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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 2, 1999
ACE LIMITED
(Exact name of registrant as specified in its charter)
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Cayman Islands 1-11778 98-0091805
(State or other jurisdiction (Commission (I.R.S. Employer of Incorporation)
File Number) Identification No.)
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The ACE Building
30 Woodbourne Avenue
Hamilton, Bermuda HM 08
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (441) 295-5200
Not Applicable
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
On July 2, 1999, ACE Limited (the "Company"), through its wholly owned
subsidiary ACE INA Holdings, Inc. ("Holdings"), completed the acquisition of the
domestic and international property and casualty business (the "Acquired
Business") of CIGNA Corporation ("CIGNA") for the previously announced price of
$3.45 billion in cash. The transaction is initially being financed with $1.025
billion of available cash, $400 million from a hybrid trust preferred security
and the remainder with commercial paper issuance. Ultimately, the commercial
paper will be replaced with a combination of newly issued equity, senior debt
and trust preferred securities. A copy of the Acquisition Agreement and
Amendments Nos. 1 and 2 thereto are filed as Exhibits 2.1, 2.2 and 2.3 to this
Form 8-K.
Also put in place at the closing was the previously announced reinsurance
arrangement with National Indemnity Company (a subsidiary of Berkshire Hathaway)
providing $1.25 billion in protection against adverse development in the run-
off operations and certain asbestos and environmental exposures of ACE INA.
The Company has also entered into a 10-year agreement with IBM Global
Services ("IBM") to manage the transition and integration of the information
technology ("IT") infrastructure for the Acquired Business and to provide
ongoing IT support for these operations. The outsourcing agreement will transfer
approximately 350 employees to IBM together with the software, hardware and
other facilities necessary to provide these services. A copy of the agreement
with IBM is filed as Exhibit 99.1.
Included as Exhibit 99.2 to this Current Report on Form 8-K is a copy of
the press release dated July 2, 1999 announcing such completion.
Item 5. Other Events
In connection with the completion of the acquisition of the Acquired
Business, ACE RHINOS Trust, a Delaware statutory business trust (the "Trust"),
sold in a private placement $400 million of Auction Rate Reset Preferred
Securities (the "Preferred Securities"). All of the common securities of the
Trust are owned by Holdings.
The Preferred Securities mature on September 30, 2002. Distribution on the
Preferred Securities are payable quarterly at LIBOR plus 125 basis points,
adjusted quarterly, provided that the Trust may defer such payments (but no
later than September 30, 2001 or earlier Redemption Date), with such deferred
payments compounded quarterly, if Holdings defers interest on the Subordinated
Notes (as defined below). If the trading price of ACE's Ordinary Shares
declines to 66-2/3% of the closing price of ACE's ordinary shares on June 30,
1999, the holders of a majority of the Preferred Securities will have the
option to require Banc of America Securities LLC ("BAS") as the Remarketing
Agent to remarket the Preferred Securities. If remarketed, the maturity of the
remarketed securities will be reset as the later of September 30,
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2001 or one year from the date on which the remarketed securities are issued.
The coupon will be reset pursuant to a bid process to value the remarketed
securities at 100.25% of the face amount thereof. A copy of the Remarketing and
Contingent Purchase Agreement is filed as Exhibit 99.3 to this Form 8-K.
The sole assets of the Trust consist of a $412,372,000 Auction Rate Reset
Subordinated Notes Series A (the "Subordinated Notes") issued by Holdings. The
Subordinated Notes mature on September 30, 2001. Interest on the Subordinated
Notes is payable quarterly at LIBOR plus 125 basis points, adjusted quarterly,
provided that Holdings may defer such interest payments (but no later than the
September 30, 2001 or earlier Redemption Date), with such deferred payments
compounded quarterly. If under certain circumstances the Trust is dissolved and
the holders of the Preferred Securities directly holds the Subordinated Notes,
then the remarketing provisions described above will be applicable to the
Subordinated Notes. A copy of the Indenture and Supplemental Indenture is filed
as Exhibits 99.5 and 99.6 to this Form 8-K.
In connection with the issuance of the Preferred Securities, the Company
has agreed with BAS to use its reasonable best efforts to complete one or more
firm commitment underwritings with an aggregate public offering price of $400
million on or before June 30, 2002. The Company has agreed to maintain an
effective shelf registration statement with availability for the issuance of up
to $400 million ordinary shares (exclusive of any amounts to cover over-
allotments). A copy of the letter agreement is filed as Exhibit 99.4 to this
Form 8-K.
Item 7. Financial Statements and Exhibits.
(a) Audited Financial Statements of the Acquired Business
See Exhibit 99.7
(b) Pro Forma Financial Information
The required pro forma financial information will be filed by
amendment to the Form 8-K as soon as practicable, but in any
event not later than 60 days after July 2, 1999.
(c) Exhibits.
2.1 Acquisition Agreement, dated as of January 11, 1999, among CIGNA
Corporation, CIGNA Holdings, Inc. and ACE Limited
2.2 Amendment No. 1 to Acquisition Agreement, dated as of July 2,
1999, CIGNA Corporation, CIGNA Holdings, Inc. and ACE Limited
2.3 Amendment No. 2 to Acquisition Agreement, dated as of July 2,
1999, CIGNA Corporation, CIGNA Holdings, Inc. and ACE Limited
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99.1 Information Technology Services Agreement, dated as of June 29, 1999,
among Holdings and International Business Machines Corporation
99.2 Press release, dated July 9, 1999
99.3 Remarketing and Contingent Purchase Agreement, dated June 30, 1999,
among ACE Limited, Holdings, ACE RHINOS Trust and Banc of America Securities LLC
99.4 Letter agreement, dated as of June 29, 1999, between Bank of America
Securities LLC and ACE Limited
99.5 Indenture, dated as of June 15, 1999, between ACE RHINOS Trust,
Holdings and The First National Bank of Chicago, as Trustee
99.6 Supplemental Indenture, dated as of June 30, 1999, between ACE RHINOS
Trust, Holdings and The First National Bank of Chicago, as Trustee
99.7 Audited financial statements for the Acquired Business for each of
the years in the three-year period ended December 31, 1998
Item 8. Change in Fiscal Year
Effective July 2, 1999, the Company changed its fiscal year so that its
fiscal year will now commence on January 1 and end on December 31. This change
was made to align the Company's fiscal year end with the statutory year ends of
the majority of its subsidiaries. A Quarterly Report on Form 10-Q for the
transition period from September 30, 1998 through December 31, 1998 will be
filed.
Because of the change in fiscal year, the 2000 annual general meeting of
stockholders will be held on June 9, 2000. Accordingly, the deadline for
stockholders who wish to submit a proposal to be considered for inclusion in the
proxy statement for such annual meeting has been extended. Stockholders wishing
to submit such a proposal should send it to the Secretary, ACE Limited, The ACE
Building, 30 Woodbourne Avenue, Hamilton HM 08 Bermuda so that it is received no
later than December 31, 1999 and such proposal must otherwise comply with the
requirements of the U.S. Securities and Exchange Commission to be eligible for
inclusion in the Company's 2000 annual general meeting proxy statement and form
of proxy. Under the Company's Articles of Association, the deadline for advance
notice to submit a proposal for consideration at the 2000 annual meeting, or to
nominate persons for election as directors, did not change. Such written notice
must be received by the Secretary of the Company on or prior to December 7,
1999. The notice must meet the requirements set forth in the Company's Articles
of Association. Under the circumstances described in, and upon compliance with,
Rule 14a-4(c) under the Exchange Act, management proxies would be allowed to use
their discretionary voting authority to vote on any proposal with respect to
which the foregoing requirements have been met.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: July 19, 1999 ACE LIMITED
By: Christopher Z. Marshall
-----------------------
Christopher Z. Marshall
Chief Financial Officer
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EXHIBIT INDEX
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Exhibit
Number Description
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2.1 Acquisition Agreement, dated as of January 11, 1999, among CIGNA
Corporation, CIGNA Holdings, Inc. and ACE Limited
2.2 Amendment No. 1 to Acquisition Agreement, dated as of July 2,
1999, CIGNA Corporation, CIGNA Holdings, Inc. and ACE Limited
2.3 Amendment No. 2 to Acquisition Agreement, dated as of July 2,
1999, CIGNA Corporation, CIGNA Holdings, Inc. and ACE Limited
99.1 Information Technology Services Agreement, dated as of June 29,
1999, among Holdings and International Business Machines Corporation
99.2 Press release, dated July 9, 1999
99.3 Remarketing and Contingent Purchase Agreement, dated June 30, 1999,
among ACE Limited, Holdings, ACE RHINOS Trust and Banc of America
Securities LLC
99.4 Letter agreement, dated as of June 29, 1999, between Bank of America
Securities LLC and ACE Limited
99.5 Indenture, dated as of June 15, 1999, between ACE RHINOS Trust,
Holdings and The First National Bank of Chicago, as Trustee
99.6 Supplemental Indenture, dated as of June 30, 1999, between ACE
RHINOS Trust, Holdings and The First National Bank of Chicago, as
Trustee
99.7 Audited financial statements for the Acquired Business for each
of the years in the three-year period ended December 31, 1998
(Incorporated by reference to Exhibit 99.2 to Current Report on Form
8-K (Date of Earliest Event Reported May 18, 1999))
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EXHIBIT 2.1
================================================================================
ACQUISITION AGREEMENT
by and among
CIGNA CORPORATION,
CIGNA HOLDINGS, INC.
and
ACE LIMITED
Dated as of January 11, 1999
================================================================================
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TABLE OF CONTENTS
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ARTICLE I THE CLOSING
Section 1.1 Purchase and Sale................................................................ 2
Section 1.2 Closing; Subsequent Closings..................................................... 3
Section 1.3 Consideration.................................................................... 5
Section 1.4 Payment of Purchase Price........................................................ 5
Section 1.5 Assumption of Liabilities........................................................ 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Section 2.1 Organization, Standing and Corporate or Other Power.............................. 7
Section 2.2 Authority........................................................................ 8
Section 2.3 Noncontravention................................................................. 8
Section 2.4 INA Corporation and its Subsidiaries............................................. 10
Section 2.5 Compliance with Applicable Laws; Litigation...................................... 12
Section 2.6 Financial Statements............................................................. 14
Section 2.7 Undisclosed Liabilities.......................................................... 15
Section 2.8 Absence of Certain Changes....................................................... 16
Section 2.9 Employee Benefit Plans; ERISA.................................................... 16
Section 2.10 Taxes............................................................................ 18
Section 2.11 Intellectual Property............................................................ 20
Section 2.12 Contracts; Insurance Contracts................................................... 22
Section 2.13 Real Property.................................................................... 24
Section 2.14 Affiliate Transactions........................................................... 25
Section 2.15 Environmental Matters............................................................ 25
Section 2.16 Insurance Coverage............................................................... 26
Section 2.17 Regulatory Filings............................................................... 27
Section 2.18 Reinsurance...................................................................... 27
Section 2.19 Brokers.......................................................................... 28
Section 2.20 Permits, Licenses and Franchises................................................. 29
Section 2.21 Contributed Assets............................................................... 29
Section 2.22 Rating Agencies.................................................................. 29
Section 2.23 No Other Agreements to Sell the Acquired Companies............................... 30
Section 2.24 1995 Restructuring............................................................... 30
Section 2.25 Year 2000 Compliance............................................................. 30
Section 2.26 Producers........................................................................ 31
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Section 2.27 Reserves......................................................................... 32
Section 2.28 Financial and Market-Conduct Examinations........................................ 33
Section 2.29 Certain Dividends................................................................ 33
Section 2.30 Labor............................................................................ 33
Section 2.31 Guaranty Fund Assessments........................................................ 33
Section 2.32 Portfolio Investments............................................................ 34
Section 2.33 Certain Arrangements............................................................. 34
Section 2.34 Internal Pooling Arrangements.................................................... 35
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
Section 3.1 Organization, Standing and Corporate Power....................................... 36
Section 3.2 Authority........................................................................ 36
Section 3.3 Noncontravention................................................................. 37
Section 3.4 Compliance with Applicable Laws; Litigation...................................... 39
Section 3.5 Purchase for Investment.......................................................... 40
Section 3.6 Financing........................................................................ 40
Section 3.7 Brokers.......................................................................... 41
Section 3.8 Absence of Certain Changes....................................................... 41
ARTICLE IV GENERAL COVENANTS
Section 4.1 Conduct of Business Pending the Closing.......................................... 41
Section 4.2 Exclusivity...................................................................... 47
Section 4.3 Investigations; Pre-Closing Access; Transition Matters........................... 48
Section 4.4 Post-Closing Access.............................................................. 50
Section 4.5 Governmental Entity Filings...................................................... 52
Section 4.6 Non-Governmental Consents and Reasonable Best Efforts............................ 54
Section 4.7 Further Assurances............................................................... 56
Section 4.8 Expenses......................................................................... 56
Section 4.9 Public Announcements............................................................. 58
Section 4.10 Waiver of Claims by the Acquired Companies....................................... 58
Section 4.11 Rating Agency Presentations...................................................... 59
Section 4.12 Notice of Adverse Developments................................................... 59
Section 4.13 Termination of Certain Agreements................................................ 60
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Section 4.14 Audited Business Financial Statements; Other Financials........................... 60
Section 4.15 Insurance Matters................................................................. 62
Section 4.16 Certain Intellectual Property Matters............................................. 63
Section 4.17 Forgiveness of Certain Indebtedness............................................... 63
Section 4.18 Updates to Seller Disclosure Schedules............................................ 63
ARTICLE V ADDITIONAL COVENANTS
Section 5.1 Affected Employees............................................................... 64
Section 5.2 Employee Benefits................................................................ 68
Section 5.3 Stock-Based Awards............................................................... 71
Section 5.4 Brandywine....................................................................... 74
Section 5.5 Intellectual Property............................................................ 75
Section 5.6 Noncompetition and Nonsolicitation by CIGNA...................................... 76
Section 5.7 Noncompetition and Nonsolicitation by the Purchaser.............................. 80
Section 5.8 Ancillary Agreements; Other Documents............................................ 83
Section 5.9 Replacement Support Agreements; New Support Agreements........................... 85
Section 5.10 Financing........................................................................ 86
Section 5.11 Persons Authorized to Act........................................................ 86
Section 5.12 Certain Insurance Certificates................................................... 87
Section 5.13 Real Estate Matters.............................................................. 87
ARTICLE VI TAX MATTERS
Section 6.1 Tax Elections Generally.......................................................... 88
Section 6.2 Tax Returns Prior to Closing..................................................... 88
Section 6.3 Transfer Taxes................................................................... 89
Section 6.4 Termination of Acquired Companies' Obligations under the Tax Sharing Agreement... 89
Section 6.5 Preparation of Tax Returns....................................................... 90
Section 6.6 Amended Tax Returns and Refund Claims............................................ 91
Section 6.7 Cooperation on Tax Matters....................................................... 92
Section 6.8 Tax Indemnification.............................................................. 92
Section 6.9 Purchase Price Adjustment and Interest........................................... 96
Section 6.10 Acquired Group Cases............................................................. 96
Section 6.11 Post-Closing Tax Period Dividends................................................ 96
Section 6.12 Resolution of Disagreements
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between CIGNA and the Purchaser................................................. 97
Section 6.13 Taxes on Transfers of Excluded Business and Deferred Companies.................. 98
Section 6.14 Survival........................................................................ 98
ARTICLE VII CONDITIONS TO THE CLOSING AND
ANY SUBSEQUENT CLOSING
Section 7.1 Conditions of the Purchaser and the Sellers to the Closing...................... 98
Section 7.2 Conditions of the Purchaser and the Sellers to each Subsequent Closing.......... 104
Section 7.3 Certain Exclusions from Conditions to the Closing and the Subsequent Closings... 109
ARTICLE VIII TERMINATION OF THIS AGREEMENT; TERMINATION
OF CERTAIN OBLIGATIONS
Section 8.1 Termination of this Agreement Prior to the Closing.............................. 110
Section 8.2 Effect of Termination pursuant to Section 8.1................................... 112
Section 8.3 Termination of Certain Obligations following the Closing........................ 113
Section 8.4 Effect of Termination of Certain Obligations Pursuant to Section 8.3............ 114
Section 8.5 Notice Regarding Termination.................................................... 115
ARTICLE IX EXCLUSIONS FROM REPRESENTATIONS AND WARRANTIES;
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
INDEMNIFICATION
Section 9.1 Exclusions from the Representations and Warranties of the Sellers............... 116
Section 9.2 Survival of Representations, Warranties and Covenants........................... 116
Section 9.3 CIGNA's Obligation to Indemnify................................................. 118
Section 9.4 The Purchaser's Obligation to Indemnify......................................... 120
Section 9.5 Other Limitations on Indemnification............................................ 120
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Section 9.6 Claims Notice................................................................... 122
Section 9.7 Right to Contest Claims of Third Parties........................................ 123
Section 9.8 Indemnification Payments........................................................ 124
Section 9.9 Exclusivity..................................................................... 125
ARTICLE X CERTAIN DEFINITIONS; OTHER MATTERS
Section 10.1 Definitions..................................................................... 126
Section 10.2 Disclosure Schedules............................................................ 141
Section 10.3 Interpretation.................................................................. 141
ARTICLE XI MISCELLANEOUS
Section 11.1 Amendment, Modification and Waiver.............................................. 142
Section 11.2 Entire Agreement................................................................ 142
Section 11.3 Notices......................................................................... 142
Section 11.4 GOVERNING LAW................................................................... 144
Section 11.5 Descriptive Headings............................................................ 144
Section 11.6 Assignment; Binding Agreement................................................... 144
Section 11.7 Third Party Beneficiaries....................................................... 145
Section 11.8 Specific Performance............................................................ 145
Section 11.9 Severability.................................................................... 145
Section 11.10 Counterparts.................................................................... 146
Section 11.11 Consent to Jurisdiction, Etc.................................................... 146
Section 11.12 Appointment of Purchaser Process Agent.......................................... 146
Section 11.13 Appointment of CIGNA Process Agent.............................................. 147
Section 11.14 Arbitration..................................................................... 148
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DISCLOSURE SCHEDULES
The Seller Disclosure Schedule and the Purchaser Disclosure Schedule
are subject, inter alia, to Section 10.2 of the Acquisition Agreement.
Seller Disclosure Schedule
--------------------------
Section 1.5 Assumed Liabilities
Section 2.3(a) Non-Governmental Consents
Section 2.3(b) Governmental Consents
Section 2.4(b) Acquired Domestic Companies
Section 2.4(c) Acquired International Companies
Section 2.4(d) Other Equity Interests
Section 2.5(a) Seller Permits
Section 2.5(b) Pending or Threatened Actions
Section 2.5(c) Outstanding Orders
Section 2.7 Liabilities
Section 2.8 Certain Changes
Section 2.9(a) Employee Benefit Plans
Section 2.10 Taxes
Section 2.11(a) Intellectual Property
Section 2.11(b) Retained Intellectual Property
Section 2.11(d) Infringement
Section 2.12(a) Material Business Contracts
Section 2.12(c) Material Breaches of the Original Equity Insurance
Joint Venture Agreements
Section 2.13 Real Property
Section 2.14 Affiliate Transactions
Section 2.15 Environmental Matters
Section 2.16 Insurance Policies
Section 2.17 Regulatory Filings
Section 2.18 Reinsurance Agreements
Section 2.19 Brokers
Section 2.20 Licensed Jurisdictions
Section 2.22 Ratings
Section 2.23 Sale Agreements
Section 2.26(a) Key Producers
Section 2.26(c) Standard Form Producer Agreements
Section 2.26(f) Interests in Managing General Agents
Section 2.27(b) Reserves
Section 2.30 Labor
Section 2.31 Guaranty Fund Assessments
Section 2.32 Portfolio Investments
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Section 2.33 Certain Arrangements
Section 4.1 Conduct of Business
Section 4.13 Agreements and Intercompany Accounts
Section 4.17 Forgiveness of Certain Indebtedness
Section 5.1(a) Excluded Domestic Employees
Section 5.1(b) Excluded International Employees
Section 5.1(c) Identified Additional Employees
Section 5.1(d) Designated Additional Employees
Section 5.5 Trademarks and Logos
Section 5.9(a) Existing Support Agreements
Section 5.14 Leases to be Assigned Prior to Closing
Section 6.10 Acquired Group Cases
Section 6.11 Section 1248 Companies
Section 7.1(c)(v) Non-Governmental Consents and Approvals
Section 10.1(a) Business Plans
Section 10.1(b) Contributed Assets
Section 10.1(c) Deferrable Acquired International Companies
Section 10.1(d) Domestic Insurance Companies
Section 10.1(e)(i) Excluded Business
Section 10.1(e)(ii) Excluded Business (Assets and Related Liabilities)
Section 10.1(f) International Insurance Companies
Section 10.1(g) Persons with knowledge
Section 10.1(h) Material Acquired International Companies
Section 10.1(i) Material Acquired International Insurance Companies
Section 10.1(j) Original Equity Insurance Joint Venture Agreements
Section 10.1(k) Retained Liabilities
Purchaser Disclosure Schedule
-----------------------------
Section 2.27(c) Reserves
Section 3.3(a) Non-Governmental Consents
Section 3.3(b) Governmental Consents
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LIST OF EXHIBITS
Exhibit 1. Assignment and Assumption Agreement
Exhibit 2. Bermuda Bulk Reinsurance Agreement
Exhibit 3. Copyright Assignment
Exhibit 4. Excluded Business Transfer Agreement
Exhibit 5. Global Cooperation/Joint Marketing Agreement
Exhibit 6. Integrated Care Agreement Term Sheet
Exhibit 7. Investment Advisory Agreement
Exhibit 8. Option Agreement
Exhibit 9. Two Liberty Place Sublease
Exhibit 10. Software Agreement
Exhibit 11. Systems Facilities Agreement
Exhibit 12. Trademark Assignment
Exhibit 13. Transition Services Agreement Term Sheet
Exhibit 14. Form of Insurance Endorsement
Exhibit 15. Eagle Lodge Use Agreement
Exhibit 16. Facility Sharing Agreements Term Sheet
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INDEX OF DEFINED TERMS
Acquired Asset Contracts..........................................(S)4.6(b)
Acquired Assets.....................................................(S)10.1
Acquired Companies..................................................(S)10.1
Acquired Domestic Companies.........................................(S)10.1
Acquired International Companies....................................(S)10.1
Acquired Securities...............................................(S)2.4(a)
Acquisition........................................................Recitals
Action..............................................................(S)10.1
Affected Domestic Employees.......................................(S)5.1(a)
Affected Employees................................................(S)5.1(d)
Affected International Employees..................................(S)5.1(b)
affiliate ..........................................................(S)10.1
Agreement...........................................................Heading
Ancillary Agreements................................................(S)10.1
Asserted Liability................................................(S)9.7(a)
Assignment and Assumption Agreement.................................(S)10.1
Assumed Liabilities..................................................(S)1.5
Audited Business Financial Statements..................................4.14
Bermuda Bulk Reinsurance Agreement..................................(S)10.1
Books and Records...................................................(S)10.1
Business............................................................(S)10.1
business day........................................................(S)10.1
Business Plans......................................................(S)10.1
CIGNA...............................................................Heading
CIGNA Awards.................................................(S)5.3(a)(iii)
CIGNA Common Stock..................................................(S)10.1
CIGNA Deferred Compensation Plan..................................(S)5.2(c)
CIGNA Holdings......................................................Heading
CIGNA LTIP........................................................(S)5.3(b)
CIGNA Process Agent................................................(S)11.13
CIGNA Restricted Stock Awards..................................(S)5.3(a)(i)
CIGNA Restricted Stock Units..................................(S)5.3(a)(ii)
CIH................................................................Recitals
Cause...............................................................(S)10.1
Claims Notice........................................................(S)9.6
Closing...........................................................(S)1.2(a)
Closing Date......................................................(S)1.2(a)
Code..............................................................(S)2.9(a)
Computer Hardware................................................(S)2.11(a)
Computer Software...................................................(S)4.16
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Consultation Notice.............................................(S)6.12
Contributed Assets..............................................(S)10.1
Copyright Assignment............................................(S)10.1
Deferrable Acquired International Company.......................(S)10.1
Deferred Assets...............................................(S)1.2(b)
Deferred Companies............................................(S)1.2(b)
Deferred Contributed Assets...................................(S)1.2(b)
Deferred Joint Venture Agreements.............................(S)1.2(b)
Deferred Purchase Price Payment Amount.....................(S)1.4(b)(i)
Designated Additional Employees...............................(S)5.1(d)
Disability Leave Employees....................................(S)5.2(h)
Disability Plans..............................................(S)5.2(h)
Domestic Insurance Companies....................................(S)10.1
Domestic SAP Financial Statements.............................(S)2.6(b)
Eagle Lodge Use Agreement.......................................(S)10.1
ERISA.........................................................(S)2.9(a)
ERISA Affiliate...............................................(S)2.9(a)
Eligible Grantee..........................................(S)5.3(a)(iv)
Environmental Laws..............................................(S)10.1
Equity Insurance Joint Venture Agreements.......................(S)10.1
Equity Insurance Joint Ventures.................................(S)10.1
Exchange Act..................................................(S)5.3(i)
Exchange Ratio................................................(S)5.3(g)
Excluded Business...............................................(S)10.1
Excluded Business Transfer Agreements...........................(S)10.1
Excluded Domestic Employees...................................(S)5.1(a)
Excluded Employees............................................(S)5.1(b)
Excluded International Employees..............................(S)5.1(b)
Exempt Employee.................................................(S)10.1
Existing Support Agreements.....................................(S)10.1
Facility Sharing Agreement......................................(S)10.1
Federal Tax.....................................................(S)10.1
Final Determination.............................................(S)10.1
Financing Commitment Letter......................................(S)3.6
Foreign Plan..................................................(S)2.9(a)
GAAP............................................................(S)10.1
Global Cooperation/Joint Marketing Agreement....................(S)10.1
Governmental Entity...........................................(S)2.3(b)
Grant Letter..................................................(S)5.3(h)
Guaranteed Reserves..............................................(S)5.4
HSR Act.........................................................(S)10.1
Hazardous Materials.............................................(S)10.1
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INA Corporation........................................................Recitals
INAC Common Stock.....................................................(S)2.4(a)
INAFC..................................................................Recitals
Identified Additional Employees.......................................(S)5.1(c)
Income Tax..............................................................(S)10.1
Indemnified Party........................................................(S)9.6
Indemnifying Party.......................................................(S)9.6
Insurance Companies.....................................................(S)10.1
Insurance Company Financial Statements................................(S)2.6(b)
Insurance Contracts.....................................................(S)10.1
Insurance Endorsements...............................................(S)4.15(b)
Insurance Policies......................................................(S)2.16
Integrated Care Agreement...............................................(S)10.1
Intellectual Property................................................(S)2.11(a)
Intercompany Reinsurance Pooling Agreement........................(S)2.34(a)(i)
International Insurance Companies.......................................(S)10.1
International Insurance Company Financial Statements..................(S)2.6(b)
Investment Advisory Agreement...........................................(S)10.1
Key Producers........................................................(S)2.26(a)
knowledge...............................................................(S)10.1
Laws....................................................................(S)10.1
Lien....................................................................(S)10.1
Loss....................................................................(S)10.1
Losses..................................................................(S)10.1
Material Business Contracts..........................................(S)2.12(a)
Material Acquired International Companies...............................(S)10.1
Material Acquired International Insurance Companies.....................(S)10.1
New Support Agreements................................................(S)5.9(b)
1995 Restructuring......................................................(S)10.1
1996 Audited Financial Statements.......................................(S)4.14
1997 Audited Financial Statements.......................................(S)4.14
1998 Audited Financial Statements.......................................(S)4.14
1999 Actual Dividends...................................................(S)10.1
1999 Dividend Shortfall Amount..........................................(S)10.1
1999 Entitled Dividends.................................................(S)10.1
1999 Interest Amount....................................................(S)10.1
Option Agreement........................................................(S)10.1
Original Equity Insurance Joint Venture Agreements......................(S)10.1
Permitted Liens.........................................................(S)10.1
xi
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person...................................................................(S)10.1
Plans..................................................................(S)2.9(a)
Post-Closing Tax Period..................................................(S)10.1
Potential Additional Employees.........................................(S)5.1(d)
Pre-Closing Tax Period...................................................(S)10.1
Producer Agreements...................................................(S)2.26(d)
Purchase Price............................................................(S)1.3
Purchaser................................................................Heading
Purchaser Common Stock..............................................(S)5.3(c)(i)
Purchaser Confidentiality Agreement......................................(S)10.1
Purchaser Disclosure Schedule.............................................(S)3.3
Purchaser Indemnitees..................................................(S)9.3(a)
Purchaser Material Adverse Effect........................................(S)10.1
Purchaser Permits......................................................(S)3.4(a)
Purchaser Process Agent.................................................(S)11.12
Purchaser Stock Plan...................................................(S)5.3(b)
Purchaser Tax Loss.....................................................(S)6.8(a)
Real Estate Agreements...................................................(S)10.1
Reasonable Best Efforts..................................................(S)10.1
Regulatory Agreement...................................................(S)2.5(c)
Reinsurance Agreements...................................................(S)2.18
Remaining Employees....................................................(S)5.1(f)
Replacement Reinsurance...................................................(S)5.4
Replacement Support Agreements.........................................(S)5.9(a)
Retained Intellectual Property........................................(S)2.11(b)
Retained Liabilities.....................................................(S)10.1
SAP......................................................................(S)10.1
SEC......................................................................(S)10.1
Section 1248 Company.....................................................(S)6.11
Securities Act............................................................(S)1.1
Self-Insurance Policies..................................................(S)10.1
Sell-off Period...........................................................(S)5.5
Seller Confidentiality Agreement.......................................(S)4.3(a)
Seller Disclosure Schedule...............................................(S)10.1
Seller Guarantee..........................................................(S)5.4
Seller Indemnitees.....................................................(S)9.4(a)
Seller Material Adverse Effect...........................................(S)10.1
Seller Permits.........................................................(S)2.5(a)
Seller Tax Loss........................................................(S)6.8(b)
Sellers..................................................................Heading
Shared Properties........................................................5.13(a)
Software Agreement.......................................................(S)10.1
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Software Relicensing Fees................................................(S)10.1
Standard & Poor(S)s......................................................(S)2.22
Subsequent Closing Date................................................(S)1.2(b)
Subsequent Closings....................................................(S)1.2(b)
subsidiary...............................................................(S)10.1
Substitute Awards......................................................(S)5.3(b)
Substitute Restricted Stock Awards.....................................(S)5.3(b)
Substitute Restricted Stock Units......................................(S)5.3(b)
Support Agreements.......................................................(S)10.1
Survival Period........................................................(S)9.2(a)
Systems Facilities Agreement.............................................(S)10.1
Tax Asset................................................................(S)10.1
Tax Loss.................................................................(S)10.1
Tax Return...............................................................(S)10.1
Tax Sharing Agreement....................................................(S)10.1
Taxes....................................................................(S)10.1
Third Party Claimant...................................................(S)9.7(a)
Third Party Insurance Policies...........................................(S)2.16
Third Party Reinsurer....................................................(S)10.1
Title IV Plan..........................................................(S)2.9(a)
Trademark Assignment.....................................................(S)10.1
Trademarks and Logos......................................................(S)5.5
Transfer Taxes...........................................................(S)10.1
Transition Services Agreement..........................................(S)5.8(f)
Transitional Services Employees........................................(S)5.1(d)
Two Liberty Place Sublease...............................................(S)10.1
Unassigned Acquired Asset Contracts....................................(S)4.6(b)
Unaudited Business Financial Statements................................(S)2.6(a)
Unaudited Interim Business Financial Statements........................(S)2.6(a)
Unaudited 1997 Business Financial Statements...........................(S)2.6(a)
WARN Act...............................................................(S)5.1(e)
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ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT (this "Agreement"), dated as of January 11,
1999, is entered into by and among CIGNA Corporation, a Delaware corporation
("CIGNA"), CIGNA Holdings, Inc., a Delaware corporation ("CIGNA Holdings" and,
together with CIGNA, the "Sellers"), and ACE Limited, a Cayman Islands company
(the "Purchaser"). Certain capitalized and uncapitalized terms used in this
Agreement are defined in Section 10.1 hereof.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, CIGNA is the owner of all of the issued and outstanding
shares of common stock of CIGNA Holdings;
WHEREAS, CIGNA Holdings is the owner of all of the issued and
outstanding shares of common stock of INA Corporation, a Pennsylvania
corporation ("INA Corporation");
WHEREAS, INA Corporation is the owner of all of the issued and
outstanding shares of common stock of INA Financial Corporation, a Delaware
corporation ("INAFC"), and of CIGNA International Holdings, Ltd., a Delaware
corporation ("CIH");
WHEREAS, CIGNA conducts its property and casualty insurance business
in the United States through INAFC and its subsidiaries;
WHEREAS, CIGNA conducts its international property and casualty
insurance business through CIH and certain of its subsidiaries, through branches
of subsidiaries of INAFC and through the Equity Insurance Joint Ventures;
WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, the Sellers
<PAGE>
desire to sell to the Purchaser, and the Purchaser desires to purchase from the
Sellers, the Acquired Assets, subject to the assumption by the Purchaser of the
Assumed Liabilities (the "Acquisition");
WHEREAS, prior to the consummation of the Acquisition, certain assets
and liabilities of the Acquired Companies will be conveyed by the Acquired
Companies to one or more indirect subsidiaries of CIGNA pursuant to the Excluded
Business Transfer Agreements;
WHEREAS, the Board of Directors of each of the Sellers have approved
this Agreement and the transactions contemplated hereby, and has determined that
this Agreement and such transactions are in the best interests of their
respective shareholders; and
WHEREAS, the Board of Directors of the Purchaser has approved this
Agreement and the transactions contemplated hereby, and has determined that this
Agreement and such transactions are in the best interests of its shareholders.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
ARTICLE I
THE CLOSING
Section 1.1 Purchase and Sale. Upon the terms and subject to the
-----------------
conditions set forth in this Agreement, at the Closing and the Subsequent
Closings (if any), the Sellers shall sell, convey, transfer and deliver to the
Purchaser, and the Purchaser shall purchase, acquire and accept from the
Sellers, all of
2
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their right, title and interest in, to and under the Acquired Assets, free and
clear of all Liens, except for Permitted Liens in respect of the Acquired Assets
(other than (1) the Acquired Securities and (2) the equity securities of CIGNA
Conference Facilities, Inc. which constitute a part of the Contributed Assets)
and except for restrictions on transfer in respect of the Acquired Securities
which arise under the Securities Act of 1933, as amended (the "Securities Act"),
and any comparable securities Laws. The consideration for the Acquired Assets is
set forth in Section 1.3 hereof.
Section 1.2 Closing; Subsequent Closings.
----------------------------
(1) The closing of the Acquisition (the "Closing") will take
place at 10:00 a.m., New York City time, on a date (the "Closing Date") to be
agreed to by the parties hereto, which shall be no later than the tenth business
day (as defined in Section 10.1 hereof) on which the last unfulfilled or
unwaived condition set forth in Section 7.1 hereof (other than any such
condition to be fulfilled at the Closing) shall be fulfilled or waived in
accordance with the terms of this Agreement, at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, or such
other date or place as the parties may mutually agree in writing.
(2) In the event that (i) all material filings with, and
approvals and authorizations of, any Governmental Entity having jurisdiction
over a Deferrable Acquired International Company or over the transactions
contemplated by an Equity Insurance Joint Venture Agreement have not been made
or obtained or all material non-governmental third person consents and approvals
which are required in connection with the execution and delivery of an Equity
Insurance Joint Venture Agreement have not been obtained and (ii) all conditions
to the Closing set forth in Section 7.1 hereof in respect of all of the other
Acquired Assets have been fulfilled or waived, then the parties hereto agree
that the Closing may proceed in respect of all of
3
<PAGE>
the Acquired Assets other than such Deferrable Acquired International Companies
and such Equity Insurance Joint Venture Agreements for which the conditions to
Closing have not been fulfilled or waived (such Deferrable Acquired
International Companies and such Equity Insurance Joint Venture Agreements that
were not conveyed to the Purchaser as part of the Closing and, as may be
determined from time to time, have not as of any such subsequent time been
conveyed to the Purchaser as part of any consummated Subsequent Closing, the
"Deferred Companies" and the "Deferred Joint Venture Agreements," respectively,
and, together, the "Deferred Assets"), and that one or more subsequent closings
("Subsequent Closings") in respect of the Deferred Assets will take place
following the Closing. Each Subsequent Closing will take place at 10:00 a.m.,
New York City time, on a date (each, a "Subsequent Closing Date") to be agreed
to between the parties hereto, which shall be no later than the fifth business
day on which the last unfulfilled or unwaived condition set forth in Section 7.2
hereof (other than any such condition to be fulfilled at the Subsequent Closing)
in respect of the Deferred Assets for which such Subsequent Closing is taking
place shall be fulfilled or waived in accordance with the terms of this
Agreement, at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
Avenue, New York, New York 10022, or on such other date or place as the parties
may agree in writing.
(3) At the Closing and each Subsequent Closing (if any), each of
the parties shall deliver or cause to be delivered to the intended recipient any
moneys, documents and instruments required to be delivered by or on behalf of
such party at or prior to such closing pursuant to the terms of this Agreement.
(4) In the event that all of the conditions to Closing in
respect of all of the Acquired Assets have not been fulfilled or waived or all
of the conditions to a Subsequent Closing in respect of all of the then-existing
Deferred Assets have not been
4
<PAGE>
fulfilled or waived, then the parties hereto shall agree upon the appropriate
actions which such parties and their affiliates shall take in order to ensure
that the Deferred Assets not included as part of the Closing or such Subsequent
Closing, as the case may be, are not inadvertently conveyed to the Purchaser at
such time.
Section 1.3 Consideration. The aggregate consideration for the
-------------
Acquired Assets shall be (i) an amount (the "Purchase Price") equal to the sum
of (1) three billion four hundred fifty million dollars ($3,450,000,000) and (2)
the 1999 Dividend Shortfall Amount, and (ii) the assumption of the Assumed
Liabilities as set forth in Section 1.5 hereof. The Purchase Price shall be
paid in accordance with Section 1.4 hereof.
Section 1.4 Payment of Purchase Price.
-------------------------
(1) In the event that all of the conditions to Closing set forth
in Section 7.1 hereof in respect of all of the Acquired Assets are fulfilled or
waived as of the Closing, then, at the Closing, the Purchaser shall deliver to
CIGNA Holdings the Purchase Price by wire transfer of immediately available
funds to an account designated in writing by CIGNA Holdings no less than five
business days prior to the Closing.
(2) In the event that all of the conditions to Closing set forth
in Section 7.1 hereof in respect of one or more of the Deferrable Acquired
International Companies or Equity Insurance Joint Venture Agreements have not
been fulfilled or waived as of the Closing, then:
(1) at the Closing, the Purchaser shall deliver
to CIGNA Holdings an amount equal to the difference determined by
subtracting the aggregate amount of the local statutory surplus
determined as of the most recent date for which such information
is available for each of the Deferred Assets
5
<PAGE>
(collectively, the "Deferred Purchase Price Payment Amount") from
(2) the Purchase Price, by wire transfer of immediately available
funds to an account designated in writing by CIGNA Holdings no
less than five business days prior to the Closing; and
(2) at each Subsequent Closing (if any), the
Purchaser shall deliver to CIGNA Holdings an amount equal to such
portion of the Deferred Purchase Price Payment Amount which is
attributable (using the methodology set forth in Section
1.4(b)(i)(1) above) to the Deferred Assets in respect of which
such Subsequent Closing is being held, by wire transfer of
immediately available funds to an account designated in writing
by CIGNA Holdings no less than five business days prior to such
Subsequent Closing.
Section 1.5 Assumption of Liabilities. At the Closing (and
-------------------------
regardless of whether or not any Subsequent Closings are then contemplated and
whether or not any Deferred Assets exist following the Closing), the Purchaser
shall assume all liabilities and obligations of any kind or nature whatsoever,
whether fixed, absolute, matured, unmatured, accrued, contingent, known or
unknown, set forth on Section 1.5 of the Seller Disclosure Schedule
(collectively, the "Assumed Liabilities"). At the Closing, the Sellers and
their affiliates (as defined in Section 10.1) and the Purchaser shall execute
and deliver the Assignment and Assumption Agreement, reinsurance agreements and
such other documents and instruments as may be necessary in order to effect the
Purchaser's assumption of the Assumed Liabilities.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
6
<PAGE>
Except as provided in Section 9.1 hereof, the Sellers represent and
warrant to the Purchaser (i) as of the date of this Agreement with respect to
each Section contained in this Article II, (ii) as of the Closing Date with
respect to only Sections 2.1, 2.2, 2.3, 2.4, 2.5(a), 2.5(c), 2.8, 2.11(e), 2.20
and 2.23 hereof, and (iii) as of each Subsequent Closing Date with respect to
only Sections 2.1, 2.2, 2.3, 2.4(c) (which Section 2.4(c) shall be deemed to be
amended to take into consideration the transfer of any Deferred Asset to another
direct or indirect subsidiary of CIGNA to the extent any such transfer was
necessary to prevent the transfer of such Deferred Asset to the Purchaser prior
to the Subsequent Closing in which such Deferred Asset is conveyed to the
Purchaser), 2.5(a), 2.5(c), 2.20 and 2.23 (each such foregoing Section specified
in this clause (iii) shall be deemed to be amended at each Subsequent Closing
such that it shall only speak in respect of the Deferred Assets being conveyed
to the Purchaser as part of such Subsequent Closing) and 2.8 (which Section 2.8
shall not be deemed to be amended in any respect, including that the definition
of Seller Material Adverse Effect shall continue to apply to the Business taken
as a whole notwithstanding that portions of the Business have been previously
conveyed to the Purchaser):
Section 1.6 Organization, Standing and Corporate or Other Power.
---------------------------------------------------
Each of the Sellers and the Acquired Companies is a corporation or other legal
entity duly organized, validly existing and in good standing (with respect to
jurisdictions which recognize such concept) under the laws of the jurisdiction
in which it is organized and has the requisite corporate or other power, as the
case may be, and authority to carry on its business as now being conducted,
except for those jurisdictions where the failure to be so organized, existing or
in good standing would not, individually or in the aggregate, have a Seller
Material Adverse Effect. Each of the Sellers and the Acquired Companies is duly
qualified or licensed to do business and is in good
7
<PAGE>
standing (with respect to jurisdictions which recognize such concept) in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
except for those jurisdictions where the failure to be so qualified or licensed
or to be in good standing would not, individually or in the aggregate, have a
Seller Material Adverse Effect. The Sellers have made available to the Purchaser
prior to the execution of this Agreement true, correct and complete copies of
(i) the certificate of incorporation and by-laws (or comparable organizational
documents) for each of the Acquired Companies and (ii) the Original Equity
Insurance Joint Venture Agreements and all material agreements relating to the
Equity Insurance Joint Ventures.
Section 1.7 Authority. Each of the Sellers has all requisite power
---------
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. Each of the Sellers and their affiliates which are a party
thereto has all requisite power and authority to execute and deliver the
Ancillary Agreements and the other agreements, documents and instruments to be
executed and delivered in connection with this Agreement or the Ancillary
Agreements and to consummate the transactions contemplated thereby. The
execution and delivery of this Agreement by the Sellers and the consummation by
the Sellers of the transactions contemplated hereby, and the execution and
delivery of the Ancillary Agreements and the other agreements, documents and
instruments to be executed and delivered in connection with this Agreement or
the Ancillary Agreements by the Sellers and their affiliates which are a party
thereto and the consummation of the transactions contemplated thereby, have been
duly authorized by all necessary action on the part of each such person. This
Agreement has been duly executed and delivered by the Sellers and, assuming the
due authorization, execution and delivery of this Agreement by the Purchaser,
constitutes a legal, valid and binding obligation of the Sellers, enforceable
against the Sellers in accordance
8
<PAGE>
with its terms. The Ancillary Agreements and the other agreements, documents and
instruments to be executed and delivered in connection with this Agreement or
the Ancillary Agreements have been duly executed and delivered by the Sellers
and their affiliates which are a party thereto and, assuming the due
authorization, execution and delivery of such other agreements, documents and
instruments by each of the other parties thereto, constitute legal, valid and
binding obligations of the Sellers and their affiliates which are a party
thereto, enforceable against each such person in accordance with their terms.
Section 1.8 Noncontravention.
----------------
(1) Except as set forth in Section 2.3(a) of the Seller
Disclosure Schedule, the execution and delivery of this Agreement, the Ancillary
Agreements and the other agreements, documents and instruments to be executed
and delivered in connection with this Agreement or the Ancillary Agreements do
not, and the consummation of the transactions contemplated by this Agreement,
the Ancillary Agreements and the other agreements, documents and instruments to
be executed and delivered in connection with this Agreement or the Ancillary
Agreements will not, conflict with, or result in any violation, impairment or
revocation of, or default (with or without notice or lapse of time, or both)
under, or give rise to the creation of a Lien, a right of termination,
cancellation, revocation or acceleration of any obligation or loss of a benefit
under, (i) the certificate of incorporation or by-laws (or comparable
organizational documents) of (1) either of the Sellers, (2) any subsidiary of
CIGNA which is a party to the Ancillary Agreements or the other agreements,
documents and instruments to be executed and delivered in connection with this
Agreement or the Ancillary Agreements or (3) the Acquired Companies, (ii) any
loan or credit agreement, note, mortgage, indenture, lease, material agreement,
concession, franchise, contractual license or similar authorization applicable
to (1) either of the Sellers, (2) any subsidiary of
9
<PAGE>
CIGNA which is a party to the Ancillary Agreements or the other agreements,
documents and instruments to be executed and delivered in connection with this
Agreement or the Ancillary Agreements or (3) the Acquired Companies or their
respective properties or assets, (iii) subject to the governmental filings and
other matters referred to in Section 2.3(b) below, any Law applicable to (1)
either of the Sellers, (2) any subsidiary of CIGNA which is a party to the
Ancillary Agreements or the other agreements, documents and instruments to be
executed and delivered in connection with this Agreement or the Ancillary
Agreements or (3) the Acquired Companies or their respective properties or
assets, (iv) any order, judgment, injunction, award or decree of any
Governmental Entity or any agreement with, or condition imposed by, any
Governmental Entity, in each case, which is binding upon CIGNA or any of its
subsidiaries in connection with the Business or (v) any Seller Permit related to
the Business, other than, in the case of clauses (ii), (iii), (iv) and (v), any
such conflicts, violations, impairments, revocations, defaults, Liens, rights or
losses (1) which are based on any facts or circumstances relating to the
Purchaser or (2) which would not, individually or in the aggregate, have a
Seller Material Adverse Effect.
