principal amount of the outstanding Securities and (ii) any default or
noncompliance with any provision may be waived with the written consent of the
Holders of at least a majority in principal amount of the outstanding
Securities. Subject to certain exceptions set forth in the Indenture, without
the consent of any Holder of Securities, the Company and the Trustee may amend
the Indenture or the Securities (i) to cure any ambiguity, omission, defect or
inconsistency; (ii) to comply with Article 5 of the Indenture; (iii) to provide
for uncertificated Securities in addition to or in place of certificated
Securities; (iv) to add Subsidiary Guarantees with respect to the Securities;
(v) to secure the Securities; (vi) to add additional covenants or to surrender
rights and powers conferred on the Company; or (vii) to make any change that
does not adversely affect the rights of any Securityholder.
14. Defaults and Remedies
---------------------
If an Event of Default occurs (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Company) and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the outstanding Securities may declare the principal of and accrued but unpaid
interest on all the Securities to be due and payable. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
7
Company occurs, the principal of and interest on all the Securities shall become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders. Under certain circumstances, the Holders of a
majority in principal amount of the outstanding Securities may rescind any such
acceleration with respect to the Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee shall be under
no obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the Holders unless such Holders have offered to
the Trustee reasonable indemnity or security against any loss, liability or
expense. Except to enforce the right to receive payment of principal, premium
(if any) or interest when due, no Holder may pursue any remedy with respect to
the Indenture or the Securities unless (i) such Holder has previously given the
Trustee notice that an Event of Default is continuing, (ii) Holders of at least
25% in principal amount of the outstanding Securities have requested the Trustee
in writing to pursue the remedy, (iii) such Holders have offered the Trustee
reasonable security or indemnity against any loss, liability or expense, (iv)
the Trustee has not complied with such request within 60 days after the receipt
of the request and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Securities have not given the
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the outstanding Securities are given the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would involve the Trustee in personal liability. Prior to taking
any action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
15. Trustee Dealings with the Company
---------------------------------
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with and
collect obligations owed to it by the Company or its Affiliates and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not Trustee.
16. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of the Company or
any Subsidiary Guarantor shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the
Securities.
17. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
8
18. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. Governing Law THIS SECURITY AND THE INDENTURE SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO THE CHOICE OF LAW PROVISIONS THEREOF THAT WOULD REQUIRE THE APPLICATION OF
ANY OTHER LAWS).
THE COMPANY WILL FURNISH TO ANY HOLDER OF SECURITIES UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE
TEXT OF THIS SECURITY.
9
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint __________ agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
________________________________________________________________________
Date: _______________ Your Signature: __________________________________
________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
Signature Guarantee:
10
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $__________ principal amount of Securities held in
(check applicable space) ____ book-entry or _____ definitive form by the
undersigned.
The undersigned (check one box below):
[_] has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated above);
[_] has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [_] to the Company; or
(2) [_] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [_] inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of
1933) that purchases for its own account or for the account
of a qualified institutional buyer to whom notice is given
that such transfer is being made in reliance on Rule 144A,
in each case pursuant to and in compliance with Rule 144A
under the Securities Act of 1933; or
(4) [_] pursuant to another available exemption from registration
provided by Rule 144 under or any other provision of the
Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Securities evidenced by this certificate in the
name of any Person other than the registered holder thereof; provided,
--------
however, that if box (4) is checked, the Trustee may require, prior to
-------
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933.
11
_____________________________________
Your Signature
Signature Guarantee:
Date:__________________ _____________________________________
Signature must be guaranteed Signature of Signature Guarantee
by a participant in a recognized
signature guaranty medallion
program or other signature
guarantor acceptable to the
Trustee
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Date:_____________ ______________________________
NOTICE: To be executed by
an executive
12
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $_____. The
following increases or decreases in this Global Security have been made:
Amount of decrease Amount of increase Principal amount of Signature of
in Principal Amount in Principal Amount this Global Security authorized signatory
Date of of this Global of this Global following such of Trustee or
Exchange Security Security decrease or increase Securities Custodian
13
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED BY THE COMPANY
PURSUANT TO SECTION 4.06 (ASSET SALE) OR 4.08 (CHANGE OF CONTROL) OF THE
INDENTURE, CHECK THE BOX:
ASSET SALE [_] CHANGE OF CONTROL [_]
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SECURITY PURCHASED BY THE
COMPANY PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE AMOUNT:
$
DATE: _________________ YOUR SIGNATURE: _________________________
(SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE SECURITY)
SIGNATURE GUARANTEE: _______________________________________
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A
RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER
SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE
14
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE, among [GUARANTOR] (the "New Guarantor"), a
subsidiary of ACE US Holdings, Inc. (or its successor), a Delaware corporation
(the "Company"), [EXISTING GUARANTORS] and UNITED STATES TRUST COMPANY OF NEW
YORK, as trustee under the indenture referred to below (the "Trustee").