(2) No consent, approval, order or authorization of, action by
or in respect of, or registration, declaration or filing with, any federal,
state, local or foreign government, any court, administrative, regulatory or
other governmental agency, commission or authority or any non-governmental
United States or foreign self-regulatory agency, commission or authority or any
arbitral tribunal (each, a "Governmental Entity") is required by either of the
Sellers, any subsidiary of CIGNA which is a party to the Ancillary Agreements or
the other agreements, documents and instruments to be executed and delivered in
connection with this Agreement or the Ancillary Agreements or the Acquired
Companies in connection with (i) the execution and delivery of this Agreement by
the Sellers, (ii) the execution and delivery of the
10
<PAGE>
Ancillary Agreements and the other agreements, documents and instruments to be
executed and delivered in connection with this Agreement or the Ancillary
Agreements by the Sellers and their subsidiaries which are a party thereto or
(iii) the consummation by the Sellers and their subsidiaries which are a party
to any such agreement of the transactions contemplated hereby or thereby, except
in the case of clauses (i), (ii) and (iii), as set forth in Section 2.3(b) of
the Seller Disclosure Schedule.
Section 1.9 INA Corporation and its Subsidiaries.
------------------------------------
(1) The authorized capital stock of INA Corporation consists of
one hundred (100) shares, par value $1.00 per share, of common stock (the "INAC
Common Stock"). One hundred (100) shares (the "Acquired Securities") of INAC
Common Stock are issued and outstanding, all of which are owned by CIGNA
Holdings free and clear of all Liens. No shares of any other class or series of
capital stock of INA Corporation are authorized, issued or outstanding. The
Acquired Securities have been validly issued and are fully paid and non-
assessable and are owned by CIGNA Holdings free and clear of all Liens. All of
the equity interests in the subsidiaries of INA Corporation which constitute
Acquired Companies and that are held by Acquired Companies have been validly
issued and are fully paid and non-assessable (with respect to jurisdictions
which recognize such concept) and are owned directly by an Acquired Company free
and clear of all Liens. Upon consummation of the transactions contemplated by
this Agreement, the Purchaser will acquire from CIGNA Holdings good title to the
Acquired Securities free and clear of all Liens, except for restrictions on
transfer which arise under the Securities Act and any comparable Laws.
(2) Section 2.4(b) of the Seller Disclosure Schedule sets forth
(i) the name, jurisdiction of organization and jurisdictions of
11
<PAGE>
qualification or other authorization to conduct insurance business of INAFC,
certain subsidiaries of INAFC and certain other persons in which INAFC holds a
direct or indirect equity interest, (ii) the authorized number and designation
of each series of equity interest of each such legal entity, (iii) the number of
each series of equity interest of each such legal entity which is issued and
outstanding, (iv) the number of each series of equity interest of each such
legal entity that is held by other Acquired Companies and the identity of each
such Acquired Company and (v) in the case where an equity interest in each such
legal entity is held by one or more persons who are not Acquired Companies, the
number of each series of equity interest that is owned by each such person and
the identity of each such person.
(3) Section 2.4(c) of the Seller Disclosure Schedule sets forth
(i) the name, jurisdiction of organization and jurisdictions of qualification or
other authorization to conduct insurance business of CIH, certain subsidiaries
of CIH and certain other persons in which CIH holds a direct or indirect equity
interest, (ii) the authorized number and designation of each series of equity
interest of each such legal entity, (iii) the number of each series of equity
interest of each such legal entity which is issued and outstanding, (iv) the
number of each series of equity interest of each such legal entity that is held
by other Acquired Companies and the identity of each such Acquired Company and
(v) in the case where an equity interest in each such legal entity is held by
one or more persons who are not Acquired Companies, the number of each series of
equity interest that is owned by each such person and the identity of each such
person.
(4) Except as set forth in Sections 2.4(b), 2.4(c) or 2.4(d) of
the Seller Disclosure Schedule, except for interests which constitute a part of
the Excluded Business, except for the Equity Insurance Joint Ventures and except
for investment
12
<PAGE>
securities owned by the Acquired Companies in the ordinary course of business,
none of the Acquired Companies owns any equity interest, or any interest
convertible or exchangeable into an equity interest, in any person.
(5) There are no outstanding options, warrants, calls,
preemptive or other rights, commitments, subscriptions or agreements of any kind
to which CIGNA or any of its subsidiaries or any of the Acquired Companies is a
party, or by which CIGNA or any of its subsidiaries or any of the Acquired
Companies is bound, relating to the sale, issuance or voting of, or the granting
of rights to acquire, all or a portion of the equity interests of any of the
Acquired Companies, or any securities convertible or exchangeable into or
evidencing the right to purchase all or a portion of the equity interests in any
of the Acquired Companies. There are no restrictions upon the voting or transfer
of the Acquired Securities pursuant to INA Corporation's certificate of
incorporation or bylaws. There are no voting trusts or other agreements or
understandings to which CIGNA or any of its subsidiaries or any of the Acquired
Companies is a party with respect to the voting of the equity interests of any
of the Acquired Companies.
Section 1.10 Compliance with Applicable Laws; Litigation.
-------------------------------------------
(1) Except as set forth in Section 2.5(a) of the Seller
Disclosure Schedule, the Acquired Companies hold all permits, licenses,
variances, exemptions, orders and registrations of all Governmental Entities
which are required for the operation of their respective businesses
(collectively, the "Seller Permits"). The Acquired Companies are in material
compliance with the terms of the Seller Permits. As of the date of this
Agreement, there are no pending or, to the knowledge of the Sellers, threatened
suits, proceedings or investigations with respect to revocation, cancellation,
suspension or nonrenewal of
13
<PAGE>
any Seller Permit, in any such case except where such a revocation,
cancellation, suspension or nonrenewal would not, individually or in the
aggregate, have a Seller Material Adverse Effect.
(2) Except as set forth in Sections 2.5(b) or 2.10 of the Seller
Disclosure Schedule, as of the date of this Agreement, no action, demand,
requirement or investigation by any Governmental Entity and, except for suits,
actions or proceedings related to any insurance contract or reinsurance
contract, no suit, action or proceeding by any person, in each case where an
Acquired Company has been named as a defendant, is pending or, to the knowledge
of the Sellers, threatened, other than those the outcome of which would not,
individually or in the aggregate, have a Seller Material Adverse Effect.
(3) Except as set forth in Section 2.5(c) of the Seller
Disclosure Schedule, none of the Acquired Companies is subject to any
outstanding judgment, award, order, injunction or decree or is a party to any
written agreement, consent agreement or memorandum of understanding with, or is
a party to any commitment letter or similar undertaking to, or is subject to any
order or directive by, or is a recipient of any supervisory letter from or has
adopted any resolutions at the request of any Governmental Entity that restricts
in any material respect the conduct of its business or that in any manner
relates to its capital adequacy, its credit policies, its management or its
business (each, a "Regulatory Agreement"), nor has CIGNA or any of its
subsidiaries been advised in writing or, to the knowledge of the Sellers,
verbally since January 1, 1997 by any Governmental Entity that it is considering
issuing or requesting any such Regulatory Agreement that would, individually or
in the aggregate, have a Seller Material Adverse Effect.
(4) Except with respect to those violations (if any) which would
not, individually or in the aggregate, have a Seller Material Adverse Effect, in
14
<PAGE>
respect of the business, (i) neither CIGNA nor any of its subsidiaries is in
violation of Law and (ii) without limiting the generality of its subsidiaries
has received any written notice from any Governmental Entity since January 1,
1997 alleging any violation of Law.
Section 1.11 Financial Statements.
--------------------
(1) On or prior to the date hereof, the Sellers have made
available to the Purchaser true, correct and complete copies of (i) the
unaudited pro forma consolidated balance sheet of the Business as of December
31, 1997, and the related unaudited pro forma consolidated statement of income
for the year ended December 31, 1997, together, in each case, with certain notes
thereon (collectively, the "Unaudited 1997 Business Financial Statements"), and
(ii) the unaudited pro forma consolidated balance sheet of the Business as of
September 30, 1998 and the related unaudited, pro forma consolidated statement
of income for the nine months ended September 30, 1998, together, in each case,
with certain notes thereon (collectively, the "Unaudited Interim Business
Financial Statements" and, together with the Unaudited 1997 Financial
Statements, the "Unaudited Business Financial Statements"). The Unaudited
Business Financial Statements have been prepared from the books and records of
CIGNA and its subsidiaries. The Unaudited Business Financial Statements have
been prepared in accordance with GAAP and fairly present in all material
respects the consolidated financial position and results of operations of the
Business as of the dates and for the periods indicated therein (subject, in the
case of the Unaudited Interim Business Financial Statements, to normal recurring
year-end adjustments).
(2) On or prior to the date hereof, the Sellers have made
available to the Purchaser true, correct and complete copies of (i) all annual
and quarterly convention statements as filed with the United States domiciliary
state insurance departments with
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jurisdiction over the Domestic Insurance Companies as of and for the years ended
December 31, 1997 and 1996, and the quarter ended September 30, 1998, together
with all exhibits, schedules and actuarial opinions filed therewith
(collectively, the "Domestic SAP Financial Statements"), and (ii) all material
annual financial statements as filed with international insurance regulatory
authorities with jurisdiction over the International Insurance Companies as of
and for the two most recent fiscal years ending on or before June 30, 1998,
together with all exhibits, schedules, actuarial opinions or memoranda filed
therewith (collectively, the "International Insurance Company Financial
Statements" and, together with the Domestic SAP Financial Statements, the
"Insurance Company Financial Statements"). Each of the audited Domestic SAP
Financial Statements presents fairly in all material respects, the assets,
liabilities, capital and surplus and the results of operations and its cash
flows at the date thereof prepared in conformity with statutory accounting
practices prescribed or permitted by the insurance department of the domiciliary
state of the Domestic Insurance Company specified thereon. No material
deficiencies or required adjustments with respect to such Domestic SAP Financial
Statements have been asserted in writing by any insurance regulatory authority
which have not been cured or otherwise resolved to the satisfaction of such
insurance regulatory authority and which have not been made available to the
Purchaser prior to the date hereof. Each of the International Insurance Company
Financial Statements has been prepared in accordance with the Laws of the
relevant jurisdictions.
Section 1.12 Undisclosed Liabilities. Except for liabilities (i)
-----------------------
reflected in this Agreement or in Section 2.7 of the Seller Disclosure Schedule,
(ii) reflected, accrued or reserved against in the Unaudited Interim Business
Financial Statements or (iii) incurred in the ordinary course of business since
September 30, 1998, since September 30, 1998, the Business has not incurred any
liabilities, whether
16
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absolute, accrued or contingent, of a nature that would, individually or in the
aggregate, have a Seller Material Adverse Effect.
Section 1.13 Absence of Certain Changes. Except as set forth in
--------------------------
Section 2.8 or 4.1 of the Seller Disclosure Schedule, since September 30, 1998:
(i) the Sellers and each of the Acquired Companies have conducted the Business
only in the usual and ordinary course consistent with past practice; and (ii)
except for claims arising under policies of insurance or reinsurance from and
after the date of this Agreement, the Business has not suffered any damage,
destruction, loss or other event (whether or not in the ordinary course of
business) which, individually or in the aggregate with all other such events,
would have a Seller Material Adverse Effect.
Section 1.14 Employee Benefit Plans; ERISA.
-----------------------------
(1) Section 2.9(a) of the Seller Disclosure Schedule
contains a true, correct and complete list, as of the date of this Agreement,
of: each "welfare" plan, fund or program (within the meaning of Section 3(1) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")); each
"pension" plan, fund or program (within the meaning of Section 3(2) of ERISA);
and each other employee benefit plan, fund, program, agreement or arrangement,
in each case, that is sponsored, maintained or contributed to or required to be
contributed to by CIGNA or any of its subsidiaries or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), that together with CIGNA or
any of its subsidiaries would be deemed a "single employer" within the meaning
of Section 4001(b) of ERISA, or to which CIGNA or any of its subsidiaries or an
ERISA Affiliate is party, for the benefit of any employee or former employee of
the Business (the "Plans") other than any Plan that is not subject to United
States Law (any such Plan, a "Foreign Plan"). Section 2.9(a) of the Seller
Disclosure Schedule also contains a true, correct and complete list, as of the
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date of this Agreement, of each material Foreign Plan. Each of the Plans that is
subject to Section 302 or Title IV of ERISA or Section 412 of the Internal
Revenue Code of 1986, as amended (the "Code"), is hereinafter referred to in
this Agreement as a "Title IV Plan".
(2) With respect to each Plan other than any Foreign Plan, CIGNA
has heretofore made available to the Purchaser true, correct and complete copies
of each of the following documents, to the extent applicable: a copy of each
Plan (or, in the case of an unwritten Plan, a summary of the material terms
thereof) and any amendments thereto; and a copy of the most recent Summary Plan
Description required under ERISA. With respect to each material Foreign Plan,
CIGNA has heretofore used its Reasonable Best Efforts to make available to the
Purchaser true, correct and complete copies of plan documents, descriptions and
summaries relating thereto.
(3) No liability under Section 302 or Title IV of ERISA has been
incurred by CIGNA or its subsidiaries or any ERISA Affiliate that has not been
satisfied in full, and, to the knowledge of the Sellers, no condition exists
that presents a material risk to CIGNA or its subsidiaries or any ERISA
Affiliate of incurring any such liability. Insofar as the representation made in
this Section 2.9(c) applies to Sections 4064, 4069 or 4204 of Title IV of ERISA,
it is made with respect to any employee benefit plan, program, agreement or
arrangement subject to Title IV of ERISA to which CIGNA or any of its
subsidiaries or any ERISA Affiliate made, or was required to make, contributions
during the five-year period ending on the last day of the most recent plan year
which ended prior to the Closing Date.
(4) The Pension Benefit Guarantee Corporation has not instituted
proceedings to terminate any Title IV Plan.
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(5) No Title IV Plan or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of each Title IV Plan which ended prior to the
Closing Date. All contributions required to be made with respect to any Plan on
or prior to the Closing Date have been made in full.
(6) No Title IV Plan is a "multiemployer pension plan," as
defined in Section 3(37) of ERISA.
(7) Each Plan has been operated and administered in all material
respects in accordance with its terms and in accordance with Law, including but
not limited to ERISA and the Code and no written notice has been delivered to
CIGNA by any governmental authority questioning or challenging such compliance.
Each Plan intended to be "qualified" within the meaning of Section 401(a) of the
Code has received a determination letter from the Internal Revenue Service
stating that it is so qualified and, to the knowledge of the Sellers, no event
has occurred since the date of such letter which could reasonably be expected to
give rise to disqualification of any such Plan. There are no pending, threatened
or anticipated claims by or on behalf of any Plan, by any participant or
beneficiary covered under any such Plan, or otherwise involving any such Plan
(other than routine claims for benefits).
Section 1.15 Taxes. Other than as set forth in Section 2.10 of the
-----
Seller Disclosure Schedule:
(1) Each of the Acquired Companies has (i) timely filed or
caused to be filed all material Tax Returns required to be filed by them, and
all such returns were true, correct and complete in all material respects when
filed and (ii) paid all Taxes shown to be due on such Tax Returns, other than
such Taxes that are being contested in good faith.
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(2) No material federal, state, local or foreign audits or other
administrative proceedings have formally commenced and are presently pending
with regard to any Income Taxes, sales or use taxes, any Taxes imposed with
respect to the receipt of insurance premiums, any value added taxes or, to the
knowledge of the Sellers, any other Taxes or Tax Returns with respect to any of
the foregoing Taxes of or including the Acquired Companies, and no notification
has been received in writing that such an audit or other proceeding is pending
or threatened with respect to any Income Taxes, sales or use taxes, any Taxes
imposed with respect to the receipt of insurance premiums, any value added taxes
or, to the knowledge of the Sellers, any other Taxes due from or with respect to
(or Tax Returns with respect to any of the foregoing Taxes) any of the Acquired
Companies.
(3) There are no outstanding written requests, agreements,
consents or waivers to extend the statutory period of limitations applicable to
the assessment of any material Income Taxes, sales or use taxes, any Taxes
imposed with respect to the receipt of insurance premiums, any value added taxes
or, to the knowledge of the Sellers, any other Taxes or deficiencies against any
of the Acquired Companies, other than the six-month extension of the statute of
limitations which results from filing of United States federal Income Tax
Returns by the extended due date.
(4) None of the Acquired Domestic Companies is party to any
agreement, and none of the Acquired International Companies is party to any
material agreement, providing for the allocation or sharing of Taxes, other than
the Tax Sharing Agreement.
(5) There are no material statutory liens for Taxes upon the
assets of any of the Acquired Companies, except liens for Taxes not yet due and
payable and liens for Taxes that are being contested in good faith.
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(6) No consent to the application of Section 341(f)(2) of the
Code (or any comparable provision of state, local or foreign law) has been made
or filed by or with respect to any of the Acquired Companies.
(7) None of the Acquired Companies has agreed to make an
adjustment pursuant to Section 481 of the Code (or any comparable provision of
state, local or foreign law) by reason of a change in accounting method or
otherwise.
(8) None of the Acquired Companies has executed, entered into
or is subject to any closing agreement pursuant to Section 7121 of the Code, or
any predecessor provisions thereof or any comparable provision of state, local
or foreign law with respect to any period for which the statute of limitations
has not expired.
(9) None of the Acquired Companies have as of the date hereof
any material Tax attributes which are subject to limitation under Sections 382,
383, 384 or 904(f) of the Code or are subject to limitation under consolidated
return regulations regarding separate return limitation years or consolidated
return changes of ownership.
(10) None of the material assets of the Acquired Companies
constitutes tax-exempt bond financed property or tax-exempt use property within
the meaning of Section 168 of the Code, and none of the material assets
contained in the Unaudited Business Financial Statements of the Acquired
Companies is subject to a lease, safe harbor lease or other arrangement as a
result of which the Acquired Companies are not treated as the owner for U.S.
federal Income Tax purposes.
Section 1.16 Intellectual Property.
---------------------
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(1) Section 2.11(a) of the Seller Disclosure Schedule sets forth a
true, correct and complete list as of the date of this Agreement of (i) all
material Intellectual Property registrations and applications for registration
owned by the Acquired Companies, (ii) all material Intellectual Property
registrations and applications for registration owned by CIGNA or its
subsidiaries (other than the Acquired Companies) and used in the conduct of the
Business and (iii) all license agreements relating to material Intellectual
Property used by the Acquired Companies in the conduct of the Business (whether
as licensor or licensee). For purposes of this Agreement, "Intellectual
Property" means all of the following throughout the world: trademarks, service
marks, trade names, slogans, logos and general intangibles of like nature
(together with all registrations and applications therefor and the goodwill of
the business associated therewith), patents (including, without limitation,
reissues, continuations in part, continuations, reexaminations, divisionals and
provisionals), patent applications, copyrights, registered copyrights and
copyright applications, trade secrets, proprietary information and know-how,
including formulae, compilations, programs, devices, methods, techniques and
processes related thereto. For purposes of this Agreement, "Computer Hardware"
means all computers, input or output devices (including printers, monitors and
other similar devices), data storage devices (including disk drives, tape drives
and other similar devices) and network, telecommunications, computing and
communications devices and devices related thereto.
(2) Section 2.11(b) of the Seller Disclosure Schedule sets forth a
true, correct and complete list of material Intellectual Property registrations
and applications for registration together with all license agreements relating
to material Intellectual Property necessary for the conduct of the Business as
conducted on the date of this Agreement but which will be retained by one of the
Sellers or their subsidiaries (other than the Acquired Companies)
22
<PAGE>
(collectively, the "Retained Intellectual Property"). Except as expressly
provided for in Section 5.5 hereof, in the Copyright Assignment or in the
Trademark Assignment, the parties hereto agree that neither the Purchaser nor
any of its subsidiaries (including all of the Acquired Companies conveyed to the
Purchaser) shall obtain any right in, to or under the Retained Intellectual
Property as a result of the transactions contemplated by this Agreement.
(3) To the knowledge of the Sellers, no registered copyright,
trademark, service mark or patent set forth in Section 2.11(a) of the Seller
Disclosure Schedule has lapsed, expired, been abandoned or cancelled, or is
subject to any pending or threatened opposition or cancellation proceeding
before the United States Patent and Trademark Office, the United States
Copyright Office, any court or in any other registration authority in any
country, and all fees for maintenance or otherwise noted in Section 2.11(a) of
the Seller Disclosure Schedule and all other filings noted in Section 2.11(a) of
the Seller Disclosure Schedule have been made in a timely manner except for such
lapses, expirations, abandonments, cancellations or oppositions or failure to
pay fees or make other filings which would not, individually or in the
aggregate, have a Seller Material Adverse Effect.
(4) Except as set forth in Section 2.11(d) of the Seller Disclosure
Schedule, there are no claims pending or, to the knowledge of the Sellers,
threatened, and, to the knowledge of the Sellers, there is no basis for any
claim, (i) alleging that the Intellectual Property set forth in Section 2.11(a)
of the Seller Disclosure Schedule infringes upon or constitutes an unauthorized
use or violation of the Intellectual Property of any third party, (ii) alleging
that the Intellectual Property set forth in Section 2.11(a) of the Seller
Disclosure Schedule is being infringed by or has been infringed upon by any
third party or (iii) challenging the ownership, validity or enforceability of
the Intellectual Property set forth in
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Section 2.11(a) of the Seller Disclosure Schedule, other than, in the case of
clauses (i), (ii) and (iii), those claims and infringements which would not,
individually or in the aggregate, have a Seller Material Adverse Effect.
(5) The Acquired Companies own or have valid licenses to use all
(i) material Intellectual Property (including in respect of all material
Computer Software) and (ii) material Computer Hardware, used by the Acquired
Companies in the conduct of the Business.
(6) This Section 2.11 is subject to Section 4.16 hereof.
Section 1.17 Contracts; Insurance Contracts.
------------------------------
(1) Other than those agreements and documents set forth in
Sections 2.14, 2.18 or 2.26 of the Seller Disclosure Schedule, Section 2.12(a)
of the Seller Disclosure Schedule sets forth, as of the date of this Agreement,
each (i) material systems outsourcing agreement to which any of the Acquired
Companies is a party or which constitutes a part of the Contributed Assets, (ii)
material distribution agreement to which any of the Acquired Domestic Companies
is a party or which constitutes a part of the Contributed Assets, (iii) to the
knowledge of the Sellers, distribution agreement to which any of the Acquired
International Companies is a party or which constitutes a part of the
Contributed Assets, (iv) noncompetition or nonsolicitation agreement which by
its terms expressly restricts the Business and (v) other agreement pursuant to
which the Business receives or is reasonably expected to receive payments, or
makes or is reasonably expected to make payments, of at least five million
dollars ($5,000,000) per calendar year or twenty million dollars ($20,000,000)
over any five-year period (clauses (i) through (v), collectively, the "Material
Business Contracts"). With respect to each Material Business Contract, assuming
the due authorization, execution and delivery thereof by the other party or
parties thereto,
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<PAGE>
(i) each Material Business Contract is valid and binding and is in full force
and effect, (ii) the Acquired Companies are not, and, to the knowledge of the
Sellers, no other party thereto is, in default in the performance, observance or
fulfillment of any obligation, covenant or condition contained in each of the
Material Business Contracts and (iii) no event has occurred which, with or
without the giving of notice or lapse of time, or both, would constitute a
default under any Material Business Contract, other than, in the case of clauses
(i), (ii) and (iii), where such failures to be valid and binding and in full
force and effect and defaults would not, individually or in the aggregate, have
a Seller Material Adverse Effect.
(2) To the extent required under Law, all Insurance Contracts in
force as of the date hereof are on forms approved by insurance regulatory
authorities of the jurisdiction in which they were issued or on forms which have
been filed with and not objected to by such authorities within the period
provided for objection and any premium rates with respect to such Insurance
Contracts required to be filed with or approved by such applicable insurance
regulatory authorities have been so filed or approved, except where the failure
to make such filings and have such approval or non-objection or the failure to
so comply would not, individually or in the aggregate, have a Seller Material
Adverse Effect.
(3) Except as set forth in Section 2.12(c) of the Seller
Disclosure Schedule, none of CIGNA, its subsidiaries or, to the knowledge of the
Sellers, any other party thereto is in material breach of the terms of the
Original Equity Insurance Joint Venture Agreements.
Section 1.18 Real Property. Section 2.13 of the Seller Disclosure
-------------
Schedule sets forth a true, correct and complete list of all real property owned
by any of the Acquired Domestic Companies, none of which are subject to any
Liens except Permitted Liens, and all
25
<PAGE>
leases for real property to which any of the Acquired Domestic Companies is a
party. Section 2.13 of the Seller Disclosure Schedule sets forth a true, correct
and complete list of real property owned or occupied by the Acquired
International Companies and all material leases for real property to which any
of the Acquired International Companies is a party. Each such lease is valid,
binding and enforceable in accordance with its respective terms against the
Acquired Domestic Company party thereto and, to the knowledge of the Sellers,
against the other parties thereto, and there does not exist under any such lease
any material default by the Acquired Domestic Company party thereto or, to the
knowledge of the Sellers, the other parties thereto. With respect to the real
property owned by the Acquired Domestic Companies, the Sellers have not received
any written notice with respect to: (i) any claimed or actual material violation
of any zoning, subdivision, building or health law, ordinance or rule that has
not heretofore been corrected or permanently dismissed; (ii) any claim, advice
or acknowledgment that any parcel of the owned real property is intended to be
acquired by condemnation, eminent domain or similar process; or (iii) any claim
or attempt to take or retake any parcel of the owned real property pursuant to
quiet title action, action for recision or reversion or similar action whereby
any person is seeking ownership of any parcel of such owned real property.
Section 1.19 Affiliate Transactions. Section 2.14 of the Seller
----------------------
Disclosure Schedule sets forth a true, correct and complete list as of the date
of this Agreement of (i) all written contracts, agreements or other arrangements
in effect as of the date hereof and (ii) to the knowledge of the Sellers, all
verbal contracts, agreements or other arrangements which will remain in effect
following the Closing (other than those governed by CIGNA's cost transfer
methodology program described in Section 2.14 of the Seller Disclosure
Schedule), in the case of clauses (i) and (ii), between CIGNA or any of its
subsidiaries (other than the Acquired Companies), on the one hand, and any
26
<PAGE>
of the Acquired Companies, on the other, and pursuant to which payments of at
least one hundred thousand dollars ($100,000) per calendar year are made or
reasonably expected to be made. Other than contracts, agreements or other
arrangements disclosed pursuant to Section 2.9 of this Agreement, there are no
agreements of the type which would have to be disclosed pursuant to Item 404 of
Regulation S-K promulgated by the SEC and to which any of the Acquired
Companies, on the one hand, and any officer or employee of an Acquired Company,
on the other, is a party.
Section 1.20 Environmental Matters. Except as set forth in Section
---------------------
2.15 of the Seller Disclosure Schedule:
(1) The Business is and has been in compliance with all
applicable Environmental Laws including, but not limited to, the possession of
all permits and other governmental authorizations required under applicable
Environmental Laws, except for such non-compliance which individually or in the
aggregate would not have a Seller Material Adverse Effect.
(2) There is no pending or, to the knowledge of the Sellers,
threatened claim, lawsuit, lien or administrative proceeding against the
Business under any Environmental Law, except for claims, lawsuits or
administrative proceedings which individually or in the aggregate would not have
a Seller Material Adverse Effect. The Sellers have not received written notice
from any person, including any Governmental Entity, alleging that the Business
is in violation of any applicable Environmental Law or otherwise may be liable
under any applicable Environmental Law, which violation or liability is
unresolved, except for such violations or liabilities which individually or in
the aggregate would not have a Seller Material Adverse Effect.
(3) To the knowledge of the Sellers, no Hazardous Materials
are present at any property currently owned, occupied or leased by the
27
<PAGE>
Acquired Companies (including soils, groundwater, surface water, buildings or
other structures) in such amount or condition as could reasonably be expected to
require remediation under any Environmental Laws.
(4) The Sellers have made available to the Purchaser copies
of all environmental reports, studies, assessments and sampling data (other than
routine environmental data or correspondence generated on a day-to-day basis) in
its possession prepared since January 1, 1995, relating to properties owned and
occupied by the Acquired Companies.
(5) The Acquired Companies have not caused the release,
transport or disposal of Hazardous Materials at or to any location that, to the
knowledge of the Sellers, is subject to environmental investigation or
remediation and is reasonably likely to result in a claim against the Acquired
Companies.
(6) The representations and warranties set forth in this
Section 2.15 are the sole and exclusive representations and warranties of the
Sellers in this Agreement relating to environmental matters.
Section 1.21 Insurance Coverage. Section 2.16 of the Seller
------------------
Disclosure Schedule sets forth a true, correct and complete list, as of the date
hereof, of all in force policies of insurance with persons which are not
affiliates of CIGNA (the "Third Party Insurance Policies" and, together with in
force policies of insurance with persons which are affiliates of CIGNA, the
"Insurance Policies"), including the annual premiums thereof, relating to the
assets, properties, business, operations, employees, officers or directors of
the Acquired Companies which (i) have been issued to any of the Acquired
Companies or (ii) are held by CIGNA or any of its subsidiaries (other than the
Acquired Companies) for the benefit of the Acquired Companies. Except in respect
of self-insurance where an affiliate of CIGNA provides the relevant coverage,
(i) each Acquired
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Company maintains insurance relating to its assets, properties, business,
operations, employees, officers or directors in such amounts and against such
risks as are reasonable for a comparable company, and (ii) all such insurance is
in full force and effect and, to the knowledge of the Sellers, has been issued
by licensed insurers.
Section 1.22 Regulatory Filings. Except as set forth in Section 2.17
------------------
of the Seller Disclosure Schedule, all reports, statements, documents,
registrations, filings or submissions (including without limitation any sales
material) required to be filed with any Governmental Entity to the extent they
relate to the Business, have been filed, except where the failure to make such
filings would not, individually or in the aggregate, have a Seller Material
Adverse Effect. Except as set forth in Section 2.17 of the Seller Disclosure
Schedule, all such reports, registrations, filings and submissions were in
compliance with Law when filed or as amended or supplemented, and no
deficiencies have been asserted in writing by any such Governmental Entity with
respect to such reports, registrations, filings or submissions that have not
been remedied, except for any non-compliance or deficiencies which would not,
individually or in the aggregate, have a Seller Material Adverse Effect.
Section 1.23 Reinsurance. Section 2.18 of the Seller Disclosure
-----------
Schedule sets forth a true, correct and complete list as of the date of this
Agreement of (i) each reinsurance treaty currently in force with Third Party
Reinsurers to which any of the Acquired Companies is a party or which otherwise
constitutes a part of the Contributed Assets, (ii) each expired reinsurance
treaty to which any of the Acquired Companies is a party or which otherwise
constitutes a part of the Contributed Assets, and under which, as of December
31, 1997, there remains any outstanding amounts payable to the Acquired
Companies party thereto in excess of ten million dollars ($10,000,000), and
(iii) each reinsurance treaty which has any of the Acquired
29
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Companies, on the one hand, and CIGNA or any of its affiliates (other than the
Acquired Companies), on the other, as a party thereto, copies of each of which
have been made available to the Purchaser (clauses (i) through (iii),
collectively, the "Reinsurance Agreements"). Each of the Reinsurance Agreements
is valid and binding and is in full force and effect. As of the date of this
Agreement, no other party to any Reinsurance Agreement has given written notice
to INA Corporation or its subsidiaries which constitute Acquired Companies that
it intends to terminate or cancel any Reinsurance Agreement as a result of the
transactions contemplated by this Agreement which would, individually or in the
aggregate with all such other notices, have a Seller Material Adverse Effect.
The transactions contemplated by this Agreement shall not affect the obligations
(if any) of the other parties to the Reinsurance Agreements to make payments to
the Acquired Companies party thereto. No Acquired Company is in default as to
any provision of any Reinsurance Agreement except for defaults, which would not,
individually or in the aggregate, have a Seller Material Adverse Effect. Each
Domestic Acquired Company was entitled to take credit in its most recent
Insurance Company Financial Statement in accordance with SAP for that portion of
each Reinsurance Agreement as to which credit was taken in such statements.
Section 1.24 Brokers. Except as set forth in Section 2.19 of the
-------
Seller Disclosure Schedule, no broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Sellers.
Section 1.25 Permits, Licenses and Franchises. Section 2.20 of the
--------------------------------
Seller Disclosure Schedule lists all jurisdictions in which the Insurance
Companies are licensed to issue Insurance Contracts. The Domestic Insurance
Companies have been duly
30
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authorized by the relevant state insurance regulatory authorities to issue the
Insurance Contracts that they are currently writing, and were duly authorized to
issue the Insurance Contracts that they are not currently writing at the time
such Insurance Contracts were issued, in the respective states in which they
conduct the Business, except for authorizations the failure of which to have
would not, individually or in the aggregate, have a Seller Material Adverse
Effect.
Section 1.26 Contributed Assets. The Sellers (or their subsidiaries)
------------------
have good and marketable title to all of the Contributed Assets, free of all
Liens except for Permitted Liens. Except for assets which are the subject of the
Ancillary Agreements, except for the Acquired Companies and the assets they own,
except for the Equity Insurance Joint Venture and Perdana CIGNA Insurance
Berhad, except for the agreements set forth in Sections 2.14 and 4.13 of the
Seller Disclosure Schedule and except for the Excluded Business, the Contributed
Assets constitute all of the assets owned by CIGNA or any of its subsidiaries
(other than the Acquired Companies) which are used exclusively in the Business,
other than any such assets the absence of which would not have a Seller Material
Adverse Effect.
Section 1.27 Rating Agencies. Between January 1, 1998 and the date of
---------------
this Agreement, no rating agency has imposed conditions (financial or otherwise)
on retaining any currently held rating assigned to any Insurance Company which
is rated as of the date of this Agreement or indicated in writing that it is
considering the downgrade of any rating assigned to any such Insurance Company.
Each such Insurance Company has as of the date of this Agreement the A.M. Best
Company Inc., Standard & Poor's Corporation Rating Service, a division of McGraw
Hill Companies, Inc. ("Standard & Poor's"), and/or Moody's Investors Service,
Inc. respective rating set forth in Section 2.22 of the Seller Disclosure
Schedule.
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Section 1.28 No Other Agreements to Sell the Acquired Companies.
--------------------------------------------------
Except as set forth in Section 2.23 of the Seller Disclosure Schedule, except as
contemplated by the Excluded Business Transfer Agreements and except as may be
necessary to effect the Sellers' retention of Deferred Assets which exist at the
Closing or any Subsequent Closing, none of the Sellers or the Acquired Companies
has any agreement, absolute or contingent, with any other person to sell the
capital stock, material assets or business of any Acquired Company or to effect
any merger, consolidation or other reorganization of any Acquired Company or to
enter into any agreement with respect thereto.
Section 1.29 1995 Restructuring. The Sellers have made available to
------------------
the Purchaser all agreements entered into to effectuate the 1995 Restructuring.
Section 1.30 Year 2000 Compliance. CIGNA has established an
--------------------
implementation plan and budgeted a reasonably sufficient amount of capital and
resources to institute software systems which include design, performance and
functionality and which are intended to ensure (it being acknowledged and agreed
by the parties hereto that such intention may never be realized) that such
software systems do not cause the Acquired Companies to experience invalid or
incorrect results or abnormal software operation related to calendar year 2000
except where such invalid or incorrect results or abnormal software operation
would not, individually or in the aggregate, have a Seller Material Adverse
Effect. Such plan and budget envision the creation of software systems which
include calendar year 2000 date conversion and compatibility capabilities,
including, but not limited to, date data century recognition, same century and
multiple century formula and date value calculations, and user interface date
data values that reflect the century. As of the date of this Agreement, such
plan, in respect of the Business, is generally proceeding on schedule.
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Section 1.31 Producers.
---------
(1) Section 2.26(a) of the Seller Disclosure Schedule lists,
based upon commissions paid during calendar year 1997, (i) the twenty-five (25)
largest producers of the Domestic Insurance Companies, together with the
aggregate amount of commissions paid to each such producer by the Domestic
Insurance Companies in 1997 and the first eleven months of 1998, and (ii) to the
knowledge of the Sellers, the fifty (50) largest producers of the International
Insurance Companies as of the date hereof (clauses (i) and (ii), collectively,
the "Key Producers").
(2) As of the date of this Agreement, no other party to any
Producer Agreement has given written notice to INA Corporation or its
subsidiaries which constitute Acquired Companies that it intends to terminate or
cancel any Producer Agreement as a result of the transactions contemplated by
this Agreement which would, individually or in the aggregate with all such other
notices, have a Seller Material Adverse Effect.
(3) Section 2.26(c) of the Seller Disclosure Schedule lists
the standard forms of producer agreements currently being utilized by the
Insurance Companies. The Sellers have made available to the Purchaser true,
correct and complete copies of such standard forms of producer agreements.
(4) The contracts and other agreements (the "Producer
Agreements") relating to the Business between the Insurance Companies and the
Key Producers, are valid, binding and in full force and effect in accordance
with their respective terms as against the Insurance Companies, and, to the
knowledge of the Sellers, the other parties thereto, and none of the Insurance
Companies and, to the knowledge of the Sellers, any Key Producer is in default
with respect to any Producer Agreement, other than for such failures to be
valid, binding and in full force and effect or such
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defaults which would not, individually or in the aggregate, have a Seller
Material Adverse Effect.
(5) Since January 1, 1997, to the knowledge of the Sellers,
at the time any of the Insurance Companies paid commissions to any producer in
connection with the sale of Insurance Contracts, each such producer was duly
licensed if required by Law in the particular jurisdiction in which such
producer sold such Insurance Contract for the Insurance Companies.
(f) Except as set forth in Section 2.26(f) of the Seller
Disclosure Schedule, none of the Acquired Companies has any equity or voting
interest in any person which is a managing general agent.
Section 1.32 Reserves.
--------
(1) Since January 1, 1997, no domiciliary state department of
insurance has alleged in writing that the reserves carried on the Domestic SAP
Financial Statements by the Domestic Insurance Companies for future insurance
policy benefits, losses and claims (including claims litigation) are not in
compliance with applicable statutory requirements.
(2) Except as set forth in Section 2.27(b) of the Seller
Disclosure Schedule, since January 1, 1997, no international insurance
regulatory authority with jurisdiction over the International Insurance
Companies has alleged in writing that the reserves carried on the International
Insurance Company Financial Statements by the International Insurance Companies
for future insurance policy benefits, losses and claims (including claims
litigation) are materially not in compliance with applicable statutory
requirements.
(3) The statistical data listed on Section 2.27(c) of the
Purchaser Disclosure Schedule: (i) was derived from the books and records of the
Acquired Companies; (ii) has been, together with analyses and other data, relied
upon by the Acquired
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Companies in establishing their reserves; and (iii) is believed by the Sellers
to be generally of a type that is acceptable for purposes of establishing
reserves as required from time to time as part of the reserving process.
Section 1.33 Financial and Market-Conduct Examinations. The Sellers
-----------------------------------------
have made available to the Purchaser true, correct and complete copies of the
reports (or the most recent drafts thereof, to the extent any final reports are
not available) reflecting the results of any financial examinations or market-
conduct examinations of any of the Insurance Companies conducted by any
Governmental Entity since January 1, 1995.
Section 1.34 Certain Dividends. The aggregate amount of cash
-----------------
dividends declared by INA Corporation during the period from July 1, 1998
through the date of this Agreement was not greater than one hundred sixty-four
million three hundred thousand dollars ($164,300,000).
Section 1.35 Labor. Except as set forth in Section 2.30 of the
-----
Seller Disclosure Schedule, as of the date of this Agreement, with respect to
the Acquired Companies: (i) neither of the Sellers is party to or bound by any
collective bargaining agreement with any labor organization; (ii) no labor
organization or group of employees has filed any representation petition or made
any written or, to the knowledge of the Sellers, verbal demand to the Sellers
for recognition; (iii) to the knowledge of the Sellers, no union organizing or
decertification efforts are underway or threatened; (iv) since January 1, 1996,
there has been no labor strike or work stoppage and none is under way or, to the
knowledge of the Sellers, threatened; (v) there is no unfair labor practice
charge or complaint against the Sellers pending, or to the knowledge of the
Sellers, threatened before the National Labor Relations Board; and (vi) no term
or condition of employment exists through arbitration awards, settlement
agreements, or written
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side agreements that is contrary in any material respect to the express terms of
any applicable collective bargaining agreement.
Section 1.36 Guaranty Fund Assessments. Each of the Insurance
-------------------------
Companies has paid in full all guaranty fund assessments (and any foreign
equivalents) required by any Governmental Entity to be paid by or for it prior
to the date of this Agreement. As of the date of this Agreement, except as set
forth in Section 2.31 of the Seller Disclosure Schedule and except as and to the
extent reserved against in the Unaudited Business Financial Statements or the
Insurance Company Financial Statements, the Insurance Companies have not
received any guaranty fund assessments requiring any payments to be made which,
as of the date of this Agreement, have not been paid in full.
Section 1.37 Portfolio Investments. All investments included in the
---------------------
investment portfolios of each of the Insurance Companies as of the date of this
Agreement comply in all material respects with all applicable insurance laws and
regulations of each of the jurisdictions to which the Insurance Companies are
subject relating thereto. Except as set forth in Section 2.32 of the Seller
Disclosure Schedule, as of December 31, 1998, none of the investments included
in the investment portfolios of the Insurance Companies is in default in the
payment of principal or interest or dividends. None of the Acquired Companies
is a party to any derivative transaction which, pursuant to its terms and
without any additional investment decision on the part of an Acquired Company,
could result in an additional payment by such Acquired Company.
Section 1.38 Certain Arrangements. Section 2.33 of the Seller
--------------------
Disclosure Schedule sets forth a list as of the date of this Agreement of those
100% indemnity reinsurance agreements (i) which have been entered into on or
after January 1, 1996 other than in connection with state residual market
mechanisms (including workers' compensation pools and plans) and (ii) which
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have been entered between any Domestic Insurance Company, on the one hand, and
persons other than affiliates of CIGNA or captive insurers owned by
policyholders of the Domestic Insurance Companies, on the other, and (iii) under
which there are outstanding reinsurance recoverables, as of the date of this
Agreement, in excess of two million five hundred thousand dollars ($2,500,000).
Section 1.39 Internal Pooling Arrangements.
-----------------------------
(1) Other than (i) the Amended and Restated Reinsurance
Agreement, dated as of December 31, 1995, by and among Bankers Standard Fire and
Marine Company, Bankers Standard Insurance Company, CIGNA Employers Insurance
Company, CIGNA Fire Underwriters Insurance Company, CIGNA Insurance Company,
CIGNA Indemnity Insurance Company, CIGNA Property and Casualty Insurance
Company, Indemnity Insurance Company of North America, Pacific Employers
Insurance Company, and Insurance Company of North America (as amended, the
"Intercompany Reinsurance Pooling Agreement"), (ii) reinsurance agreements
between parties to the Intercompany Reinsurance Pooling Agreement, on the one
hand, and the Domestic Insurance Companies, on the other, and (iii) reinsurance
agreements between CIGNA Overseas Insurance Company and any International
Insurance Company, as of the date of this Agreement, none of the Acquired
Companies is a party to any intercompany reinsurance pooling agreement with
CIGNA or any of its affiliates (other than the Acquired Companies).
(2) Except for the Insurance Company of North America, CIGNA
Property and Casualty Insurance Company, CIGNA Insurance Company and Indemnity
Insurance Company of North America, no Domestic Insurance Company wrote, on a
direct basis, more than 10% of the aggregate gross written premiums written by
all of the Domestic Insurance Companies in calendar year 1997.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
The Purchaser represents and warrants to each of the Sellers (i) as of
the date of this Agreement with respect to each Section contained in this
Article III, (ii) as of the Closing Date with respect to only Sections 3.1, 3.2,
3.3, 3.4(a), 3.5 and 3.6 hereof and (iii) as of each Subsequent Closing Date
with respect to only Sections 3.1, 3.2, 3.3, 3.4(a), 3.5 and 3.6 hereof:
Section 1.40 Organization, Standing and Corporate Power. The
------------------------------------------
Purchaser is a company duly organized, validly existing and in good standing
under the laws of the Cayman Islands and has the requisite corporate power and
authority to carry on its business as now being conducted, except for those
jurisdictions where the failure to be in good standing would not, individually
or in the aggregate, have a Purchaser Material Adverse Effect. The Purchaser is
duly qualified or licensed to do business and is in good standing (with respect
to jurisdictions which recognize such concept) in each jurisdiction in which the
nature of its business or the ownership, leasing or operation of its properties
makes such qualification or licensing necessary, except for those jurisdictions
where the failure to be so qualified or licensed or to be in good standing would
not, individually or in the aggregate, have a Purchaser Material Adverse Effect.
The Purchaser has made available to CIGNA prior to the execution of this
Agreement true, correct and complete copies of the Memorandum of Association and
Articles of Association of the Purchaser.
Section 1.41 Authority. The Purchaser has all requisite power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The Purchaser and its affiliates which are a party thereto
have all requisite power and
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authority to execute and deliver the Ancillary Agreements and the other
agreements, documents and instruments to be executed and delivered in connection
with this Agreement or the Ancillary Agreements and to consummate the
transactions contemplated thereby. The execution and delivery of this Agreement
by the Purchaser and the consummation by the Purchaser of the transactions
contemplated hereby, and the execution and delivery of the Ancillary Agreements
and the other agreements, documents and instruments to be executed and delivered
in connection with this Agreement or the Ancillary Agreements by the Purchaser
and its affiliates which are a party thereto and the consummation of the
transactions contemplated thereby, have been duly authorized by all necessary
action on the part of each such person. This Agreement has been duly executed
and delivered by the Purchaser and, assuming the due authorization, execution
and delivery of this Agreement by the Sellers, constitutes a legal, valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms. The Ancillary Agreements and the other agreements,
documents and instruments to be executed and delivered in connection with this
Agreement or the Ancillary Agreements have been duly executed and delivered by
the Purchaser and its affiliates which are a party thereto and, assuming the due
authorization, execution and delivery of such other agreements, documents and
instruments by each of the other parties thereto, constitute legal, valid and
binding obligations of the Purchaser and its affiliates which are a party
thereto, enforceable against each such person in accordance with their terms.
Section 1.42 Noncontravention.
----------------
(1) Except as set forth in Section 3.3(a) of the Purchaser
Disclosure Schedule, the execution and delivery of this Agreement, the Ancillary
Agreements and the other agreements, documents and instruments to be executed
and delivered in connection with this Agreement or the Ancillary Agreements do
not,
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and the consummation of the transactions contemplated by this Agreement, the
Ancillary Agreements and the other agreements, documents and instruments to be
executed and delivered in connection with this Agreement or the Ancillary
Agreements will not, conflict with, or result in any violation, impairment or
revocation of, or default (with or without notice or lapse of time, or both)
under, or give rise to the creation of a Lien (other than pursuant to financing
arrangements entered into by the Purchaser or any subsidiary of the Purchaser to
finance the transactions contemplated by this Agreement), a right of
termination, cancellation, revocation or acceleration of any obligation or loss
of a benefit under, (i) the Memorandum of Association or Articles of Association
of the Purchaser and the certificate of incorporation and by-laws (or comparable
organizational documents) of any subsidiary of the Purchaser which is a party to
the Ancillary Agreements or the other agreements, documents and instruments to
be executed in connection with this Agreement or the Ancillary Agreements, (ii)
any loan or credit agreement, note, mortgage, indenture, lease, material
agreement, concession, franchise, contractual license or similar authorization
applicable to the Purchaser or any subsidiary of the Purchaser which is a party
to the Ancillary Agreements or the other agreements, documents and instruments
to be executed in connection with this Agreement or the Ancillary Agreements or
their respective properties or assets, (iii) subject to the governmental filings
and other matters referred to in Section 3.3(b) below, any Law applicable to the
Purchaser or any subsidiary of the Purchaser which is a party to the Ancillary
Agreements or the other agreements, documents and instruments to be executed in
connection with this Agreement or the Ancillary Agreements or their respective
properties or assets, (iv) any order, judgment, injunction, award or decree of
any Governmental Entity or any agreement with, or condition imposed by, any
Governmental Entity, in each case, which is binding upon the Purchaser or any of
its subsidiaries or (v) any Purchaser Permit, other than, in the case of clauses
(ii), (iii), (iv) and (v), any such
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conflicts, violations, impairments, revocations, defaults, Liens, rights or
losses (1) which are based on any facts or circumstances relating to the Sellers
or (2) which would not, individually or in the aggregate, have a Purchaser
Material Adverse Effect.
(2) No consent, approval, order or authorization of, action
by or in respect of, or registration, declaration or filing with, any
Governmental Entity is required by the Purchaser or any subsidiary of the
Purchaser which is a party to the Ancillary Agreements or the other agreements,
documents and instruments to be executed and delivered in connection with this
Agreement or the Ancillary Agreements in connection with (i) the execution and
delivery of this Agreement by the Purchaser, (ii) the execution and delivery of
the Ancillary Agreements and the other agreements, documents and instruments to
be executed and delivered in connection with this Agreement or the Ancillary
Agreements by the Purchaser and its subsidiaries which are a party thereto, or
(iii) the consummation by the Purchaser and its subsidiaries which are a party
to any such agreement of the transactions contemplated hereby or thereby, except
in the case of clauses (i), (ii) and (iii), as set forth in Section 3.3(b) of
the disclosure schedule delivered by the Purchaser to the Sellers prior to the
execution of this Agreement (the "Purchaser Disclosure Schedule").
Section 1.43 Compliance with Applicable Laws; Litigation.
-------------------------------------------
(1) The Purchaser holds all permits, licenses, variances,
exemptions, orders, registrations and approvals of all Governmental Entities
which are required for the operation of its businesses (collectively, the
"Purchaser Permits"). The Purchaser is in material compliance with the terms of
the Purchaser Permits.
(2) As of the date of this Agreement, there are no pending
or, to the knowledge of
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the Purchaser, threatened suits, proceedings or investigations with respect to
revocation, cancellation, suspension or nonrenewal of any Purchaser Permit, in
any such case except where such a revocation, cancellation, suspension or
nonrenewal would not, individually or in the aggregate, have a material adverse
effect on the Purchaser's ability to consummate the transactions contemplated by
this Agreement.
(3) As of the date of this Agreement, no action, demand,
requirement or investigation by any Governmental Entity and, except for suits,
actions or proceedings related to any insurance contract or reinsurance
contract, no suit, action or proceeding by any person is pending or, to the
knowledge of the Purchaser, threatened, other than those the outcome of which
would not, individually or in the aggregate, have a material adverse effect on
the Purchaser's ability to consummate the transactions contemplated by this
Agreement.
(4) The Purchaser is not subject to any Regulatory
Agreement, nor has the Purchaser or any of its subsidiaries been advised in
writing or, to the knowledge of the Purchaser, verbally since January 1, 1997 by
any Governmental Entity that it is considering issuing or requesting any such
Regulatory Agreement that would, individually or in the aggregate, have a
material adverse effect on the Purchaser's ability to consummate the
transactions contemplated by this Agreement.
(5) Except with respect to those violations (if any) which
would not, individually or in the aggregate, have a material adverse effect on
the Purchaser's ability to consummate the transactions contemplated by this
Agreement, (i) neither the Purchaser nor any of its subsidiaries is in violation
of Law, and (ii) without limiting the generality of the foregoing, neither the
Purchaser nor any of its subsidiaries has received any written notice from any
Governmental Entity since January 1, 1997 alleging any violation of Law.
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Section 1.44 Purchase for Investment. The Purchaser is acquiring the
-----------------------
Acquired Securities solely for its own account for investment, and not with the
view to, or for resale in connection with, any distribution thereof in violation
of the Securities Act or any other foreign securities Law. The Purchaser
acknowledges that the Acquired Securities are not registered under the
Securities Act and may not be transferred or sold except pursuant to an
applicable exemption therefrom.
Section 1.45 Financing. The Purchaser has provided to the Sellers a
---------
true, correct and complete copy of the commitment letter for the benefit of the
Purchaser (the "Financing Commitment Letter") relating to obtaining financing
for the transactions contemplated by this Agreement. The financings outlined in
the Financing Commitment Letter (or such other financing as the Purchaser may
arrange between the date of this Agreement and the Closing Date pursuant to the
terms of this Agreement), together with available cash of the Purchaser, are
sufficient to provide the funds required by the Purchaser to pay the Purchase
Price hereunder and all fees and expenses required to be paid by the Purchaser
in connection with the consummation of the transactions contemplated hereby.
Section 1.46 Brokers. Except for Merrill Lynch, Pierce, Fenner &
-------
Smith Incorporated, no broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or similar fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Purchaser.
Section 1.47 Absence of Certain Changes. Except for claims arising
--------------------------
under policies of insurance or reinsurance, since September 30, 1998, the
Purchaser's business has not suffered any damage, destruction, loss or other
event (whether or not in the ordinary course of business) which, individually or
in the aggregate with
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all other events, would have a Purchaser Material Adverse Effect.
ARTICLE IV
GENERAL COVENANTS
Section 1.48 Conduct of Business Pending the Closing.
---------------------------------------
(1) (i) Except as set forth in Section 4.1 of the Seller
Disclosure Schedule, except as contemplated by this Agreement or by any of the
Ancillary Agreements, and except with the written consent of the Purchaser,
during the period from the date hereof to the Closing Date (or, in the case of a
Deferred Asset, to the Subsequent Closing Date on which such Deferred Asset is
conveyed to the Purchaser), the Sellers shall, and shall cause INA Corporation
and its subsidiaries which constitute Acquired Companies to, (1) use Reasonable
Best Efforts to preserve their relationships with and the goodwill of their
agents, brokers, customers, suppliers, employees and other persons having
business dealings with the Sellers and the Acquired Companies in connection with
the Business and (2) use Reasonable Best Efforts to preserve the Business, and
(ii) except as set forth in Section 4.1 of the Seller Disclosure Schedule,
except as may be required in connection with the transactions contemplated by
the Excluded Business Transfer Agreements, except as may be required to effect
the Sellers' retention of any Deferred Assets at any Closing or any Subsequent
Closing in accordance with Section 1.3 hereof, except as contemplated by this
Agreement or by any of the Ancillary Agreements, and except with the written
consent of the Purchaser, during the period from the date hereof to the Closing
Date (or, in the case of a Deferred Asset, to the Subsequent Closing Date on
which such Deferred Asset is conveyed to the Purchaser), the Sellers shall, and
shall cause INA Corporation and its subsidiaries which constitute Acquired
Companies to,
44
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conduct the Business in the ordinary course consistent with past practice
(including in respect of underwriting standards and reserving guidelines).
Without limiting the generality of the foregoing, except as set forth in Section
4.1 of the Seller Disclosure Schedule, except as may be required in connection
with the transactions contemplated by the Excluded Business Transfer Agreements,
except as may be required to effect the Sellers' retention of any Deferred
Assets at any Closing or any Subsequent Closing in accordance with Section 1.3
hereof, except as contemplated by this Agreement or by any of the Ancillary
Agreements, and except with the written consent of the Purchaser, during the
period from the date hereof to the Closing Date (or, in the case of a Deferred
Asset, to the Subsequent Closing Date on which such Deferred Asset is conveyed
to the Purchaser), the Sellers shall not, and shall not permit INA Corporation
or its subsidiaries which constitute Acquired Companies to, with respect to the
Business:
(1) enter into any contract or agreement (including
insurance agreements) relating to the Business or that would constitute
part of the Acquired Assets, in each case, other than: (1) such contracts
or agreements that are entered into in the ordinary course of business
consistent with past practice (including investments made in the ordinary
course of business consistent with the investment policies of INA
Corporation or its subsidiaries which constitute Acquired Companies, as the
case may be); and (2) any such contract or agreement not entered into in
the ordinary course of business consistent with past practice and pursuant
to which the Business receives or is reasonably expected to receive
payments, or makes or is reasonably expected to make payments, of less than
one million dollars ($1,000,000) per calendar year;
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(2) acquire, lease, encumber, transfer or dispose of any
asset relating to the Business or that presently does or would at the
Closing constitute part of the Acquired Assets, in each case, other than:
(1) acquisitions, leases, encumbrances, transfers or dispositions entered
into in the ordinary course of business consistent with past practice
(including acquisitions or dispositions of investments in the ordinary
course of business consistent with the investment policies of INA
Corporation or its subsidiaries which constitute Acquired Companies, as the
case may be); and (2) any acquisition, lease, encumbrance, transfer or
disposition not entered into in the ordinary course of business consistent
with past practice and pursuant to which the Business receives or is
reasonably expected to receive payments, or makes or is reasonably expected
to make payments, of less than one million dollars ($1,000,000) per
calendar year;
(3) pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, contingent or otherwise)
associated with the Business, other than the payment, discharge or
satisfaction in the ordinary course of business consistent with past
practice;
(4) incur any indebtedness for borrowed money or guarantee
any indebtedness of another or make any loans or advances of borrowed money
or capital contributions to, or equity investments in, any other person,
other than: (1) indebtedness, guarantees, loans, advances, contributions
and investments in the ordinary course of business consistent with the
investment policies of INA Corporation or its subsidiaries which constitute
Acquired
46
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Companies, as the case may be; and (2) indebtedness, guarantees, loans,
advances, contributions and investments in the ordinary course of business
under lines of credit with CIGNA or its affiliates;
(5) issue or sell or agree to issue or sell any additional
equity interests of, or grant, confer or award any options, warrants or
rights of any kind to acquire any equity interests, including without
limitation securities convertible or exchangeable for equity interests, of
INA Corporation or its subsidiaries which constitute Acquired Companies;
(6) acquire (by merger, consolidation, acquisition of stock
or assets or otherwise) any corporation, partnership or other business
organization or assets comprising a business or make any material
investment, either by purchase of stock or other securities, or
contribution to capital, in any case, in any material amount of property or
assets in or of any other person (other than acquisitions, investments or
contributions in the ordinary course of business consistent with the
investment policies of INA Corporation or its subsidiaries which constitute
Acquired Companies, as the case may be);
(7) (1) enter into any employment or severance agreement,
other than for new employees in the ordinary course of business, (2)
increase the benefits payable in the aggregate under severance or
termination pay plans or policies in effect on the date hereof, other than
amendments to existing policies or agreements of CIGNA which apply to all
employees who are subject to the plans or policies (and not just Affected
Employees) and
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other than as required by Law, (3) adopt any new or amend any existing
bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan or policy
for the benefit of any director, officer or employee, other than (A) for
new employees in the ordinary course of business, (B) amendments to
existing plans or policies of CIGNA which apply to all employees who
participate in the plan or policy (and not just Affected Employees), (C) as
required by Law and (D) amendments to bonus and profit sharing plans or
policies which are applicable to all or a portion of the Business and which
do not in the aggregate increase amounts otherwise payable under such plans
or policies, or (4) increase the compensation or benefits of any director,
officer or employee, other than in the ordinary course of business and
other than as required by Law; provided, however, that INA Corporation and
-------- -------
its subsidiaries which constitute Acquired Companies may enter into, adopt
or amend any of the foregoing prohibited agreements or take any of the
foregoing prohibited actions which, in the good faith judgement of the
Sellers after consultation with the Purchaser, are necessary or desirable
to conduct or maintain the Business in the ordinary course;
(8) change any of the material accounting principles,
practices, methods or policies (including but not limited to any reserving
methods, practices or policies) employed with respect to the Business,
except as may be required as a result of a change in Law, GAAP or SAP (with
the Sellers providing the Purchaser with prompt, prior written notice of
any such change);
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(9) pledge or otherwise encumber shares of capital stock of
INA Corporation or its subsidiaries which constitute Acquired Companies, or
mortgage or pledge any of their assets, tangible or intangible, or create
any encumbrance, other than Permitted Liens;
(10) adopt a plan of complete or partial liquidation or
resolutions providing for the complete or partial liquidation, dissolution,
amalgamation, consolidation, restructuring, recapitalization or other
reorganization of INA Corporation or its subsidiaries which constitute
Acquired Companies;
(11) make any investments other than in accordance with the
investment policies of the Acquired Companies as of the date of this
Agreement, or make any material amendments to such investment policies;
(12) other than settlements under insurance policies in the
ordinary course of business, make any prepayment of any material
liabilities;
(13) make any amendment restricting the Business,
termination (other than in accordance with its terms), waiver or disposal
of any Seller Permit which is material to the Business;
(14) (A) from the date hereof through May 31, 1999, pay any
dividend or authorize the payment of any dividends, (B) from June 1, 1999
through June 30, 1999, pay any dividend or authorize the payment of any
dividends in excess of eleven million seven hundred thousand dollars
($11,700,000), and (C) from and after July 1, 1999, pay any
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dividend or authorize the payment of any dividends in excess of fifteen
million dollars ($15,000,000) per fiscal month, other than, in the case of
clauses (A), (B) and (C), the payment of any dividends or the authorization
of the payment of any dividends which originate from any person which
constitutes part of the Excluded Business;
(15) enter into any new agreement or arrangement between any
of the Acquired Companies, on the one hand, and CIGNA or any of its
subsidiaries (other than the Acquired Companies), on the other;
(16) enter into any agreement with a third party providing
for the acceleration, payment, performance, consent or other consequence as
a result of a change in control of INA Corporation and its subsidiaries
which constitute Acquired Companies; or
(17) agree in writing or otherwise to take any of the
actions described above in clauses (i) through (xvi) of this Section
4.1(a).
(2) Notwithstanding anything to the contrary contained in
Sections 4.1(a)(i), 4.1(a)(ii), 4.1(a)(iii), 4.1(a)(iv) and 4.1(a)(xvii) hereof
(in the case of Section 4.1(a)(xvii) hereof, only in respect of Sections
4.1(a)(i), 4.1(a)(ii), 4.1(a)(iii) and 4.1(a)(iv) hereof), the Sellers and the
Acquired Companies shall be entitled to take any and all actions provided for in
the Business Plans without the consent of the Purchaser. Notwithstanding
anything to the contrary contained in Section 4.1(a) hereof, if the transactions
to be implemented pursuant to Article I of the Excluded Business Transfer
Agreement would result in an adverse effect on all or a portion of the Business,
then the Sellers must obtain the written consent of the
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Purchaser (not to be unreasonably withheld) before implementing any such
transactions.
Section 1.49 Exclusivity.
-----------
(1) From the date of this Agreement through the Closing (and
regardless of whether any Subsequent Closings occur), none of CIGNA or its
subsidiaries, or their respective officers, employees, representatives or agents
will, directly or indirectly, solicit, encourage or initiate any negotiations or
discussions with, or provide any information to, or otherwise cooperate in any
manner with, any person or group of persons (other than the Purchaser and its
affiliates) concerning any direct or indirect sale or other disposition of all
or a material portion of the Business.
(2) From the date of this Agreement through the Closing, the
Purchaser will not take, nor agree to commit to take, any action that could
reasonably be expected to impede the ability of the Purchaser to consummate the
transactions contemplated by this Agreement.
Section 1.50 Investigations; Pre-Closing Access; Transition Matters.
------------------------------------------------------
(1) Prior to the Closing Date, the Purchaser shall be
entitled, through its employees and representatives, to make such further
investigation of the assets, liabilities, business and operations of the
Business, and such further examination of the Books and Records, as the
Purchaser may reasonably request. Any investigation, examination or interview by
the Purchaser of employees of CIGNA or any of its subsidiaries or access
pursuant to any of the provisions of this Section 4.3(a) shall be conducted or
occur at reasonable times during regular business hours upon reasonable prior
notice. Each of the parties hereto and its employees and representatives,
including, without limitation, counsel, environmental consultants, investment
bankers
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and independent public accountants, shall cooperate with the other's employees
and representatives, as the case may be, in connection with such review and
examination. Any such investigation, examination or interview shall be subject
to the terms and conditions of the letter agreement, dated September 14, 1998,
between the Purchaser and CIGNA (as may be amended, the "Seller Confidentiality
Agreement") and shall be subject to all other legal limitations (including
attorney-client and work product privileges, confidentiality, antitrust and fair
trade limitations). Each of the parties hereto shall cooperate in implementing
the provisions of this Section 4.3 so as to not unreasonably interfere with
CIGNA's or any of its subsidiaries' (or any of their successors') business
operations.
(2) Prior to the Closing Date, the Sellers shall be entitled,
through their employees and representatives, to make such further investigation
of the assets, liabilities, business and operations of the Purchaser and its
subsidiaries, as the Sellers may reasonably request, in connection with the
Financing Commitment Letter and the ability of the Purchaser to finance the
transactions contemplated hereby. Any investigation, examination or interview by
the Sellers of employees of the Purchaser or any of its subsidiaries or access
pursuant to any of the provisions of this Section 4.3(b) shall be conducted or
occur at reasonable times during regular business hours upon reasonable prior
notice. Each of the parties hereto and its employees and representatives,
including, without limitation, counsel, investment bankers and independent
public accountants, shall cooperate with the other's employees and
representatives, as the case may be, in connection with such review and
examination. Any such investigation, examination or interview shall be subject
to the terms and conditions of the Purchaser Confidentiality Agreement and shall
be subject to all other legal limitations (including attorney-client and work
product privileges, confidentiality, antitrust and fair trade limitations).
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(3) In addition, prior to the Closing Date, CIGNA and the
Purchaser shall, and shall cause their respective subsidiaries to, in respect of
the Business, cooperate with respect to transition matters, including to: (i)
provide access to their employees in respect of transition planning; (ii)
designate certain of their employees to serve as members of a joint
CIGNA/Purchaser transition team and cause such individuals to devote reasonable
time to transition matters (it being agreed that neither CIGNA (including its
subsidiaries), on the one hand, nor the Purchaser (including its subsidiaries),
on the other, is required to appoint more than 20 employees to such team); (iii)
devote office accommodations and related facilities for a continuing presence of
transition team members on the premises of CIGNA; (iv) promptly provide the
other parties hereto with copies of all correspondence or written communication
among any party hereto or any of the Acquired Companies, on the one hand, and
A.M. Best Company Inc., Standard & Poor's or Moody's Investors Service, Inc., on
the other, which relates to the business of such entity and which is material to
the financial condition or operation of such entity; (v) consult with the other
regarding their development work pertaining to systems, products, distribution
and customer and producer services relating to the property and casualty
insurance business; (vi) make reasonably available officers of the Business to
assist the Purchaser and its investment bankers in connection with any
"roadshows" conducted in connection with any financing arrangements necessary
for the Purchaser to consummate the transactions contemplated by this Agreement;
and (vii) request PricewaterhouseCoopers LLP to deliver "comfort" letters in
respect of financial statements or financial information as are customary in
connection with such financing arrangements. The foregoing matters relating to
transitional planning shall be subject to the terms and conditions of the Seller
Confidentiality Agreement and the Purchaser Confidentiality Agreement and shall
be subject to all other legal limitations (including attorney-client and work
product privileges, confidentiality, antitrust and
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fair trade limitations). Each of the parties hereto shall cooperate in
implementing the provisions of this Section 4.3(c) so as to not unreasonably
interfere with the Purchaser's or CIGNA's or their respective subsidiaries' (or
any of their successors') business operations.
(4) Following the Closing Date and until the earlier to
occur of (i) the termination of certain obligations under this Agreement in
respect of remaining Deferred Assets pursuant to Section 8.4 hereof or (ii) all
of the Deferred Assets being conveyed to the Purchaser, the provisions of this
Section 4.3 shall continue to be binding upon the parties hereto in respect of
any Deferred Assets that may exist from time to time.
Section 1.51 Post-Closing Access.
-------------------
(1) Following the Closing Date, CIGNA and its subsidiaries
shall (i) allow the employees and representatives of the Purchaser, upon
reasonable prior notice and during regular business hours, the right, at the
Purchaser's expense, to examine and make copies of any Books and Records
relating to the Business which were retained by CIGNA or any of its subsidiaries
for any reasonable purpose relating to the Business, including, without
limitation, the preparation or examination of the Purchaser's Tax Returns,
regulatory filings and financial statements and the conduct of any litigation or
regulatory dispute, whether pending or threatened, concerning the conduct of the
Business prior to the Closing Date or any Subsequent Closing Date (if any), as
the case may be, and (ii) maintain such Books and Records for the Purchaser's
examination and copying for a period of not less than ten years following the
later of the Closing Date or the last Subsequent Closing Date (if any), provided
that after such period CIGNA shall provide the Purchaser with at least twenty
business days' written notice prior to destroying or otherwise disposing of any
such Books and Records, at which time and at the option and expense of the
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Purchaser, the Sellers shall deliver such Books and Records to the Purchaser
rather than destroying the same. Access to such Books and Records shall be at
the Purchaser's expense and may not unreasonably interfere with CIGNA's or any
of its subsidiaries' (or any of their successors') business operations.
Notwithstanding anything to the contrary contained in this Section 4.4(a), the
Purchaser may not exercise its rights under this Section 4.4(a) in respect of
any Deferred Assets that, from time to time, have not been conveyed to the
Purchaser until such time as they have been conveyed to the Purchaser.
(2) Following the Closing Date, the Purchaser shall (i)
allow CIGNA and its subsidiaries, upon reasonable prior notice and during
regular business hours, through their employees and representatives, the right,
at the expense of CIGNA, to examine and make copies of the Books and Records
transferred to the Purchaser at the Closing or any Subsequent Closing for any
reasonable business purpose relating to their respective businesses, including,
without limitation, the preparation or examination of Tax Returns, regulatory
filings and financial statements or the conduct of any litigation or regulatory
dispute, whether pending or threatened, and (ii) maintain such Books and Records
for examination and copying by CIGNA and its subsidiaries for a period of not
less than ten years following the later of the Closing Date or the last
Subsequent Closing Date (if any), provided that after such period the Purchaser
shall provide CIGNA with at least twenty business days' written notice prior to
destroying or disposing of any such Books and Records at which time and at the
option and expense of CIGNA, the Purchaser shall deliver such Books and Records
to CIGNA, rather than destroying the same. Access to such Books and Records
shall be at CIGNA's expense and may not unreasonably interfere with the
Purchaser's or any of its subsidiaries' (or any of their successors') business
operations.
Section 1.52 Governmental Entity Filings.
---------------------------
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(1) The parties hereto shall (i) cooperate and use their
Reasonable Best Efforts to obtain all consents, approvals and agreements of all
Governmental Entities necessary to authorize, approve or permit the consummation
of the transactions contemplated by this Agreement and the Ancillary Agreements
at the earliest possible time hereafter, (ii) as promptly as practicable
hereafter, file or submit, or cause to be filed or submitted, to all
Governmental Entities all notices, applications, documents and other materials
necessary in connection with the consummation of such transactions and (iii) use
their respective Reasonable Best Efforts to respond as promptly as practicable
to all inquiries received from all Governmental Entities for additional
information or documentation in connection with such transactions. CIGNA and the
Purchaser shall promptly advise each other upon receiving any communication from
any Governmental Entity whose consent or approval is required for consummation
of the transactions contemplated by this Agreement and the Ancillary Agreements
which constitutes a reasonable likelihood that any requisite regulatory approval
will not be obtained or that receipt of any such approval will be materially
delayed. CIGNA and the Purchaser shall furnish to the other such necessary
information and reasonable assistance as the other may reasonably request in
connection with its preparation of necessary filings or submissions to any
Governmental Entity. CIGNA and the Purchaser shall provide the other with draft
copies and as-filed copies of all filings and submissions with Governmental
Entities and shall provide the other with a reasonable opportunity to comment
upon all such draft copies. CIGNA and the Purchaser agree that, to the extent
permitted and feasible and reasonable, all meetings with any Governmental Entity
(whether in person, by telephone or other means of instantaneous communication)
regarding the transactions contemplated hereby or by the Ancillary Agreements
shall include representatives of CIGNA and the Purchaser unless such parties
jointly decide otherwise. Nothing in this Agreement is intended to require that
any party
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hereto or any of their respective affiliates pay any type of unlawful
consideration to obtain the approval or consent of any Governmental Entity. The
parties hereto agree that to the extent that the existence of any Replacement
Reinsurance would prevent or materially delay obtaining any consents, approvals
or agreements of Governmental Entities necessary to authorize, approve or permit
the consummation of the transactions contemplated by this Agreement or the
Ancillary Agreements, the Purchaser shall take all steps and actions necessary
to remove such impediment or delay.
(2) Without limiting the generality of the foregoing, the
parties hereto agree to use their respective Reasonable Best Efforts to
consummate the Closing on or before June 30, 1999, it being acknowledged and
agreed by the parties that time is of the essence.
(3) Notwithstanding anything in this Agreement to the contrary
(including Section 5.9(b) hereof), in no event shall the Purchaser be obligated
to accept any condition or requirement imposed by a Governmental Entity relating
to the acquisition, ownership or operation of the Business by the Purchaser
which, either alone or together with all such other conditions or requirements,
materially and adversely affects the benefits, taken as a whole, which the
Purchaser would otherwise receive from the transactions contemplated by this
Agreement had all such conditions and requirements not been imposed; provided,
--------
however, that (i) in considering whether or not such conditions or requirements
- -------
materially and adversely affects such benefits, no consideration shall be given
to any conditions or requirements that relate to the Seller Guarantee or the
Replacement Reinsurance and (ii) in considering the benefits that the Purchaser
receives from the transactions contemplated by this Agreement, such benefits
shall not include the benefits under the Seller Guarantee and the Replacement
Reinsurance.
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Section 1.53 Non-Governmental Consents and Reasonable Best Efforts.
-----------------------------------------------------
(1) The Sellers and the Purchaser shall cooperate and use
Reasonable Best Efforts to obtain all required approvals and consents of non-
governmental persons to the transactions contemplated by this Agreement and the
Ancillary Agreements, and CIGNA and the Purchaser each agree to pay 50% of the
aggregate consideration mutually agreed to be paid to all non-governmental
persons in connection therewith. Nothing in this Agreement is intended to
require that any party hereto or any of their respective affiliates pay any type
of unlawful consideration to obtain the approval or consent of any non-
governmental person.
(2) To the extent permitted by any agreement, arrangement or
license which constitutes part of the Acquired Assets (such agreements,
arrangements and licenses, the "Acquired Asset Contracts"), or to the extent
consented to by all other parties to such Acquired Asset Contract, at the
Closing, CIGNA and its subsidiaries shall execute and deliver such instruments
of transfer, and take such further action as the Purchaser and CIGNA may
reasonably deem necessary in order to effectively transfer, convey and assign to
the Purchaser such Acquired Asset Contracts and all of CIGNA's and it
subsidiaries' rights thereunder, and the Purchaser shall execute such
instruments of assumption in order to effectively assume all of the obligations
of CIGNA and its subsidiaries thereunder. In the event and to the extent that at
the Closing CIGNA and its subsidiaries are unable to obtain any such required
consents under any of the Acquired Asset Contracts (the "Unassigned Acquired
Asset Contracts"), to the extent permitted by Law, during the period from the
Closing until the Subsequent Closing upon which such Unassigned Acquired Asset
Contract is conveyed to the Purchaser: (i) CIGNA and its subsidiaries, as the
case may be, shall, to the extent such Unassigned Acquired Asset Contracts
continue to be in force, continue to be bound
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thereby; (ii) the Purchaser shall pay, perform and discharge fully all of the
obligations of CIGNA and its subsidiaries thereunder from and after the Closing;
and (iii) CIGNA and the Purchaser and their respective subsidiaries shall
continue to use Reasonable Best Efforts to obtain all such unobtained consents
at the earliest practicable date following the Closing. CIGNA and its
subsidiaries shall, without further consideration therefor, pay, assign and
remit to the Purchaser all monies, rights and other consideration received in
respect of the performance by the Purchaser of the obligations under such
Unassigned Acquired Asset Contracts. CIGNA and its subsidiaries shall use
Reasonable Best Efforts to exercise or exploit the rights under all such
Unassigned Acquired Asset Contracts only as reasonably directed in writing by
the Purchaser and at the Purchaser's expense, and the Purchaser shall indemnify
and hold harmless CIGNA and its subsidiaries against all Losses resulting from
any actions taken by CIGNA or its subsidiaries in connection with such
Unassigned Acquired Asset Contracts in accordance with the directions of the
Purchaser. Except with respect to the exercise or exploitation of the rights
under the Unassigned Acquired Asset Contracts at the direction of the Purchaser,
CIGNA and its subsidiaries shall have no obligation hereunder to pay, perform or
discharge any obligations under any such Unassigned Acquired Asset Contract
after the Closing, and the Purchaser shall indemnify and hold harmless CIGNA and
its subsidiaries from all Losses relating thereto. If and when the necessary
consents shall be obtained or such Unassigned Acquired Asset Contract shall
otherwise become assignable, then CIGNA and its subsidiaries, as the case may
be, shall promptly assign such Unassigned Acquired Asset Contract and all its
rights and obligations thereunder to the Purchaser without payment of further
consideration and the Purchaser shall, without the payment of any further
consideration therefor, assume all of such party's obligations thereunder.
Section 1.54 Further Assurances.
------------------
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(1) Upon the terms and subject to the conditions herein
provided, until the Closing Date or, if any Deferred Assets exist following the
Closing, until the earlier to occur of (i) the termination of certain
obligations under this Agreement in respect of remaining Deferred Assets
pursuant to Section 8.4 hereof or (ii) all of the Deferred Assets being conveyed
to the Purchaser, each of the parties hereto shall use Reasonable Best Efforts
to take, or cause to be taken, all actions or do, or cause to be done, all
things or execute any documents necessary, proper or advisable under Laws to
consummate and make effective the transactions contemplated by this Agreement
and the Ancillary Agreements.
(2) On and after the Closing Date, the Sellers, as reasonably
requested from time to time by the Purchaser, and the Purchaser, as reasonably
requested from time to time by any of the Sellers, shall take all reasonably
appropriate action and execute any additional documents, instruments or
conveyances of any kind (not containing additional representations and
warranties) which may be reasonably necessary to carry out any of the provisions
hereof, including, without limitation, putting the Purchaser in full possession
and operating control of the Acquired Assets and the Business and causing the
Purchaser to have full unencumbered ownership of all of the Acquired Securities,
and giving effect to the assumption of the Assumed Liabilities by the Purchaser
as contemplated hereby.
Section 1.55 Expenses. Except as otherwise specifically provided in
--------
this Agreement, the parties to this Agreement shall bear their respective costs
and expenses incurred in connection with the preparation, execution and
performance of this Agreement and the Ancillary Agreements and the transactions
contemplated hereby and thereby, including, without limitation, all fees and
expenses of agents, representatives, counsel, investment bankers, actuaries and
accountants; provided,
--------
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however, that: (i) the Purchaser shall (1) pay the cost of all filing fees in
- -------
connection with all filings by any of the parties hereto with Governmental
Entities (including the Federal Trade Commission and the Antitrust Division
under the HSR Act and all filings under European and Japanese antitrust or
competition statutes or regulations) with respect to the transactions
contemplated hereby (other than the transactions contemplated by the Excluded
Business Transfer Agreements), (2) bear the cost of obtaining required insurance
regulatory approvals, consents and orders for the implementation of the
transactions contemplated by this Agreement and the Ancillary Agreements and any
agreement, document or instrument necessary in connection therewith and (3) pay
all Transfer Taxes including those incurred upon the conveyance of any Deferred
Assets to the Purchaser (or the conveyance of any of the assets underlying the
Deferred Assets if alternate arrangements are agreed to in writing between the
Sellers and the Purchaser), but excluding those Transfer Taxes incurred in
connection with the transactions contemplated by the Excluded Business Transfer
Agreements and excluding those Transfer Taxes incurred in connection with any
actions or transactions undertaken by the Sellers to ensure that the Deferred
Assets are not conveyed to the Purchaser at the Closing or any Subsequent
Closing; (ii) the Sellers shall pay all Transfer Taxes incurred in connection
with the transactions contemplated by the Excluded Business Transfer Agreements
and all Transfer Taxes incurred in connection with any actions or transactions
undertaken by the Sellers to ensure that the Deferred Assets are not conveyed to
the Purchaser at the Closing or any Subsequent Closing; and (iii) CIGNA and the
Purchaser shall each pay for 50% of the aggregate amount of Software Relicensing
Fees (regardless of whether or not any relevant Computer Software was disclosed
in any Section of the Seller Disclosure Schedule) incurred by CIGNA and its
subsidiaries, the Purchaser and the Acquired Companies. The costs and expenses
incurred by the Acquired Companies in connection with the preparation, execution
and performance of this Agreement
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and the Ancillary Agreements and the transactions contemplated hereby and
thereby shall be borne by the Acquired Companies and shall not be the
responsibility of CIGNA or any of its subsidiaries (other than the Acquired
Companies); provided, however, the parties hereto agree that CIGNA shall be
-------- -------
responsible for the payment of all costs and expenses incurred by CIGNA's legal,
accounting, investment banking and other advisers (including, Skadden, Arps,
Slate, Meagher & Flom LLP, PricewaterhouseCoopers LLP (in respect of GAAP
accounting items) and Goldman, Sachs & Co.) in respect of structuring,
negotiating and documenting the transactions contemplated by this Agreement and
the Ancillary Agreements as well as CIGNA's direct, out-of-pocket expenses.
Section 1.56 Public Announcements. The parties hereto acknowledge
--------------------
that after the execution of this Agreement, CIGNA and the Purchaser will make
joint public disclosure of the transactions contemplated by this Agreement and
the Ancillary Agreements after giving the other the opportunity to review and
comment on such disclosure in advance of its release. Thereafter through the
Closing Date, to the extent reasonable and feasible, the parties hereto shall
consult with each other prior to making any subsequent public announcements
which primarily relate to the transactions contemplated by this Agreement or any
of the Ancillary Agreements.
Section 1.57 Waiver of Claims by the Acquired Companies. The
------------------------------------------
Purchaser (on behalf of the Acquired Companies) hereby waives at and after the
Closing or, in the case of an Acquired Company which constitutes a Deferred
Company, at and after the Subsequent Closing (if any) at which such Deferred
Company was conveyed to the Purchaser, any and all Actions and Losses against
CIGNA or any of its subsidiaries, or their respective officers, directors,
employees, advisors, representatives or agents in connection with, or arising
out of, any act or omission of any of such person, in such capacity, at or prior
to
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the Closing or such Subsequent Closing, as the case may be, including, without
limitation, with respect to the Sellers' negotiation of the terms of this
Agreement and the Ancillary Agreements; provided, however, that nothing in this
-------- -------
Section 4.10 shall affect the rights of any of the Acquired Companies under any
agreement or arrangement to which it is a party, under any of the Ancillary
Agreements to which it is a party or in respect of any intercompany account
receivables between CIGNA and its subsidiaries (other than the Acquired
Companies conveyed to the Purchaser), on the one hand, and the Acquired
Companies conveyed to the Purchaser, on the other, which in any such case
remains in effect after the Closing or the Subsequent Closing, as the case may
be.
Section 1.58 Rating Agency Presentations. The Sellers shall give the
---------------------------
Purchaser reasonable notice of any meetings prior to the Closing Date with any
rating agency (including A.M. Best Company Inc. and Standard & Poor's) to
discuss the ratings (including insurance claims paying ratings) of INA
Corporation and any of its subsidiaries which constitute Acquired Companies, and
the Purchaser at its option shall have the right to have an observer at such
meetings.
Section 1.59 Notice of Adverse Developments. From the date hereof
------------------------------
through the Closing Date or, in respect of any Deferred Asset, through the
Subsequent Closing Date on which such Deferred Asset was conveyed to the
Purchaser, (i) the Sellers shall notify the Purchaser promptly of any event,
condition or circumstance of which the Sellers have knowledge which occurs from
the date hereof through the Closing Date or the applicable Subsequent Closing
Date, as the case may be, that would jeopardize the fulfillment of any condition
to the Closing or the applicable Subsequent Closing, as the case may be, and
(ii) the Purchaser shall notify the Sellers promptly of any event, condition or
circumstance of which the Purchaser has knowledge which occurs from the date
hereof through the Closing Date or the applicable Subsequent Closing Date,
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as the case may be, that would jeopardize the fulfillment of any condition to
the Closing or the applicable Subsequent Closing, as the case may be.
Section 1.60 Termination of Certain Agreements. Except in respect of
---------------------------------
the agreements and the intercompany accounts set forth in Section 4.13 of the
Seller Disclosure Schedule, at or prior to the Closing, the Sellers shall
deliver to the Purchaser documentation evidencing the termination of any
agreements and the settlement of outstanding balances of all intercompany
accounts, in each case, between CIGNA or any of its subsidiaries (other than the
Acquired Companies conveyed to the Purchaser), on the one hand, and any of the
Acquired Companies conveyed to the Purchaser, on the other. The Sellers agree to
deliver to the Purchaser no later than 30 days prior to the anticipated Closing
Date, the estimated aggregate amount of the outstanding balances of the
intercompany accounts set forth on Section 4.13 of the Seller Disclosure
Schedule as of the Closing Date. The agreements and intercompany accounts set
forth on Section 4.13 of the Seller Disclosure Schedule shall be settled after
the Closing or Subsequent Closing (if any), as the case may be, in the ordinary
course of business. In the event that any agreements or intercompany account
which this Section 4.13 requires be terminated or settled before the Closing is
inadvertently not terminated or settled, such agreement or intercompany account
shall be settled after the Closing or Subsequent Closing (if any), as the case
may be, in the ordinary course of business.
Section 1.61 Audited Business Financial Statements; Other Financials.
-------------------------------------------------------
(1) As promptly as practicable following the date hereof but
in no event later than 90 days after the date of this Agreement, the Sellers
shall deliver to the Purchaser the following audited financial statements of the
Business and the related unqualified report of independent accountants: (i) the
combined balance sheet as of December 31, 1998, and the related
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combined statements of income and of comprehensive income and shareholders'
equity and of cash flows for the year ended December 31, 1998, together with
appropriate footnotes, all in accordance with Regulation S-X as promulgated by
the SEC (collectively, the "1998 Audited Financial Statements"); (ii) the
combined balance sheet as of December 31, 1997, and the related combined
statements of income and of comprehensive income and shareholders' equity and of
cash flows for the year ended December 31, 1997, together with appropriate
footnotes, all in accordance with Regulation S-X as promulgated by the SEC
(collectively, the "1997 Audited Financial Statements"); and (iii) the combined
statements of income and of comprehensive income and shareholders' equity and of
cash flows for the year ended December 31, 1996, together with appropriate
footnotes, all in accordance with Regulation S-X as promulgated by the SEC
(collectively, the "1996 Audited Financial Statements" and, together with the
1998 Audited Financial Statements and the 1997 Audited Financial Statements, the
"Audited Business Financial Statements").
(2) As promptly as practicable following the end of each
calendar quarter after the date of this Agreement, but in no event later than 45
days after the end of each such calendar quarter, the Sellers shall deliver to
the Purchaser unaudited financial statements of the Business including a
combined balance sheet as of December 31, 1998 and the last day of such calendar
quarter, and the related combined statements of income and comprehensive income
and shareholder's equity and of cash flows for the three-month periods, three-
and six-month periods and three-, six- and nine-month periods, as applicable, in
each of 1998 and 1997, together with appropriate footnotes, all in accordance
with Regulation S-X as promulgated by the SEC.
(3) From and after the date upon which the Audited Business
Financial Statements have been delivered to the Purchaser through to the Closing
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Date, as part of the Purchaser's transitional planning, the Sellers shall
provide access to, and shall use their Reasonable Best Efforts to cause the
Sellers' independent public accountants to cooperate with, the Purchaser and the
Purchaser's independent public accountants in the Purchaser's preliminary work
to prepare a combined balance sheet of the Business as of the Closing Date. The
Purchaser agrees to reimburse the Sellers for all fees, costs and expenses
incurred by the Sellers' independent public accountants in connection with this
Section 4.14(c).
Section 1.62 Insurance Matters.
-----------------
(1) CIGNA shall, and shall cause each of the Acquired
Companies to, use Reasonable Best Efforts to keep in effect the Insurance
Policies or substantially comparable insurance polices until the Closing or the
Subsequent Closing on which the relevant Acquired Company is conveyed to the
Purchaser. CIGNA shall terminate the Third Party Insurance Policies in respect
of each Acquired Company as of the Closing or the Subsequent Closing on which
such Acquired Company is conveyed to the Purchaser. If the Purchaser chooses to
arrange for such coverage, the Purchaser shall be responsible for paying and
arranging for any insurance coverage for the Acquired Companies from and after
the Closing Date or the Subsequent Closing Date on which each such Acquired
Company is conveyed to the Purchaser.
(2) The Sellers shall cause the Acquired Companies to
issue, effective as of the Closing or the Subsequent Closing upon which each
such Acquired Company is conveyed to the Purchaser, endorsements to each of the
Self-Insurance Policies substantially in the form attached hereto as Exhibit N
---------
(collectively, the "Insurance Endorsements"). If additional Self-Insurance
Policies are identified after the Closing Date or the Subsequent Closing Date,
as the case may be, the Purchaser shall promptly cause the Acquired Companies
conveyed to the Purchaser to execute such an endorsement with respect to such
Self-Insurance Policies.
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(3) The Purchaser and the Sellers shall cooperate to replace
on the Closing Date or the Subsequent Closing Date upon which an Acquired
Company is conveyed to the Purchaser those surety bonds in effect as of the
Closing Date or the Subsequent Closing Date, as the case may be, which were
issued by insurers other than the Acquired Companies on behalf of or in support
of the business of the Acquired Companies, including, without limitation, appeal
bonds and statutory bonds. In the event certain of such surety bonds cannot be
replaced prior to the Closing Date or the Subsequent Closing Date, as the case
may be, the parties agree to replace such surety bonds as soon as reasonably
practicable thereafter, and the Purchaser shall indemnify and hold harmless the
Sellers for any liability relating such surety bonds incurred after the Closing
Date or the Subsequent Closing Date, as the case may be.
Section 1.63 Certain Intellectual Property Matters. Notwithstanding
-------------------------------------
anything to the contrary in this Agreement, the parties hereto acknowledge and
agree that the Sellers shall deliver those portions of Section 2.11 of the
Seller Disclosure Schedule relating to Computer Software which constitutes
Intellectual Property used by the Acquired Companies in the conduct of the
Business (whether as licensor or licensee) no later than ninety days following
the date of this Agreement. For purposes of this Agreement, the term "Computer
Software" means all computer software (whether in source code or object code)
and databases except "off-the-shelf" and "shrink-wrap" commercially available
software.
Section 1.64 Forgiveness of Certain Indebtedness. Notwithstanding
-----------------------------------
anything to the contrary contained in this Agreement, CIGNA shall forgive
outstanding debt of the Acquired Companies in an aggregate amount equal to one
hundred eighteen million dollars ($118,000,000) as of the Closing.
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Section 1.65 Updates to Seller Disclosure Schedules. Beginning on the
--------------------------------------
first business day in March and on the first business day of every second
calendar month thereafter through to the Closing Date, the Sellers shall use
their Reasonable Best Efforts to provide in writing to the Purchaser updates to
the following Sections of the Seller Disclosure Schedule: 2.5(a), 2.5(b),
2.5(c), 2.7, 2.8, 2.9(a), 2.10, 2.17, 2.22, 2.31 and 2.32. To the extent that
the Sellers become aware of any error in any Section of the Seller Disclosure
Schedule, the Sellers shall promptly notify the Purchaser of the error.
ARTICLE V
ADDITIONAL COVENANTS
Section 1.66 Affected Employees.
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(1) The Purchaser shall cause the Acquired Domestic
Companies to continue to employ effective as of the Closing each person who is
an employee (such employees, other than the Excluded Domestic Employees, the
"Affected Domestic Employees") of any of the Acquired Domestic Companies as of
the Closing, other than those employees set forth in Section 5.1(a) of the
Seller Disclosure Schedule (the "Excluded Domestic Employees"), on terms
comparable to those provided on the date hereof to such employee. Prior to the
Closing, CIGNA or its subsidiaries shall transfer the Excluded Domestic
Employees from, or otherwise cause the Excluded Domestic Employees to cease to
be employed by, the Acquired Domestic Companies.