WITNESSETH:
WHEREAS the Company [and each of the OLD GUARANTORS (the "Existing
Guarantors")] has heretofore executed and delivered to the Trustee an Indenture
(the "Indenture") dated as of October 27, 1998, providing for the issuance of an
aggregate principal amount of up to $250,000,000 of Credit Sensitive Senior
Notes due 2008 (the "Securities");
WHEREAS Section 4.11 of the Indenture provides that under certain
circumstances the Company is required to cause the New Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the New
Guarantor shall unconditionally guarantee all the Company's obligations under
the Securities pursuant to a Subsidiary Guarantee on the terms and conditions
set forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company
and the Existing Guarantors are authorized to execute and deliver this
Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor, the Company, the Existing Guarantors and the Trustee mutually
covenant and agree for the equal and ratable benefit of the holders of the
Securities as follows:
1. Agreement to Guarantee. [Article 10 of the Indenture, as set forth in
----------------------
Annex 1 hereto, is hereby added to the Indenture.]/2/ The New Guarantor hereby
agrees, jointly and severally with all the Existing Guarantors, to
unconditionally guarantee the Company's obligations under the Securities and to
be bound by all other applicable provisions of the Indenture and the Securities.
2. Ratification of Indenture; Supplemental Indentures Part of Indenture.
--------------------------------------------------------------------
Except as expressly amended hereby, the Indenture is in all respects ratified
and confirmed and all the terms, conditions and provisions thereof shall remain
in full force and effect. This Supplemental Indenture shall form a part of the
Indenture for all purposes, and every holder of Securities heretofore or
hereafter authenticated and delivered shall be bound hereby.
_______________
/2/ Include only in first supplemental indenture executed pursuant to Section
4.11.
1
3. Governing Law. THIS SUPPLEMENTAL INDENTURE AND THE SECURITIES SHALL BE
-------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF THAT WOULD REQUIRE THE
APPLICATION OF ANY OTHER LAWS).
4. Trustee Makes No Representation. The Trustee makes no representation
-------------------------------
as to the validity or sufficiency of this Supplemental Indenture.
5. Counterparts. The parties may sign any number of copies of this
------------
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. Effect of Headings. The Section Headings herein are for convenience
------------------
only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR],
by
________________________
Name:
Title:
ACE US HOLDINGS, INC.
by
________________________
Name:
Title:
[EXISTING GUARANTORS],
by
________________________
Name:
Title
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee,
2
by:_____________________
Name:
Title:
3
ANNEX 1
SECTION 10.01. Subsidiary Guarantees. Each Subsidiary Guarantor hereby
---------------------
jointly and severally unconditionally and irrevocably guarantees, as a primary
obligor and not merely as a surety, to each Holder and to the Trustee and its
successors and assigns (a) the full and punctual payment of principal of and
interest on the Securities when due, whether at Stated Maturity, by
acceleration, by redemption, upon repurchase or otherwise, and all other
monetary obligations of the Company under this Indenture (including obligations
to the Trustee) and the Securities and (b) the full and punctual performance
within applicable grace periods of all other obligations of the Company whether
for expenses, indemnification or otherwise under this Indenture and the
Securities (all the foregoing being hereinafter collectively called the
"Guaranteed Obligations"). Each Subsidiary Guarantor further agrees that the
Guaranteed Obligations may be extended or renewed, in whole or in part, without
notice or further assent from each such Subsidiary Guarantor, and that each such
Subsidiary Guarantor shall remain bound under this Article 10 notwithstanding
any extension or renewal of any Guaranteed Obligation.
Each Subsidiary Guarantor waives presentation to, demand of, payment from
and protest to the Company of any of the Guaranteed Obligations and also waives
notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of
any default under the Securities or the Guaranteed Obligations. The obligations
of each Subsidiary Guarantor hereunder shall not be affected by (a) the failure
of any Holder or the Trustee to assert any claim or demand or to enforce any
right or remedy against the Company or any other Person under this Indenture,
the Securities or any other agreement or otherwise; (b) any extension or renewal
of any thereof, (c) any rescission, waiver, amendment or modification of any of
the terms or provisions of this Indenture, the Securities or any other
agreement; (d) the release of any security held by any Holder or the Trustee for
the Guaranteed Obligations or any of them; (e) the failure of any Holder or
Trustee to exercise any right or remedy against any other guarantor of the
Guaranteed Obligations; or (f) any change in the ownership of such Subsidiary
Guarantor, except as provided in Section 10.02(b).