(2) The Purchaser shall cause the Acquired International
Companies to continue to employ effective as of the Closing or effective as of
any Subsequent Closing on which the Acquired International Company was conveyed
to the Purchaser, as the case may be, each person who is an employee (such
employees, other than the Excluded International Employees, the
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"Affected International Employees") of any of the Acquired International
Companies as of the Closing or a Subsequent Closing, as the case may be, other
than those employees set forth in Section 5.1(b) of the Seller Disclosure
Schedule (the "Excluded International Employees" and, together with the Excluded
Domestic Employees, the "Excluded Employees"), on terms comparable to those
provided on the date hereof to such employee. Prior to the Closing or the
Subsequent Closing, as the case may be, CIGNA or its subsidiaries shall transfer
the Excluded International Employees from, or otherwise cause the Excluded
International Employees to cease to be employed by, the Acquired International
Companies conveyed to the Purchaser.
(3) Prior to the Closing, the Purchaser shall offer employment
effective as of the Closing to each of the employees of CIGNA and its
subsidiaries (other than the Acquired Companies) set forth on Section 5.1(c) of
the Seller Disclosure Schedule (the "Identified Additional Employees") on terms
comparable to those provided on the date hereof to such employee. The
Purchaser's offer of employment to each of the Identified Additional Employees
shall be in writing, shall contain such terms as CIGNA may reasonably request
and shall otherwise be subject to the approval of CIGNA, which approval shall
not be unreasonably withheld. The Sellers will provide such reasonable
information as the Purchaser may request to confirm that each of the Identified
Additional Employees has committed substantial amounts of his or her time to the
Business in 1998. The parties hereto agree that the Purchaser shall have until
the forty-fifth day following the date of this Agreement to identify any
Identified Additional Employees who have not committed substantial amounts of
his or her time to the Business in 1998 and the Sellers shall reasonably
cooperate with the Purchaser in connection therewith. In the event that the
Purchaser has identified to the reasonable satisfaction of the Sellers any
Identified Additional Employees who have not committed substantial amounts of
his or her time to the Business in 1998, then such
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employees shall be treated as Excluded Employees for all purposes of this
Agreement unless the Purchaser subsequently designates any such employee as a
Transitional Service Employee.
(4) Section 5.1(d) of the Seller Disclosure Schedule sets forth
a list by department or function of the equivalent number of full-time employees
in such department or in respect of such function providing services to the
Business in 1998. No later than ninety days prior to the anticipated Closing
Date, the Seller shall deliver a written list to the Purchaser specifying for
each such department or function the name of each employee in such department or
function that the Sellers propose that the Purchaser offer employment to as of
the Closing (the "Potential Additional Employees"); provided, however, that the
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number of employees in each such department or function specified by the Sellers
shall not exceed the equivalent number of full-time employees for such
department or function specified in Section 5.1(d) of the Seller Disclosure
Schedule. Within 30 days of the Purchaser's receipt of the list of Potential
Additional Employees, the Purchaser shall deliver a written list to CIGNA
setting forth those Potential Additional Employees it desires to offer
employment to as of the Closing (the "Designated Additional Employees" and,
together with the Affected Domestic Employees, the Affected International
Employees and the Identified Additional Employees, the "Affected Employees") and
those of the Potential Additional Employees the Purchaser desires that the
Sellers continue to employ to provide services to the Acquired Companies
conveyed to the Purchaser pursuant to the Transition Services Agreement (the
"Transitional Services Employees"). Prior to the Closing, the Purchaser shall
offer employment effective as of the Closing to each of the Designated
Additional Employees on terms comparable to those provided on the date hereof to
such employee. The Purchaser's offer of employment to each of the Designated
Additional Employees shall be in writing, shall contain such terms as CIGNA may
reasonably request and shall otherwise be subject to the
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approval of CIGNA, which approval shall not be unreasonably withheld.
(5) Notwithstanding anything to the contrary in this Agreement,
the Purchaser shall be liable for any and all obligations and liabilities in
respect of the Affected Employees and the Transitional Services Employees
arising under any Law (including the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN Act")) or arising under any employee severance
plan or agreement of the Purchaser or its subsidiaries (including all of the
Acquired Companies conveyed to the Purchaser). Moreover, notwithstanding
anything to the contrary in this Agreement, the Purchaser shall indemnify and
reimburse CIGNA for any obligations and liabilities incurred by CIGNA and its
subsidiaries in respect of the Affected Employees and the Transitional Services
Employees arising under (i) any Law or (ii) any employee severance plan or
agreement of CIGNA or its subsidiaries; provided, however, that in the event
-------- -------
that any such employee severance plan or agreement has been amended to provide
greater benefits than were provided at the date of this Agreement, then, in
respect of clause (ii) only, the Purchaser shall only be liable for those
obligations and liabilities arising under such employee severance plan or
agreements as were in effect as of the date of this Agreement.
(6) Notwithstanding anything to the contrary in this Agreement,
each of CIGNA and the Purchaser shall be liable for 50% of all obligations and
liabilities in respect of the Potential Additional Employees who do not
constitute Designated Additional Employees or Transitional Services Employees
(the "Remaining Employees"), arising under (i) any Law (including the WARN Act)
or (ii) any employee severance plan or agreement of CIGNA or its subsidiaries;
provided, however, that in the event that any such employee severance plan or
- -------- -------
agreement has been amended to provide greater benefits than were provided at the
date of this Agreement, then, in respect of clause (ii) only, the Purchaser
shall only be liable for 50% of the
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obligations and liabilities arising under such employee severance plan or
agreements as were in effect as of the date of this Agreement. The Purchaser
shall indemnify and promptly reimburse CIGNA for any of the Purchaser's share of
the obligations and liabilities specified in the immediately preceding sentence.
(7) Prior to the Closing Date, the Sellers shall promptly
provide to the Purchaser, upon the Purchaser's reasonable request and to the
extent permitted by Law, any information or copies of personnel records held by
the Sellers relating to the Affected Employees. The Sellers and the Purchaser
shall each cooperate with each other and shall provide to the other such
documentation, information and assistance as is reasonably necessary to effect
the provisions of this Section 5.1. Notwithstanding anything to the contrary in
this Agreement, the Purchaser shall not be obligated to employ any Affected
Employee for any fixed period of time following the Closing.
Section 1.67 Employee Benefits.
-----------------
(1) Service Credit. The Purchaser shall give the Affected
--------------
Employees full credit, for purposes of eligibility, vesting and benefit accrual
under any employee benefit plans, programs or arrangements maintained by the
Purchaser, for the Affected Employees' service with CIGNA and its subsidiaries
to the same extent recognized by CIGNA and its subsidiaries immediately prior to
the Closing or the Subsequent Closing, as the case may be. The Purchaser shall
(i) waive all limitations as to preexisting conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable to
the Affected Employees under any welfare benefit plans that such employees may
be eligible to participate in after the Closing Date or, in the case of the
Affected International Employees employed by Acquired International Companies
not conveyed to the Purchaser on the Closing Date, the Subsequent Closing Date
on which such Acquired International Company was conveyed to the
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Purchaser and (ii) provide each Affected Employee with credit for any co-
payments and deductibles paid prior to the Closing Date or the Subsequent
Closing Date, as the case may be, in satisfying any applicable deductible or
out-of-pocket requirements under any welfare plans that the Affected Employees
are eligible to participate in after the Closing Date or the Subsequent Closing
Date, as the case may be.
(2) Level of Benefits. During the period beginning on the
-----------------
Closing Date (or the Subsequent Closing Date, as the case may be) and ending on
December 31st of the first full calendar year following the Closing (or the
Subsequent Closing, as the case may be), except as provided below, the Purchaser
shall provide the Affected Employees with coverage and benefits pursuant to
employee benefit and compensation plans, programs and arrangements which are
substantially similar to the plans, programs and policies provided to the
Affected Employees on the date of this Agreement (including but not limited to
the Plans). Notwithstanding the generality of the foregoing, during such period,
the Purchaser shall (i) maintain severance plans, programs and arrangements
covering the Affected Employees, the terms and conditions of which shall be no
less favorable with respect to any Affected Employee than the severance benefit
plans, programs and arrangements that cover Affected Employees as in effect on
the date of this Agreement, (ii) provide to Affected Domestic Employees and
other Affected Employees who are United States expatriates a pension program
that provides benefits to the group of Affected Domestic Employees and other
Affected Employees who are United States expatriates that are substantially
similar in the aggregate to benefits that would be earned under the benefit
accrual formula in effect on the date of this Agreement under Part B of the
CIGNA Pension Plan and the CIGNA Supplemental Pension Plan and (iii) provide to
Affected Employees, both during and after employment with the Purchaser,
medical, dental and life insurance benefits that are substantially similar to
the medical, dental and life insurance benefits provided by CIGNA to
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its current and former employees under programs in effect on the date of this
Agreement. The Purchaser shall be liable for and shall hold CIGNA, its officers,
directors, employees, agents and affiliates harmless from all severance costs
associated with the termination of employment of any Affected Employee following
the Closing Date or the Subsequent Closing Date, as the case may be.
(3) Deferred Compensation Plan. Except for the obligation to
--------------------------
deliver shares of CIGNA Common Stock, the Purchaser shall assume all obligations
and liabilities for each Affected Employee under the Deferred Compensation Plan
of CIGNA Corporation (the "CIGNA Deferred Compensation Plan"), which amounts
shall be credited to a deferred compensation plan to be designated or
established by the Purchaser. Prior to the Closing Date (or the Subsequent
Closing Date, as the case may be) CIGNA shall take all action necessary to
retain all liabilities under the CIGNA Deferred Compensation Plan with respect
to all participants therein who are not Affected Employees and with respect to
the obligation to deliver shares of CIGNA Common Stock.
(4) Disability. Liabilities under CIGNA's short- and long-term
----------
disability plans (collectively, the "Disability Plans") with respect to Affected
Employees who are on disability leave pursuant to the Disability Plans (such
employees, the "Disability Leave Employees") as of the Closing Date or the
Subsequent Closing Date, as the case may be, shall be the responsibility of
CIGNA. If a Disability Leave Employee terminates disability leave and indicates
a desire to return to employment during the twelve-month period following the
Closing Date or the Subsequent Closing Date, as the case may be, the Purchaser
shall make a good faith effort to employ such for the Disability Leave Employee
on the basis set forth in Section 5.1 hereof, and if such employee is hired such
employee shall then be treated as an Affected Employee for purposes of this
Agreement.
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(5) Effective as of the Closing Date (or the Subsequent Closing
Date, as the case may be), the Purchaser shall assume all assets and liabilities
under all Foreign Pension Plans covering Affected Employees. With respect to
such Foreign Pension Plans, CIGNA and the Purchaser agree to cooperate and use
their respective Reasonable Best Efforts to implement as of the Closing Date (or
Subsequent Closing Date, as the case may be) an equitable, appropriate and
efficient allocation of assets and liabilities thereunder as between Affected
Employees, employees retained by CIGNA and former employees.
(6) Except for the obligations and liabilities for (i) the CIGNA
Deferred Compensation Plan assumed by Purchaser pursuant to Section 5.2(c)
hereof, (ii) the Foreign Pension Plans assumed by the Purchaser pursuant to
Section 5.2(e) hereof, (iii) liabilities for severance assumed by the Purchaser
pursuant to Section 5.1(e) or 5.1(f) hereof, and (iv) liabilities in respect of
Affected Employees for vacation and personal holidays earned or accrued but
unused as of the Closing Date, neither the Purchaser nor any of the Acquired
Companies shall assume any liability for any benefits or other expenses under
any Plans, and CIGNA shall retain all such liabilities and shall indemnify the
Purchaser for any liability the Purchaser, its subsidiaries or its affiliates
may incur with respect thereto.
Section 1.68 Stock-Based Awards.
------------------
(1) For purposes hereof:
(1) "CIGNA Restricted Stock Awards" shall mean all
outstanding awards of restricted CIGNA Common Stock held by Affected
Employees;
(2) "CIGNA Restricted Stock Units" shall mean all
outstanding CIGNA
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restricted stock units (including restricted stock units awarded under the
CIGNA Stock Unit Plan and phantom shares awarded under the CIGNA
International Share Program) held by Affected Employees;
(3) "CIGNA Awards" shall mean all CIGNA Restricted Stock
Awards and CIGNA Restricted Stock Units; and
(4) "Eligible Grantee" shall mean any Affected Employee
who holds a CIGNA Award immediately prior to the Closing Date (or
Subsequent Closing Date, as the case may be).
(2) As soon as practicable following the date of this
Agreement, the Purchaser shall take such actions as may be required to adopt
three plans (the "Purchaser Stock Plan"), the terms and conditions of which
shall be substantially identical to the CIGNA Long-Term Incentive Plan (the
"CIGNA LTIP"), the CIGNA International Share Program and the CIGNA International
Stock Unit Plan respectively, under which the Purchaser shall (A) grant to each
Eligible Grantee restricted stock awards ("Substitute Restricted Stock Awards")
to replace any CIGNA Restricted Stock Awards held by such Eligible Grantee
immediately prior to the Closing Date (or Subsequent Closing Date, as the case
may be) which expire or terminate on the Closing Date (or Subsequent Closing
Date, as the case may be) and (B) grant to each Eligible Grantee restricted
stock units ("Substitute Restricted Stock Units" and, together with the
Substitute Restricted Stock Awards, the "Substitute Awards") to replace any
CIGNA Restricted Stock Units held by such Eligible Grantee immediately prior to
the Closing Date (or Subsequent Closing Date, as the case may be) which expire
or terminate on the Closing Date (or Subsequent Closing Date, as the case may
be).
(3) Each Substitute Restricted Stock Award granted to an
Eligible Grantee shall:
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(1) be for a number of ordinary shares, par value
$0.041666667 per share of the Purchaser ("Purchaser Common Stock") equal to
the number of shares of CIGNA Common Stock subject to the CIGNA Restricted
Stock Award it replaces, multiplied by the Exchange Ratio, rounded down to
the nearest whole number of shares; and
(2) otherwise be subject to substantially the same terms
and conditions as applicable to such CIGNA Restricted Stock Award.
(4) Each Substitute Restricted Stock Unit granted to an
Eligible Grantee shall:
(1) be for a number of shares of Purchaser Common Stock
equal to the number of shares of CIGNA Common Stock subject to the CIGNA
Restricted Stock Unit it replaces, multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares; and
(2) otherwise be subject to substantially the same terms
and conditions as applicable to such CIGNA Restricted Stock Unit.
(5) No later than 30 days following the receipt by CIGNA of
evidence that the Purchaser has made the substitute grants in accordance with
this Section 5.3, CIGNA shall pay to the Purchaser an amount in cash, determined
with respect to each CIGNA Restricted Stock Award and each CIGNA Restricted
Stock Unit, equal to the product of (i) the average of the high and low sales
price of CIGNA Common Stock on the New York Stock Exchange on the Closing Date,
(ii) the number of shares of CIGNA Common Stock to which such CIGNA Award
relates and (iii) a fraction, the numerator
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of which is the number of whole months elapsed from the grant of such CIGNA
Award to the Closing Date and the denominator of which is the total number of
whole months required from the grant date for such CIGNA Award to vest. For
purposes of the preceding sentence, each portion of a CIGNA Award that has a
distinct vesting date shall be treated as a separate CIGNA Award.
(6) For purposes of this Agreement, "Exchange Ratio" means
an amount equal to the quotient determined by dividing (1) the average of the
closing prices per share of CIGNA Common Stock on the Composite Tape of the New
York Stock Exchange as reported in the Wall Street Journal for the Closing Date
and the four trading days immediately prior to the Closing Date by (2) the
average closing prices per share of Purchaser Common Stock on the Composite Tape
of the New York Stock Exchange as reported in the Wall Street Journal for the
Closing Date and the four trading days immediately prior to the Closing Date.
(7) As soon as practicable after the Closing Date (or
Subsequent Closing Date, as the case may be), the Purchaser shall deliver to
each Eligible Grantee an award document evidencing the grant of such award (the
"Grant Letter"), based upon a form which is substantially identical to CIGNA's
form of restricted stock grant letter and attachment or restricted stock unit
grant letter and attachment, as applicable. Each Grant Letter shall provide, in
such form reasonably acceptable to CIGNA, that the Eligible Grantee releases
CIGNA from any and all claims in any way related to the CIGNA Award which such
Substitute Award replaces.
(8) The Purchaser shall take all corporate action necessary
to reserve for issuance a sufficient number of shares of Purchaser Common Stock
for delivery upon exercise (or vesting, as the case may be) of the Substitute
Awards in accordance with this Section 5.3. On the Closing Date, the Purchaser
shall file a registration statement on Form S-8 (or any
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successor or other appropriate form) with the Securities and Exchange Commission
with respect to the shares of Purchaser Common Stock subject to such Substitute
Awards and shall use its Reasonable Best Efforts to maintain the effectiveness
of such registration statement or registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such Substitute Awards remain outstanding. With respect to those individuals
who, subsequent to the Closing Date (or Subsequent Closing Date, as the case may
be), are subject to the reporting requirements under Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), with respect
to the Purchaser, where applicable, the Purchaser shall administer the Purchaser
Stock Plan in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act to the extent that the CIGNA LTIP complied with such rule prior to
the Closing Date (or Subsequent Closing Date, as the case may be).
Section 1.69 Brandywine. Subject to the terms and conditions of
----------
this Section 5.4, at the Closing, the Sellers shall provide a guarantee to the
Purchaser in form and substance reasonably acceptable to the Sellers and the
Purchaser (the "Seller Guarantee"), as to the adequacy of the recorded reserves
for losses and loss adjustment expenses as of the Closing for certain Insurance
Company subsidiaries of Brandywine Holdings Corporation as well as with respect
to such other liabilities of the Domestic Insurance Companies as the Purchaser
may reasonably request (the "Guaranteed Reserves"). The Seller Guarantee shall
indemnify the Purchaser or the Purchaser's subsidiaries against unanticipated
increases in the Guaranteed Reserves in an aggregate amount as shall be agreed
to by the parties. In exchange for and in full replacement of the Seller
Guarantee, the Sellers may, at its option, obtain reinsurance (the "Replacement
Reinsurance") from a mutually agreed upon third-party reinsurer to directly
indemnify certain of the Domestic Insurance Companies against unanticipated
increases in the Guaranteed Reserves in the same aggregate amount as has been
agreed
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pursuant to the second sentence of this Section 5.4. In the event that, for
whatever reason, Replacement Reinsurance has not been obtained at the Closing,
then the Seller Guarantee shall automatically be void ab initio and shall be of
no further force and effect immediately prior to the Closing without any action
on the part of any person, and the Sellers shall have no liability or obligation
whatsoever to the Purchaser or any subsidiary or affiliate of the Purchaser,
including, without limitation, the Purchaser's Insurance Company subsidiaries,
with respect to such Seller Guarantee.
Section 1.70 Intellectual Property. Except as provided for in the
---------------------
Copyright Assignment or in the Trademark Assignment, the parties hereto agree
that the Purchaser is not purchasing, acquiring or otherwise obtaining any
right, title or interest in, to or under any intellectual property owned by the
Sellers, including, but not limited to, the Retained Intellectual Property, the
names "CIGNA" and "LINA" or any trade names, trademarks, identifying logos or
service marks related thereto or employing the words "CIGNA" and "LINA" or any
part or variation thereof or any confusingly similar trade name, trademark,
service mark or logo (including all registrations and applications relating
thereto). Notwithstanding the foregoing, the parties agree that during the
period from the Closing Date until 180 days after the Closing Date (the "Sell-
off Period"), the Acquired Companies shall be entitled to use, on a non-
exclusive basis, the Sellers' Intellectual Property set forth in Section 5.5 of
the Seller Disclosure Schedule (the "Trademarks and Logos") to the extent that
the Trademarks and Logos exist or are contained as of the date such Acquired
Company was conveyed to the Purchaser on any business cards, schedules,
stationery, displays, signs, promotional materials, manuals, forms, computer
software and other material used in the Business, without any obligation on the
part of the Purchaser to pay royalties or similar fees to CIGNA or its
subsidiaries during the Sell-off Period. The Purchaser agrees that: (i)
immediately
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upon termination of the Sell-off Period, the Acquired Companies shall cease and
desist from all further use of the Trademarks and Logos and will adopt new trade
names, trademarks, identifying logos and service marks related thereto which are
not confusingly similar to the Trademarks and Logos; (ii) except as set forth in
this Section 5.5, neither the Purchaser nor any of its subsidiaries (including
all of the Acquired Companies conveyed to the Purchaser) nor any of their
affiliates shall make any use of the Trademarks and Logos; and (iii) any use of
the Trademarks and Logos by the Acquired Companies during the Sell-off Period
shall be in a manner which is identical or substantially identical to the manner
used prior to the Closing and shall not be used in any manner which could
degrade the quality of the Trademarks and Logos or could be misleading in any
manner. At the Closing and each Subsequent Closing (if any), as the case may be,
the Purchaser shall, and shall cause its subsidiaries to, make appropriate
filings with all Governmental Entities and any other applicable registries to
change the legal name and any d/b/a of any Acquired Company that contains any of
the Trademarks and Logos to a name that does not include any of the Trademarks
and Logos or words confusingly similar thereto.
Section 1.71 Noncompetition and Nonsolicitation by CIGNA.
-------------------------------------------
(1) Except as contemplated by this Agreement or any of the
Ancillary Agreements and except as set forth in Section 5.6(b) hereof and
subject to Section 5.6(d) hereof, until the third anniversary of the Closing
Date (and regardless if any Subsequent Closings occur), CIGNA and its
subsidiaries shall not engage in (i) the property and casualty insurance
business in any jurisdiction in which the Sellers have transferred an Insurance
Company to the Purchaser pursuant to this Agreement or (ii) any direct writing
of accident and health insurance anywhere in the world where a property and
casualty Insurance Company which was transferred by the Sellers to the Purchaser
pursuant
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to this Agreement is licensed, except in any jurisdiction where the Sellers have
or may establish a life Insurance Company or an Insurance Company that has the
authority to write both life and property and casualty insurance business and
except in any jurisdiction where such business is written through a Lloyd's
syndicate under the arrangements carried on by the Sellers through their
Reinsurance Life, Accident and Health Division immediately prior to the Closing
("RLAH Activities"); provided, however, that the Sellers' investment in a
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Lloyd's managing agency for the purpose of continuing to engage in RLAH
Activities shall not constitute engaging in the property and casualty insurance
business.
(2) Notwithstanding anything contained in Section 5.6(a)
hereof to the contrary, CIGNA and its subsidiaries shall not be prohibited from:
(1) making investments in the ordinary course of
business, by CIGNA or by any of its subsidiaries, in either their general
or separate accounts, in persons engaging in the property and casualty
insurance and related businesses so long as such investments (1) do not
exceed 10% of such person's equity and (2) are not for the purpose of
acquiring control of such person;
(2) managing investment funds that make investments in
persons engaging in the property and casualty insurance or related
businesses so long as such investments (1) do not exceed 10% of such
person's equity and (2) are not for the purpose of acquiring control of
such person;
(3) conducting a property and casualty insurance business
for property and assets located in Poland as may be required under current
or future joint venture arrangements in Poland;
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(4) conducting a property and casualty insurance business
for property and assets located in Brazil as may be required under current
or amended joint venture arrangements with EXCEL CIGNA Seguradora, S.A.,
provided that, to the extent permitted by Law and any applicable joint
venture agreement, CIGNA or its subsidiary, as the case may be, reinsures
its portion of such property and casualty insurance business with the
Purchaser;
(5) conducting a property and casualty insurance business
for property and assets located in China or India as may be required under
future joint venture arrangements in China or India, respectively, provided
that (1) such joint venture is entered into for a primary purpose other
than entering into a property and casualty insurance business in such
jurisdiction and (2) to the extent permitted by Law and any applicable
joint venture agreement, CIGNA or its subsidiary, as the case may be,
reinsures its portion of such property and casualty insurance business with
the Purchaser;
(6) insuring (whether by self-insurance, reinsurance,
captive arrangements or otherwise) the property and casualty insurance
risks of, and issuing bonds related to, the business and operations of (1)
CIGNA or any of its affiliates and (2) health care providers affiliated
with or participating in CIGNA's or any of its affiliates' provider
networks;
(7) structured settlements for property and casualty
insurance claims and the underwriting or brokering of structured settlement
contracts;
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(8) insurance or reinsurance related to health care
expenditure risks, aggregate claim costs, medical or other trends,
including but not limited to plan sponsor and health care provider stop
loss arrangements;
(9) insurance, reinsurance, managed care services or
provider network services related to workers' compensation, disability,
managed disability, long-term care, integrated care arrangements, 24-hour
health coverage arrangements, personal accident reinsurance (including,
without limitation, personal accident aviation reinsurance) including,
without limitation, reinsurance carve out arrangements (whether or not the
issuing carrier is a property and casualty insurer) and other managed
injury or disability coverages, including but not limited to the provision
of managed care for bodily injury related to automobile policies;
(10) applying for and holding a property and casualty
insurance license, permit or comparable authorization to the extent
necessary to conduct any business not prohibited by Section 5.6(a) hereof;
(11) conducting any property and casualty insurance
business through any Deferred Asset at any time following the Closing
(regardless of whether the rights and obligations of the parties under this
Agreement in respect of the Deferred Assets have or have not been
terminated in accordance with Section 8.4 hereof); provided, however, that
-------- -------
the Deferred Asset shall not be used to (1) enter into lines of business
not conducted by such Deferred Asset as of the Closing Date and (2)
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conduct business in any jurisdiction in which such Deferred Asset does not
conduct business as of the Closing Date; or
(12) acquiring any person or assets that includes
operations the conduct of which by CIGNA or its subsidiaries would
otherwise violate the non-competition provisions set forth in Section
5.6(a) hereof; provided, however, such operations are not the primary
-------- -------
business of the person or assets being acquired; provided further, however,
-------- ------- -------
that (1) CIGNA or its subsidiary, as the case may be, sells, terminates or
otherwise disposes of any such operations within twelve months of such
acquisition and (2) in the event that CIGNA or its subsidiary, as the case
may be, determines to sell such operations pursuant to a competitive
bidding process involving more than one bidder, the Purchaser shall have a
one-time right of first offer in respect of such operations.
(3) Subject to Section 5.6(d) hereof, until the second
anniversary of the Closing Date (and regardless if any Subsequent Closings
occur), without the prior written consent of the Purchaser, CIGNA shall not,
whether directly or indirectly, and shall not permit any of its subsidiaries to
employ or retain as a consultant any Affected Employee who was an Exempt
Employee as of the date hereof.
(a) In the event of any material violation of Section
5.7(a) hereof or Section 5.7(c) hereof in one or more jurisdictions, then the
corresponding obligations set forth in Sections 5.6(a) hereof and Section 5.6(c)
hereof, respectively, shall be discharged with respect to such jurisdictions;
provided, however, that nothing in this Section 5.6(d) shall prevent any party
- -------- -------
to this Agreement from exercising any rights under this Agreement (including its
rights to enforce the provisions contained in Section 5.7 hereof
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and to seek damages in respect of any violation of Section 5.7 hereof) or to
exercise any other remedy available under this Agreement or under Law in respect
of such violations.
Section 1.72 Noncompetition and Nonsolicitation by the Purchaser.
---------------------------------------------------
(1) Except as contemplated by this Agreement or any of the
Ancillary Agreements and except as set forth in Section 5.7(b) hereof and
subject to Section 5.7(d) hereof, until the third anniversary of the Closing
Date (and regardless if any Subsequent Closings occur), the Purchaser and its
subsidiaries (which shall include from time to time those Acquired Companies
conveyed to the Purchaser as of any such time) shall not engage in the life,
employee benefits, healthcare (other than accident and health insurance business
outside of the United States which is placed by independent producers with
licensed property and casualty insurance companies) and pension businesses.
(2) Notwithstanding anything contained in Section 5.7(a)
hereof to the contrary, the Purchaser and its subsidiaries (which shall include
from time to time those Acquired Companies conveyed to the Purchaser as of any
such time) shall not be prohibited from:
(1) issuing or selling reinsurance policies or generally
engaging in the reinsurance business, in each case, with respect to life,
employee benefits, healthcare and pension policies;
(2) making investment in the ordinary course of business
by the Purchaser or any of its subsidiaries (which shall include from time
to time those Acquired Companies conveyed to the Purchaser as of any such
time), in either their general or separate accounts, in persons engaged in
the
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life, employee benefits, healthcare or pension businesses so long as such
investments (1) do not exceed 10% of such person's equity and (2) are not
for the purpose of acquiring control of such person;
(3) managing investment funds that make investments in
persons engaging in the life, employee benefits, healthcare or pension
businesses so long as such investments (1) do not exceed 10% of such
person's equity and (2) are not for the purpose of acquiring control of
such person;
(4) insuring (whether by self-insurance, reinsurance,
captive arrangements or otherwise) the life and healthcare insurance risks
of, and issuing bonds related to, the business and operations of the
Purchaser or any of its subsidiaries (which shall include from time to time
those Acquired Companies conveyed to the Purchaser as of any such time);
(5) acquiring any person or assets that includes
operations the conduct of which by the Purchaser or its subsidiaries
(including all of the Acquired Companies conveyed to the Purchaser) would
otherwise violate the non-competition provisions set forth in Section
5.7(a) hereof; provided, however, that such operations are not the primary
-------- -------
business of the person or assets being acquired; provided further, however,
---------------- -------
that (1) the Purchaser or its subsidiary, as the case may be, sells,
terminates or otherwise disposes of any such operations within twelve
months of such acquisition and (2) in the event that the Purchaser or its
subsidiary (including all of the Acquired Companies conveyed to the
Purchaser), as the case may be, determines to sell such operations
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pursuant to a competitive bidding process involving more than one bidder,
CIGNA shall have a one-time right of first offer in respect of such
operations; or
(6) issuing or selling insurance policies to employees on
a voluntary group accident basis.
(b) Subject to Section 5.7(d) hereof, until the second
anniversary of the Closing Date (and regardless if any Subsequent Closings
occur), without the prior written consent of CIGNA, the Purchaser shall not,
whether directly or indirectly, and shall not permit any of its subsidiaries
(including all of the Acquired Companies conveyed to the Purchaser) to employ or
retain as a consultant any employee of CIGNA or its subsidiaries who was an
Exempt Employee as of the date of this Agreement or as of any date during the
period of six months prior hereto; provided, however, that nothing in this
-------- -------
Section 5.7(c) shall prohibit the Purchaser or its subsidiaries from employing
any Affected Employee.
(c) In the event of any material violation of Section 5.6(a)
hereof or Section 5.6(c) hereof in one or more jurisdictions, then the
corresponding obligations set forth in Section 5.7(a) hereof and Section 5.7(c)
hereof, respectively, shall be discharged with respect to such jurisdictions;
provided, however, that nothing in this Section 5.7(d) shall prevent any party
- -------- -------
to this Agreement from exercising any rights under this Agreement (including its
rights to enforce the provisions contained in Section 5.6 hereof and to seek
damages in respect of any violation of Section 5.6 hereof) or to exercise any
other remedy available under this Agreement or under Law in respect of such
violations.
Section 1.73 Ancillary Agreements; Other Documents.
-------------------------------------
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(a) Each of the Sellers shall, and shall cause their
subsidiaries and affiliates to, execute and deliver at the Closing each of the
Ancillary Agreements to which it is a party and each other agreement, document
or instrument which is necessary or desirable to effect the transactions
contemplated by this Agreement or the Ancillary Agreements. Each of the Sellers
shall, and shall cause their subsidiaries and affiliates to, execute and deliver
at each Subsequent Closing each agreement, document or instrument which is
necessary or desirable to effect the transactions contemplated by this Agreement
and the Ancillary Agreements.
(b) The Purchaser shall, and shall cause its subsidiaries and
affiliates to, execute and deliver at the Closing each of the Ancillary
Agreements to which it is a party and each other agreement, document or
instrument which is necessary or desirable to effect the transactions
contemplated by this Agreement or the Ancillary Agreements. The Purchaser shall,
and shall cause its subsidiaries and affiliates to, execute and deliver at each
Subsequent Closing each agreement, document or instrument which is necessary or
desirable to effect the transactions contemplated by this Agreement and the
Ancillary Agreements.
(1) Promptly following the date of this Agreement, the
parties hereto agree to negotiate in good faith the definitive terms of an
appropriate agreement or agreements in respect of the matters described in
Section 5.13(a) hereof which shall incorporate the terms set forth on Exhibit P
---------
attached hereto (collectively, the "Facility Sharing Agreements").
(2) Promptly following the date of this Agreement, the
parties hereto agree to negotiate in good faith the definitive terms of an
appropriate agreement which shall incorporate the terms set forth on Exhibit F
---------
attached hereto (the "Integrated Care Agreement").
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(3) The parties hereto shall cause their respective
subsidiaries party thereto to execute and deliver the Bermuda Bulk Reinsurance
Agreement immediately prior to the Closing.
(4) Promptly following the date of this Agreement, the
parties hereto agree to negotiate in good faith the definitive terms of an
appropriate agreement which shall incorporate the terms set forth on Exhibit M
---------
attached hereto (the "Transition Services Agreement").
(5) Notwithstanding anything to the contrary in this
Agreement, in respect of the leased property commonly known as Two Liberty
Place, 1601 Chestnut Street, Philadelphia, Pennsylvania (the "Liberty Place
Property") the parties hereto shall use their Reasonable Best Efforts to obtain
the consent of the landlord and any mortgagee of the Liberty Place Property to
the replacement at the Closing of the current lease of the whole of the property
by two separate leases of portions of the Liberty Place Property to each of INA
Corporation and CIGNA (or an affiliate of CIGNA which is not an Acquired
Company) as separate tenants; provided, however, that (i) if such consents
-------- -------
cannot be obtained prior to the Closing, the parties shall enter into the Two
Liberty Place Sublease as provided for herein, and (ii) if such consents can be
obtained prior to the Closing, then such two separate leases shall be
substituted for the Two Liberty Place Sublease for all purposes of this
Agreement.
(6) The parties hereto shall, and shall cause their
respective subsidiaries party thereto to, execute and deliver the Excluded
Business Transfer Agreements at an appropriate time prior to the Closing such
that the transactions contemplated thereby relating to the Excluded Business can
be effected without delaying the anticipated Closing.
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Section 1.74 Replacement Support Agreements; New Support Agreements.
------------------------------------------------------
(1) To the extent permitted by Law, the Purchaser agrees to
deliver at the Closing and each Subsequent Closing at which any relevant
Acquired Asset is conveyed to the Purchaser, such agreements, instruments and
other documents (collectively, the "Replacement Support Agreements") as may be
necessary to assume all of CIGNA's and its affiliates' (other than the Acquired
Companies conveyed to the Purchaser) obligations under those Existing Support
Agreements in force in respect of the Acquired Assets conveyed to the Purchaser
at the Closing and each Subsequent Closing and set forth in Section 5.9(a) of
the Seller Disclosure Schedule or otherwise identified to the Purchaser by
CIGNA. The Replacement Support Agreements shall also contain provisions
releasing CIGNA and its affiliates from all such obligations. Without limiting
the foregoing, the Purchaser hereby agrees to indemnify and hold harmless CIGNA
and its affiliates from and against all obligations under all Existing Support
Agreements in respect of the Acquired Assets conveyed to the Purchaser. Each
Replacement Support Agreement shall be effective at the Closing or the
Subsequent Closing at which it is delivered. To the extent that any Governmental
Entity increases the obligations that the Purchaser must assume under any
Existing Support Agreement then, for purposes of this Agreement, such additional
obligations shall be subject to Section 4.5(c) hereof. Notwithstanding anything
to the contrary in this Agreement, the Purchaser shall not be obligated to
assume any obligations, or provide any indemnification, in respect of any person
under any Existing Support Agreement other than the Acquired Companies.
(2) Subject to Section 4.5(c) hereof, the Purchaser agrees to
deliver at the Closing and each Subsequent Closing at which any relevant
Acquired Asset is conveyed to the Purchaser, such Support Agreements as any
Governmental Entity may
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require as a condition to approving the transactions contemplated by this
Agreement or the Ancillary Agreements (the "New Support Agreements").
Section 1.75 Financing. The Purchaser shall use its Reasonable Best
---------
Efforts to obtain, at the Purchaser's reasonable discretion (but without such
discretion delaying or adversely affecting the consummation of the transactions
contemplated hereby), (i) the financing set forth in the Financing Commitment
Letter substantially upon the terms set forth therein or (ii) such alternative
financing as is sufficient to enable the Purchaser to consummate the
transactions contemplated by this Agreement, in the case of clauses (i) and
(ii), no later than the Closing. Notwithstanding anything to the contrary
contained in this Agreement, the parties hereto acknowledge and agree that any
failure by the Purchaser to obtain any financing (regardless of whether or not
the Purchaser has used its Reasonable Best Efforts to obtain financing or the
conditions contained in the Financing Commitment Letter have been fulfilled)
shall not be a condition precedent of the Purchaser to the Closing or any
Subsequent Closing and shall not relieve the Purchaser of its obligations to
consummate the transactions contemplated by this Agreement and the Ancillary
Agreements.
Section 1.76 Persons Authorized to Act. Prior to the Closing, the
-------------------------
Sellers shall deliver to the Purchaser (i) a true, correct and complete list of
the names and locations of all banks, trust companies, securities brokers and
other financial institutions at which each of the Acquired Companies has an
account or safe deposit box or maintains a banking, custodial, trading or other
similar relationship, (ii) a true, correct and complete list of each such
account, box and relationship, indicating in each case the account number and
the names of the respective officers, employees, agents or other similar
representatives of the Acquired Companies transacting business with respect
thereto and (iii) a true, correct and complete list of each person
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authorized to draw on each such account, entitled to have access thereto or
authorized to borrow money (or furnish security for the same) therefrom.
Section 1.77 Certain Insurance Certificates. The Sellers shall
------------------------------
request delivery at a reasonable time prior to the Closing of certificates from
the respective departments of insurance of the jurisdiction or domicile of each
of the International Insurance Companies evidencing the continued existence and
licensure of such International Insurance Company as an insurance company (it
being acknowledged that certain jurisdictions may not deliver such certificates
in the ordinary course).
Section 1.78 Real Estate Matters.
-------------------
(1) The parties hereto acknowledge and agree that, as of
the date of this Agreement, a number of the properties (collectively, the
"Shared Properties") owned or leased by the Acquired Companies, or owned or
leased by CIGNA and its affiliates (other than the Acquired Companies), are used
and occupied jointly by such Acquired Companies, on the one hand, and by CIGNA
and its affiliates (other than the Acquired Companies), on the other. Following
the Closing or any Subsequent Closing upon which any relevant Acquired Company
is conveyed to the Purchaser, the Shared Properties shall continue to be used by
the Acquired Companies, on the one hand, and CIGNA and its affiliates (other
than the Acquired Companies), on the other, in accordance with the terms of the
Facilities Sharing Agreements.
(2) Notwithstanding anything contained in this Agreement to
the contrary, the Sellers and the Purchaser hereby acknowledge and agree that,
on or prior to the Closing Date, CIGNA shall cause certain of its affiliates to
assign their respective interests as tenants under certain leases of shared
property to an affiliate of CIGNA as more particularly described in Section 5.14
of the Seller Disclosure Schedule. Such assignments shall be made on the
Sellers' standard
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terms, without payment of any additional fee or consideration, and shall include
a provision releasing the assignor from any and all liability under the relevant
lease.
ARTICLE VI
TAX MATTERS
Section 1.79 Tax Elections Generally. Without the prior written
-----------------------
consent of the Purchaser (which shall not be unreasonably withheld), none of the
Acquired Companies shall make or change any Tax election, change an annual Tax
accounting period, adopt or change any method of Tax accounting, enter into any
closing agreement, settle or compromise any Tax claim or assessment, surrender
any right to claim a Tax refund, consent to any extension or waiver of the
limitations period applicable to any Tax claim or assessment or take or omit to
take any other action except in the ordinary course of business consistent with
past practice, if any such action or omission referred to above would (i) have a
legally binding effect upon the Acquired Companies with respect to items in a
Post-Closing Tax Period (including, without limitation, under a closing
agreement pursuant to Section 7121 of the Code or a comparable provision under
state, local or foreign Law) and (ii) have the effect of increasing the Tax
liability of the Acquired Companies with respect to a Post-Closing Tax Period.
In connection with the Closing, none of the Purchaser or its affiliates, CIGNA
or its affiliates, and the Acquired Companies shall make an election under
Treasury Regulations Section 1.1502-76(b)(2)(ii)(B) (or any comparable provision
under state, local or foreign Law).
Section 1.80 Tax Returns Prior to Closing. All material Tax Returns
----------------------------
not required to be filed on or before the date hereof but required to be filed
on or before the Closing Date or the Subsequent Closing Date on which an
Acquired Company is conveyed to the
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Purchaser will be timely filed in accordance with Law along with payment for all
Taxes shown to be due and owing and, as of the time of filing, will be true and
correct in all material respects and will be prepared in a manner consistent
with past practice.
Section 1.81 Transfer Taxes.
--------------
(a) The Purchaser (including the Acquired Companies conveyed to
the Purchaser) shall be responsible for and shall timely pay all Transfer Taxes
specified in Section 4.8 hereof. The Purchaser shall prepare all such Tax
Returns, which shall be timely filed by the party legally responsible to do so,
and CIGNA will, and will cause its affiliates to, cooperate with the Purchaser.
(b) CIGNA shall be responsible for and shall timely pay all
Transfer Taxes specified in Section 4.8 hereof.
Section 1.82 Termination of Acquired Companies' Obligations under the
--------------------------------------------------------
Tax Sharing Agreement. Except as set forth in this Section 6.4, CIGNA shall
- ---------------------
cause the Acquired Companies to terminate their respective rights and
obligations under the Tax Sharing Agreement as of the Closing Date. At the
Closing, CIGNA shall deliver to the Purchaser documentation evidencing both the
termination of the rights and obligations of the Acquired Companies under the
Tax Sharing Agreement and the settlement of all outstanding balances (which
balances shall be determined in accordance with the Tax Sharing Agreement based
on estimates determined by CIGNA and consistent with past practice) between the
relevant companies (other than any balance due from one Acquired Company to
another Acquired Company, both of which are conveyed to the Purchaser on the
Closing Date). Final settlement of all amounts due under the Tax Sharing
Agreement shall be made after the Closing Date as though the Acquired Companies
continued to be subject to Section 3 of the Tax Sharing Agreement. The
obligations of the Acquired Companies under all other agreements
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providing for the allocation or sharing of Taxes identified in Section 2.10 of
the Seller Disclosure Schedule shall be settled in the ordinary course of
business consistent with past practice.
Section 1.83 Preparation of Tax Returns.
--------------------------
(1) CIGNA shall prepare and file (or shall cause to be
prepared and filed), and the appropriate Acquired Company shall pay (or cause to
be paid) all Taxes shown to be due and owing on, all Tax Returns required to be
filed by or on behalf of (i) any Acquired Domestic Company and any Acquired
International Company which is included in CIGNA's U.S. consolidated federal
Income Tax Return with respect to all Pre-Closing Tax Periods and (ii) any
Acquired International Company (except for those Acquired International
Companies covered by Section 6.5(a)(i)) with respect to all Pre-Closing Tax
Periods for which Tax Returns are due to be filed on or before the Closing Date,
and, as of the time of filing, will be true and correct in all material respects
and prepared in a manner consistent with past practices. The Purchaser shall or
shall cause the Acquired Companies to provide to CIGNA, as soon as such
information is available but in no event later than five months prior to the due
date (including extensions) for filing the Tax Return to which such information
relates (or as soon thereafter as is reasonably practicable), all information
regarding the Acquired Companies reasonably required to complete the Tax Returns
for which CIGNA has filing responsibility pursuant to this Section 6.5(a) for
any Pre-Closing Tax Period. The Purchaser shall cause the Acquired Companies to
provide any other Tax related information reasonably requested by CIGNA within
five business days of such request. All Tax Returns (or copies thereof) as to
which CIGNA has filing responsibility under this Section 6.5 shall be, if
reasonably practicable, provided to the Purchaser a reasonable amount of time
prior to the due date (including extensions) for filing that Tax Return, and, if
such Tax Return is not provided to Purchaser in a reasonable amount of time
prior to the
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due date for filing that Tax Return, a draft of such Tax Return shall be
provided. If a draft of a Tax Return has been provided pursuant to the preceding
sentence, CIGNA shall provide the Purchaser with the final Tax Return as soon as
is practicable, along with a schedule indicating any changes from the draft Tax
Return. If the Purchaser has any dispute regarding any such Tax Return as
presented by CIGNA, such Tax Return shall be filed as prepared by CIGNA, and the
Purchaser thereafter shall be entitled to initiate a dispute under Section 6.12
hereof. The Purchaser shall prepare and file all other Tax Returns. The
Purchaser shall not file, or permit any affiliate to file, any amended Tax
Returns for any of the Acquired Companies with respect to Pre-Closing Tax
Periods without the prior written approval of CIGNA, which approval shall not be
unreasonably withheld. Nothing in the preceding sentence is intended to modify
the rights or obligations of any person under Section 6.6 hereof.
(c) Consistent with past practice, CIGNA shall include the
appropriate Acquired Domestic Companies and Acquired International Companies in
its United States consolidated federal Income Tax Return (and in any state or
local Tax Return filed on a similar basis) through the close of business on the
Closing Date.
Section 1.84 Amended Tax Returns and Refund Claims.
-------------------------------------
(1) Any required amended returns relating to a Pre-Closing
Tax Period and any refund claims relating to a Pre-Closing Tax Period shall be
prepared by CIGNA and furnished to the relevant Acquired Company for approval
(which approval shall not be unreasonably withheld), execution and filing, at
least thirty days (30) prior to the due date (including extensions) of such
returns or claims. Without limiting the generality of the preceding sentence (or
the penultimate sentence of Section 6.5(a) hereof), neither the Purchaser nor
any of its affiliates shall file any
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Tax Return (or any other document) which attempts to carry back to any Pre-
Closing Tax Period any item of income, loss, deduction or credit (including,
without limitation, any net operating loss) incurred, created or sustained
during any Post-Closing Tax Period.
(d) Any refunds or credits of Taxes of an Acquired Company for
any Pre-Closing Tax Period shall be for the account of CIGNA. Any refunds or
credits of Taxes of an Acquired Company for any Post-Closing Tax Period shall be
for the account of the Purchaser.
(2) The Purchaser shall promptly pay over to CIGNA (and shall
cause the Acquired Companies conveyed to the Purchaser to pay over to CIGNA) all
refunds received by the Purchaser or its affiliates to which CIGNA is entitled
under this Section 6.6. CIGNA shall promptly pay over to the Purchaser (and
shall cause its affiliates to pay over to the Purchaser) all refunds received by
CIGNA or its affiliates to which the Purchaser is entitled under this Section
6.6.
Section 1.85 Cooperation on Tax Matters. The Purchaser and CIGNA
--------------------------
shall, and shall cause their respective affiliates to, cooperate fully with one
another, as and to the extent reasonably requested by the other in connection
with the preparation and filing of any Tax Return and in any audit, litigation
or other proceeding with respect to Taxes, including granting powers of
attorney, as appropriate, in connection with audits. Such cooperation shall
include the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Notwithstanding anything in this Agreement to the
contrary, CIGNA shall not be required to provide the Purchaser CIGNA's Tax Books
and Records, including its United States Consolidated federal Income Tax Return,
which are not
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directly related to the Acquired Companies conveyed to the Purchaser.
Section 1.86 Tax Indemnification.
-------------------
(a) From and after the Closing Date, CIGNA shall be liable to,
and shall indemnify and hold harmless, the Purchaser Indemnitees (as defined in
Section 9.3(a) hereof) against the following Taxes: (i) with respect to any
Acquired Domestic Company and any Acquired International Company which is
included in CIGNA's U.S. consolidated federal Income Tax Return, Income Taxes
imposed on a Purchaser Indemnitee for a Pre-Closing Tax Period; provided,
--------
however, CIGNA shall not be required to indemnify Purchaser Indemnitees for any
- -------
state or local Income Taxes for any Tax period ending after December 31, 1998;
(ii) with respect to any Acquired International Company (except for those
Acquired International Companies covered by Section 6.8(a)(i)), Income Taxes due
and payable (including extension periods normally requested and granted) on or
before the Closing Date or the Subsequent Closing Date on which such Acquired
International Company was conveyed to the Purchaser and (iii) Taxes of the
Sellers or an affiliate of the Sellers (other than Taxes of an Acquired Company
not otherwise covered by this Section 6.8(a)) imposed on any Acquired Company
conveyed to the Purchaser by reason of Treasury Regulations Section 1.1502-6 (or
any comparable provision under state, local or foreign Law or limitation
imposing joint or several liability upon members of a consolidated, combined,
affiliated or unitary group), but solely with respect to any such liability of a
Pre-Closing Tax Period. For purposes of this Agreement, a "Purchaser Tax Loss"
shall mean any and all amounts under clauses (i), (ii) and (iii) of the
immediately preceding sentence.
(b) The Purchaser shall be liable for, and shall indemnify and
hold the Seller Indemnitees (as defined in Section 9.4(a) hereof) harmless
against: (i) with respect to any Acquired Company conveyed to the Purchaser, any
and all Taxes imposed on any Seller
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Indemnitee relating or apportioned to a Post-Closing Tax Period; (ii) loss
sustained by any Seller Indemnitee as a result (direct or indirect) of any
election by any Purchaser Indemnitee under Section 338 of the Code (or any
comparable provision under state, local or foreign Law); (iii) the breach of the
covenant set forth in Section 6.3(a) hereof; and (iv) any extraordinary item
arising from any action taken on the Closing Date after the Closing by any
Purchaser Indemnitee. For purposes of this Agreement, a "Seller Tax Loss" shall
mean any and all amounts under clauses (i), (ii), (iii) and (iv) of the
immediately preceding sentence.
(c) Any payment pursuant to this Section 6.8 shall be made not
later than the later of (i) 30 days after receipt by CIGNA or the Purchaser, as
the case may be, of written notice from the other party stating that any Tax
Loss has been paid by a Purchaser Indemnitee or a Seller Indemnitee, as the case
may be, and the amount thereof and of the indemnity payment requested, (ii) the
date on which such Purchaser Indemnitee or Seller Indemnitee is required to make
any payment in respect of any Tax Loss and (iii) the resolution of any dispute
regarding such item under Section 6.12 hereof.
(d) The Purchaser agrees to provide prompt written notice to
CIGNA of any Tax Loss or the assertion of any claim, or the commencement of any
suit, action or proceeding in respect of which indemnity may be sought hereunder
(specifying with reasonable particularity the basis therefor) and will provide
CIGNA such information with respect thereto as CIGNA may reasonably request.
CIGNA may, at its own expense, (i) participate in and (ii) except as provided in
Section 6.8(e) hereof (which describes, subject to the limitation contained
therein, the circumstances under which the Purchaser shall have the exclusive
right to control and compromise a Tax claim), upon notice to the Purchaser,
assume control over the defense of any such suit, action or proceeding
(including any Tax audit); provided, however, that (i) CIGNA shall from time to
-------- -------
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time consult with the Purchaser upon the Purchaser's reasonable request therefor
with respect to such suit, action or proceeding (including any Tax audit) and
(ii) CIGNA shall not, without the Purchaser's consent (which shall not be
unreasonably withheld), agree to any settlement with respect to any Tax if such
settlement would, in a Post-Closing Tax Period (including, without limitation,
under a closing agreement pursuant to Section 7121 of the Code or any comparable
provision under any other Law), (1) have a legally binding effect with respect
to a Post-Closing Tax Period and (2) have the effect of increasing the Tax
liability of a Purchaser Indemnitee in respect of any Post-Closing Tax Period or
diminishing a Tax Asset of a Purchaser Indemnitee in respect of any Post-Closing
Tax Period. If CIGNA assumes such defense, the Purchaser shall have the right
(but not the duty) to participate in (but not control) the defense thereof to
the extent that the matter in dispute relates directly to any of the Acquired
Companies conveyed to the Purchaser; provided, however, nothing in this Section
-------- -------
shall permit the Purchaser to participate in the defense of any Tax claim or
portion of any Tax claim (or be provided with any information or documentation
concerning a Tax claim, including, without limitation, CIGNA's United States
federal Income Tax Return) that relates to any affiliate of CIGNA which is not
an Acquired Company. If CIGNA elects not to assume such defense, the Purchaser
may pay, compromise or contest the Tax at issue. Whether or not CIGNA chooses
to defend or prosecute any claim, all of the parties hereto shall cooperate in
the defense or prosecution thereof. The provisions of this Section 6.8(d) shall
be applied reciprocally, as appropriate, to indemnification claims made under
this Article VI by CIGNA or one of its affiliates, except as the context
otherwise requires.
(e) The Purchaser shall control the defense of any claim that
relates solely to a Post-Closing Tax Period. The Purchaser shall not, without
CIGNA's consent (which consent shall not be unreasonably withheld) agree to any
settlement with respect to any
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Tax if such settlement would (i) have a legally binding effect with respect to
any Pre-Closing Tax Period and (ii) have the effect of increasing the Tax
liability or diminishing a Tax Asset of a Seller Indemnitee.
(f) Neither the Purchaser nor CIGNA shall be liable under this
Section 6.8 with respect to any Tax Loss resulting from a claim or demand the
defense of which such party was not offered the opportunity to assume as
provided under Section 6.8(d) hereof to the extent such party's liability under
this Section is materially adversely affected as a result thereof.
(g) Any claim of any Purchaser Indemnitee (other than the
Purchaser) under this Section may be made and enforced by the Purchaser on
behalf of such Purchaser Indemnitee, and CIGNA shall have reciprocal rights with
respect to the Seller Indemnitees.
Section 1.87 Purchase Price Adjustment and Interest. Any amount paid
--------------------------------------
by CIGNA or the Purchaser or their affiliates under this Article VI or Article
IX hereof shall be treated as an adjustment to the Purchase Price unless a Final
Determination causes any such amount not to constitute an adjustment to the
Purchase Price for Federal Tax purposes. Any payment required to be made by the
Purchaser or CIGNA under Section 6.8 hereof that is not made when due shall bear
interest at the rate per annum determined, from time to time, under the
provision of Section 6621(a)(2) of the Code for each day until paid.
Section 1.88 Acquired Group Cases. Notwithstanding anything to the
--------------------
contrary contained in this Agreement, (i) any favorable resolution of the
"Acquired Group Cases" (as more particularly described in Section 6.10 of the
Seller Disclosure Schedule) shall inure to the sole benefit of CIGNA, and (ii)
CIGNA shall control, at its own expense, all proceedings related to such
"Acquired Group Cases", and the Purchaser and the
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Acquired Companies conveyed to the Purchaser shall have no liability for any
unfavorable resolution of such cases.
Section 1.89 Post-Closing Tax Period Dividends. After the Closing, no
---------------------------------
Acquired Company which constitutes a Section 1248 Company shall make any
distributions or otherwise take any action (other than the payment of operating
expenses, reinsurance premiums, commissions, and insurance claims in the
ordinary course of business consistent with past practice) that would materially
reduce the "earning and profits" (as determined under Sections 312 and 1248 of
the Code) of such Section 1248 Company during any Tax period that includes the
Closing Date. For purposes of this Agreement, a "Section 1248 Company" is an
Acquired Company which is listed in Section 6.11 of the Seller Disclosure
Schedule.
Section 1.90 Resolution of Disagreements between CIGNA and the
-------------------------------------------------
Purchaser. If either CIGNA or the Purchaser disagrees as to the amount of Taxes
- ---------
for which it (or one of its affiliates) may be liable under this Agreement,
CIGNA and the Purchaser shall promptly consult with each other to resolve such
dispute following their receipt of written notice from the other party to begin
such consultation (the "Consultation Notice"). If any such point of
disagreement cannot be resolved within 60 days of the date of receipt of the
Consultation Notice, CIGNA and the Purchaser shall within ten days after such
period jointly select a nationally recognized independent public accounting or
law firm (which does not have a conflict of interest with respect to the matter
at issue), to in turn select a qualified member of such firm to act as an
arbitrator to determine, within 60 days after his or her selection, all points
of disagreement concerning Tax matters with respect to this Agreement which are
presented to such arbitrator for resolution at the time of his or her selection.
If the parties cannot agree on the selection of an accounting or law firm within
such ten-day period, they shall cause their respective accounting firms to
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select such accounting or law firm within five business days of the end of such
ten-day period, failing which either party may request the American Arbitration
Association to select the arbitrator who shall be a member of a nationally
recognized accounting or law firm with no less than 15 years of experience in
the practice of Tax law or Tax accounting. The arbitration shall be conducted
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect except as modified herein. Any arbitration award
shall be final and binding on the Purchaser and CIGNA and their respective
affiliates. The fees of the arbitrator shall be divided equally between CIGNA
and the Purchaser. CIGNA and the Purchaser shall, and the Purchaser shall cause
the Acquired Companies conveyed to it to, provide full cooperation to the
arbitrator. The arbitrator shall not have the power to amend or modify this
Agreement. The arbitration provided for in this Section 6.12 shall be subject
to Section 11.14 hereof.
Section 1.91 Taxes on Transfers of Excluded Business and Deferred
----------------------------------------------------
Companies. Notwithstanding any other provisions of this Agreement (other than
- ---------
Section 4.8 hereof), CIGNA shall be responsible for and pay all Taxes incurred
by the Purchaser or any Acquired Company which arise as a direct result of the
transactions contemplated by the Excluded Business Transfer Agreements or
incurred in connection with transfers or deemed transfers of Deferred Assets to
ensure that a Deferred Asset is not conveyed to the Purchaser at the Closing or
any Subsequent Closing.
Section 1.92 Survival. Notwithstanding anything in this Agreement to
--------
the contrary, the provisions of this Article VI shall survive for the full
period of all applicable statutes of limitations (giving effect to any waiver,
mitigation or extension thereof).
ARTICLE VII
CONDITIONS TO THE CLOSING AND ANY SUBSEQUENT CLOSING
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Section 1.93 Conditions of the Purchaser and the Sellers to the
--------------------------------------------------
Closing.
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(1) The respective obligations of the Purchaser and the
Sellers to effect the Closing are subject to the satisfaction (or waiver by each
such person) at or prior to the Closing of the following conditions:
(1) any waiting period (and any extensions
thereof) applicable to the consummation of the Closing under the
HSR Act shall have terminated or expired; and, all other consents
and approvals required from United States Governmental Entities
for the consummation of the Closing and the transactions
contemplated thereby, the transactions contemplated by the
Excluded Business Transfer Agreements and any transactions
necessary to effect the retention of the Deferred Assets (if any)
by the Sellers shall have been obtained and shall be in effect on
the Closing Date;
(2) all material consents and approvals
required from non-United States Governmental Entities for the
consummation of the Closing and the transactions contemplated
thereby, the transactions contemplated by the Excluded Business
Transfer Agreements and any transactions necessary to effect the
retention of the Deferred Assets (if any) by the Sellers shall
have been obtained and shall be in effect on the Closing Date;
(3) no statute, rule, regulation, order,
decree or injunction shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal the consummation of the
Closing or any of the
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transactions contemplated thereby or which would, individually or
in the aggregate, result in a Seller Material Adverse Effect or a
Purchaser Material Adverse Effect;
(4) there shall not be any suit, action,
investigation, inquiry or other proceeding instituted by any
Governmental Entity which seeks to enjoin or otherwise prevent
consummation of the Closing or the transactions contemplated
thereby or which would, individually or in the aggregate, result
in a Seller Material Adverse Effect or a Purchaser Material
Adverse Effect; and
(5) all consents and approvals of each
person which is not a Governmental Entity and whose consent or
approval is required in connection with the transactions
contemplated by the Equity Insurance Joint Venture Agreements
shall have been obtained.
(2) The respective obligations of each of the Sellers to
effect the Closing are further subject to the satisfaction (or waiver by each
such person) at or prior to the Closing of the following conditions:
(1) the representations and warranties of
the Purchaser contained in Article III of this Agreement shall be
true and correct at the date hereof and the representations and
warranties of the Purchaser contained in Sections 3.1, 3.2, 3.3,
3.4(a), 3.5 and 3.6 hereof shall be true and correct at and as of
the Closing Date as if made at and as of the Closing Date, except
to the extent they expressly refer to another time or period, in
which case they shall be true and correct at and as of such other
time or period; provided, however, that the
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conditions set forth in this Section 7.1(b)(i) shall be deemed
satisfied if the respects in which such representations and
warranties are not true and correct at the date hereof and, as
applicable, at and as of the Closing Date or, in either such
case, at and as of such other time or period (without giving
effect to any materiality qualifications contained therein) would
not constitute a Purchaser Material Adverse Effect;
(2) the Purchaser shall have duly performed
and complied in all material respects with each obligation,
covenant, agreement and condition required by this Agreement to
be performed or complied with by the Purchaser at or prior to the
Closing;
(3) the Sellers shall have received a
certificate of a senior executive officer of the Purchaser
certifying the accuracy of the statements set forth in Sections
7.1(b)(i) and (ii) hereof; and
(4) the Sellers shall have received copies
of the Ancillary Agreements duly executed by each party thereto
that is not a Seller or an affiliate of any Sellers and such
other documents, instruments and certificates as are required to
be delivered prior to or on the Closing by the Purchaser pursuant
to this Agreement or the Ancillary Agreements or as the Sellers
may reasonably request from the Purchaser.
(3) The obligation of the Purchaser to effect the Closing
is further subject to the satisfaction (or waiver by the Purchaser) at or prior
to the Closing of the following conditions:
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(1) the representations and warranties of
the Sellers contained in Article II of this Agreement shall be
true and correct at the date hereof and the representations and
warranties of the Sellers contained in Sections 2.1, 2.2, 2.3,
2.4, 2.5(a), 2.5(c), 2.8, 2.11(e), 2.20 and 2.23 hereof shall be
true and correct at and as of the Closing Date as if made at and
as of the Closing Date, except to the extent they expressly refer
to another time or period, in which case they shall be true and
correct at and as of such other time or period; provided,
--------
however, that the conditions set forth in this Section 7.1(c)(i)
-------
shall be deemed satisfied if the respects in which such
representations and warranties are not true and correct at the
date hereof and, as applicable, at and as of the Closing Date or,
in either such case, at and as of such other time or period
(without giving effect to any materiality qualifications
contained therein) would not constitute a Seller Material Adverse
Effect;
(2) the Sellers shall have duly performed
and complied in all material respects with each obligation,
covenant, agreement and condition required by this Agreement to
be performed or complied with by such legal entities at or prior
to the Closing;
(3) the Purchaser shall have received a
certificate of a senior executive officer of CIGNA certifying the
accuracy of the statements set forth in Sections 7.1(c)(i) and
(ii) hereof;
(4) no condition or requirement has been
imposed by one or more Governmental Entities relating to the
acquisition, ownership or operation of the
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Business by the Purchaser which, either alone or together with
all such other conditions or requirements, materially and
adversely affects the benefits, taken as a whole, which the
Purchaser would otherwise receive from the transactions
contemplated by this Agreement had such conditions and
requirements not been imposed; provided, however, that (1) in
-------- -------
considering whether or not such conditions or requirements
materially and adversely affects such benefits, no consideration
shall be given to any conditions or requirements that relate to
the Seller Guarantee or the Replacement Reinsurance and (2) in
considering the benefits that the Purchaser receives from the
transactions contemplated by this Agreement, such benefits shall
not include the benefits under the Seller Guarantee and the
Replacement Reinsurance;
(5) all consents and approvals of each
person which is not a Governmental Entity and whose consent or
approval is required in connection with the Closing and the
transactions contemplated thereby in respect of the contracts and
agreements set forth on Section 7.1(c)(v) of the Seller
Disclosure Schedule shall have been obtained, and the Purchaser
shall have received written evidence reasonably satisfactory to
the Purchaser that all such consents and approvals have been
obtained;
(6) the Purchaser shall have received copies
of the Ancillary Agreements duly executed by each party thereto
that is not an affiliate of the Purchaser and such other
documents, instruments and certificates as are required to be
delivered prior to or on the Closing by the Sellers pursuant to
this Agreement or the Ancillary
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Agreements or as the Purchaser may reasonably request from the
Sellers;
(7) the Sellers shall have caused to be
delivered to the Purchaser one or more certificates representing
all of the Acquired Securities free and clear of all Liens (other
than restrictions under the Securities Act and any comparable
Laws), duly executed in blank or accompanied by stock powers duly
executed in blank, in proper form for transfer;
(8) the Sellers shall have delivered to the
Purchaser certificates as to the good standing or comparable
status (to the extent jurisdictions recognize such concept) of
INA Corporation and its subsidiaries which constitute Acquired
Domestic Companies and each of the Material Acquired
International Companies from the respective jurisdictions of
their incorporation or domicile to the extent such jurisdictions
deliver such documentation in the ordinary course, dated as of a
date not earlier than 21 days prior to the Closing Date;
(9) the Sellers shall have delivered to the
Purchaser certificates obtained from the respective departments
of insurance of the jurisdiction or domicile of each of the
Domestic Insurance Companies and each of the Material Acquired
International Insurance Companies evidencing the continued
existence and licensure of such Domestic Insurance Company as an
insurance company, dated as of the date not earlier than 21 days
prior to the Closing Date; and
(10) except to the extent that such
resignation is not permitted by the
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Seller Permits or Law, the Sellers shall cause to be delivered to
the Purchaser the resignations of (i) each person who is a
director of INA Corporation and (ii) each person who is a
director or an officer of INA Corporation or any of its
subsidiaries which constitute Acquired Companies conveyed to the
Purchaser if such person's principal employment is as an officer
or an employee of the Sellers.
Section 7.2 Conditions of the Purchaser and the Sellers to each
---------------------------------------------------
Subsequent Closing.
- ------------------
(1) The respective obligations of the Purchaser and each of
the Sellers to effect each Subsequent Closing are subject to the satisfaction
(or waiver by each such person) at or prior to the Subsequent Closing of the
following conditions:
(1) all consents and approvals required from
United States Governmental Entities for the consummation of the
Subsequent Closing and the transactions contemplated thereby and
any transactions necessary to effect the continued retention by
the Sellers of any Deferred Assets not being conveyed to the
Purchaser as part of such Subsequent Closing shall have been
obtained and be in effect on the Subsequent Closing Date;
(2) all material consents and approvals
required from non-United States Governmental Entities for the
consummation of the Subsequent Closing and the transactions
contemplated thereby and any transactions necessary to effect the
continued retention by the Sellers of any Deferred Assets not
being conveyed to the Purchaser as part of such Subsequent
Closing shall have been obtained
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and be in effect on the Subsequent Closing Date;
(3) no statute, rule, regulation, order,
decree or injunction which is in effect shall have been enacted,
entered, promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal the consummation of the
Subsequent Closing or any of the transactions contemplated
thereby or which would, individually or in the aggregate, result
in a Seller Material Adverse Effect or a Purchaser Material
Adverse Effect;
(4) there shall not be any suit, action,
investigation, inquiry or other proceeding instituted by any
Governmental Entity which seeks to enjoin or otherwise prevent
consummation of the Subsequent Closing or any of the transactions
contemplated thereby or which would, individually or in the
aggregate, result in a Seller Material Adverse Effect or a
Purchaser Material Adverse Effect; and
(5) all consents and approvals of each
person which is not a Governmental Entity and whose consent or
approval is required in connection with the transactions
contemplated by any Equity Insurance Joint Venture which is the
subject of such Subsequent Closing shall have been obtained.
(2) The respective obligations of each of the Sellers to
effect the Subsequent Closing are further subject to the satisfaction (or waiver
by each such person) at or prior to the Subsequent Closing of the following
conditions:
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(1) the representations and warranties of
the Purchaser contained in Article III of this Agreement shall be
true and correct at the date hereof and the representations and
warranties of the Purchaser contained in Sections 3.1, 3.2, 3.3,
3.4(a), 3.5 and 3.6 hereof shall be true and correct at and as of
the Subsequent Closing Date as if made at and as of the
Subsequent Closing Date, except to the extent they expressly
refer to another time or period, in which case they shall be true
and correct at and as of such other time or period; provided,
--------
however, that the conditions set forth in this Section 7.2(b)(i)
-------
shall be deemed satisfied if the respects in which such
representations and warranties are not true and correct at the
date hereof and, as applicable, at and as of the Subsequent
Closing Date or, in either such case, at and as of such other
time or period (without giving effect to any materiality
qualifications contained therein) would not constitute a
Purchaser Material Adverse Effect;
(2) the Purchaser shall have duly performed
and complied in all material respects with each obligation,
covenant, agreement and condition required by this Agreement to
be performed or complied with by the Purchaser at or prior to the
Subsequent Closing;
(3) the Sellers shall have received a
certificate of a senior executive officer of the Purchaser
certifying the accuracy of the statements set forth in Sections
7.2(b)(i) and 7.2(b)(ii) hereof; and
(4) the Sellers shall have received such
documents, instruments and certificates as are required to be
delivered
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prior to or on the Subsequent Closing by the Purchaser pursuant
to this Agreement or the Ancillary Agreements or as the Sellers
may reasonably request from the Purchaser.
(3) The obligation of the Purchaser to effect the
Subsequent Closing is further subject to the satisfaction (or waiver by the
Purchaser) at or prior to the Subsequent Closing of the following conditions:
(1) the representations and warranties of
the Sellers contained in Article II of this Agreement shall be
true and correct at the date hereof and the representations and
warranties of the Sellers contained in Sections 2.1, 2.2, 2.3,
2.4(c) (which Section 2.4(c) shall be deemed to be amended to
take into consideration the transfer of such Deferred Asset to
another direct or indirect subsidiary of CIGNA to the extent any
such transfer was necessary to prevent the transfer of such
Deferred Asset to the Purchaser prior to the Subsequent Closing
in which such Deferred Asset is conveyed to the Purchaser),
2.5(a), 2.5(c), 2.20 and 2.23 (each such foregoing Section shall
be deemed to be amended such that it shall only speak in respect
of the Deferred Assets being conveyed to the Purchaser as part of
such Subsequent Closing) and 2.8 hereof (which Section 2.8 shall
not be deemed to be amended in any respect, including that the
definition of Seller Material Adverse Effect shall continue to
apply to the Business taken as a whole notwithstanding that
portions of the business have been previously conveyed to the
Purchaser) shall be true and correct at and as of the Subsequent
Closing Date as if made at and as of the Subsequent Closing Date,
except to the extent they expressly refer to another time or
period, in which case they shall be
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true and correct at and as of such other time or period;
provided, however, that the conditions set forth in this Section
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7.2(c)(i) shall be deemed satisfied if the respects in which such
representations and warranties are not true and correct at the
date hereof and, as applicable, at and as of the Closing Date or,
in either such case, at and as of such other time or period
(without giving effect to any materiality qualifications
contained therein) would not constitute a Seller Material Adverse
Effect;
(2) the Sellers shall have duly performed
and complied in all material respects with each obligation,
covenant, agreement and condition required by this Agreement to
be performed or complied with by the Sellers at or prior to the
Subsequent Closing;
(3) the Purchaser shall have received a
certificate of a senior executive officer of CIGNA certifying the
accuracy of the statements set forth in Sections 7.2(c)(i) and
7.2(c)(ii) hereof;
(4) no condition or requirement has been
imposed by one or more Governmental Entities relating to the
acquisition, ownership or operation of the Business by the
Purchaser which, either alone or together with all such other
conditions or requirements, materially and adversely affects the
benefits, taken as a whole, which the Purchaser would otherwise
receive from the transactions contemplated by this Agreement had
such conditions and requirements not been imposed; provided,
--------
however, that (1) in considering whether or not such conditions
-------
or requirements materially and adversely affects such benefits,
no consideration shall be given
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to any conditions or requirements that relate to the Seller
Guarantee or the Replacement Reinsurance and (2) in considering
the benefits that the Purchaser receives from the transactions
contemplated by this Agreement, such benefits shall not include
the benefits under the Seller Guarantee and the Replacement
Reinsurance;
(5) other than those consents and approvals
obtained in connection with the Closing and each previous
Subsequent Closing, all consents and approvals of each person
which is not a Governmental Entity and whose consent or approval
is required in connection with the Subsequent Closing and the
transactions contemplated thereby in respect of the contracts and
agreements set forth on Section 7.1(c)(v) of the Seller
Disclosure Schedule shall have been obtained; and
(6) the Purchaser shall have received such
documents, instruments and certificates as are required to be
delivered prior to or on the Subsequent Closing by the Sellers
pursuant to this Agreement or the Ancillary Agreements or as the
Purchaser may reasonably request from the Sellers.
Section 1.95 Certain Exclusions from Conditions to the Closing and
-----------------------------------------------------
the Subsequent Closings. Notwithstanding anything to the contrary contained in
- -------------------
Section 7.1 or Section 7.2 hereof, the following shall not be considered in
determining whether or not any of the Purchaser's conditions precedent to the
Closing or any Subsequent Closing have been fulfilled: (i) the obligations and
conditions under the Replacement Support Agreements; (ii) any approval, order or
consent of any Governmental Entity conditioned upon the Purchaser's obtaining
the financing proposed by the Purchaser in connection with the transactions
contemplated by this Agreement or the Ancillary Agreements; and (iii) any
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approval, order or consent of any Governmental Entity relating to the Seller
Guarantee or the Replacement Reinsurance.
ARTICLE VII
TERMINATION OF THIS AGREEMENT;
TERMINATION OF CERTAIN OBLIGATIONS
Section 1.96 Termination of this Agreement Prior to the Closing. This
--------------------------------------------------
Agreement may be terminated at any time prior to the Closing:
(1) by the mutual written consent of the Purchaser and the
Sellers;
(2) by the Purchaser, on the one hand, or either of the
Sellers, on the other, upon written notice given to the other if the Closing has
not taken place on or before December 31, 1999; provided, however, that if, as
-------- -------
of December 31, 1999, (i) all conditions to the Closing set forth in Section 7.1
have been fulfilled or waived, other than those contained in Section 7.1(a)(i)
or Section 7.1(a)(ii) hereof, (ii) a reasonable person would expect that the
conditions to the Closing contained in Section 7.1(a)(i) and Section 7.1(a)(ii)
hereof will be fulfilled as of March 31, 2000, and (iii) (1) the Financing
Commitment Letter shall have been amended to remain in full force and effect
through March 31, 2000 or (2) the Purchaser has delivered written evidence of
alternate financing which will remain in full force and effect through March 31,
2000 (A) adequate to consummate the transactions contemplated by this Agreement
and the Ancillary Agreements and (B) that is "committed" to an equal or greater
degree of certainty as the Financing Commitment Letter was, in the case of each
of clauses (A) and (B), as determined in the Sellers' reasonable discretion,
then the parties hereto agree that they shall not exercise their rights of
termination under this Section 8.1(b) prior to March 31, 2000;
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(3) by the Purchaser, on the one hand, or either of the
Sellers, on the other, upon written notice given to the other if any
Governmental Entity of competent jurisdiction shall have issued a final,
unappealable order, decree or ruling permanently restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement;
(4) by the Purchaser, upon a material breach of any
covenant or agreement on the part of the Sellers set forth in this Agreement or
upon a material breach of any of the representations and warranties (without
giving effect to any materiality qualifications contained therein) of the
Sellers set forth in this Agreement, in either case such that the conditions set
forth in Section 7.1(c)(i) or 7.1(c)(ii) hereof would not be satisfied as of the
time of such breach, after affording the Sellers a 60-day period after written
notice in which to cure such breach; provided, however, that such 60-day period
-------- -------
shall be subject to any party's terminating this Agreement pursuant to any other
provision of this Section 8.1;
(5) by either of the Sellers, upon a material breach of any
covenant or agreement on the part of the Purchaser set forth in this Agreement
or upon a material breach of any of the representations and warranties (without
giving effect to any materiality qualifications contained therein) of the
Purchaser set forth in this Agreement, in either case such that the conditions
set forth in Section 7.1(b)(i) or 7.1(b)(ii) hereof would not be satisfied as of
the time of such breach, after affording the Purchaser a 60-day period after
written notice in which to cure such breach; provided, however, that such 60-day
-------- -------
period shall be subject to any party's terminating this Agreement pursuant to
any other provision of this Section 8.1;
(6) by either of the Sellers if the Financing Commitment
Letter shall have expired or been terminated, after affording the Purchaser a
60-day
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period after such expiration or termination to deliver to the Sellers written
evidence of financing (i) adequate to consummate the transactions contemplated
by this Agreement and the Ancillary Agreements and (ii) that is "committed" to
an equal or greater degree of certainty as the Financing Commitment Letter was,
in each case as determined in the Seller's reasonable discretion; provided,
--------
however, that such 60-day period shall be subject to any party's terminating
- -------
this Agreement pursuant to any other provision of this Section 8.1. No such 60-
day period shall be afforded if it would delay the Closing and no such period
shall affect the rights and obligations of the parties described in Section 5.10
hereof; or
(7) by either of the Sellers at any time on or after
October 1, 1999 if (i) the Financing Commitment Letter shall have expired or
been terminated and (ii) the Purchaser has not delivered written evidence of
alternate financing (1) adequate to consummate the transactions contemplated by
this Agreement and the Ancillary Agreements and (2) that is "committed" to an
equal or greater degree of certainty as the Financing Commitment Letter was, in
each case as determined in the Sellers' reasonable discretion.
Section 1.97 Effect of Termination pursuant to Section 8.1.
---------------------------------------------
(1) In the event of the termination of this Agreement as
provided in Section 8.1 hereof, this Agreement shall become null and void and of
no further force or effect, and there shall be no liability or obligation
hereunder on the part of the Sellers or the Purchaser or their respective
subsidiaries, or any of their respective directors, officers, employees,
affiliates, agents, representatives, successors or assigns, except (i) for the
provisions of this Agreement relating to the obligations of the parties hereto
to keep confidential and not to use information and data obtained from the other
parties hereto, (ii) the obligations of the parties to this Agreement under
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Sections 4.8, 8.2, 11.3, 11.11, 11.12 and 11.13 hereof shall survive any such
termination and (iii) one or more of the Sellers or the Purchaser, as the case
may be, may have liability to one or more of the Sellers or the Purchaser, as
the case may be, if the basis of the termination is a willful, material breach
by one or more of the Sellers or the Purchaser, as the case may be, of one or
more of the provisions of this Agreement.
(2) If this Agreement is terminated pursuant to Section 8.1
hereof, neither party shall, until December 31, 2002, directly or indirectly,
through any subsidiary, affiliate, officer, director, agent or otherwise, (i)
use any information that is subject to the Seller Confidentiality Agreement (in
the case of the Purchaser) or the Purchaser Confidentiality Agreement (in the
case of the Sellers) to the detriment (business or otherwise) of the other
party, or (ii) solicit the employment of or employ or retain as a consultant any
employee of the other party or any of its subsidiaries who is an Exempt Employee
as of the date hereof or at any time during such period. Furthermore, if this
Agreement is terminated pursuant to Section 8.1 hereof, the Purchaser shall not
oppose or seek to prevent or frustrate any transaction or agreement that CIGNA
or any of its subsidiaries may propose or enter into relating to the sale of all
or any portion of the Business to any third party. Nothing in this Section
8.2(b) is intended to, nor shall it be construed as, a waiver or discharge of
any of the rights and obligations under the Seller Confidentiality Agreement of
the parties thereto.
Section 1.98 Termination of Certain Obligations following the
------------------------------------------------
Closing. The rights and obligations under this Agreement of the parties hereto
- -------
in respect of the Deferred Assets may be terminated at any time following the
Closing:
(1) by the mutual written consent of the Purchaser and the
Sellers;
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(2) by the Purchaser, on the one hand, or either of the
Sellers, on the other, upon written notice given to the other if any Deferred
Assets remain unconveyed to the Purchaser notwithstanding the terms of this
Agreement on or after June 30, 2000;
(3) by the Purchaser, on the one hand, or either of the
Sellers, on the other, upon written notice given to the other if any
Governmental Entity of competent jurisdiction will have issued a final,
unappealable order enjoining or otherwise prohibiting the conveyance of all or a
material portion of the Deferred Assets to the Purchaser;
(4) by the Purchaser, upon a material breach of any
covenant or agreement on the part of the Sellers set forth in this Agreement or
upon a material breach of any of the representations and warranties (without
giving effect to any materiality qualifications contained therein) of the
Sellers set forth in this Agreement, in either case such that the conditions set
forth in Section 7.2(c)(i) or 7.2(c)(ii) hereof would not be satisfied as of the
time of such breach, after affording the Sellers a 60-day period after written
notice in which to cure such breach; provided, however, that such 60-day period
-------- -------
shall be subject to any party's terminating this Agreement pursuant to any other
provision of this Section 8.3; or
(5) by either of the Sellers, upon a material breach of any
covenant or agreement on the part of the Purchaser set forth in this Agreement
or upon a material breach of any of the representations and warranties (without
giving effect to any materiality qualifications contained therein) of the
Purchaser set forth in this Agreement, in either case such that the conditions
set forth in Section 7.2(b)(i) or 7.2(b)(ii) hereof would not be satisfied as of
the time of such breach, after affording the Purchaser a 60-day period after
written notice in which to cure such breach; provided, however, that such 60-day
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period shall be
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subject to any party's terminating this Agreement pursuant to any other
provision of this Section 8.3.
Section 1.99 Effect of Termination of Certain Obligations Pursuant to
--------------------------------------------------------
Section 8.3. In the event of the termination of certain rights and obligations
- -----------
under this Agreement in respect of the Deferred Assets as provided in Section
8.3 hereof, all of the rights and obligations under this Agreement of the
parties hereto in respect of the Deferred Assets shall become null and void and
of no further force or effect, and there shall be no liability or obligation
hereunder in respect of the Deferred Assets on the part of the Sellers or the
Purchaser or their respective subsidiaries, or any of their respective
directors, officers, employees, affiliates, agents, representatives, successors
or assigns, except one or more of the Sellers or the Purchaser, as the case may
be, may have liability to one or more of the Sellers or the Purchaser, as the
case may be, if the basis of the termination of the rights and obligations under
this Agreement of the parties hereto in respect of the Deferred Assets is a
willful, material breach by one or more of the Sellers or the Purchaser, as the
case may be, of one or more of the provisions of this Agreement relating to the
Deferred Assets; provided, however, that nothing in this Section 8.4 shall
-------- -------
affect any of the other rights or obligations under this Agreement of any party
to this Agreement; provided further, however, that in the event of the
-------- ------- -------
termination of certain rights and obligations under this Agreement in respect of
Deferred Assets pursuant to Section 8.3(b) or 8.3(c) hereof, at the Purchaser's
election (notice of which must be delivered in writing to CIGNA within thirty
days of such termination), CIGNA, the Purchaser and their respective
subsidiaries shall use their Reasonable Best Efforts to obtain comparable
benefits for the Purchaser, including, but not limited to, entering into
reinsurance (the terms of which would include the payment to the Sellers of
consideration substantially equal to the local statutory surplus determined as
of the most recent date for which such information is available for each of such
Deferred
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Assets), noncompetition and exclusivity arrangements, in each case, in form and
substance satisfactory to all parties thereto.
Section 1.100 Notice Regarding Termination. Any notice delivered by
----------------------------
any party pursuant to Section 8.1 or 8.3 hereof shall be in accordance with
Section 11.3 hereof and shall include a statement of the grounds for
termination.
ARTICLE IX
EXCLUSIONS FROM REPRESENTATIONS AND WARRANTIES; SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND COVENANTS; INDEMNIFICATION
Section 1.101 Exclusions from the Representations and Warranties of
-----------------------------------------------------
the Sellers. Notwithstanding anything to the contrary in this Agreement or the
- -----------
Ancillary Agreements, the Purchaser acknowledges and agrees that the Sellers
make no representation or warranty with respect to, and nothing contained in
this Agreement (including Article II hereof), in the Ancillary Agreements or in
any other agreement, document or instrument to be delivered in connection
herewith or therewith is intended or shall be construed to be a representation
or warranty (express or implied) of any of the Sellers or any of their
subsidiaries or affiliates, for any purpose of this Agreement (including Article
VII and this Article IX), the Ancillary Agreements or any other agreement,
document or instrument to be delivered in connection herewith or therewith, in
respect of (i) the adequacy or sufficiency of the reserves (including loss
reserves and loss adjustment expense reserves) of the Business or of any of the
Acquired Companies for losses, loss adjustments expenses or uncollectible
reinsurance, (ii) whether or not the reserves specified in clause (i) above were
determined in accordance with any actuarial, statutory or other standard, or
concerning the effect of the adequacy or sufficiency of reserves on any "line
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item" or asset, liability or equity amount, (iii) any facts, circumstances or
developments relating to the 1995 Restructuring (including any adverse judgment
before any Governmental Entity), (iv) any system of the Business or of the
Acquired Companies or of CIGNA or any of its affiliates actually being able to
accurately handle date information before, during and after the calendar year
2000 A.D. (including single century formulae, multi-century formulae and leap
years) in a manner that will not abnormally provide invalid results or (v) the
compliance or non-compliance by any person with United States Environmental Laws
in jurisdictions outside of the United States.
Section 1.102 Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
(1) The representations and warranties of the parties
contained in Articles II and III of this Agreement which are made as of the date
of this Agreement and the representations and warranties of the parties
contained in Articles II and III of this Agreement which are made as of the
Closing Date (in each case in accordance with the introductory language to
Articles II and III hereof) shall survive the Closing and shall continue in full
force and effect until January 31, 2001 (regardless of whether any Subsequent
Closings occur), after which time such representations and warranties shall
terminate and have no further force or effect; provided, however, that (i) the
-------- -------
representations and warranties contained in Sections 2.1, 2.2, 2.4 and 2.15
hereof shall survive the Closing and remain in full force and effect until the
tenth anniversary of the Closing Date, after which time such representations and
warranties shall terminate and have no further force or effect, (ii) the
representations and warranties contained in Section 2.9 hereof shall survive the
Closing and remain in full force and effect until the expiration of all
applicable statutes of limitations, after which time such representations and
warranties shall terminate and have no further force or effect, and (iii) the
representations and warranties
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contained in Section 2.10 hereof shall survive the Closing and remain in full
force and effect until the expiration of all applicable statutes of limitations
(giving effect to any waiver, mitigation or extensions thereof), after which
time such representations and warranties shall terminate and have no further
force or effect. The representations and warranties of the parties contained in
Articles II and III of this Agreement which are made as of a Subsequent Closing
Date (in accordance with the introductory language to Articles II and III
hereof) shall survive such Subsequent Closing and shall continue in full force
and effect until the later to occur of January 31, 2001 and the first
anniversary of such Subsequent Closing Date (regardless of whether any
additional Subsequent Closings occur), after which time such representations and
warranties shall terminate and have no further force or effect; provided,
--------
however, that the representations and warranties contained in Section 2.4(c)
- -------
hereof (as amended in accordance with the introductory language to Article II
hereof) shall survive such Subsequent Closing and remain in full force and
effect until the tenth anniversary of such Subsequent Closing Date, after which
time such representation and warranty shall terminate and have no further force
or effect. The period during which any such representation and warranty
survives is the "Survival Period" for such representation and warranty.
Notwithstanding the foregoing, any representation or warranty that would
otherwise terminate shall survive with respect to Losses asserted in any Action
of which notice is given pursuant to this Agreement prior to the end of the
Survival Period, until such Action is finally resolved and any related Losses
are paid. The parties to this Agreement intend to shorten the statute of
limitations and agree that, except as provided in this Article IX, no claims or
causes of action may be brought against any of the Sellers or the Purchaser or
any of their directors, officers, employees, affiliates, successors, permitted
assigns, agents, or representatives based upon, directly or indirectly, any of
the representations or warranties contained in this Agreement following the
Closing Date
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(regardless of whether any Subsequent Closings occur) or, except as provided in
Section 8.2 hereof, any termination of this Agreement.
(2) Unless otherwise limited by the terms of this
Agreement, covenants of the parties contained in this Agreement shall survive
the Closing indefinitely.
Section 1.103 CIGNA's Obligation to Indemnify.
-------------------------------
(1) Subject to the limitations set forth in this Article
IX, CIGNA agrees to indemnify, defend and hold harmless the Purchaser and its
directors, officers, employees, affiliates, successors, permitted assigns,
agents and representatives (collectively, the "Purchaser Indemnitees") from and
against any and all Losses resulting from: (i) any breach (1) as of the date of
this Agreement of any of the representations and warranties of the Sellers
contained in Article II of this Agreement (other than the representations and
warranties contained in Section 2.29 hereof), (2) as of the Closing Date of any
of the representations and warranties contained in Sections 2.1, 2.2, 2.3, 2.4,
2.5(a), 2.5(c), 2.8, 2.11(e), 2.20 and 2.23 hereof, and (3) as of each
Subsequent Closing Date of any of the representations and warranties contained
in Sections 2.1, 2.2, 2.3, 2.4(c) (which Section 2.4(c) shall be deemed to be
amended to take into consideration the transfer of any Deferred Asset to another
direct or indirect subsidiary of CIGNA to the extent any such transfer was
necessary to prevent the transfer of such Deferred Asset to the Purchaser prior
to the Subsequent Closing in which such Deferred Asset is conveyed to the
Purchaser), 2.5(a), 2.5(c), 2.20 and 2.23 (each such foregoing Section in this
clause (3) shall be deemed to be amended at each Subsequent Closing such that it
shall only speak in respect of the Deferred Assets being conveyed to the
Purchaser as part of such Subsequent Closing) and 2.8 (which Section 2.8 shall
not be deemed to be amended in any respect, including that
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the definition of Seller Material Adverse Effect shall continue to apply to the
Business taken as a whole notwithstanding that portions of the Business have
been previously conveyed to the Purchaser); (ii) any breach of the
representations and warranties of the Sellers contained in Section 2.29 hereof;
(iii) any breach of any of the covenants and agreements of the Sellers contained
in this Agreement; (iv) the Retained Liabilities; and (v) the Excluded Business,
the Excluded Business Transfer Agreements and the Excluded Employees.
(2) The aggregate amount for which CIGNA shall be liable
under Section 9.3(a)(i) hereof shall in no event exceed twenty-five percent
(25%) of the Purchase Price. CIGNA shall be required to indemnify the Purchaser
Indemnitees pursuant to Section 9.3(a)(i) hereof only to the extent that the
aggregate Losses incurred by the Purchaser Indemnitees in connection with the
matters identified therein exceeds one percent (1%) of the Purchase Price and,
in such event, indemnification shall be made by CIGNA only to the extent of such
excess.
Section 1.104 The Purchaser's Obligation to Indemnify.
---------------------------------------
(1) Subject to the limitations set forth in this Article
IX, the Purchaser agrees to indemnify, defend and hold harmless each of the
Sellers and their respective directors, officers, employees, affiliates,
successors, permitted assigns, agents and representatives (collectively, the
"Seller Indemnitees") from and against any and all Losses resulting from: (i)
any breach (1) as of the date of this Agreement of any of the representations
and warranties of the Purchaser contained in Article III of this Agreement, (2)
as of the Closing Date of any of the representations and warranties contained in
Sections 3.1, 3.2, 3.3, 3.4(a), 3.5, 3.6 and 3.8 hereof, and (3) as of each
Subsequent Closing Date of any of the representations and warranties contained
in Sections 3.1, 3.2, 3.3, 3.4(a), 3.5, 3.6 and 3.8 hereof; (ii) any breach of
any of the
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covenants and agreements of the Purchaser contained in this Agreement; (iii) the
Acquired Assets; and (iv) the Assumed Liabilities.
(2) The aggregate amount for which the Purchaser shall be
liable under Section 9.4(a)(i) hereof shall in no event exceed twenty-five
percent (25%) of the Purchase Price. The Purchaser shall be required to
indemnify the Seller Indemnitees pursuant to Section 9.4(a)(i) hereof only to
the extent that the aggregate Losses incurred by the Seller Indemnitees in
connection with the matters identified therein exceeds one percent (1%) of the
Purchase Price and, in such event, indemnification shall be made by the
Purchaser only to the extent of such excess.
Section 1.105 Other Limitations on Indemnification.