Each Subsidiary Guarantor hereby waives any right to which it may be
entitled to have its obligations hereunder divided among the Subsidiary
Guarantors, such that such Subsidiary Guarantor's obligations would be less than
the full amount claimed. Each Subsidiary Guarantor hereby waives any right to
which it may be entitled to have the assets of the Company first be used and
depleted as payment of the Company's or such Subsidiary Guarantor's obligations
hereunder prior to any amounts being claimed from or paid by such Subsidiary
Guarantor hereunder. Each Subsidiary Guarantor hereby waives any right to which
it may be entitled to require that the Company be sued prior to an action being
initiated against such Subsidiary Guarantor.
Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee
herein constitutes a guarantee of payment, performance and compliance when due
(and not a guarantee of collection) and waives any right to require that any
resort be had by any Holder or the Trustee to any security held for payment of
the Guaranteed Obligations.
1
Except as expressly set forth in Sections 8.01(b), 10.02 and 10.06, the
obligations of each Subsidiary Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of the
Guaranteed Obligations or otherwise. Without limiting the generality of the
foregoing, the obligations of each Subsidiary Guarantor herein shall not be
discharged or impaired or otherwise affected by the failure of any Holder or the
Trustee to assert any claim or demand or to enforce any remedy under this
Indenture, the Securities or any other agreement, by any waiver or modification
of any thereof, by any default, failure or delay, willful or otherwise, in the
performance of the obligations, or by any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to any
extent vary the risk of any Subsidiary Guarantor or would otherwise operate as a
discharge of any Subsidiary Guarantor as a matter of law or equity.
Each Subsidiary Guarantor agrees that its Subsidiary Guarantee shall remain
in full force and effect until payment in full of all the Guaranteed
Obligations. Each Subsidiary Guarantor further agrees that its Subsidiary
Guarantee herein shall continue to be effective or be reinstated, as the case
may be, if at any time payment, or any part thereof, of principal of or interest
on any Guaranteed Obligation is rescinded or must otherwise be restored by any
Holder or the Trustee upon the bankruptcy or reorganization of the Company or
otherwise.
In furtherance of the foregoing and not in limitation of any other right
which any Holder or the Trustee has at law or in equity against any Subsidiary
Guarantor by virtue hereof, upon the failure of the Company to pay the principal
of or interest on any Guaranteed Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Guaranteed Obligation, each Subsidiary
Guarantor hereby promises to and shall, upon receipt of written demand by the
Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the
Trustee an amount equal to the sum of (i) the unpaid principal amount of such
Guaranteed Obligations, (ii) accrued and unpaid interest on such Guaranteed
Obligations (but only to the extent not prohibited by law) and (iii) all other
monetary obligations of the Company to the Holders and the Trustee.
Each Subsidiary Guarantor agrees that, as between it, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
Guaranteed Obligations guaranteed hereby may be accelerated as provided in
Article 6 for the purposes of any Subsidiary Guarantee herein, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the Guaranteed Obligations guaranteed hereby, and (y) in the event of
any declaration of acceleration of such Guaranteed Obligations as provided in
Article 6, such Guaranteed Obligations (whether or not due and payable) shall
forthwith become due and payable by such Subsidiary Guarantor for the purposes
of this Section 10.01.
Each Subsidiary Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses) incurred by the Trustee or
any Holder in enforcing any rights under this Section 10.01.
2
Upon request of the Trustee, each Subsidiary Guarantor shall execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this Indenture.
SECTION 10.02. Limitation on Liability. (a) Any term or provision of this
-----------------------
Indenture to the contrary notwithstanding, the maximum aggregate amount of the
Guaranteed Obligations guaranteed hereunder by any Subsidiary Guarantor shall
not exceed the maximum amount that can be hereby guaranteed without rendering
this Indenture, as it relates to such Subsidiary Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
(b) This Subsidiary Guarantee as to any Subsidiary Guarantor shall
terminate and be of no further force or effect and such Subsidiary Guarantor
shall be deemed to be released from all obligations under this Article 10 upon
(i) the merger or consolidation of such Subsidiary Guarantor with or into any
Person other than the Company or a Subsidiary or Affiliate of the Company where
such Subsidiary Guarantor is not the surviving entity of such consolidation or
merger or (ii) the sale by the Company or any Subsidiary of the Company (or any
pledgee of the Company) of the Capital Stock of such Subsidiary Guarantor,
where, after such sale, such Subsidiary Guarantor is no longer a Subsidiary of
the Company; provided, however, that each such merger, consolidation or sale
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(or, in the case of a sale by such a pledgee, the disposition of the proceeds of
such sale) shall comply with Section 4.06 and Section 5.01(b). At the request
of the Company, the Trustee shall execute and deliver an appropriate instrument
evidencing such release.