------------------------------------
(1) The amount of any Losses sustained by a Purchaser
Indemnitee or a Seller Indemnitee shall be reduced by any amount received by
such Purchaser Indemnitee or Seller Indemnitee with respect thereto under any
insurance coverage relating thereto or from any other party alleged to be
responsible therefor, and by the amount of any Tax benefit actually realized
with respect to the Loss. The Purchaser Indemnitees and the Seller Indemnitees
shall use Reasonable Best Efforts to collect any amounts available under such
insurance coverage and from such other party alleged to have responsibility and
to realize any Tax benefit with respect to the Loss. If a Purchaser Indemnitee
or a Seller Indemnitee realizes a Tax benefit or receives an amount under
insurance coverage or from such other party with respect to Losses sustained at
any time subsequent to any indemnification provided pursuant to this Article IX,
then such Purchaser Indemnitee or Seller Indemnitee shall promptly reimburse the
applicable Indemnifying Party for any payment made by such Indemnifying Party in
connection with providing such indemnification up to such amount
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realized or received by the Purchaser Indemnitee or the Seller Indemnitee, as
applicable.
(2) With respect to Losses arising out of the breach of any
representation or warranty contained herein, the Indemnifying Party shall be
obligated to indemnify the Indemnified Party only for those claims for which the
Indemnified Party has given the Indemnifying Party written notice within the
Survival Period relating to such breached representation or warranty.
(3) Each Indemnified Party shall be obligated to use its
Reasonable Best Efforts to mitigate to the fullest extent practicable the amount
of any Loss for which it is entitled to seek indemnification hereunder, and the
Indemnifying Party shall not be required to make any payment to an Indemnified
Party in respect of such Loss to the extent such Indemnified Party has failed to
comply with the foregoing obligation.
(4) Upon making any indemnification payment, the
Indemnifying Party will, to the extent of such payment, be subrogated to all
rights of the Indemnified Party against any third party in respect of the Loss
to which the payment relates; provided, however, that until the Indemnified
-------- -------
Party recovers full payment of its Loss, any and all claims of the Indemnifying
Party against any such third party on account of said payment are hereby made
expressly subordinated and subjected in right of payment to the Indemnified
Party's rights against such third party. Without limiting the generality of any
other provision hereof, each such Indemnified Party and Indemnifying Party will
duly execute upon request all instruments reasonably necessary to evidence and
perfect the above-described subrogation and subordination rights.
(5) None of the Sellers, on the one hand, nor the
Purchaser, on the other hand, shall have any right to set-off any Losses against
any payments to
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be made by such party or parties pursuant to this Agreement or the Ancillary
Agreements.
(6) The provisions of this Article IX shall not apply to
any Tax matter which is governed by Section 6.8 hereof.
(7) Notwithstanding anything to the contrary contained in
this Agreement, the Purchaser shall not be entitled to any indemnification in
respect of any Software Relicensing Fees on the grounds that any representation
or warranty in Article II was violated by the Sellers through the Sellers'
failure to disclose any Computer Software which, pursuant to the terms of such
representation or warranty, should have been disclosed; nor shall any such
Software Relicensing Fees be considered for purposes of determining whether the
1% threshold specified in Section 9.3(b) hereof has been satisfied.
Section 1.106 Claims Notice. In the event that either a
-------------
Purchaser Indemnitee or a Seller Indemnitee wishes to assert a claim for
indemnification hereunder, such party seeking indemnification (the "Indemnified
Party") shall deliver written notice (a "Claims Notice") to the other party (the
"Indemnifying Party") no later than thirty (30) business days after such claim
becomes known to the Indemnified Party, specifying the facts constituting the
basis for, and the amount (if known) of the claim asserted. Failure to deliver a
Claims Notice with respect to a claim in a timely manner as specified in the
preceding sentence shall not be deemed a waiver of the Indemnified Party's right
to indemnification hereunder for Losses in connection with such claim, but the
amount of reimbursement to which the Indemnified Party is entitled shall be
reduced by the amount, if any, by which the Indemnified Party's Losses would
have been less had such Claims Notice been timely delivered.
Section 1.107 Right to Contest Claims of Third Parties.
----------------------------------------
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(1) If an Indemnified Party asserts, or may in the future
seek to assert, a claim for indemnification hereunder because of an Action
instituted by any person not a party to this Agreement (a "Third Party
Claimant") that may result in a Loss with respect to which the Indemnified Party
would be entitled to indemnification pursuant to this Article IX (an "Asserted
Liability"), the Indemnified Party shall deliver to the Indemnifying Party a
Claims Notice with respect thereto, which Claims Notice shall, in accordance
with the provisions of Section 9.6 hereof, be delivered as promptly as
practicable and in any event no later than thirty (30) business days after such
Asserted Liability is actually known to the Indemnified Party. Failure to
deliver Claims Notice with respect to a claim in a timely manner as specified in
the preceding sentence shall not be deemed a waiver of the Indemnified Party's
right to indemnification hereunder for Losses in connection with such claim, but
the amount of reimbursement to which the Indemnified Party is entitled shall be
reduced by the amount, if any, by which the Indemnified Party's Losses would
have been less had such Claims Notice been timely delivered.
(2) The Indemnifying Party shall have the right, upon
written notice to the Indemnified Party, to investigate, contest, defend or
settle any Asserted Liability that may result in a Loss with respect to which
the Indemnified Party is entitled to indemnification pursuant to this Article
IX; provided, however, that the Indemnified Party may, at its option and at its
-------- -------
own expense, participate in the investigation, contesting, defense or settlement
of any such Asserted Liability through representatives and counsel of its own
choosing; provided further, however, that the Indemnifying Party shall not
-------- ------- -------
settle any Asserted Liability unless (i) such settlement is exclusively on
monetary terms and no obligation, admission, restriction or Loss shall be
imposed on the Indemnified Party or (ii) the Indemnified Party shall have
consented to the terms of such settlement, which
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consent shall not be unreasonably withheld. If requested by the Indemnifying
Party, the Indemnified Party will, at the sole cost and expense of the
Indemnifying Party, cooperate with the Indemnifying Party and its counsel in
contesting any Asserted Liability or, if appropriate and related to the Asserted
Liability in question, in making any counterclaim against the Third Party
Claimant, or any cross-complaint against any person (other than the Indemnified
Party or its affiliates). Unless and until the Indemnifying Party elects to
defend the Asserted Liability, the Indemnified Party shall have the right, at
its option and at the Indemnifying Party's expense, to do so in such manner as
it deems appropriate; provided, however, that the Indemnified Party shall not
-------- -------
settle or compromise any Asserted Liability for which it seeks indemnification
hereunder without the prior written consent of the Indemnifying Party (which
shall not be unreasonably withheld).
(3) The Indemnifying Party shall be entitled to participate
in (but not to control) the defense of any Asserted Liability which it has not
elected to defend with its own counsel and at its own expense.
(4) CIGNA and the Purchaser shall make mutually available
to each other all relevant information in their possession relating to any
Asserted Liability (except to the extent that such action would result in a loss
of attorney-client privilege) and shall cooperate with each other in the defense
thereof.
Section 1.108 Indemnification Payments. Any payment hereunder
------------------------
shall be made by wire transfer of immediately available funds to such account or
accounts as the Indemnified Party shall designate to the Indemnifying Party in
writing.
Section 1.109 Exclusivity. The Purchaser agrees, to the fullest
-----------
extent permitted by Law, that the Sellers and their subsidiaries and their
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respective directors, officers, employees, affiliates, controlling persons,
agents or representatives shall not have any liability to the Purchaser or its
subsidiaries or any of their respective directors, officers, employees,
affiliates, controlling persons, agents or representatives on any basis
(including in contract or tort, under federal or state securities laws or
otherwise) based upon (i) any information provided or made available, or
statements made (or any omissions therefrom), including any projections,
estimates or other forward looking information, to the Purchaser or its
subsidiaries or any of their respective directors, officers, employees,
affiliates, controlling persons, agents or representatives, or (2) the accuracy
or completeness of such information or statements, including in respect of the
specific representations and warranties of the Sellers set forth in Article II
of this Agreement, except as and only to the extent expressly set forth in
Article II hereof with respect to such representations and warranties and
subject to the limitations and restrictions contained in this Agreement
(including Article IX). The Sellers and the Purchaser hereby agree that, other
than the representations and warranties contained in Articles II and III hereof,
no representations or warranties are being made in this Agreement by any party
hereto. Following the Closing (and regardless if any Subsequent Closings occur),
the indemnities provided for in Sections 9.3 and 9.4 hereof shall be the
exclusive remedies of the parties to this Agreement and their respective
officers, directors, employees, affiliates, agents, representatives, successors
and assigns for any breach of or inaccuracy in any representation or warranty or
any breach, nonfulfillment or default in the performance of any of the covenants
or agreements contained in this Agreement (but not any such covenants or
agreements to the extent they are by their terms to be performed after the
Closing Date or any Subsequent Closing Date, as the case may be), and the
parties shall not be entitled to a rescission of this Agreement or to any
further indemnification rights or claims of any nature
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whatsoever in respect thereof, all of which the parties hereto hereby waive.
ARTICLE X
CERTAIN DEFINITIONS; OTHER MATTERS
Section 1.110 Definitions. For purposes of this Agreement, the
-----------
Seller Disclosure Schedule and the Purchaser Disclosure Schedule, the following
terms shall have the following meanings:
"Acquired Assets" means (i) the Acquired Securities, (ii) the
Contributed Assets and (iii) the rights of CIGNA and its affiliates which are a
party thereto under the Original Equity Insurance Joint Venture Agreements,
including, in each case, all Books and Records relating thereto; provided,
--------
however, that the Acquired Assets shall not include the Excluded Business.
- -------
"Acquired Companies" means INA Corporation, the Acquired Domestic
Companies and the Acquired International Companies.
"Acquired Domestic Companies" means the legal entities identified in
Column 1 in Section 2.4(b) of the Seller Disclosure Schedule.
"Acquired International Companies" means the legal entities identified
in Column 1 in Section 2.4(c) of the Seller Disclosure Schedule.
"Action" means any action, demand, claim, suit, arbitration, inquiry,
subpoena, discovery request, investigation, or other proceeding by or before any
Governmental Entity.
"Affiliate" of any person means another person that directly or
indirectly controls, is controlled by, or is under common control with, such
first person, where "control" means the possession, directly or
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indirectly, of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of voting securities, by
contract, as trustee or executor, or otherwise; provided, however, that the
-------- -------
Equity Insurance Joint Ventures shall not be considered for the purposes of this
Agreement as an affiliate of CIGNA or of any of CIGNA's subsidiaries. For the
purposes of this Agreement, the term "affiliated" has a meaning correlative to
the foregoing.
"Ancillary Agreements" means the Assignment and Assumption Agreement,
the Bermuda Bulk Reinsurance Agreement, the Copyright Assignment, the Excluded
Business Transfer Agreements, the Global Cooperation/Joint Marketing Agreement,
the Integrated Care Agreement, the Investment Advisory Agreement, the Option
Agreement, the Real Estate Agreements, the Software Agreement, the Support
Agreements, the Systems Facilities Agreement, the Trademark Assignment, the
Transition Services Agreement and the Insurance Endorsements.
"Assignment and Assumption Agreement" means the Assignment and
Assumption Agreement substantially in the form set forth on Exhibit A hereto.
---------
"Bermuda Bulk Reinsurance Agreement" means the Bermuda Bulk
Reinsurance Agreement substantially in the form set forth on Exhibit B hereto.
---------
"Books and Records" means the originals or copies of all customer
lists, policy information, Insurance Contract forms, administrative and pricing
manuals, medical procedure code lists, claim records, sales records,
underwriting records, financial records, compliance records prepared for or
filed with regulators of the Business and premium tax records, each in the
possession or control of CIGNA or any of its subsidiaries and used in the
operation of the Business, whether or not stored in hardcopy form or on magnetic
or optical media (to the extent not subject to licensing
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restrictions), but excluding any such lists, information and records that are
subject to the attorney-client and work product privileges or prohibited from
being disclosed or transferred by Law or regulatory requirements.
"Business" means the business of issuing, selling and administering
property and casualty insurance policies carried on in the United States and
internationally by the Acquired Companies, the Contributed Assets and the Equity
Insurance Joint Ventures, and shall not include the Excluded Business.
"Business day" means a Monday, Tuesday, Wednesday, Thursday or Friday
on which banking institutions in the State of New York are not authorized or
obligated by Law to close.
"Business Plans" means those documents listed in Section 10.1(a) of
the Seller Disclosure Schedule.
"CIGNA Common Stock" means shares of common stock, par value $1.00 per
share, of CIGNA.
"Cause" means (i) the clearly willful failure or refusal by an
employee to follow the instructions of any manager, supervisor or other person
to whom such employee reports which are lawful and reasonable and which serve
the interests of the Purchaser or any of its subsidiaries, (ii) the willful
violation by an employee of any material policy of the Purchaser or any of its
subsidiaries, (iii) the willful violation by an employee of any agreement
between such employee and the Purchaser or any of its subsidiaries or (iv) any
theft, fraud or embezzlement by the employee against the Purchaser or any of its
subsidiaries or a client of any of them.
"Contributed Assets" means the assets set forth in Section 10.1(b) of
the Seller Disclosure Schedule.
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"Copyright Assignment" means the Instrument of Copyright Assignment
substantially in the form set forth on Exhibit C hereto.
---------
"Deferrable Acquired International Company" means the Acquired
International Companies set forth in Section 10.1(c) of the Seller Disclosure
Schedule.
"Domestic Insurance Companies" means those Acquired Companies set
forth in Section 10.1(d) of the Seller Disclosure Schedule.
"Eagle Lodge Use Agreement" means the Eagle Lodge Use Agreement
substantially in the form set forth on Exhibit O hereto.
---------
"Environmental Laws" means all federal, state, local and foreign Laws
and regulations relating to pollution or protection of human health or the
environment, including without limitation, laws relating to Releases or
threatened Releases of Hazardous Materials or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
disposal, transport or handling of Hazardous Materials and all laws and
regulations with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials together with all related
amendments, implementing regulations and reauthorizations, including, but not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 and the Superfund Amendments and Preauthorization Act of 1986
(together, as amended, "CERCLA"), the Resource Conservation and Recovery Act of
1976 ("RCRA"), as amended, the Toxic Substances Control Act of 1976, as amended,
the Federal Water Pollution Control Act Amendments of 1972, the Clean Air Act,
as amended, the Clean Water Act, as amended, and any other similar laws or
regulations. For purposes of this Agreement, the term "Release" means any
release, spill, emission, discharge, leaking or disposal into the indoor or
outdoor environment or into or out of any property, including the movement of
Hazardous Materials through or
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in the air, soil, surface water, groundwater or property.
"Equity Insurance Joint Venture Agreements" means those agreements and
arrangements as the parties hereto may reasonably determine to be necessary to
effect the assignment and assumption of all of CIGNA's and its affiliates'
rights and obligations in respect of the Original Equity Insurance Joint Venture
Agreements to the Purchaser and its affiliates.
"Equity Insurance Joint Ventures" means P.T. Asuransi CIGNA Indonesia,
an Indonesian corporation.
"Excluded Business" means: (i) all of the interests held, directly or
indirectly, by any of the Sellers or any of their affiliates in the persons
listed in Section 10.1(e)(i) of the Seller Disclosure Schedule; (ii) the assets
and related liabilities set forth in Section 10.1(e)(ii) of the Seller
Disclosure Schedule; and (iii) any right to receive proceeds or other property
in the event of any favorable resolution of the "Acquired Group Cases" (as more
particularly described in Section 6.10 of the Seller Disclosure Schedule).
"Excluded Business Transfer Agreements" means the Excluded Business
Transfer Agreement in respect of the Excluded Businesses substantially in the
form set forth on Exhibit D hereto and such other agreements or instruments as
---------
are necessary to effect the transactions contemplated by such Excluded Business
Transfer Agreement or to comply with Law.
"Exempt Employee" means (i) with respect to any employee subject to
the Fair Labor Standards Act, any "exempt employee" (as such term is defined in
the Fair Labor Standards Act), (ii) with respect to employees not subject to the
Fair Labor Standards Act in jurisdictions with Laws comparable to the Fair Labor
Standards Act, any employee that is in a comparable legal classification under
such comparable Law, and (iii) with respect to employees not subject to the Fair
Labor Standards Act in jurisdictions without Laws
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comparable to the Fair Labor Standards Act, any management or key employee.
"Existing Support Agreements" means all Support Agreements to which
CIGNA or any of its affiliates (other than the Acquired Companies conveyed to
the Purchaser) is a party.
"Federal Tax" means any Tax imposed under Subtitle A of the Code.
"Final Determination" shall mean, with respect to Federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870-AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under Law, is not subject to further appeal, review or modification through
proceedings or otherwise (including the expiration of a statute of limitations
or period for the filing of claims for refunds, amended returns or appeals from
adverse determinations).
"GAAP" means generally accepted accounting principles in effect in the
United States of America at the time of determination, and which are
consistently applied.
"Global Cooperation/Joint Marketing Agreement" means the Global
Cooperation/Joint Marketing Agreement substantially in the form set forth on
Exhibit E hereto.
- ---------
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements act of
1976, as amended.
"Hazardous Materials" means all substances defined as Hazardous
Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. (S) 300.5, petroleum, crude oil
or fraction thereof, asbestos-containing materials in any form or condition,
polychlorinated biphenyls (PCBs) in any form or
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condition and any hazardous, dangerous or toxic material, waste or substance, or
defined as such by, or regulated as such under, any Environmental Law.
"Income Tax" means any federal, state, local, provincial, foreign or
other income, alternative, minimum, franchise, profits, or other similar tax,
estimated tax, duty or other governmental charge or assessment (determined with
respect to net income) or deficiencies with respect thereto (including but not
limited to all interest and penalties thereon and additions thereto).
"Insurance Companies" means the Domestic Insurance Companies and the
International Insurance Companies.
"Insurance Contracts" means all property and casualty insurance
policies and contracts (other than reinsurance and retrocessional agreements),
including riders thereto, issued and administered by the Business which are in
effect on the date hereof and any additional property and casualty insurance
policies and contracts (other than reinsurance and retrocessional agreements)
issued and administered by the Business after the date hereof and prior to the
Closing Date, in each case, to the extent that such policies and contracts are
in effect as of the Closing Date.
"International Insurance Companies" means those Acquired Companies set
forth in Section 10.1(f) of the Seller Disclosure Schedule.
"Investment Advisory Agreement" means the Investment Advisory
Agreement substantially in the form set forth on Exhibit G hereto.
---------
"knowledge" in respect of: (i) the Sellers means the actual knowledge
of the natural persons listed in Section 10.1(g) of the Seller Disclosure
Schedule; and (ii) the Purchaser means the actual knowledge of the Purchaser's
executive officers.
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"Laws" means all applicable laws, common laws, rules, regulations,
ordinances, codes, statutes, judgments, injunctions, orders, decrees, licenses,
permits, policies and other requirements of all Governmental Entities.
"Lien" means any mortgage, pledge, lien, encumbrance, charge, adverse
claim (whether pending or, to the knowledge of the person against whom the
adverse claim is being asserted, threatened) or restriction of any kind
affecting title or resulting in an encumbrance against property, real or
personal, tangible or intangible, or a security interest of any kind, including,
without limitation, any conditional sale or other title retention agreement, any
lease in the nature thereof, and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statute) of
any jurisdiction (other than a financing statement which is filed or given
solely to protect the interest of a lessor).
"Loss" and "Losses" means any and all actual and out-of-pocket:
losses, liabilities, damages, costs and expenses (including reasonable
attorneys' fees), Taxes, penalties, fines, expenditures, judgments and awards.
"Material Acquired International Companies" means those Acquired
Companies set forth in Section 10.1(h) of the Seller Disclosure Schedule.
"Material Acquired International Insurance Companies" means those
Acquired Companies set forth in Section 10.1(i) of the Seller Disclosure
Schedule.
"1995 Restructuring" means the transactions contemplated by, or
otherwise effected in connection with, the Restructuring Agreement, effective as
of December 31, 1995, by and among INA Financial Corporation, Brandywine
Holdings Corporation, INA Holdings Corporation, Insurance Company of North
America, Allied Insurance Company, Atlantic Employers
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Insurance Company, Bankers Standard Fire and Marine Company, Bankers Standard
Insurance Company, Century Indemnity Company, CIGNA Employers Insurance Company,
CIGNA Fire Underwriters Insurance Company, CIGNA Indemnity Insurance Company,
CIGNA Insurance Company, CIGNA Insurance Company of Illinois, CIGNA Insurance
Company of the Midwest, CIGNA Insurance Company of Ohio, CIGNA Insurance Company
of Texas, CIGNA Property and Casualty Insurance Company, CIGNA Reinsurance
Company, CIGNA Speciality Insurance Company, Illinois Union Insurance Company,
INA Surplus Insurance Company, Indemnity Insurance Company of North America, and
Pacific Employers Insurance Company.
"1999 Actual Dividends" means an amount equal to the sum of (i)
seventy-eight million three hundred thousand dollars ($78,300,000), (ii) the
aggregate amount of cash dividends declared and paid by INA Corporation to CIGNA
Holdings during the period from January 1, 1999 through the Closing Date and
(iii) 1999 Interest Amount; provided, however, that all dividends that originate
-------- -------
from a person that constitutes part of the Excluded Business shall not be
included in calculating the 1999 Actual Dividends.
"1999 Dividend Shortfall Amount" means an amount equal to the
difference determined by subtracting the 1999 Actual Dividends from the 1999
Entitled Dividends.
"1999 Entitled Dividends" means an amount equal to the product
determined by multiplying (i) fifteen million dollars ($15,000,000) by (ii) the
number of fiscal months between January 1, 1999 and the Closing Date (it being
understood that if the Closing does not occur on the last day of a fiscal month,
the fiscal month in which the Closing occurs shall be prorated comparing the
number of days which have elapsed in such fiscal month up to and including the
Closing Date, on the one hand, and the total number of days in such fiscal
month, on the other).
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"1999 Interest Amount" means the aggregate amount of interest which
would have accrued on sixty-three million three hundred thousand dollars
($63,300,000) assuming: (i) an annual interest rate equal to the 60-day dealer
commercial paper rate published in the Wall Street Journal on the date of this
Agreement; and (ii) that beginning on the first day of the second fiscal month
of 1999 and on the first day of every fiscal month thereafter such sixty-three
million three hundred thousand dollar ($63,300,000) amount is reduced by fifteen
million dollars ($15,000,000) until the earlier to occur of the Closing Date and
the date upon which such former amount reaches zero.
"Option Agreement" means the Option Agreement substantially in the
form set forth on Exhibit H hereto.
---------
"Original Equity Insurance Joint Venture Agreements" means those
agreements and arrangements set forth in Section 10.1(j) of the Seller
Disclosure Schedule.
"Permitted Liens" means the following: (i) any Lien existing on any
real property, zoning restrictions, easements, rights-of-way and restrictions on
use of real property that do not materially diminish the value or use of such
real property in the Business; (ii) Liens for Taxes or other assessments or
charges of Governmental Entities, including those arising by operation of Law,
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings, in each case, with respect to which adequate reserves
or other appropriate provisions are being maintained to the extent required by
GAAP; (iii) statutory Liens of landlords and lessors and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by Law and created
in the ordinary course of business for amounts not yet overdue or which are
being contested in good faith by appropriate proceedings, in each case, with
respect to which adequate reserves or other appropriate provisions are being
maintained to the extent required by GAAP; (iv)
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leases or subleases heretofore disclosed to the Purchaser; (v) pledges and
deposits made in the ordinary course of business in compliance with workers'
compensation, unemployment insurance and other social security laws or
regulations; (vi) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business;
and (vii) other Liens which, in the aggregate, are not substantial in amount and
do not materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the Business.
"person" means an individual, corporation, partnership, joint venture,
association, limited liability company, trust, unincorporated organization, or
other entity.
"Post-Closing Tax Period" means, for any Acquired Company, any Tax
period other than the Pre-Closing Tax Period for such Acquired Company.
"Pre-Closing Tax Period" means, for any Acquired Company, any Tax
period ending on or before (and including) the Closing Date or the Subsequent
Closing Date on which such Acquired Company was conveyed to the Purchaser, as
the case may be.
"Purchaser Confidentiality Agreement" means a letter agreement to be
entered into between CIGNA and the Purchaser and containing confidentiality
provisions substantially comparable to the Seller Confidentiality Agreement,
relating to the disclosure to CIGNA of certain confidential proprietary
information of the Purchaser pursuant to Sections 4.3(b) and 4.3(c) hereof.
"Purchaser Material Adverse Effect" means a material adverse effect on
the business, financial condition or results of operations of the business of
the Purchaser and its subsidiaries, taken as a whole; provided, however, that
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the following shall be excluded
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from the definition of "Purchaser Material Adverse Effect" and from any
determination as to whether such Purchaser Material Adverse Effect has occurred
or may occur: (i) the effects of changes that are generally applicable to (1)
the property and casualty insurance and/or brokerage industries (including,
without limitation, the impact of natural catastrophes) or (2) any material
change in the financial, banking, currency or capital markets in general (either
in the United States or any international market); and (ii) any facts or
circumstances relating to the Sellers; provided further, however, that any such
-------- ------- -------
adverse effect from and after the date hereof shall also be excluded from such
determination unless such effect is clearly unrelated to, and not caused by, the
execution of this Agreement, the transactions contemplated hereby and by the
Ancillary Agreements and the announcement of this Agreement (including the
identity of the Sellers) or the transactions contemplated hereby; provided
--------
further, however, a matter will be deemed to be "material" or to have a
- ------- -------
"Purchaser Material Adverse Effect" in connection with any provision contained
in Article III of this Agreement (other than Section 3.8 hereof) if such matter
would be considered significant by a reasonable seller of the Business in the
context of the particular provision in which the word "material" or the phrase
"Purchaser Material Adverse Effect" appears (i.e., a matter need not have a
material adverse effect in order to be deemed "material" or to have a "Purchaser
Material Adverse Effect" in the context of a particular provision).
"Real Estate Agreements" means, collectively, the Two Liberty Place
Sublease, the Facility Sharing Agreements and the Eagle Lodge Use Agreement.
"Reasonable Best Efforts" means the efforts that a prudent person
desirous of achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible.
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"Retained Liabilities" means those liabilities and obligations set
forth in Section 10.1(k) of the Seller Disclosure Schedule.
"SAP" means accounting practices prescribed or permitted by regulatory
authorities, as in effect on the applicable date, consistently applied by the
Insurance Companies in the preparation of statutory financial statements as of
and for the year ended on or before December 31, 1997.
"SEC" means the United States Securities and Exchange Commission.
"Self-Insurance Policies" means insurance policies, contracts and
surety bonds provided by an Acquired Company to CIGNA or any of CIGNA's
affiliates (other than the Acquired Companies conveyed to the Purchaser).
"Seller Disclosure Schedule" means the disclosure schedule delivered
by the Sellers to the Purchaser prior to the execution of this Agreement.
"Seller Material Adverse Effect" means a material adverse effect on
the business, financial condition or results of operations of the Business taken
as a whole; provided, however, that the following shall be excluded from the
-------- -------
definition of "Seller Material Adverse Effect" and from any determination as to
whether such Seller Material Adverse Effect has occurred or may occur: (i) the
effects of changes that are generally applicable to (1) the property and
casualty insurance and/or brokerage industries (including, without limitation,
the impact of natural catastrophes) or (2) any material change in the financial,
banking, currency or capital markets in general (either in the United States or
any international market); (ii) any facts, circumstances or developments
relating to the 1995 Restructuring (including any adverse judgment before any
Governmental Entity); and (iii) any facts or circumstances relating to the
Purchaser; provided
--------
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further, however, that any such adverse effect from and after the date hereof
- ------- -------
shall also be excluded from such determination unless such effect is clearly
unrelated to, and not caused by, the execution of this Agreement, the
transactions contemplated hereby and by the Ancillary Agreements and the
announcement of this Agreement (including the identity of the Purchaser) or the
transactions contemplated hereby; provided further, however, except in
-------- ------- -------
determining whether the conditions to the Closing and any Subsequent Closing
have been fulfilled in respect of the truthfulness, correctness, accuracy or
breach of Section 2.7 hereof (for which purpose this proviso shall not apply), a
matter will be deemed to be "material" or to have a "Seller Material Adverse
Effect" in connection with any provision contained in Article II of this
Agreement (other than Section 2.8 hereof) if such matter would be considered
significant by a reasonable acquiror of the Business in the context of the
particular provision in which the word "material" or the phrase "Seller Material
Adverse Effect" appears (i.e., a matter need not have a material adverse effect
on the Business in its entirety in order to be deemed "material" or to have a
"Seller Material Adverse Effect" in the context of a particular provision).
"Software Agreement" means the Software Agreement substantially in the
form set forth on Exhibit J hereto.
---------
"Software Relicensing Fees" means all fees (including transitional
service fees) paid to third parties in connection with (i) the provision to
CIGNA or any of its subsidiaries (other than the Acquired Companies conveyed to
the Purchaser) of a new license or a sublicense (on substantially similar terms
as used by such entities) in respect of any software used by any such entities
prior to the Closing or Subsequent Closing, as the case may be, and which is
owned by or licensed to an Acquired Company conveyed to the Purchaser and (ii)
the provision to any of the Acquired Companies conveyed to the Purchaser of a
new license or
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a sublicense (on substantially similar terms as used by such entities) in
respect of any software used by any such entities in the conduct of the Business
prior to the Closing or Subsequent Closing, as the case may be, and which is
owned by or licensed to CIGNA or any of its subsidiaries (other than the
Acquired Companies conveyed to the Purchaser).
"subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person; provided, however, that the Equity Insurance Joint Ventures shall not
-------- -------
for the purposes of this Agreement be considered as a direct or indirect
subsidiary of CIGNA or of any subsidiary of CIGNA.
"Support Agreements" means (i) any agreement with a Governmental
Entity or other person which provides capital, surplus, balance sheet or any
other form of economic support to an Acquired Company upon the happening of a
defined event or under which the obligations or performance of any Acquired
Company is guaranteed or (ii) any stop loss or insolvency policy or agreement
for the benefit of any Acquired Company.
"Systems Facilities Agreement" means the Systems Facilities Agreement
substantially in the form set forth on Exhibit K hereto.
---------
"Tax Asset" means any net operating loss, net capital loss, investment
tax credit, foreign tax credit, charitable deduction or any other credit or tax
attribute that could be carried forward or back to reduce Taxes (including
without limitation deductions and credits related to alternative minimum Taxes).
"Tax Loss" means the Purchaser Tax Loss and the Seller Tax Loss.
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"Tax Return" means any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction with respect to Taxes.
"Tax Sharing Agreement" means the Amended and Restated Consolidated
Federal Income Tax Agreement between CIGNA and each of its subsidiaries that are
or become party thereto, originally adopted as of April 1, 1982, as amended,
including amendments effective as of January 1, 1997.
"Taxes" means any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise, real
or personal property, sales, withholding, social security, insurance premium,
occupation, use, service, service use, value added, license, net worth, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the United
States Internal Revenue Service or any taxing authority (whether domestic or
foreign including, without limitation, any state, local or foreign government or
any subdivision or taxing agency thereof (including a United States
possession)), whether computed on a separate, consolidated, unitary, combined or
any other basis; and, such term shall include any interest, penalties or
additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments.
"Third Party Reinsurer" means any reinsurer which has assumed a
portion of the Business under a reinsurance contract other than any affiliate of
CIGNA and other than any captive insurance or reinsurance company subsidiary of
a policyholder of the SRF Division of the Business.
"Trademark Assignment" means the Instrument of Trademark and Domain
Name Assignment substantially in the form set forth on Exhibit L hereto.
---------
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"Transfer Taxes" means all transfer, documentary, sales, use, stamp,
registration, value added and other similar Taxes and fees (including any
reasonable out-of-pocket filing expenses, penalties and interest) incurred in
connection with this Agreement or the Ancillary Agreements (including any real
property transfer or gains tax and any similar Tax).
"Two Liberty Place Sublease" means the Sublease substantially in the
form set forth on Exhibit I hereto.
---------
Section 1.111 Disclosure Schedules. Any disclosure in any Section of
--------------------
the Seller Disclosure Schedule or the Purchaser Disclosure Schedule of any
contract, document, liability, default, breach, violation, limitation,
impediment or other matter, although the provision for such disclosure may
require such disclosure only if such contract, document, liability, default,
breach, violation, limitation, impediment or other matter be "material," shall
not be construed against any party to this Agreement, as an assertion by such
party, that any such contract, document, liability, default, breach, violation,
limitation, impediment or other matter is, in fact, material.
Section 1.112 Interpretation. When a reference is made in this
--------------
Agreement to a Section or Article, such reference shall be to a section or
article of this Agreement unless otherwise clearly indicated to the contrary.
Whenever the words "include", "includes" or "including" are used in this
Agreement they shall be deemed to be followed by the words "without limitation."
The words "hereof," "herein" and "herewith" and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole and
not to any particular provision of this Agreement. The meaning assigned to each
term used in this Agreement shall be equally applicable to both the singular and
the plural forms of such term, and words denoting any gender
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shall include all genders. Where a word or phrase is defined herein, each of its
other grammatical forms shall have a corresponding meaning. The parties have
participated jointly in the negotiation and drafting of this Agreement and the
Ancillary Agreements; consequently, in the event an ambiguity or question of
intent or interpretation arises, this Agreement and each of the Ancillary
Agreements shall be construed as if drafted jointly by the parties thereto, and
no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any provisions of this Agreement or of any of the
Ancillary Agreements.
ARTICLE XI
MISCELLANEOUS
Section 1.113 Amendment, Modification and Waiver. This Agreement may
----------------------------------
not be amended, modified or waived except by an instrument or instruments in
writing signed and delivered on behalf of each of the parties hereto.
Section 1.114 Entire Agreement. This Agreement (together with the
----------------
Seller Disclosure Schedule, the Purchaser Disclosure Schedule, the letter
agreements dated the date hereof and making specific reference hereto, exhibits
hereto, annexes hereto and the other agreements, documents and instruments
delivered pursuant hereto) and the Ancillary Agreements constitute the entire
agreement among the parties with respect to the subject matter hereof and
thereof and supersede all other prior agreements and understandings (other than
the Seller Confidentiality Agreement and the Purchaser Confidentiality
Agreement), both written and verbal, among the parties or any of them with
respect to the subject matter hereof.
Section 1.115 Notices. All notices, requests, claims, demands and
-------
other communications hereunder shall be in writing and shall be given (and
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shall be deemed to have been duly given upon receipt) by delivery in person, by
telecopy (which is confirmed), or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties to this Agreement
as follows:
If to either of the Sellers:
CIGNA Corporation
Two Liberty Place
1601 Chestnut Street
Philadelphia, Pennsylvania 19192
Attention: Thomas J. Wagner, Esq.
Telephone No.: (215)761-6027
Telecopy No.: (215)761-5519
with a copy to (which shall not constitute notice):
CIGNA Corporation
Two Liberty Place
1601 Chestnut Street
Philadelphia, Pennsylvania 19192
Attention: David R. DeVoe, Esq.
Telephone No.: (215)761-6226
Telecopy No.: (215)761-5715
and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Robert J. Sullivan, Esq.
Telephone No.: (212)735-3000
Telecopy No.: (212)735-2001
If to the Purchaser:
ACE Limited
The ACE Building
30 Woodbourne Avenue
Hamilton HM 08 Bermuda
Attention: Peter N. Mear, Esq.
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Telephone No.: (441)295-5200
Telecopy No.: (441)296-7799
with a copy to (which shall not constitute notice):
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Edward S. Best, Esq.
Telephone No.: (312)782-0600
Telecopy No.: (312)701-7711
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. In
no event shall the provision of notice pursuant to this Section 11.3 constitute
notice for service of any writ, process or summons in any suit, action or other
proceeding.
Section 1.116 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF.
Section 1.117 Descriptive Headings. The descriptive article and
--------------------
section headings herein are inserted for convenience of reference only and are
not intended to be part of or to affect the meaning or interpretation of this
Agreement.
Section 1.118 Assignment; Binding Agreement. This Agreement shall be
-----------------------------
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and permitted assigns. Neither this Agreement, nor any
rights, interests or obligations hereunder, may be directly or indirectly
assigned, delegated, sublicensed or transferred by any party to this Agreement,
in whole or in part, to any other person (including any bankruptcy trustee) by
operation of law or otherwise, whether voluntarily or
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involuntarily, without the prior written consent of the other parties hereto;
provided, however, (i) subject to applicable regulatory approvals, the Purchaser
- -------- -------
may assign to one or more of its wholly owned subsidiaries all or a portion of
its rights under this Agreement, provided that (1) no such assignment shall
relieve the Purchaser of its obligations under this Agreement and (2) each
wholly owned subsidiary of the Purchaser to which such rights have been assigned
shall not further assign, sublicense or transfer (directly or indirectly, by
operation of law or otherwise) such rights to any person other than another
wholly owned subsidiary of the Purchaser, and (ii) each of the Sellers may
freely assign (whether by operation of law or otherwise) all or a portion of
their rights under this Agreement.
Section 1.119 Third Party Beneficiaries. Except as provided for in
-------------------------
Section 5.2 hereof, nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the parties hereto any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 1.120 Specific Performance. The parties recognize and agree
--------------------
that if for any reason any of the provisions of this Agreement are not performed
in accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to any
other available remedies, each other party shall be entitled to an injunction
restraining any violation or threatened violation of the provisions of this
Agreement without the necessity of posting a bond or other form of security. In
the event that any action should be brought in equity to enforce the provisions
of this Agreement, no party will allege, and each party hereby waives the
defense, that there is an adequate remedy at law.
Section 1.121 Severability. Any term or provision of this Agreement
------------
which is invalid or
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unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as would be enforceable.
Section 1.122 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 1.123 Consent to Jurisdiction, Etc. Each of the parties
----------------------------
hereto irrevocably and unconditionally submits to the non-exclusive jurisdiction
of The United States District Court for the Southern District of New York or, if
such court will not accept jurisdiction, the Supreme Court of the State of New
York or any court of competent civil jurisdiction sitting in New York County,
New York. In any action, suit or other proceeding, each of the parties hereto
irrevocably and unconditionally waives and agrees not to assert by way of
motion, as a defense or otherwise any claims that it is not subject to the
jurisdiction of the above courts, that such action or suit is brought in an
inconvenient forum or that the venue of such action, suit or other proceeding is
improper. Each of the parties hereto also agrees that any final and unappealable
judgment against a party hereto in connection with any action, suit or other
proceeding shall be conclusive and binding on such party and that such award or
judgment may be enforced in any court of competent jurisdiction, either within
or outside of the United States. A certified or exemplified copy of such award
or judgment shall be conclusive evidence of the fact and amount of such award or
judgment.
155
<PAGE>
Section 1.124 Appointment of Purchaser Process Agent. The Purchaser
--------------------------------------
agrees that service of all writs, process and summonses in any suit, action or
proceeding brought in the State of New York may be made upon ACE USA, Inc.
presently located at 90 Park Avenue, Suite 1600, New York, New York 10016,
United States of America (the "Purchaser Process Agent") and the Purchaser
hereby irrevocably appoints the Purchaser Process Agent as its true and lawful
agent for the service of process in its name, place and stead to accept such
service of any and all such writs, process and summonses, and agrees that the
failure of the Purchaser Process Agent to give any notice of any such service of
process to the Purchaser shall not impair or affect the validity of such service
or of any judgment based thereon. The Purchaser agrees to maintain at all times
an agent aforesaid in The City of New York, and to give the Sellers advance
written notice of any change of such Purchaser Process Agent. Nothing herein
shall in any way be deemed to limit the ability of the Sellers to serve any such
writs, process or summonses in other manner permitted by Law or to obtain
jurisdiction over the Purchaser in such other jurisdictions, and in such manner,
as may be permitted by Law. The Purchaser Process Agent hereby accepts the
foregoing appointment in respect of this Agreement and in respect of the
Ancillary Agreements which incorporate, or contain provisions comparable to,
this Section 11.12.
Section 1.125 Appointment of CIGNA Process Agent. The Sellers agree
----------------------------------
that service of all writs, process and summonses in any suit, action or
proceeding brought in the State of New York may be made upon INA Life Insurance
Company of New York presently located at 195 Broadway, 4th floor, New York, New
York 10007, United States of America (the "CIGNA Process Agent") and the Sellers
hereby irrevocably appoint the CIGNA Process Agent as their true and lawful
agent for the service of process in their name, place and stead to accept such
service of any and all such writs, process and summonses, and agrees that the
failure of the CIGNA Process Agent to give any notice of any such service of
156
<PAGE>
process to the Sellers shall not impair or affect the validity of such service
or of any judgment based thereon. The Sellers agree to maintain at all times an
agent aforesaid in The City of New York, and to give the Purchaser advance
written notice of any change of such CIGNA Process Agent. Nothing herein shall
in any way be deemed to limit the ability of the Purchaser to serve any such
writs, process or summonses in other manner permitted by Law or to obtain
jurisdiction over the Sellers in such other jurisdictions, and in such manner,
as may be permitted by Law. The CIGNA Process Agent hereby accepts the
foregoing appointment in respect of this Agreement and in respect of the
Ancillary Agreements which incorporate, or contain provisions comparable to,
this Section 11.13.
Section 1.126 Arbitration. With respect to any matter which the
-----------
parties hereto have agreed will be resolved by arbitration pursuant to Section
6.12 hereof, each party hereto agrees that the arbitration award rendered by the
arbitrator specified therein shall be final and binding upon such party.
Judgment on the arbitration award may be entered in any court of competent
jurisdiction (within and outside the United States). Any arbitration award
shall be rendered in U.S. dollars (free of Tax or other off-set), with
appropriate pre-award and post-award interest as determined by the arbitrator,
and shall be paid within ten business days of the delivery to the parties of the
arbitrator's written arbitration award. All arbitration shall be governed by
the Federal Arbitration Act, 9 U.S.C. sections 1-16, 201-208. In the event that
any party to this Agreement fails to comply with the arbitration procedures set
forth in Section 6.12 hereof or this Section 11.14, or the orders of the
arbitrator or the arbitration award, then such noncomplying party shall be
liable for all costs and expenses, including attorneys' fees, incurred by a
party in its effort to obtain either an order to compel compliance with such
arbitration procedures or such orders, or an enforcement of the arbitration
award, from a court of competent jurisdiction.
157
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Acquisition
Agreement to be executed on its behalf by its officer thereunto duly authorized,
all as of the day and year first above written.
CIGNA CORPORATION
By: /s/ Paul Rohrkemper
Name: Paul Rohrkemper
Title: Sr. Vice President
CIGNA HOLDINGS, INC.
By: /s/ Joanne L. Dorak
Name: Joanne L. Dorak
Title: President
ACE LIMITED
By: /s/ Dominic Frederico
Name: Dominic Frederico
Title: President & CEO
158
<PAGE>
EXHIBIT 2.2
AMENDMENT NO. 1 TO THE ACQUISITION AGREEMENT
AMENDMENT NO. 1 TO THE ACQUISITION AGREEMENT (this "Amendment"), dated
as of July 2, 1999, by and among CIGNA Corporation, a Delaware corporation
("CIGNA"), CIGNA Holdings, Inc., a Delaware corporation ("CIGNA Holdings" and,
together with CIGNA, the "Sellers"), and ACE Limited, a Cayman Islands company
(the "Purchaser"). This Amendment amends the Acquisition Agreement, dated as of
January 11, 1999, by and among the Sellers and the Purchaser (the "Acquisition
Agreement"). Capitalized and uncapitalized terms used but not defined in this
Amendment shall have the meanings ascribed to such terms in the Acquisition
Agreement.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Purchaser has asserted that there have been certain
developments that may constitute a Seller Material Adverse Effect on the
Business taken as a whole and while the Sellers have not conceded that a Seller
Material Adverse Effect has occurred, the Sellers and the Purchaser have agreed
to enter into this Amendment; and
WHEREAS, the parties to the Acquisition Agreement wish to amend the
Acquisition Agreement in the manner set forth in this Amendment.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
<PAGE>
ARTICLE I
THE AMENDMENTS
1.1 Capital Contribution to INA Corporation. On or prior to the
-------------------------------------------
Closing, CIGNA shall make a cash capital contribution to INA Corporation in the
amount of one hundred twenty eight million two hundred fifty thousand dollars
($128,250,000).
1.2 Closing on July 2, 1999. The Sellers and the Purchaser hereby
----------------------------
agree that they shall take all necessary actions to effect the Closing at 10:00
a.m., New York City time, on July 2, 1999.
1.3 Business through the date of this Amendment.
------------------------------------------------
(a) The Purchaser agrees that no event, condition, fact or
information relating to the Business up to or as of the date of this Amendment,
whether known or unknown to the Purchaser, shall be used by the Purchaser to
assert, either alone or together with any other events, conditions, facts or
information, that any of the conditions to the Purchaser's obligation to effect
the Closing set forth in Sections 7.1(a)(i), 7.1(a)(ii), 7.1(a)(iii), 7.1(a)(v),
7.1(c)(i), 7.1(c)(ii), 7.1(c)(iv), 7.1(c)(v), 7.1(c)(vi) with respect to Mexico
and Poland, 7.1(c)(viii) and 7.1(c)(ix) of the Acquisition Agreement have not
been satisfied.
(b) The Purchaser acknowledges and agrees that none of the following
shall constitute a Seller Material Adverse Effect for any purpose whatsoever
under the Acquisition Agreement: (i) any overstatement of revenues or deferral
of expenses of CIGNA's ESIS operations ("ESIS") (including, without limitation,
as set forth in Annmarie Hagan's memorandum to Dennis Reding, a copy of which is
attached hereto (the "Hagan Memorandum")) or any
2
<PAGE>
events, conditions, facts or information relating thereto; (ii) any other ESIS
accounting matters as to which the Purchaser has knowledge (which knowledge
shall be limited to the actual scope of the knowledge of the Purchaser) up to or
as of the Closing (including, without limitation, any of the matters set forth
in the Hagan Memorandum); or (iii) consequences on the Business arising out of
or relating to the matters described in clause (i) above or consequences on the
Business which a reasonable person could foresee arising out of or relating to
the matters described in clause (ii) above (such matters referred to in clauses
(i), (ii) and (iii) are collectively referred to in this Amendment as the "ESIS
Information").