SECTION 10.03. Successors and Assigns. This Article 10 shall be binding
----------------------
upon each Subsidiary Guarantor and its successors and assigns and shall inure to
the benefit of the successors and assigns of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges conferred upon that party in this Indenture and in the
Securities shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of this Indenture.
SECTION 10.04. No Waiver. Neither a failure nor a delay on the part of
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either the Trustee or the Holders in exercising any right, power or privilege
under this Article 10 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 10 at law,
in equity, by statute or otherwise.
SECTION 10.05. Modification. No modification, amendment or waiver of any
------------
provision of this Article 10, nor the consent to any departure by any Subsidiary
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Subsidiary Guarantor in any case shall entitle such
Subsidiary Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
3
SECTION 10.06. Execution of Supplemental Indenture for Future Subsidiary
---------------------------------------------------------
Guarantors. Each Subsidiary which is required to become a Subsidiary Guarantor
- ----------
pursuant to Section 4.11 shall promptly execute and deliver to the Trustee a
supplemental indenture in the form of Exhibit B hereto pursuant to which such
Subsidiary shall become a Subsidiary Guarantor under this Article 10 and shall
guarantee the Guaranteed Obligations.
4
EXHIBIT D
ACE US HOLDINGS, INC.
FORM OF
QUARTERLY CERTIFICATE
TO THE TRUSTEE AND CALCULATION AGENT
We, ____________ and _____________, the ___________________ and
____________________, respectively, of ACE US Holdings, Inc., a Delaware
corporation (the "Company"), do hereby certify on behalf of the Company pursuant
to Section 4.02(d) of the Indenture (the "Indenture") for the Company's Credit
Sensitive Senior Notes due 2008 (the "Securities") between the Company and
United States Trust Company of New York, as Trustee (the "Trustee"), that the
following information is true and correct as of the date hereof :
(i) The Company's Indebtedness/Total Capital Ratio as of the last day of
the fiscal quarter most recently ended, measured in accordance with GAAP on a
Consolidated basis was ___%, calculated as follows:
(1) Balance Sheet Indebtedness as of ___________: $________
(2) Funded Indebtedness as of ________________: $_________
(3) Consolidated Net Worth as of ______________: $________
Indebtedness/Total Capital Ratio ((1)/((2)+(3))): __________
(ii) The current S&P Ratings and Moody's Ratings for each ACE USA
Insurance Group as of the date of this Certificate are: [set forth ratings for
each such group].
(iii) Based upon the calculation and rating set forth respectively in (i)
and (ii) above, the applicable interest rate in effect for the Pricing Period
beginning ________ and ending ____________ will be ______.
Capitalized terms used but not defined herein shall have their respective
meanings as set forth in the Indenture and the Securities.
[Signature on following page]
1
IN WITNESS WHEREOF, the undersigned have executed and delivered this
certificate on behalf of Company.
Dated: __, ____ACE US HOLDINGS, INC.
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
2
EXHIBIT E
ACE US HOLDINGS, INC.
FORM OF
RATINGS CERTIFICATE
TO THE TRUSTEE TO THE TRUSTEE AND CALCULATION AGENT
We, ____________ and _____________, the ___________________ and
____________________, respectively, of ACE US Holdings, Inc., a Delaware
corporation (the "Company"), do hereby certify on behalf of the Company pursuant
to Section 4.02(e) of the Indenture (the "Indenture") for the Company's Credit
Sensitive Senior Notes due 2008 (the "Securities") between the Company and
United States Trust Company of New York, as Trustee (the "Trustee"), that the
following information is true and correct as of the date hereof :
(i) The current S&P Ratings and Moody's Ratings for each ACE USA Insurance
Group as of the date of this Certificate are: [set forth ratings for each such
group].
(ii) Taking into account the rating set forth in (i) above and the
Indebtedness/Total Capital Ratio set forth in the Quarterly Certificate most
recently delivered pursuant to Section 4.02(d) of the Indenture, the applicable
interest rate in effect for the Pricing Period beginning ________ and ending
____________ is ______.
Capitalized terms used but not defined herein shall have their respective
meanings as set forth in the Indenture and the Securities.
[Signature on following page]
1
IN WITNESS WHEREOF, the undersigned have executed and delivered this
certificate on behalf of Company.
Dated: __, ____ ACE US HOLDINGS, INC.
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
2