(c) The Purchaser hereby acknowledges and agrees that it shall not
use any ESIS Information, either alone or together with any other events,
conditions, facts, matters or information, to: (i) assert that a Seller Material
Adverse Effect exists; (ii) assert that any of the Sellers' representations or
warranties in the Acquisition Agreement are not true or correct or have been
breached; (iii) assert that any of the conditions to the consummation of the
Closing or any Subsequent Closing (if any) have not been satisfied; or (iv)
assert or support any claim for indemnification under Article IX of the
Acquisition Agreement. Examples of the operation of this Section 1.3(c) as
applied to the matters in clauses (ii) and (iii) but not clause (i) in Section
1.3(b) hereof are set forth on Exhibit 1 hereto.
---------
(d) The Purchaser agrees that all of the ESIS Information is deemed
disclosed as of January 11, 1999 for any and all purposes under the Acquisition
Agreement, including, without limitation, the Seller Disclosure Schedule; and,
each Section of the Seller Disclosure Schedule shall be deemed to be amended to
include the ESIS Information for any and all purposes under the Acquisition
Agreement.
(e) Notwithstanding anything to the contrary in the Acquisition
Agreement, for purposes of this Amendment only, the term "knowledge of the
Purchaser" (or
3
<PAGE>
words of similar import) shall mean the actual knowledge of the persons listed
on Exhibit 2 hereto.
---------
1.4 Accounting Charge. The Sellers represent that they have booked an
-----------------
after tax charge of $64 million on the consolidated financial statements of the
Business for the period ended June 30, 1999.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties.
-----------------------------------
(a) The Sellers hereby represent and warrant to the Purchaser that: (i)
the Sellers have the necessary corporate power and authority to execute and
deliver this Amendment, to perform its obligations under the Acquisition
Agreement as amended hereby and to consummate the transactions contemplated
hereby; (ii) the execution and delivery of this Amendment by the Sellers and the
consummation by the Sellers of the transactions contemplated by the Acquisition
Agreement as amended hereby have been duly and validly authorized by all
necessary corporate action; (iii) this Amendment has been duly and validly
executed by the Sellers and, assuming this Amendment has been duly authorized,
executed and delivered by the Purchaser, constitutes the legal, valid and
binding obligation of the Sellers, enforceable against the Sellers in accordance
with its terms, except that (x) such enforcement may be subject to any
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other
laws, now or hereafter in effect, relating to or limiting creditor's rights
generally and (y) enforcement of this Amendment, including among other things,
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
4
<PAGE>
(b) The Purchaser hereby represents and warrants to the Sellers that:
(i) the Purchaser has the necessary corporate power and authority to execute and
deliver this Amendment, to perform its obligations under the Acquisition
Agreement as amended hereby and to consummate the transactions contemplated
hereby; (ii) the execution and delivery of this Amendment by the Purchaser and
the consummation by the Purchaser of the transactions contemplated by the
Acquisition Agreement as amended hereby have been duly and validly authorized by
all necessary corporate action; (iii) this Amendment has been duly and validly
executed by the Purchaser and, assuming this Amendment has been duly authorized,
executed and delivered by the Sellers, constitutes the legal, valid and binding
obligation of the Sellers, enforceable against the Purchaser in accordance with
its terms, except that (x) such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other laws, now
or hereafter in effect, relating to or limiting creditor's rights generally and
(y) enforcement of this Amendment, including among other things, the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
ARTICLE III
MISCELLANEOUS
3.1 Entire Agreement. This Amendment is limited precisely as written
---------------------
and shall not be deemed to be an amendment to any other terms or conditions of
the Acquisition Agreement. Whenever the Acquisition Agreement is referred to in
the Acquisition Agreement or in any other agreements, documents and instruments,
such reference shall be deemed to be to the Acquisition Agreement as amended by
this Amendment. There is no restriction, agreement, promise, representation,
warranty, covenant or undertaking with respect to the transactions
5
<PAGE>
contemplated hereby other than those expressly set forth herein.
3.2 Counterparts. This Amendment may be executed in two or more
-----------------
counterparts, all of which will be considered one and the same agreement and
each of which will be deemed an original.
3.3 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
------------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to the
Acquisition Agreement to be duly executed as of the day and year first above
written.
CIGNA CORPORATION
By: /s/ Judith E. Solts
Name: Judith E. Solts
Title: Sr. Vice President
CIGNA HOLDINGS, INC.
By: /s/ Robert J. Sullivan
Name: Robert J. Sullivan
Title: (attorney in fact)
ACE LIMITED
By: /s/ Peter Mear
Name: Peter Mear
Title:General Counsel & Secretary
<PAGE>
EXHIBIT 2.3
AMENDMENT NO. 2 TO THE ACQUISITION AGREEMENT
AMENDMENT NO. 2 TO THE ACQUISITION AGREEMENT (this "Amendment"), dated
as of July 2, 1999, by and among CIGNA Corporation, a Delaware corporation
("CIGNA"), CIGNA Holdings, Inc., a Delaware corporation ("CIGNA Holdings" and,
together with CIGNA, the "Sellers"), and ACE Limited, a Cayman Islands company
(the "Purchaser"). This Amendment amends the Acquisition Agreement, dated as of
January 11, 1999, by and among the Sellers and the Purchaser, as amended by
Amendment No. 1 to the Acquisition Agreement, dated as of July 2, 1999, by and
among Sellers and the Purchaser (collectively, the "Acquisition Agreement").
Capitalized and uncapitalized terms used but not defined in this Amendment shall
have the meanings ascribed to such terms in the Acquisition Agreement.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Sellers and the Purchaser wish to amend the Acquisition
Agreement in the manner set forth in this Amendment.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
ARTICLE I
THE AMENDMENTS
Section 1.1 Amendments to the Seller Disclosure Schedule. Attached
--------------------------------------------
as Exhibit 1.1 are the amended Sections of the Seller Disclosure Schedule. The
Sellers and the Purchaser hereby acknowledge and agree that such amended
Sections shall replace or supplement, as the case may be, the corresponding
Sections of the Seller Disclosure Schedule, and that they constitute part of
the Acquisition Agreement.
Section 1.2 Liquidation of GRANCOL, Asesoramiento y Servicios Ltda.
-------------------------------------------------------
(Colombia). CIGNA shall
- ----------
<PAGE>
dissolve GRANCOL, Asesoramiento y Servicios Ltda. (Colombia) and place it in a
status of liquidation prior to the Closing, and ACE hereby consents (pursuant to
Section 4.1(a) of the Acquisition Agreement) to CIGNA taking such action as
needed to dissolve GRANCOL.
Section 1.3 Bermuda Bulk Reinsurance Agreement. Each of the Sellers
----------------------------------
and the Purchaser agree that neither party shall execute the Bermuda Bulk
Reinsurance Agreement at the Closing or any other time, and the Bermuda Bulk
Reinsurance Agreement shall not be a condition to Closing or any Subsequent
Closing (if any).
Section 1.4 1999 Dividend Shortfall Amount. The 1999 Dividend
-------------------------------
Shortfall Amount is four hundred eighty-three thousand eight hundred seventy-one
dollars ($483,871) in the event the Closing Date is July 1, 1999. In the event
the Closing Date is another date, the 1999 Dividend Shortfall amount shall be
increased by four hundred eighty-three thousand eight hundred seventy-one
dollars ($483,871) for each calendar day after July 1, 1999 up to and including
the actual Closing Date.
Section 1.5 Amendment to Article II of the Acquisition Agreement.
----------------------------------------------------
The parties hereto acknowledge and agree that Section 2.4 of the Acquisition
Agreement is hereby amended by adding the following paragraphs at the conclusion
thereof:
"(f) The authorized capital stock of CIGNA Conference Facilities,
Inc. consists of one thousand (1,000) shares, par value $1.00 per share, of
common stock (the "Conference Facilities Common Stock"). One thousand (1,000)
shares (the "CF Securities") of Conference Facilities Common Stock are issued
and outstanding, all of which are owned by CIGNA Properties, Inc. free and clear
of all Liens. No shares of any other class or series of capital stock of CIGNA
Conference Facilities, Inc. are authorized, issued or outstanding. The CF
Securities have been validly issued and are fully paid and non-assessable and
are owned by CIGNA Properties, Inc. free and clear of all Liens. All of the
equity interests in the subsidiaries of Conference Facilities, Inc. have been
validly issued and are fully paid and non-assessable (with respect to
jurisdictions which recognize such concept) and are owned free and clear of all
Liens.
2
<PAGE>
(g) The authorized capital stock of CIGNA Properties, Inc. consists
of one thousand (1,000) shares, par value $1.00 per share, of common stock (the
"CIGNA Properties Common Stock"). One thousand (1,000) shares (the "CP
Securities") of CIGNA Properties Common Stock are issued and outstanding, all of
which are owned by CIGNA Holdings free and clear of all Liens. No shares of any
other class or series of capital stock of CIGNA Properties, Inc. are authorized,
issued or outstanding. The CP Securities have been validly issued and are fully
paid and non-assessable and are owned by CIGNA Holdings free and clear of all
Liens. All of the equity interests in the subsidiaries of CIGNA Properties,
Inc. have been validly issued and are fully paid and non-assessable (with
respect to jurisdictions which recognize such concept) and are owned free and
clear of all Liens. Upon consummation of the transactions contemplated by this
Agreement, the Purchaser (or its designee) will acquire from CIGNA Holdings good
title to the CP Securities free and clear of all Liens, except for restrictions
on transfer which arise under the Securities Act and any comparable Laws."
Section 1.6 Foreign Pension Plans. Effective as of the date hereof,
---------------------
Section 5.2(e) of the Acquisition Agreement is amended to read in its entirety
as follows:
"(e) As soon as practicable following the Closing Date (or the
Subsequent Closing Date, as the case may be), the Purchaser shall assume all
assets and liabilities under all Foreign Pension Plans covering Affected
Employees, except as otherwise provided in the proposal set forth in the letter
dated June 25, 1999, attached hereto as Exhibit 1.6 (the "Foreign Pension Plan
Letter"). With respect to such Foreign Pension Plans, CIGNA and the Purchaser
agree to cooperate and use their respective Reasonable Best Efforts to
implement, as soon as practicable following the Closing Date (or Subsequent
Closing Date, as the case may be), an equitable, appropriate and efficient
allocation of assets and liabilities thereunder as between Affected Employees,
employees retained by CIGNA and former employees substantially as contemplated
in the proposal set forth in the Foreign Pension Plan Letter."
Section 1.7 Transfer Costs. Notwithstanding anything to the contrary
--------------
in Section 4.8 of the Acquisi-
3
<PAGE>
tion Agreement, the Sellers and the Purchaser agree that all costs incurred upon
the conveyance of any equity interest in an Acquired Company from an Excluded
Business shall be allocated in the following manner: (i) CIGNA and the Purchaser
shall each pay 50% of the aggregate amount of all expenses incurred upon the
conveyance of the equity interest in Seguros CIGNA, S.A. from GRANCOL,
Asesoramiento y Servicios Ltd. (Columbia) to AFIA Finance Corporation; (ii)
CIGNA and the Purchaser shall each pay 50% of all Transfer Taxes incurred upon
the conveyance of any equity interest in an Acquired Company from an Excluded
Business; and (iii) CIGNA shall reimburse the Purchaser for any consideration
paid upon the conveyance of any equity interest in an Acquired Company from an
Excluded Business.
Section 1.8 Payment of Purchase Price. In the event (i) the
-------------------------
Purchaser fails to deliver to CIGNA Holdings all or a portion of the Purchase
Price by wire transfer of immediately available funds to an account designated
in writing by CIGNA Holdings by 10:00 a.m., New York City time, on the Closing
Date and (ii) CIGNA Holdings is unable utilizing commercially reasonable efforts
to timely invest for one or, in the event that the Closing Date precedes a
weekend or a holiday or both, more calendar days all or such portion of the
Purchase Price which has not been delivered in such manner by such time in
financial instruments yielding at a minimum a rate equal to the Federal Funds
Rate, the Purchaser shall reimburse CIGNA Holdings in an amount equal to the
product determined by multiplying (x) an amount equal to the excess (if any)
of the Federal Funds Rate over the rate (if any) at which the funds were
invested on the Closing Date by (y) the number of calendar days from (and
including) the Closing Date through the first business day following the Closing
Date. For the purposes of this Amendment, "Federal Funds Rate" shall mean the
average of the high and low federal fund rates as quoted in the Wall Street
Journal on Money Rates on the Closing Date. Notwithstanding anything to the
contrary in this Amendment, the Purchaser's reimbursement obligations under this
Section 1.9 shall apply for the period on and after the Closing Date until the
first business day after the Closing Date.
Section 1.9 Equity Insurance Joint Ventures. The definition of
-------------------------------
"Equity Insurance Joint Ventures" in
4
<PAGE>
Section 10.1 of the Acquisition Agreement shall be amended to read in its
entirety as follows:
""Equity Insurance Joint Ventures" means P.T. Asuransi CIGNA
Indonesia, an Indonesian corporation, and Perdana CIGNA Insurance Berhad, a
Malayasian company."
Section 1.10 Incorrect Dating. To the extent any documents,
----------------
agreements or instruments executed and delivered at the Closing by the parties
hereto or any of their affiliates have been dated July 1, 1999, each of the
parties hereto acknowledge and agree (on behalf of itself and its affiliates)
that such documents, agreements and instruments were incorrectly dated July 1,
1999 and are hereby amended to be dated the Closing Date.
ARTICLE II
MISCELLANEOUS
Section 1.11 Amendment; Entire Agreement. This Amendment is limited
---------------------------
precisely as written and shall not be deemed to be an amendment to any other
terms or conditions of the Acquisition Agreement. Whenever the Acquisition
Agreement is referred to in the Acquisition Agreement or in any other
agreements, documents and instruments, such reference shall be deemed to be to
the Acquisition Agreement as amended by this Amendment. There is no
restriction, agreement, promise, warranty, covenant or undertaking with respect
to the transactions contemplated hereby other than those expressly set forth
therein or herein.
Section 1.12 Counterparts. This Amendment may be executed in two or
------------
more counterparts, all of which will be considered one and the same agreement
and each of which will be deemed an original.
Section 1.13 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAW THEREOF.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Acquisition Agreement to be duly executed as of the day and year first above
written.
CIGNA CORPORATION
By: /s/ Paul Rohrkemper
Paul H. Rohrkemper
Senior Vice President
CIGNA HOLDINGS, INC.
By: /s/ Joanne L. Dorak
Joanne L. Dorak
President
ACE LIMITED
By: /s/ Peter Mear
Peter N. Mear
General Counsel & Secretary
<PAGE>
EXHIBIT 99.1
INFORMATION TECHNOLOGY SERVICES AGREEMENT
BY AND BETWEEN
ACE INA HOLDINGS INC.
AND
INTERNATIONAL BUSINESS MACHINES CORPORATION
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. BACKGROUND AND OBJECTIVES.................................................................... 1
2. DEFINITIONS AND DOCUMENTS.................................................................... 2
2.1 Definitions......................................................................... 2
2.2 Other Terms......................................................................... 9
2.3 Associated Contract Documents....................................................... 10
3. TERM......................................................................................... 10
3.1 Initial Term........................................................................ 10
3.2 Extension........................................................................... 10
4. SERVICES..................................................................................... 11
4.1 Overview............................................................................ 11
4.2 Transition Services................................................................. 12
4.3 Transfer Assistance Services........................................................ 13
5. REQUIRED CONSENTS............................................................................ 16
6. FACILITIES, SOFTWARE, EQUIPMENT, CONTRACTS AND ASSETS ASSOCIATED WITH THE
PROVISION OF SERVICES........................................................................ 17
6.1 Service Facilities.................................................................. 17
6.2 Software............................................................................ 19
6.3 Equipment........................................................................... 20
6.4 Third Party Contracts............................................................... 21
6.5 Assignment of Licenses, Leases and Related Agreements............................... 21
6.6 License to ACE Software............................................................. 22
6.7 License to IBM Owned Software....................................................... 22
6.8 Access to Third Party Software and Maintenance...................................... 23
6.9 Acquired Assets..................................................................... 23
6.10 Notice of Defaults.................................................................. 23
6.11 Thornton Data Center................................................................ 24
7. SERVICE LEVELS............................................................................... 24
7.1 General............................................................................. 24
7.2 Service Level Credits............................................................... 24
7.3 Problem Analysis.................................................................... 24
7.4 Continuous Improvement Reviews...................................................... 24
7.5 Measurement and Monitoring.......................................................... 25
7.6 ACE Satisfaction Surveys............................................................ 25
8. PROJECT PERSONNEL............................................................................ 25
8.1 Transitioned Personnel.............................................................. 26
8.2 Employee Benefit Plans.............................................................. 27
8.3 Other Employee Matters.............................................................. 29
8.4 Key IBM Personnel .................................................................. 29
8.5 IBM Project Executive............................................................... 30
</TABLE>
<PAGE>
<TABLE>
<S> <C>
8.6 IBM Personnel Are Not ACE Employees............................ 30
8.7 Replacement, Qualifications, and Retention of IBM Personnel.... 30
8.8 Training/Career Opportunities.................................. 31
8.9 Conduct of IBM Personnel....................................... 31
8.10 Substance Abuse................................................ 31
9. IBM RESPONSIBILITIES.................................................... 31
9.1 Policy and Procedures Manual................................... 31
9.2 Cooperation with ACE Third Party Contractors................... 32
9.3 Reports........................................................ 33
9.4 Meetings....................................................... 34
9.5 Quality Assurance.............................................. 34
9.6 Architecture, Standards and Information Technology Planning.... 35
9.7 Change Control................................................. 35
9.8 Software Currency.............................................. 36
9.9 Year 2000 Compliance........................................... 37
9.10 Access to Specialized IBM Skills and Resources................. 38
9.11 Audit Rights................................................... 38
9.12 Agency and Disbursements....................................... 40
9.13 Subcontractors................................................. 41
10. ACE RESPONSIBILITIES.................................................... 41
10.1 Responsibilities............................................... 41
10.2 Savings Clause................................................. 42
11. CHARGES................................................................. 42
11.1 General........................................................ 42
11.2 Retained and Pass-Through Expenses............................. 42
11.4 Taxes ........................................................ 43
11.5 New Services................................................... 44
11.6 Extraordinary Events........................................... 45
11.7 Technology..................................................... 46
11.8 Projects....................................................... 47
11.9 Proration...................................................... 47
11.10 Refundable Items............................................... 47
11.11 ACE Benchmarking Reviews....................................... 48
12. INVOICING AND PAYMENT................................................... 49
12.1 Invoicing...................................................... 49
12.2 Payment Due.................................................... 49
12.3 Set Off........................................................ 50
12.4 Disputed Charges............................................... 50
13. ACE DATA AND OTHER PROPRIETARY INFORMATION.............................. 50
13.1 ACE Ownership of ACE Data...................................... 50
13.2 Safeguarding ACE Data.......................................... 51
13.3 Confidentiality................................................ 51
13.4 File Access.................................................... 54
14. OWNERSHIP OF MATERIALS.................................................. 54
14.1 ACE Owned Materials............................................ 54
</TABLE>
<PAGE>
<TABLE>
<S> <C>
14.3 IBM Owned Materials......................................... 55
14.4 Other Materials............................................. 55
14.5 General Rights.............................................. 55
14.6 ACE Rights Upon Expiration or Termination of Agreement...... 55
15. REPRESENTATIONS AND WARRANTIES....................................... 57
15.1 Work Standards.............................................. 57
15.2 Maintenance................................................. 57
15.3 Efficiency and Cost Effectiveness........................... 57
15.4 Technology.................................................. 58
15.5 Software.................................................... 58
15.6 Non-Infringement............................................ 59
15.7 Authorization............................................... 59
15.8 Inducements................................................. 59
15.9 Malicious Code.............................................. 60
15.10 Disabling Code.............................................. 60
15.11 Compliance With Laws........................................ 60
15.12 Ownership of ACE Machines................................... 60
15.13 Environmental Warranty...................................... 60
15.14 Remedy...................................................... 61
15.15 Disclaimer.................................................. 61
16. INSURANCE AND RISK OF LOSS........................................... 61
16.1 Insurance................................................... 61
16.2 Risk of Loss................................................ 62
17.1 Indemnity by IBM............................................ 62
17.2 Indemnity by ACE............................................ 64
17.3 Additional Indemnities...................................... 65
17.4 Infringement................................................ 65
17.5 Environmental............................................... 65
17.6 Indemnification Procedures.................................. 66
17.7 Indemnification Procedures -- Governmental Claims........... 67
17.8 Subrogation................................................. 68
18. LIABILITY............................................................ 68
18.1 General Intent.............................................. 68
18.2 Force Majeure............................................... 68
18.3 Limitation of Liability..................................... 69
19. CONTRACT GOVERNANCE AND DISPUTE RESOLUTION........................... 71
19.1 Informal Dispute Resolution................................. 71
19.2 Mediation................................................... 72
19.3 Jurisdiction................................................ 72
19.4 Continued Performance....................................... 72
19.5 Governing Law............................................... 72
19.6 Expiration of Claims........................................ 72
20. TERMINATION.......................................................... 72
Termination for Cause................................................ 72
..................................................................... 74
</TABLE>
<PAGE>
<TABLE>
<S> <C>
21. GENERAL........................................................... 74
21.1 Binding Nature and Assignment............................ 74
21.2 Entire Agreement; Amendment.............................. 75
21.3 Compliance with Laws and Regulations..................... 75
21.4 Notices.................................................. 75
21.5 Counterparts............................................. 76
21.6 Headings................................................. 77
21.7 Relationship of Parties.................................. 77
21.8 Severability............................................. 77
21.9 Consents and Approval.................................... 77
21.10 Waiver of Default; Cumulative Remedies................... 77
21.11 Survival................................................. 78
21.12 Publicity................................................ 78
21.13 Service Marks............................................ 78
21.14 Export................................................... 78
21.15 Third Party Beneficiaries................................ 78
21.16 Order of Precedence...................................... 78
21.17 Hiring of Employees...................................... 79
21.18 Further Assurances....................................... 79
21.19 Liens.................................................... 79
21.20 Covenant of Good Faith................................... 79
21.21 Acknowledgment........................................... 79
21.22 Related Entities ........................................ 79
21.23 Remarketing.............................................. 80
21.24 Right to Perform Services for Others..................... 80
21.25 Geographic Scope of Services............................. 80
</TABLE>
<PAGE>
SCHEDULES
A Applications Software
B Systems Software
C Key IBM Positions and Personnel and Critical Support Personnel
D Subcontractors
E Statement of Work and Responsibility Matrix
E.1 Financial and Operational Responsibility for Software and Related Third
Party Contracts
E.2 Financial and Operational Responsibility for Equipment and Related
Leases and Third Party Contracts
E.3 Deliverables
F.1 Acquired Assets
F.2 Equipment Leases
F.3 Third Party Services Contracts
F.4 Third Party Software
G Service Levels and Performance Credits
H Transition Plan
I Transfer Assistance Services
J IBM Charges and Measures of Utilization
K ACE IT Base Case
L Additional Projects
M Affected Employees and Human Resources Provisions
M.1 Employee Benefit Plans
N Termination Charges
O Data Centers
O.1 ACE Facilities
O.2 IBM Facilities
P [Reserved]
Q Direct IBM Competitors
R Reports
S Satisfaction Survey/Balanced Score Card
T.1 ACE Equipment
T.2 IBM Equipment
<PAGE>
INFORMATION TECHNOLOGY SERVICES AGREEMENT
This Information Technology Services Agreement (the "Agreement") is
---------
executed this ___________ ___, 1999 (the "Effective Date") by and between ACE
--------------
INA Holdings Inc., a Delaware corporation having offices at 1601 Chestnut
Street, Two Liberty Place, Philadelphia, Pennsylvania, 19192-2211 ("ACE") and
---
International Business Machines Corporation, a New York corporation having
offices at Route 100, Somers, NY ("IBM").
---
WHEREAS, ACE and IBM have engaged in extensive negotiations,
discussions and due diligence that have culminated in the formation of the
contractual relationship described in this Agreement;
WHEREAS, ACE desires to procure from IBM, and IBM desires to provide to
ACE, the information technology products and services described in this
Agreement, on the terms and conditions specified herein;
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, and of other good and valid consideration, the receipt and
sufficiency of which is hereby acknowledged, ACE and IBM (collectively, the
"Parties" and each, a "Party") hereby agree as follows:
------- -----
1. BACKGROUND AND OBJECTIVES
1.1 ACE desires that certain information technology services presently
performed and managed by or for ACE, and certain additional information
technology services, as each is described in this Agreement, be
performed and managed by IBM. IBM has carefully reviewed ACE's
requirements, has performed initial due diligence, and desires to
perform and manage such information technology services for AC E.
1.2 The Parties acknowledge and agree that the specific goals and
objectives of the Parties in entering into this Agreement are to:
. Provide services that meet ACE's needs and show steady
improvement;
. Align information technology with business drivers;
. Permit ACE to focus its internal resources on its core
competencies;
. Accelerate the deployment of a single integrated information
technology strategy;
. Provide better cost visibility and variability to ACE for improved
cost management and information technology investment leverage;
. Reduce information technology assets as appropriate;
. Achieve cost savings consistent with IBM's representations to ACE
regarding cost savings;
. Reduce the complexity of ACE's information technology
organization;
. Obtain a fair return for IBM's shareholders for the Services
provided and assets acquired; and
. Increase the scope of the Services to IBM by adding new recipients
and new services.
Ace/IBM Proprietary Information
<PAGE>
1.3 The provisions of this Article 1 are intended to be a general
---------
introduction to this Agreement and are not intended to expand the scope
of the Parties' obligations or alter the plain meaning of this
Agreement's terms and conditions, as set forth hereinafter. However, to
the extent the terms and conditions of this Agreement are unclear or
ambiguous, such terms and conditions are to be construed so as to be
consistent with the background and objectives set forth in this
Article 1.
---------
2. DEFINITIONS AND DOCUMENTS
2.1 Definitions
As used in this Agreement:
"ACE Business" means the business of providing property and casualty
------------
insurance and property and casualty insurance services.
"ACE Data" means any data or tangible information of ACE or any
--------
Eligible Recipient that is provided by ACE or any Eligible Recipient to
IBM in the performance of its obligations under this Agreement,
including data and information with respect to the businesses,
customers, operations, facilities, products, consumer markets, assets,
and finances of ACE or any Eligible Recipient. ACE Data also shall mean
any data or information created, generated, collected or processed by
IBM (a) as a deliverable, or (b) which is necessary for ACE to provide
to itself, or obtain from third parties, the Services, and is used by
IBM explicitly and exclusively to provide the Services to ACE or the
Eligible Recipients. ACE Data shall not include any data or tangible
information relating to IBM's customer list; IBM's employment
relationship with IBM employees; the manner in which IBM operates;
technology that relates to the IBM Business and not to the ACE
Business; facilities of IBM; consumer markets for services or products
of IBM; IBM products; IBM capacities, IBM systems; IBM procedures; IBM
security practices at IBM Facilities; research, templates and
development conducted by IBM that is not paid for by ACE; IBM business
affairs; and IBM finances.
"ACE Facilities" means the facilities provided by ACE or the Eligible
--------------
Recipients for the use of IBM to the extent necessary to provide the
Services. For the purposes of this Agreement, the Thornton Data Center
is an ACE Facility unless or until IBM purchases, or causes to be
purchased, the Thornton Data Center.
"ACE Owned Developed Materials" means all Materials created by IBM for
-----------------------------
ACE or an Eligible Recipient that relate only to the ACE Business and
arise in IBM's performance of the Services.
"ACE Owned Materials" shall mean: (a) the Materials owned by ACE as of
-------------------
the Commencement Date and not conveyed to IBM pursuant to this
Agreement and all enhancements and derivative works of such Materials,
including United States and foreign intellectual property rights in
such Materials, and (b) the ACE Owned Developed Materials. ACE Owned
Materials do not include any IBM Owned Materials in existence on the
Effective Date.
"ACE Owned Software" means Applications Software owned by ACE and
------------------
listed in Schedule A.
----------
"ACE Personnel" means the employees, agents, contractors or
-------------
representatives of ACE, including employees of CIGNA who ACE will hire
pursuant to the Acquisition Agreement who performed any of the Services
to be provided by IBM hereunder.
"ACE Project Executive" shall have the meaning given such term in
---------------------
Section 10.1.
------------
Ace/IBM Proprietary Information
2
<PAGE>
"ACE Sites" or "Sites" means the offices or other facilities listed on
--------- -----
Schedule O.1 at or to which IBM is to provide the Services.
------------
"ACE Third Party Contractors" shall have the meaning given such term
---------------------------
in Section 9.2.
-----------
"Acquired Assets" means the Equipment, Software and other assets listed
---------------
on Schedule F.1.
------------
"Acquired Assets Credit" means the amount that IBM will pay to ACE as
----------------------
consideration for the Acquired Assets.
"Acquisition Agreement" means that certain Acquisition Agreement dated
---------------------
as of January 11, 1999, by and among CIGNA Corporation, CIGNA
Holdings, Inc. and ACE Limited.
"Additional Resource Charge" or "ARC" means the charge for additional
--------------------------
utilization of Services in excess of the defined Resource Baseline
volume, as set forth in Schedule J.
----------
"Additional Services" means quantities of Services that exceed the
-------------------
defined Resource Baseline volumes for such Services. Charges for
Additional Services will be at the ARC rate specified in the Agreement.
"Affiliate" means, generally, with respect to any Entity, any other
---------
Entity Controlling, Controlled by or under common Control with such
Entity.
"Agreement" shall have the meaning given such term in the preamble to
---------
this Agreement.
"Applications Software" or "Applications" means those software
--------------------- ------------
application programs and programming (and all modifications,
replacements, upgrades, enhancements, documentation, materials and
media related thereto) listed in Schedule A.
----------
"Charges" means the amounts set forth in this Agreement as charges for
-------
the Services.
"CIGNA" means CIGNA Holdings, Inc. and its Affiliates.
-----
"CIGNA Services" means all functions and services performed by CIGNA as
--------------
described in the CIGNA Services Directory dated September 11, 1998, to
those portions of CIGNA that were acquired by ACE pursuant to the
Acquisition Agreement.
"Commencement Date" means the date upon which the closing of the
-----------------
transaction contemplated by the Acquisition Agreement occurs, or such
other date as the Parties may agree upon in writing as the date on
which IBM will assume full responsibility for the Services described in
the Agreement.
"Contract Year" means a period during the Term commencing on the
-------------
Commencement Date or an anniversary thereof and ending on the date one
(1) year thereafter (or, if earlier, on the last day of the Term). If
any Contract Year is less than twelve (12) months, the rights and
obligations under this Agreement for that period will be
proportionately adjusted.
"Control" and its derivatives mean the legal, beneficial, or equitable
-------
ownership, directly or indirectly, of more than 50% of the aggregate of
all voting equity interests in an Entity or equity interests having the
right to more than 50% of the profits of an Entity or, in the event of
dissolution, to more than 50% of the assets of an Entity
Ace/IBM Proprietary Information
3
<PAGE>
and, in the case of a general partnership, also includes the holding by
an Entity (or one of its Affiliates) of the position of sole general
partner.
"Critical Support Personnel" means those ACE Personnel identified in
--------------------------
Schedule C as critical to the ongoing success of IBM's delivery of
----------
information technology services to ACE and the Eligible Recipients,
which ACE Personnel will become IBM Personnel in connection with this
Agreement.
"Data Center" means any controlled, consolidated and specialized
-----------
location where computing equipment (e.g., mainframe, midrange,
telecommunications or server hardware) resides for the delivery of the
Services to ACE as set forth in Schedule O.
----------
"Developed Materials" shall mean the ACE Owned Developed Materials and
-------------------
the IBM Owned Developed Materials.
"Effective Date" shall have the meaning given such term in the preamble
--------------
to this Agreement.
"Eligible Recipients" means the Entities listed in Schedule P.
------------------- ----------
"End User" means ACE and all Eligible Recipients designated by ACE to
--------
receive Services provided by IBM and the Personnel of each of them.
"Entity" means a corporation, partnership, joint venture, trust,
------
limited liability company, association or other organization or legal
entity.
"Equipment" means all mainframe, midrange, distributed, network,
---------
telecommunications, and related computing equipment procured, provided,
operated, supported, or used by IBM and required to perform the
Services. Equipment used in ACE Facilities is set forth in Schedules
---------
T.1 and T.2.
--- ---
"Equipment Leases" means all leasing arrangements whereby ACE leases
----------------
Equipment as of the Commencement Date which will be used by IBM to
perform the Services after such Commencement Date as set forth in
Schedule F.2.
------------
"Event of Loss" shall have the meaning given such term in Section 16.2.
------------- ------------
"Exclusive Services" means all Services that are so designated in
------------------
Schedule E.
----------
"Extraordinary Event" shall have the meaning given such term in
-------------------
Section 1 1.6.
-------------
"Full Time Equivalent" or "FTE" means a level of effort, excluding
-------------------- ---
vacation and other non-productive time (but including a reasonable
amount of overtime), equivalent to that which would be provided by one
person working full time for one year. Unless otherwise agreed, one FTE
is assumed to be 1650 productive hours annually.
"Hazardous Materials" means: (i) any "hazardous substance" as defined
-------------------
in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended from time to time (42 USC 9601 et seq.) and the
regulations promulgated thereunder; (ii) any asbestos or
asbestos-containing materials; (iii) petroleum, crude oil or any
fraction thereof, natural gas or synthetic gas used for fuel; and (iv)
any additional substances or materials which at such time are
classified or considered to be hazardous or toxic under the laws of the
state wherein the facilities in question are located.
Ace/IBM Proprietary Information
4
<PAGE>
"IBM Business" means the business of providing information technology
------------
services and developing information technology products.
"IBM Facilities" means the facilities listed in Schedule O.
-------------- ----------
"IBM Owned Developed Materials" means Materials created by IBM for ACE
-----------------------------
or an Eligible Recipient in connection with the Services that do not
relate solely to the ACE Business.
"IBM Owned Materials" shall mean: (i) the Materials owned by IBM as of
-------------------
the Commencement Date, (ii) Materials acquired by IBM on or after the
Commencement Date (including any such Materials acquired from ACE
pursuant to this Agreement) and used by IBM in the performance of the
Services, (iii) derivative works of IBM Software created by IBM; (iv)
IBM Owned Developed Materials and (v) Materials developed by IBM other
than in the course of the performance of its obligations under this
Agreement. IBM Owned Materials do not include any ACE Owned Materials
in existence on the Effective Date.
"IBM Owned Software" means any Software owned by IBM and used to
------------------
provide the Services and which is listed in Schedule B.
"IBM Personnel" means Personnel of IBM who are assigned to perform any
-------------
Services under this Agreement.
"IBM Project Executive" shall have the meaning given such term in
---------------------
Section 8.5 and shall describe the IBM representative responsible for
-----------
both the day to day relationship with ACE as well as the delivery of
the Services to ACE.
"Include" and its derivatives mean including without limitation. This
-------
term is as defined, whether or not capitalized in this Agreement.
"Information Systems Plan" means the information and hardware/software
------------------------
architecture plan described in Section 9.6.
"Key IBM Personnel" means the IBM Personnel filling the positions
-----------------
designated in Schedule C as Key IBM Personnel.
----------
"LAN" means a network in a physically confined region or space,
---
typically within a single building or campus. LAN includes the
electronic device (e.g., the router, switch or bridge) that is
connected to a WAN.
"Laws" mean all federal, state and local laws, statutes, regulations,
----
rules, executive orders, supervisory requirements, directives,
interpretive letters and other official releases of or by any
government, or any authority, department or agency thereof.
"Losses" mean all losses, liabilities, damages and claims (including
------
taxes), and all related costs and expenses (including reasonable legal
fees and disbursements and reasonable costs of investigation,
litigation, settlement, judgment, interest and penalties).
"Major Release" means a release of Software that includes major feature
-------------
enhancements. These releases are identified by full integer changes in
the numbering, such as from "7.0" to "8.0", but may be identified by
the industry as a major release without the accompanying integer
change.
Ace/IBM Proprietary Information
5
<PAGE>
"Malicious Code" means (i) any code, program, or sub-program whose
--------------
knowing or intended purpose is to damage or interfere with the
operation of the computer system containing the code, program or
sub-program, or to intentionally halt, disable or interfere with the
operation of the Software, code, program, or sub-program, itself, or
(ii) any device, method, or token that permits any person to circumvent
the normal security of the Software or the system containing the code.
"Materials" means, collectively, Software, literary works, other works
---------
of authorship, specifications, design documents and analyses, programs,
program listings, programming tools, documentation, reports, drawings
and similar work product.
"Minor Release" means a release of software consisting of relatively
-------------
minor enhancements or corrections to known errors or faults. These
releases are identified by a change in the decimal numbering of a
release, such as "7.12" to "7.13".
"New Services" means services that (a) are different from the Services
------------
and (b) require resources not covered by an existing charging
methodology (i.e., resources for which there is a Resource Baseline) or
require start-up expenses (i.e., payments by the provider of such
services for additional Equipment or Software).
"New Technology" shall have the meaning given such term in Section
-------------- -------
11.7(b).
-------
"Non-Exclusive Services" means all Services that are not Exclusive
----------------------
Services.
"Non-Standard" means a software or hardware product that is not
------------
Standard.
"Out-of-Pocket Expenses" means reasonable and actual out-of-pocket
----------------------
expenses incurred by IBM for which IBM is entitled to be reimbursed by
ACE under this Agreement.
"Pass-Through Expenses" means the expenses listed in Schedule J for
--------------------- ----------
which ACE has agreed in advance to be responsible, in accordance with
Article 11 of this Agreement, following review of the third party
----------
invoice by IBM for accuracy.
"Performance Standards" means, individually and collectively, (i) the
---------------------
Service Levels and the other quantitative and qualitative performance
standards and commitments for the Services contained in Schedule G and
----------
(ii) all Laws applicable to the provision of the Services.
"Personnel" means, with respect to an Entity, the employees, agents,
---------
contractors and representatives of such Entity.
"Policy and Procedures Manual" shall have the meaning given such term
----------------------------
in Section 9.1.
-----------
"Proprietary Information" shall have the meaning given such term in
-----------------------
Section 13.3.
------------
"Reduced Resource Credit" or "RRC" means the credit for reduced
-----------------------
utilization of the Services below the defined Resource Baseline volume,
as set forth in Schedule J.
----------
"Reports" shall have the meaning given such term in Section 9.3.
------- -----------
"Required Consent Costs" shall have the meaning given such term in
----------------------
Section 5(a).
------------
Ace/IBM Proprietary Information
6
<PAGE>
"Required Consents" means the consents (if any) required to be
-----------------
obtained: (i) to assign or transfer to IBM any Third Party Software,
Third Party Service Contracts, Equipment Leases or Acquired Assets
(including related warranties); (ii) to grant IBM the right to use
and/or access the ACE Owned Software and Third Party Software in
connection with providing the Services; (iii) to grant ACE and the
Eligible Recipients during the Term the right to use and/or access the
IBM Owned Software, IBM Third Party Software and Equipment programming
acquired, operated, supported or used by IBM in connection with
providing the Services; (iv) if necessary, to assign or transfer to ACE
any Developed Materials, (v) to assign or transfer to ACE or its
designee IBM Owned Software and Third Party Software following the Term
to the extent provided in this Agreement; and (vi) all other consents
required from third parties in connection with IBM's provision of the
Services.
"Resource Baselines" or "Baselines" are the annual volumes of specific
------------------ ---------
resources or services expected to be delivered or performed by IBM
under this Agreement. If ACE's actual usage of such resources or
services exceeds or falls below the defined Resource Baseline, such
usage may result in Additional Resource Charges or Reduced Resource
Charges.
"Resource Unit" ("RU") means a particular unit of resource, as
------------- --
described in Schedule J, which is measured to determine ACE's actual
----------
utilization of such resource compared to the applicable Resource
Baseline for purposes of calculating ARCs and RRCs as described in
Schedule J.
----------
"Retained Expenses" means the expenses listed in Schedule J that ACE
----------------- ----------
has agreed in advance to retain and pay directly to a third party, in
accordance with Article 11 of this Agreement.
----------
"Root Cause Analysis" means a formal process that diagnoses systemic or
-------------------
catastrophic problems to determine what corrective action should be
taken to eliminate repeat failures.
"Service Taxes" means all sales, lease, service, value-added, use,
-------------
personal property, excise, consumption, and other taxes or duties that
are assessed against either Party on the provision of the Services as a
whole, or on any particular Service received by ACE or the Eligible
Recipients from IBM.
"Services" means, collectively: (i) the services, functions and
--------
responsibilities set forth in Article 4 and Schedule E as they may be
----------
supplemented, enhanced, modified or replaced by mutual agreement during
the Term in accordance with this Agreement, and (ii) any New Services.
"Service Levels" means the quantitative performance standards for the
--------------
Services set forth in Schedule G.
----------
"Service Level Credits" shall have the meaning given such term in
---------------------
Section 7.2 and Schedule G.
----------- ----------
"Software" means software programs (including compilers, database
--------
management software, applications software, system software, utilities
and other software programs), all associated documentation and all
versions, Upgrades and enhancements to the same.
"Specialized Services" shall have the meaning given such term in
--------------------
Section 9.10.
------------
"Standard" means those legacy hardware and software products that are
--------
as of the date of acquisition or installation designated in or
consistent with the product standards established by ACE and agreed to
by IBM. ACE may establish multiple standards as to each category of
products and may change these product standards from time to time at
its option subject to the Change Management process.
Ace/IBM Proprietary Information
7
<PAGE>
"Subcontractors" means subcontractors of IBM, including those approved
--------------
in writing by ACE. The initial list of mutually agreeable
Subcontractors is set forth on Schedule D, which may be amended during
the Term with ACE's prior written approval which approval will not be
unreasonably withheld.
"System Change" means any change to the operating environment including
-------------
changes to programs, manual procedures, job control language
statements, distribution parameters, or schedules.
"Systems Facilities Agreement" means that certain Systems Facilities
----------------------------
Agreement between INA Corporation and Connecticut General Life
Corporation executed in connection with the Acquisition Agreement, in
the version of the same provided to IBM on the Effective Date.
"Systems Software" means all software programs and programming (and all
----------------
modifications, replacements, upgrades, enhancements, documentation,
materials and media related thereto) that perform tasks basic to the
functioning of the Equipment and are required to operate the
Applications Software or otherwise support the provision of Services by
IBM, including operating systems, systems utilities, data security
software, network monitoring and database managers. Systems Software is
set forth in Schedule B.
----------
"Targeted Cost Reductions" shall have the meaning given in Section
------------------------
11.6(b).
"Targeted Resource Reductions" shall have the meaning given such term
----------------------------
in Section 11.6(b).
"Term" means the period that commences as of 12:00:01 a.m., EST, on the
----
Commencement Date and continues until 12:00 midnight, EST, on June 30,
2009, unless this Agreement is terminated as provided herein or
extended as provided in Sections 3.2 or 20.5, in which case the Term
--------------------
shall end at 12:00 midnight on the effective date of such termination
or the date to which this Agreement is extended.
"Termination Charge" means the termination charges payable by ACE upon
------------------
termination pursuant to Sections 11.11, 20.3 or 20.4 as set forth in
----------------------------
Exhibit J-1. The Termination Charge shall be payable at such time the
-----------
termination is effective.
"Third Party Contracts" means all written third party agreements with
---------------------
ACE or IBM that have been used to provide the Services, including
licenses to Third Party Software. Third Party Contracts are set forth
in Schedule F.3. Third Party Contracts also shall include those third
------------
party agreements entered into by IBM following the Commencment Date.
"Third Party Software" means all Software products (and all
--------------------
modifications, replacements, upgrades, enhancements, documentation,
materials and media related thereto) that are provided under license or
lease to IBM or ACE and for which IBM is financially, administratively
or operationally responsible under Schedule E.1. Third Party Software
------------
is set forth in Schedules B and F.4.
-------------------
"Thornton Data Center" means the data center acquired by ACE pursuant
--------------------
to the Acquisition Agreement that is located in Thornton, Colorado,
excluding all personal property (including Software and Equipment)
located at such data center.
"Tower" shall mean each of the following Services described in Schedule
----- --------
E: (a) Data Center (including Mainframe Services); (b) Distributed
--
Management Services; (c) Network (including Managed Network Services,
Voice and Videoconferencing Network Services and Voice Network
Services) and (d) Application Enhancement/Maintenance.
Ace/IBM Proprietary Information
8
<PAGE>
"Transfer Assistance Services" means the termination/expiration
----------------------------
assistance requested by ACE to allow the Services to continue without
material interruption or material adverse effect, and to facilitate the
orderly transfer of the Services to ACE or its designee, as such
assistance is further described in Section 4.3 and Schedule I.
----------
"Transitioned Employees" means the ACE Personnel who accept IBM's offer
----------------------
of employment and become employed by IBM pursuant to Sections 8.1 and
----------------
8.2.
---
"Transition Milestone" means a date identified on the Transition Plan
--------------------
as a milestone by which IBM shall have completed a certain task or set
of tasks in the Transition Plan in a manner acceptable to ACE. The
Parties acknowledge and agree that the failure to complete such tasks
by the specified dates may have an adverse impact on contract
operations.
"Transition Period" means the period that commences on the Commencement
-----------------
Date, and expires upon completion by IBM of all tasks specified in the
Transition Plan but in no event later than two (2) years after the
Commencement Date.
"Transition Plan" means the plan set forth in Schedule H.
---------------
"Upgrade" and its derivatives mean the Services to be provided by IBM
-------
in connection with the updating, renovation, and/or replacement of
Software or Equipment by IBM. Unless otherwise agreed, financial
responsibility for the costs, fees and expenses associated with an
update, renovation or replacement of Software or Equipment shall be
allocated between the Parties in accordance with Sections 6.2, 6.3 and
-----------------
6.4 and Schedules J.1 and J.2.
--- ------------- ---
"WAN" means a wide area network, which links LANs.
---
"Year 2000 Compliant" or "Year 2000 Compliance" shall have the meaning
------------------- --------------------
given such term in Section 9.9(a).
--------------
2.2 Other Terms
The terms defined in this Article include the plural as well as the
singular. Unless otherwise expressly stated, the words "herein,"
"hereof," and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section,
Subsection or other subdivision. Article, Section, Subsection and
Attachment references refer to articles, sections and subsections of,
and attachments to, this Agreement. The words "include" and "including"
shall not be construed as terms of limitation. The words "day,"
"month," and "year" mean, respectively, calendar day, calendar month
and calendar year, and the words "writing" or "written" mean preserved
or presented in retrievable or reproducible written form. Except as
provided in this Agreement, "writing" or "written" may mean electronic
(including E-mail transmissions where receipt is acknowledged by the
recipient, but excluding voice-mail), or hard copy, including by
facsimile (with acknowledgment of receipt from the recipient's
facsimile machine) unless otherwise stated. Other terms used in this
Agreement are defined in the context in which they are used and shall
have the meanings there indicated.
All references in this Agreement to Schedules denominated by letter
shall be deemed to refer to the Schedule denominated with such letter
and each subschedule of such Schedule (e.g., each reference to Schedule
--------
F shall be deemed to refer to Schedule F, Schedule F.1, Schedule F.2,
- ---------- ------------ ------------
Schedule F.3 and Schedule F.4). Each reference to a subschedule in this
------------ ------------
Agreement shall be deemed to be a reference to such subschedule, its
related
Ace/IBM Proprietary Information
9
<PAGE>
Schedule, and all subschedules of such Schedule (e.g, a reference to
Schedule F.1 shall be deemed to be a reference to Schedule F, Schedule
------------ ---------- --------
F.1, Schedule F.2, Schedule F.3 and Schedule F.4).
--- ------------ ------------ ------------
2.3 Associated Contract Documents
This Agreement includes each of the following schedules and their
attached exhibits, all of which are attached to this Agreement and
incorporated into this Agreement by this reference:
A Applications Software
B System Software
C Key IBM Positions and Personnel and Critical Support Personnel
D Subcontractors
E Statement of Work and Responsibility Matrix
F.1 Acquired Assets
F.2 Equipment Leases
F.3 Third Party Services Contracts
F.4 Third Party Software
G Service Levels and Performance Credits
H Transition Plan
I Transfer Assistance Services
J IBM Charges and Measures of Utilization
K Standards
L Additional Projects
M Affected Employees and Human Resources Provisions
M.1 Employee Benefit Plans
N [Reserved]
O.1 ACE Facilities
O.2 IBM Facilities
P Eligible Recipients
Q [Reserved]
R Reports
S Satisfaction Survey/Balanced Score Card
T Equipment
3. TERM
3.1 Initial Term
This Agreement shall come into full force and effect upon the
Commencement Date. If the closing of the Acquisition Agreement does not
occur on or before July 2, 1999, or such later date as may be agreed to
by the Parties, this Agreement shall be deemed void ab initio. This
Agreement shall continue throughout the Term, unless terminated earlier
or extended in accordance with this Agreement.
3.2 Extension
By giving written notice to IBM no less than one hundred eighty (180)
days prior to the expiration date of the initial Term, ACE shall have
the right to extend the Term for a one (1) year extension period on the
terms and conditions set forth in this Agreement (the "Extension
---------
Period"). If during the Extension Period, ACE and IBM desire to extend
------
the Term, the Parties will negotiate in good faith and agree upon
renewal terms and
Ace/IBM Proprietary Information
10
<PAGE>
conditions. If the Parties are unable to reach agreement upon renewal
prices, terms and conditions during this Extension Period, the
Agreement will expire at the end of the Extension Period.
4. SERVICES
4.1 Overview
(a) Description. Commencing on the Commencement Date, IBM shall
provide the Services to ACE, and to Eligible Recipients. The
Services shall consist of the services, functions and
responsibilities as set forth in this Agreement (including the
Schedules), and any subtasks that are not specifically
described in this Agreement but which are an inherent,
necessary or customary part of the Services, which subtasks
shall be deemed to be included within the scope of the
Services to be delivered for the base Charges, as if such
subtasks were specifically described in this Agreement.
Except as otherwise expressly provided in this Agreement, IBM
shall be responsible for providing the facilities, personnel,
Equipment, Software and other resources necessary to provide
the Services.
(b) Implementing Post-Effective Date Due Diligence. During the
ninety (90) day period following the Commencement Date, IBM
and ACE reserve the right to inventory, validate and update
any information that is reflected in or omitted from this
Agreement. If, during such period, inaccuracies are discovered
regarding the information reflected in this Agreement, this
Agreement shall be amended, and there shall be equitable
adjustments to the Charges and the related Resource Baselines.
If either Party disputes the inaccuracy, then the Parties will
submit the matter to the senior managers for dispute
resolution as specified in Section 19 of this Agreement.
----------
(c) Discovered Agreements. If payments by an Eligible Recipient
pursuant to an agreement not listed on Schedule E are
----------
contemplated (as reasonably determined from any financial due
diligence information disclosed to IBM prior to the Effective
Date) and, (a) within ninety (90) days after the Commencement
Date, ACE reasonably determines that such agreement should
have been listed as a Third Party Contract or Equipment Lease
for which IBM has financial, administrative or operational
responsibility, and (b) the payments by the Eligible Recipient
under such agreement, together with the payments under all
other agreements added to Schedule E pursuant to this Section
---------- -------
4.1 are not in excess of $200,000 per annum in the aggregate,
---
then ACE shall have the right, by notice to IBM, to add such
agreement on Schedule E and thereby to cause such agreement to
----------
constitute a Third Party Contract or Equipment Lease for which
IBM has financial, administrative and operational
responsibility for all purposes of this Agreement effective
from and after the Commencement Date, provided that IBM shall
not have responsibility for any breach of such agreement
(including any late payment penalties) occurring prior to
delivery of such notice and a copy of such agreement by ACE.
IBM and ACE will discuss in good faith any remaining
agreements for which IBM has no obligation to assume
financial, administrative or operational responsibility under
this Section 4.1(c).
--------------
(d) Exclusivity. Nothing in this Agreement shall be construed as a
requirements contract with respect to the Non-Exclusive
Services, and notwithstanding anything to the contrary
contained herein, this Agreement shall not be interpreted to
prevent ACE or any Eligible Recipient from obtaining from
third parties, or providing to itself, any or all of the
Non-Exclusive Services described in this Agreement. Nor shall
anything in this Agreement be construed or interpreted as
limiting ACE's right or ability during the Term to increase or
decrease the demand for Services, consistent with Schedule J.
----------
This Section 4.1(d) shall not be deemed to permit ACE to
--------------
terminate, and ACE may not terminate pursuant to this Section
-------
4.1(d), any obligation of IBM to perform any specific Service
------
that is
Ace/IBM Proprietary Information
11
<PAGE>
currently being performed by IBM (e.g., if IBM is performing
applications development services to develop a specified
application, ACE may not, by reference to this Section,
terminate such development. On the other hand, if ACE has not
yet selected the Entity that will perform such application
development services, because application development services
are Non-Exclusive Services, ACE may select IBM or any third
party or ACE to perform such services. If ACE selects IBM, IBM
will perform such services as specified in this Agreement.)
(e) Systems Facilities Agreement. Notwithstanding anything to the
contrary herein, IBM acknowledges that ACE may obtain any of
the CIGNA Services from CIGNA pursuant to the Systems
Facilities Agreement until the expiration of the Transition
Period or the completion of ACE's separation from CIGNA,
whichever occurs later.
4.2 Transition Services
(a) Transition. During the Transition Period, IBM shall perform
the transition activities and provide the deliverables which
are IBM's responsibilities set forth in the Transition Plan,
which is attached to this Agreement as Schedule H. Unless
----------
otherwise agreed, ACE shall not incur any charges, fees or
expenses payable to IBM or third parties in connection with
the Transition, other than those charges, fees and expenses
specified in Schedule J. During the Transition Period, ACE
----------
will perform those transition activities which are designated
to be ACE's responsibility in the Transition Plan.
Neither Party shall be obligated to perform any transition
tasks that are not set forth in the Transition Plan.
(b) Transition Plan. On or before ninety (90) days after the
Commencement Date, IBM shall deliver to ACE for ACE's review
and comment the detailed Transition Plan consistent with the
tasks outlined in Schedule H. The Transition Plan shall
----------
identify (i) the transition activities to be performed by IBM
and the significant components and subcomponents of each such
activity, (ii) the deliverables to be completed by IBM, (iii)
the date(s) by which each such activity or deliverable is to
be completed ("Transition Milestones"), (iv) the contingency
---------------------
or risk mitigation strategies to be employed by IBM in the
event of disruption or delay, and (v) any transition
activities (and the specific components and subcomponents of
each such activity) to be performed or transition resources to
be provided by ACE. Such detailed transition plan shall become
a part of the Transition Plan and be incorporated in Schedule
--------
H. The Transition Period may be extended by mutual agreement
-
of the Parties.
(c) Performance. IBM shall perform the tasks described in the
Transition Plan in accordance with the timetable and the
Transition Milestones set forth in the Transition Plan. IBM
shall provide all reasonable cooperation and assistance
required or requested by ACE in connection with ACE's
evaluation or testing of the deliverables set forth in the
Transition Plan. IBM shall perform the tasks described in the
Transition Plan in a manner that will not materially or
unnecessarily disrupt or adversely impact the business or
operations of ACE or the Eligible Recipients. IBM shall
identify and resolve, with ACE's reasonable assistance, any
problems that may impede or delay the timely completion of
each task in the Transition Plan that are IBM's responsibility
and shall use all reasonable efforts to assist ACE with the
resolution of any problems that may impede or delay the timely
completion of each task in the Transition Plan that are ACE's
responsibility.
(d) Reports. IBM shall report to ACE weekly on its progress in
performing its responsibilities and meeting the timetable set
forth in the Transition Plan. Promptly upon receiving any
information indicating that IBM shall not perform its
responsibilities or meet the timetable set forth in the
Ace/IBM Proprietary Information
12
<PAGE>
Transition Plan, IBM shall disclose such information to ACE
and shall identify specific measures to address such delay and
mitigate the risks associated therewith.
4.3 Transfer Assistance Services
(a) Availability. As part of the Services, and pursuant to the
rates and Charges specified in Sections 4.3(b)(7), (8) and (9)
-------------------------------
and Schedule J, IBM shall provide to ACE or ACE's designee the
----------
Transfer Assistance Services described in Section 4.3(b) and
--------------
Schedule I.
----------
(i) IBM shall provide such Transfer Assistance Services
to ACE or its designee (i) commencing up to six (6)
months prior to the expiration of the Term or on such
earlier date as ACE may request and continuing for up
to six (6) months following the effective date of the
expiration of the Term (as such effective date may be
extended pursuant to Section 3.2), (ii) commencing
-----------
upon any notice of termination of the Term with
respect to all of the Services, and continuing for up
to six (6) months following the effective date of
such termination (as such effective date may be
extended pursuant to Section 20.5) or (iii)
------------
commencing upon notice of termination of the Services
to an Eligible Recipient no longer Controlled by ACE
and continuing for up to six (6) months following the
effective date of such termination (as such effective
date may be extended pursuant to Section 20.5),
------------
provided such Eligible Recipient agrees to the terms
and conditions hereof and subject to additional costs
associated with delivery of the Transfer Assistance
Services, including software licenses, transition and
separation expenses.
(ii) IBM shall provide Transfer Assistance Services to ACE
or its designee regardless of the reason for the
expiration or termination of the Term; provided, if
the Agreement is terminated by IBM under Section
-------
20.1(b) or (c) for ACE's default, IBM may require ACE
--------------
to (i) pay in advance for Transfer Assistance
Services provided or performed under this Section
-------
4.3., (ii) pay all outstanding undisputed charges,
---
and (iii) establish an escrow account based on
mutually agreed terms to ensure payment of future
charges
(iii) To the extent ACE requests Transfer Assistance
Services, such Services shall be provided subject to
and in accordance with the terms and conditions of
this Agreement. IBM shall perform the Transfer
Assistance Services with at least the same degree of
accuracy, quality, completeness, timeliness,
responsiveness and cost-effectiveness as it provided
and was required to provide the same or similar
Services during the Term. The quality and level of
performance of the Services provided by IBM following
the expiration or termination of the Term with
respect to all or part of the Services or IBM's
receipt of a notice of termination or non-renewal
shall not be materially degraded or deficient in any
respect.
(b) Scope of Service. As part of the Transfer Assistance Services,
IBM will timely transfer the control and responsibility for
all information technology functions and Services previously
performed by or for IBM to ACE and/or ACE's designees by the
execution of any documents reasonably necessary to effect such
transfers. Additionally, IBM shall provide any and all
reasonable assistance requested by ACE to allow:
(i) the systems associated with the Services to
operate efficiently;
(ii) the Services to continue without material
interruption or material adverse effect; and
Ace/IBM Proprietary Information
13
<PAGE>
(iii) the orderly transfer of the Services to ACE
and/or its designee(s).
The Transfer Assistance Services shall consist of the
Services, functions and responsibilities set forth on Schedule
--------
I. In addition, IBM will provide the following assistance and
-
Services at ACE's direction:
(1) IBM shall, at ACE's cost,: (i) assist ACE in
developing a written transition plan for the
transition of the Services to ACE or ACE's designee,
which plan shall include capacity planning,
facilities planning, telecommunications planning and
other planning necessary to effect the transition,
(ii) perform consulting services as requested to
assist in implementing the transition plan, (iii)
train personnel designated by ACE in the use and
maintenance of any Software utilized in the delivery
of the Services for which IBM provides maintenance
under this Agreement, (iv) catalog all Software, ACE
Data and Equipment used to provide the Services,
provide machine readable and printed listings of
source code for Software owned by ACE or as to which
ACE is entitled to under this Agreement and assist in
its re-configuration, (v) analyze and report on the
space required for the ACE Data and the Software
needed to provide the Services, (vi) assist in the
data migration and testing process, (vii) provide a
complete and up-to-date, electronic copy of the
Policy and Procedures Manual, and (viii) provide
other technical assistance as reasonably requested by
ACE.
(2) ACE or ACE's designee shall be permitted to
undertake, without interference from IBM, or IBM
Affiliates, to hire any IBM or IBM Affiliate employee
performing the Services full-time, on-site at ACE,
within the 6-month period prior to the expiration or
termination date. IBM shall waive, and shall cause
its Affiliates to waive, their rights, if any, under
contracts with such personnel restricting the ability
of such full-time, on-site personnel to be recruited
or hired by ACE or its designee. ACE or its designee
shall have reasonable access to such IBM or IBM
Affiliate employees for interviews, evaluations and
recruitment to the extent that the provision of the
Services is not impacted. ACE shall endeavor to
conduct the above-described hiring activity in a
manner that is not unnecessarily disruptive of the
performance by IBM of its obligations under this
Agreement and IBM shall be relieved of Service Levels
to the extent impacted by such activity.
(3) To the extent ACE or its designee is entitled under
Section 14.6 to a license, sublicense or other right
------------
to use any Software utilized in performing the
Services, IBM shall provide ACE or its designee with
such license, sublicense or other right subject to
the terms of Section 14.6.
------------
(4) ACE or its designee shall have the right (but not the
obligation) to purchase at agreed upon prices, or
assume the lease for at its expense, any Equipment
owned or leased by IBM that is used by IBM, IBM
Subcontractors or IBM Affiliates and dedicated to
perform the Services. Such Equipment shall be
transferred in "AS-IS" condition, as of (a) the
expiration or termination date of this Agreement, or
(b) the completion of any Services associated with
such Equipment requested by ACE under Section 4.3(b),
--------------
whichever is later.
(5) IBM shall use commercially reasonable efforts to make
available to ACE or its designee at ACE's expense,
pursuant to such third party terms and conditions,
any third party services dedicated solely to the
performance of the Services at ACE. IBM shall be
entitled to retain
Ace/IBM Proprietary Information
14
<PAGE>
the right to utilize any such third party services in
connection with the performance of services for any
other IBM customer.
(6) IBM shall inform ACE of Equipment Leases and Third
Party Contracts used by IBM, IBM Subcontractors or
IBM Affiliates and dedicated solely to perform the
Services. ACE or its designees may, at ACE's option
and to the extent IBM is permitted to assign such
contracts, assume prospectively responsibility for
any or all of such contracts upon expiration or
termination of this Agreement for any reason. If ACE
agrees to do so, IBM shall assign the designated
Equipment Leases and Third Party Contracts to ACE or
its designee as of the expiration or termination date
or the completion of any Services associated with
such Equipment or Third Party Contracts requested by
ACE under Section 4.3(b), whichever is later. IBM
--------------
shall represent and warrant that such Equipment
Leases and Third Party Contracts used by IBM are not
in default and that all payments have been made
thereunder through the date of assignment.
(7) For a period of six (6) months following the
expiration or termination date, IBM shall provide to
the Eligible Recipient(s), at ACE's written request
180 days prior to the expiration or termination date,
the Services being performed for such Eligible
Recipients by IBM prior to the expiration or
termination date. In addition, at ACE's written
request 180 days prior to the expiration or
termination date, and provided that ACE is pursuing a
migration of some or all of the Services to itself or
a third party, IBM shall provide to the Eligible
Recipient(s) such Services for an additional period
not to exceed six (6) months from the end of such six
(6) month period. To the extent ACE requests such
Services, ACE will pay IBM the Charges specified in
Schedule J that ACE would have been obligated to pay
----------
IBM for such Services if this Agreement had not yet
expired or been terminated.
(8) If IBM uses a proprietary communications network to
provide Services to ACE or the Eligible Recipients,
then for a period of no more than six (6) months
following the expiration or termination date, ACE may
request that IBM continue to provide such proprietary
communications network Services at the rates
available to IBM.
(9) Except as provided in Sections 4.3(b)(7) and (8), if
-------------------------
ACE requests that IBM provide or perform Transfer
Assistance Services in accordance with this
Agreement, ACE will pay IBM the rates and charges
specified in Schedule J for IBM Personnel or
----------
resources required to perform such Transfer
Assistance Services. If Transfer Assistance Services
require additional resources beyond those being used
to provide the Services, ACE will pay IBM for such
usage as a New Service.
(c) Survival of Terms. This Section 4.3 shall survive
-----------
termination/expiration of the Term.
5. REQUIRED CONSENTS
(a) ACE shall obtain all Required Consents. Each party shall pay
fifty percent (50%) of any fees (such as transfer, relicensing
or upgrade fees) associated with obtaining any Required
Consents and any other costs that result from the termination
or underutilization of any agreement with a third party (the
"Required Consent Costs"); provided, however, that ACE shall
----------------------
not be required to pay more than two million ($2,000,000)
dollars as Required Consent Costs and IBM shall be responsible
for all Required Consent Costs after ACE has paid such amount.
IBM shall undertake all administrative activities necessary to
obtain the Required Consents. If ACE requests, IBM will
cooperate with ACE
Ace/IBM Proprietary Information
15
<PAGE>
in obtaining the Required Consents by executing certain
written communications and other documents prepared or
provided by ACE.
(b) If, despite using commercially reasonable efforts, ACE is
unable to obtain a Required Consent, then, unless and until
such Required Consent is obtained, IBM and ACE shall use
commercially reasonable efforts to determine and adopt,
subject to ACE's prior approval, such alternative approaches
as are necessary and sufficient for IBM to provide the
Services without such Required Consent. If such alternative
approaches are required for a period longer than ninety (90)
days following the Commencement Date, the Parties will
equitably adjust the terms and reduce the prices specified in
this Agreement to reflect any additional costs being incurred
and any Services not being received by ACE and the Eligible
Recipients. In addition, if, pursuant to the above, the
Parties fail to obtain a Required Consent or an acceptable
alternative approach within ninety (90) days of the
Commencement Date and such failure has a material adverse
impact on the use or enjoyment of the Services by ACE or the
Eligible Recipients, ACE will terminate the Agreement or any
affected portion thereof without payment of any Termination
Charges; provided, however that ACE will reimburse IBM with
respect to related Acquired Assets for payment by ACE of the
associated portions of the Acquired Assets Credit. IBM and ACE
will discuss whether the termination will be of the Agreement
or the affected portion. Upon any such termination, IBM shall
sell and assign the Acquired Assets back to ACE. Each Party
agrees that it shall not allege that a failure to obtain a
Required Consent after using the efforts required under this
Section 5 is a breach of this Agreement.
---------
6. FACILITIES, SOFTWARE, EQUIPMENT, CONTRACTS AND ASSETS ASSOCIATED WITH
THE PROVISION OF SERVICES
6.1 Service Facilities
(a) Service Facilities. The Services shall be provided at or from
(i) the data centers and other service locations owned or
leased by ACE and set forth on Schedule O.1, (ii) the data
------------
centers and other service locations owned or leased by IBM or
its suppliers and set forth on Schedule O.2, (iii) any other
------------
service location as may be agreed upon by IBM and ACE.
(b) ACE Facilities. ACE shall provide to IBM the use of and access
to the ACE Facilities (or equivalent space) set forth in
Schedule O.1 for the periods specified therein (or for those
------------
portions of the Term of this Agreement during which such use
or access is necessary to perform the Services if not
otherwise specified). All ACE owned or leased assets provided
for the use of IBM under this Agreement shall remain in ACE
Facilities unless ACE otherwise agrees. In addition, all
leasehold improvements made for IBM during the Term shall be
and remain part of the ACE Facility. EXCEPT AS EXPRESSLY
PROVIDED HEREIN, THE ACE FACILITIES ARE PROVIDED BY ACE TO IBM
ON AN "AS-IS", "WHERE-IS" BASIS. ACE EXPRESSLY DISCLAIMS ANY
WARRANTIES, EXPRESSED OR IMPLIED, AS TO THE ACE FACILITIES, OR
THEIR CONDITION OR SUITABILITY FOR USE BY IBM. ACE will be
responsible for all leasehold improvements including cost and
completion. ACE is not required under this Agreement to make
any leasehold improvements.
(c) Furniture, Fixtures and Equipment. The office facilities
provided by ACE for the use of IBM Personnel will be generally
comparable to the office, storage and other space occupied by
similarly situated Transitioned Employees prior to the
Commencement Date. IBM shall be permitted to use the office
furniture, fixtures, telephone handsets and personal computers
being used by the Transitioned Employees as of the
Commencement Date. IBM shall be responsible for providing all
other office
Ace/IBM Proprietary Information
16
<PAGE>
furniture and fixtures needed by IBM or IBM Personnel to
provide the Services, and for all upgrades, replacements and
additions to such furniture, telephone handsets, personal
computers or fixtures. In the event that IBM purchases any of
the assets (personal computers or telephone handsets), ACE
shall not have any additional or continuing obligations
regarding the provision of such assets nor will IBM be
obligated to ACE to return or account for such assets. IBM
Personnel using the office facilities provided by ACE will be
accorded reasonable access to, and the use of at no cost to
IBM, certain shared office equipment and services, such as
photocopiers, telephone service for ACE-related calls, mail
service, office support service (e.g., janitorial), heat,
light, and air conditioning. IBM shall be responsible for
providing all other office, data processing and computing
equipment and services needed by IBM or IBM Personnel to
provide the Services, and for upgrades, improvements,
replacements and additions to such equipment or services. The
office, data processing and computing equipment and services
used by IBM or IBM Personnel in providing the Services shall
not be counted in calculating the Resource Units utilized by
ACE.
(d) ACE's Responsibilities Regarding Utilities and Facilities
Maintenance. Subject to reasonable usage by IBM, ACE and the
Eligible Recipients shall be responsible for paying for the
following for ACE Facilities used to provide Services: (i)
electricity supplied by the power utility company, (ii) water
supplied by the water utility company, (iii) natural gas
supplied by the natural gas utility company, (iv) local and
long distance telephone service, and (v) maintenance,
excluding any amounts to be paid by IBM under the terms of
Schedule J. In addition, ACE shall be responsible for
----------
maintaining the account relationship with the power
utility company, the water utility company, the natural gas
utility company and the local telephone service provider. If
it wishes, ACE may identify and designate one or more
alternative sources from which to obtain power, water, natural
gas or local telephone services.
(e) IBM's Responsibilities Regarding Facilities. Except as
provided in Sections 6.1 (a), (b), (c) and (d), IBM shall be
----------------------------------
responsible for providing all furniture, fixtures, Equipment,
space and other facilities required to perform the Services
and all upgrades, improvements, replacements and additions to
such furniture, fixtures, Equipment, space and facilities.
Without limiting the foregoing, IBM shall,except as provided
in Section 6.1(d), (i) provide site management, site
--------------
administration and similar services at the ACE Facilities, and
(ii) provide all necessary emergency power supply and
uninterrupted power supply services and all necessary
Equipment at IBM facilities. IBM shall not be responsible for
any failure to perform its obligations under this Section
-------
6.1(e) arising as a direct result of any failure of ACE to
------
perform its obligations under Section 6.1(d).
--------------
(f) Physical Security. ACE is responsible for the physical
security of the ACE Facilities; provided, that IBM shall be
--------
responsible for compliance by IBM Personnel with the security
and safety standards and procedures that are enforced by ACE
and applicable to the ACE Facilities, provided that IBM
received a copy of such standards and procedures and has an
opportunity to review the same in advance of the commencement
of IBM's responsibility under this Section 6.1(f). Such
--------------
standards and procedures may be modified by ACE from time to
time subject to the New Services provision of the Agreement.
(g) Employee Services. Subject to applicable security
requirements, ACE will permit IBM Personnel to use all
employee facilities (e.g., parking, cafeteria, and common
facilities) at the ACE Facilities that are generally made
available to the employees of ACE or the Eligible Recipients.
IBM Personnel will not be permitted to use such employee
facilities designated by ACE for the exclusive use of certain
ACE or Eligible Recipient employees.
Ace/IBM Proprietary Information
17
<PAGE>
(h) Use of ACE Facilities. Unless IBM obtains ACE's prior written
agreement, which may be withheld by ACE in its sole
discretion, IBM shall use the ACE Facilities only to provide
the Services to ACE and the Eligible Recipients. ACE reserves
the right to relocate a ACE Facility from which the Services
are then being provided by IBM to another geographic location;
provided that, in such event, ACE will provide IBM with
--------
comparable space, facilities and resources in the new location
at no cost to IBM. ACE shall also be responsible for the
reasonable cost associated with such relocation including
personnel relocation, moving expenses and start-up and fit up
activities. In the event that such relocation impacts IBM's
ability to provide the Services in accordance with the Service
Levels, IBM shall be relieved from Service Levels until the
relocation is complete and the Service Levels are
appropriately adjusted by the Parties. ACE also reserves the
right to direct IBM to cease using all or part of the space in
a ACE Facility from which the Services are then being provided
by IBM and to thereafter use such space for its own purposes;
provided that, in such event, ACE shall reimburse IBM for the
--------
incremental Out-of-Pocket Expenses incurred by IBM as a result
of such direction, and IBM shall not be responsible for any
failures of IBM to perform Services at the Service Levels
required by this Agreement to the extent such failures result
from such use or direction of ACE.
(i) Conditions for Return. When the ACE Facilities are no longer
to be used by IBM as contemplated by Section 6.1 or are
-----------
otherwise no longer required for performance of the Services,
IBM shall return them to ACE in substantially the same
condition (as they may have been improved) as when IBM began
use of such facilities, subject to reasonable wear and tear.
(j) No Violation of Laws. IBM shall (i) ensure that the ACE
Facilities are treated in a reasonable manner, and (ii) ensure
that neither IBM nor any of its Subcontractors commit any act
in violation of any Laws in such IBM occupied ACE Facility or
any act in violation of ACE's insurance policies or in breach
of ACE's obligations under the applicable real estate leases
in such IBM occupied ACE Facilities to the extent that such
insurance policies and leases have been previously disclosed
to IBM. IBM shall not be responsible for any violations of
Laws in the ACE Facilities occupied by IBM to the extent such
violations are created or otherwise caused by ACE or ACE'S
direction.
(k) Transition Use. Following the expiration or termination of
this Agreement, ACE will allow IBM the use of those ACE
Facilities then being used to perform the Services for a
period of up to 60 days following the effective date of the
expiration or termination (inclusive of any Transfer
Assistance Services period) to enable IBM to conduct an
orderly transition of IBM resources.
6.2 Software
(a) With respect to Software and related Third Party Contracts for
which IBM is financially responsible under Schedules F.2, F.3
------------------
and F.4, IBM shall be responsible for any fees, costs or
-------
expenses related to the evaluation, procurement, testing,
installation, rollout, use, support, management,
administration, operation and maintenance of such Software or
related Third Party Contracts. IBM also shall be responsible
for any fees, costs or expenses related to the evaluation,
procurement, testing, installation, rollout, use, support,
management, administration, operation and maintenance of
upgrades, enhancements, new versions or new releases of such
Software. With respect to Software licenses and related Third
Party Contracts that are transferred to IBM by ACE or for
which IBM otherwise assumes responsibility under this
Agreement, except as set forth in Article 5, IBM shall (i) pay
all amounts becoming due under such licenses or agreements,
and all related expenses, for periods on or after the
Commencement Date; (ii) rebate to ACE any prepayment of such
amounts in accordance with Section 11.10(a); and (iii) pay all
modification, termination, cancellation, late payment, renewal
or other fees, penalties, charges, interest or other expenses
associated with the transfer or assumption
Ace/IBM Proprietary Information
18
<PAGE>
of responsibility or relating to periods on or after the
Commencement Date except to the extent such fees, penalties,
charges, interest or other expenses are associated with ACE's
inappropriate direction, use or violation of the applicable
license agreement.
(b) With respect to Software and related Third Party Contracts for
which IBM is operationally or administratively responsible
under Schedules F.2, F.3 and F.4, IBM shall be responsible for
---------------------------
(i) the support, administration, operation and maintenance of
such Software and related Third Party Contracts subject to
ACE's payment of appropriate license and maintenance fees, if
any, as expressly set forth in this Agreement; (ii) the
compliance with and performance of all operational and
administrative obligations specified in such licenses and
agreements, including nondisclosure obligations; (iii) the
administration and exercise as appropriate of all rights
available under such licenses and agreements; and (iv) the
payment of any fees, penalties, charges, interest or other
expenses caused by or resulting from IBM's failure to comply
with or perform its obligations under this Section except to
the extent such fees, penalties, charges, interest or other
expenses are associated with ACE's inappropriate direction,
use or violation of the applicable license agreement.
6.3 Equipment
(a) With respect to Equipment, Equipment Leases and related Third
Party Contracts for which IBM is financially responsible under
Schedule F, IBM shall be responsible for the fees, costs and
----------
expenses related to the evaluation, procurement, testing,
installation, rollout, use, support, management,
administration, operation and maintenance of such Equipment,
Equipment Leases or related Third Party Contracts. IBM also
shall be responsible for any fees, costs or expenses related
to the evaluation, procurement, testing, installation,
rollout, use, support, management, administration, operation
and maintenance of new, substitute or replacement Equipment or
related Third Party Contracts (including upgrades,
enhancements or new releases of such Equipment), provided,
however, that IBM will be compensated for new Equipment or
upgrades, enhancements, and new installations that are not
required under this Agreement and are requested by ACE through
a Project or other charging metric. With respect to Equipment,
Equipment Leases and related Third Party Contracts that are
transferred to IBM by ACE or for which IBM otherwise assumes
responsibility under this Agreement, IBM shall (i) pay all
amounts becoming due with respect to such Equipment, leases or
agreements, and all related expenses, for periods on or after
the Commencement Date; (ii) rebate to ACE any prepayment of
such amounts in accordance with Section 11.10(a); and (iii)
----------------
pay all modification, termination, transfer, cancellation,
late payment, renewal or other fees, penalties, charges,
interest or other expenses associated with the transfer or
assumption of responsibility or relating to periods on or
after the Commencement Date except to the extent such fees,
penalties, charges, interest or other expenses are associated
with ACE's inappropriate direction, use or violation of the
applicable license agreement.
(b) With respect to Equipment, Equipment Leases and related Third
Party Contracts for which IBM is operationally or
administratively responsible as set forth in Schedule F and of
----------
which IBM had received a complete copy, IBM shall be
responsible for (i) the evaluation, procurement, testing,
installation, rollout, use, support, management,
administration, operation and maintenance of such Equipment,
Equipment Leases and related Third Party Contracts; (ii)
subject to mutual agreement pursuant to the Change Control
process, the evaluation, procurement, testing, installation,
rollout, use, support, management, administration, operation
and maintenance of new, substitute or replacement Equipment,
Equipment Leases and related Third Party Contracts; (iii)
subject to mutual agreement pursuant to the Change Control
process, the performance, availability, reliability,
compatibility and interoperability of such Equipment,
Equipment Leases and related Third Party Contracts in
Ace/IBM Proprietary Information
19
<PAGE>
accordance with this Agreement, including the Service Levels and
change management procedures; (iv) the compliance with and performance
of all operational, administrative and contractual obligations with
respect to such Equipment, leases and agreements, including
nondisclosure obligations; (v) the administration and exercise as
appropriate of all rights available with respect to such Equipment,
leases or agreements; and (vi) the payment of any fees, penalties,
charges, interest or other expenses caused by or resulting from IBM's
failure to comply with or perform its obligations under this Section
except to the extent such fees, penalties, charges, interest or other
expenses are associated with ACE's inappropriate direction, use or
violation of the applicable license agreement.
6.4 Third Party Contracts
(a) In addition to the Third Party Contracts identified in Sections 6.2
------------
and 6.3 and Schedule F, IBM shall be financially, operationally and
------- ----------
administratively responsible for all Third Party Contracts entered
into by ACE prior to the Commencement Date for the Services to be
performed by IBM hereunder as set forth in Section 4.1(c). IBM shall
--------------
be responsible for the fees, costs and expenses related to these Third
Party Contracts and any new, substitute or replacement Third Party
Contracts placed by IBM. With respect to Third Party Contracts that
are transferred to IBM by ACE or for which IBM otherwise assumes
responsibility under this Agreement, IBM shall (i) pay all amounts
becoming due with respect to such agreements, and all related
expenses, for periods on or after the Commencement Date; (ii) rebate
to ACE any prepayment of such amounts in accordance with Section
-------
11.10(a); and (iii) pay all modification, termination, transfer,
--------
cancellation, late payment, renewal or other fees, penalties, charges,
interest or other expenses relating to periods on or after the
Commencement Date except to the extent such fees, penalties, charges,
interest or other expenses are associated with ACE's inappropriate
direction, use or violation of the applicable license agreement.
(b) With respect to the Third Party Contracts identified in Section 6.4(a)
--------------
and the services and products provided thereunder, IBM shall be
responsible for (i) the evaluation, procurement, use, support,
management, administration, operation and maintenance of such Third
Party Contracts and any new, substitute or replacement Third Party
Contracts placed by IBM; (ii) the performance, availability,
reliability, compatibility and interoperability of such Third Party
Contracts and the services and products provided thereunder; (iii) the
compliance with and performance of any operational, administrative or
contractual obligations imposed on ACE or IBM under such Third Party
Contracts, including nondisclosure obligations; (iv) the
administration and exercise as appropriate of all rights available
under such Third Party Contracts; and (v) the payment of any fees,
penalties, charges, interest or other expenses caused by or resulting
from IBM's failure to comply with or perform its obligations under
this Section except to the extent such fees, penalties, charges,
interest or other expenses are associated with ACE's inappropriate
direction, use or violation of the applicable license agreement.
6.5 Assignment of Licenses, Leases and Related Agreements
(a) On and as of the Commencement Date, ACE shall assign to IBM, and IBM
shall assume and agree to perform, the Software licenses, Equipment
Leases and Third Party Contracts for which IBM is financially
responsible under Sections 6.2, 6.3 and 6.4 and Schedules F.2, F.3 and
------------ --- --- ----------------------
F.4. ACE and IBM shall execute and deliver a mutually satisfactory
---
assignment and assumption agreement with respect to such leases,
licenses and agreements, evidencing the assignment and assumption
provided for herein.
Ace/IBM Proprietary Information
20
<PAGE>
(b) With respect to any such Software licenses, Equipment Leases or Third
Party Contracts that can not, as of the Commencement Date, be assigned
to IBM without breaching its terms or otherwise adversely affecting
the rights or obligations of ACE or IBM thereunder, the performance
obligations shall be deemed to be subcontracted or delegated to IBM
until any requisite consent, notice or other prerequisite to
assignment can be obtained, given or satisfied by ACE. It is
understood that, from and after the Commencement Date, IBM, as a
subcontractor or delegatee, shall be financially, administratively and
operationally responsible for such Software license, Equipment Lease
or Third Party Contract. ACE shall use commercially reasonable efforts
to satisfy the consent, notice or other prerequisite to assignment
and, upon ACE doing so, the Software license, Equipment Lease or Third
Party Contract shall immediately be assigned and transferred to and
assumed by IBM.
(c) If it is not possible to assign a license, lease or agreement without
breaching its terms or otherwise adversely affecting the rights or
obligations of ACE or IBM thereunder, the Parties shall take such
actions and execute and deliver such documents as may be necessary to
cause the Parties to realize the practical effects of the allocation
of responsibilities intended to be effected by this Agreement.
(d) Subject to the conditions and limitations of the next sentence, IBM
may terminate, shorten or extend the Software license, Equipment
Leases and Third Party Contracts for which IBM is financially
responsible under Schedules F.2, F.3 and F.4 of this Agreement and may
--------------------------
substitute or change vendors relating to goods or services covered
thereby as IBM chooses so long as (i) such action does not increase
the cost to ACE or any Eligible Recipient of obtaining from third
parties, or providing itself, any New Services or services similar to
the Services, at any time during the Term or thereafter, (ii) such
action would not materially and adversely affect the ability of ACE or
any Eligible Recipient to obtain from third parties, or to provide
itself, any New Services, (iii) such action does not constitute a
breach of any obligation of ACE or any Eligible Recipient under any
Software license, Equipment Leases and Third Party Contracts, (iv)
such action does not impose any Losses upon or result in any Losses to
ACE or any Eligible Recipient, and (v) IBM continues to perform the
Services in the manner required by this Agreement. IBM's rights under
the immediate preceding sentence are conditioned upon IBM paying all
applicable termination charges, Losses and other amounts directly
related to such termination or cancellation. IBM shall indemnify ACE
and the Eligible Recipients for any payment they have made for such
termination or cancellation charges, Losses or other amounts directly
related to termination or cancellation, unless directed by ACE or the
Eligible Recipients to terminate or cancel the applicable agreement.
6.6 License to ACE Software
As of the Commencement Date, ACE hereby grants, and shall grant, to IBM (or
at IBM's request, to one of its Subcontractors) a non-exclusive, fully
paid-up, irrevocable (during the Term and during any period of Transfer
Assistance Services) license during the Term and any Transfer Assistance
Services period to use the ACE Owned Software and ACE Owned Materials and
prepare derivative works of the same, in each case solely at the ACE
Facilities and IBM Facilities, for the express and sole purpose of
providing the Services and Transfer Assistance Services. ACE Owned Software
shall remain the property of ACE. IBM and its Subcontractors shall not use
any ACE Owned Software or ACE Owned Materials for the benefit of any person
or Entity other than ACE without the prior written consent of ACE, which
may be withheld at ACE's sole discretion. Except as otherwise requested or
approved by ACE, IBM and its Subcontractors shall cease all use of ACE
Owned Software and ACE Owned Materials upon the end of the Term and any
Transfer Assistance Services period.
6.7 License to IBM Owned Software
Ace/IBM Proprietary Information
21
<PAGE>
IBM Owned Software shall remain the property of IBM. Effective as of the
Commencement Date, IBM hereby grants, and shall grant, to ACE and the
Eligible Recipients during the Term and the Transfer Assistance Services
period, at no additional charge, a non-exclusive, royalty-free right and
license to access and/or use for the sole benefit of ACE and the Eligible
Recipients only and to permit third parties to use during the Term and the
Transfer Assistance Services period and solely in connection with providing
goods and services to ACE, the IBM Owned Software and the Third Party
Software as to which IBM holds the license or for which IBM is financially
responsible under Section 6.2 and Schedules F and F.1 that is necessary for
----------- -------------------
use by ACE as contemplated by this Agreement during the Term and the
Transfer Assistance Services period, including related documentation,
methodology and tools. ACE and the Eligible Recipients shall not use any
IBM Owned Software or IBM Owned Materials for the benefit of any person or
Entity other than ACE and the Eligible Recipients without the prior written
consent of IBM, which may be withheld at IBM's sole discretion.
Notwithstanding anything to the contrary contained in this Agreement,
source code relating to IBM or Third Party Software will not be provided
under this Agreement.
6.8 Access to Third Party Software and Maintenance
Subject to ACE having obtained any Required Consents, as of the
Commencement Date, ACE hereby grants to IBM (or, at IBM's request, to one
of its Subcontractors) for the sole purpose of performing the Services
during the Term and the Transfer Assistance Services period, the same
rights to access and use ACE Third Party Software and related ACE Third
Party Contracts as to which ACE is retaining financial responsibility that
ACE has with respect to such Third Party Software and Third Party
Contracts. IBM and its Subcontractors shall comply with the duties,
including use restrictions and those of nondisclosure, imposed on ACE by
such licenses and agreements to the extent IBM is advised in writing of
such restrictions. Except as otherwise requested or approved by ACE (or the
relevant licensor), IBM and its Subcontractors shall cease all use of such
ACE Third Party Software and ACE Third Party Contracts when the Term and
Transfer Assistance Services period ends.
6.9 Acquired Assets
ACE agrees to convey to IBM, and IBM agrees to accept, as of the
Commencement Date, all of ACE's right, title and interest in and to the
Acquired Assets, subject to certain restrictions regarding the use of the
same and providing access to the same set forth in the Systems Facilities
Agreement. In consideration for such conveyance, IBM agrees to pay ACE the
Acquired Assets Credit. ACE represents and warrants to IBM that IBM shall
take good title to the Acquired Assets as of the Commencement Date, free
and clear of all liens. Except as otherwise expressly provided in this
Section 6.9, ACE CONVEYS THE ACQUIRED ASSETS TO IBM ON AN "AS IS," "WHERE
-----------
IS" AND "WITH ALL FAULTS" BASIS. ACE HEREBY DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO THE ACQUIRED ASSETS, INCLUDING WITHOUT
LIMITATION WARRANTIES OF NON-INFRINGEMENT, MERCHANTABILITY, OR FITNESS FOR
A PARTICULAR PURPOSE. ACE agrees to pass through to IBM any warranties made
by third parties regarding the Acquired Assets, to the extent ACE is
permitted to do so by such third parties. To the extent that IBM reconveys
to ACE the Acquired Assets, IBM will do so in the same condition that IBM
received such Acquired Assets except for reasonable wear and tear. EXCEPT
AS SET FORTH IN THE PRECEDING SENTENCE, TO THE EXTENT THAT IBM RECONVEYS TO
ACE THE ACQUIRED ASSETS, THEY ARE RECONVEYED TO ACE ON AN "AS IS," "WHERE
IS" AND "WITH ALL FAULTS" BASIS, AND IBM HEREBY DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO SUCH RECONVEYED ACQUIRED ASSETS,
INCLUDING WITHOUT LIMITATION WARRANTIES OF NON-INFRINGEMENT,
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE.
Ace/IBM Proprietary Information
22
<PAGE>
6.10 Notice of Defaults
ACE and IBM shall promptly inform the other Party of any breach of, or
misuse or fraud in connection with, any Third Party Services Contract,
Equipment Lease or Third Party Software license of which it becomes aware
and shall cooperate with the other Party to prevent or stay any such
breach, misuse or fraud.
6.11 Thornton Data Center
IBM may purchase, or cause to be purchased, the Thornton Data Center,
subject to mutually agreeable terms and conditions.
If IBM does not purchase, or cause to be purchased, the Thornton Data
Center, then IBM will require the use of the Thornton Data Center for the
first Contract Year, (and ACE will permit such use, consistent with the
use and access rights to which CIGNA is entitled under the Systems
Facilities Agreement), and IBM (a) will lease from ACE or a third party
the Thornton Data Center on commercially reasonable terms and conditions,
and will be financially responsible for such lease, and (b) will credit a
total of $2,000,000, split equally between the first and second Contract
Years against application development services.
6.12 Systems Facilities Agreement
Subject to the conditions set forth in Section 3.1 of the Systems
-----------
Facilities Agreement, IBM shall grant such full and unrestricted access to
use the Acquired Assets at the locations specified in Section 3.1 of the
Systems Facilities Agreement as ACE is required to grant pursuant to
Section 3.1 of the Systems Facilities Agreement.
-----------
7. SERVICE LEVELS
7.1 General
At all times, IBM shall perform the Services at levels of accuracy,
quality, completeness, timeliness, responsiveness, productivity and user
satisfaction that are equal to or higher than the levels of accuracy,
quality, completeness, timeliness, responsiveness, cost-effectiveness,
productivity and user satisfaction received by ACE or the Eligible
Recipients prior to the Commencement Date. Without limiting the generality
of the foregoing or the other obligations of IBM, on or before one hundred
and eighty (180) days after the expiration of the Transition Period, the
Parties will establish mutually acceptable Service Levels. IBM shall
perform the Services so as to meet or exceed the Service Levels set forth
in Schedule G.
----------
7.2 Service Level Credits
IBM recognizes that its failure to meet critical Service Levels may have a
material adverse impact on the business and operations of ACE and that the
damages resulting from IBM's failure to meet such Service Levels may not
be capable of precise determination. Accordingly, if IBM fails to meet any
such Service Level for reasons other than the actions of ACE or
circumstances that constitute Force Majeure, then, within thirty (30) days
from the date that the failure is reported to ACE by IBM, ACE may notify
IBM that it is reserving, and may exercise, its rights at law and in
equity. In the event that ACE, in its sole discretion, elects to accept
Service Level Credits for such failure, ACE shall not be entitled to other
remedies as a result of IBM's failure to meet such Service Levels, and IBM
shall pay ACE the performance credits specified in Schedule G ("Service
---------- -------
Level Credits").
-------------
Ace/IBM Proprietary Information
23
<PAGE>
7.3 Problem Analysis
If IBM fails to provide Services in accordance with the Service Levels and
the Agreement, IBM shall (i) promptly investigate and report on the causes
of the problem; (ii) provide a Root Cause Analysis of such failure as soon
as practicable after such failure (iii) develop and implement a plan to
correct the problem and to begin meeting the Service Levels as soon as
practicable; and (iv) advise ACE, as and to the extent reasonably
requested by ACE, of the status of remedial efforts being undertaken with
respect to such problem. IBM shall use diligent efforts to complete the
Root Cause Analysis within fifteen (15) days. IBM may charge ACE for
identifying, detailing and correcting failures of Service Levels to the
extent such failures are caused by ACE, its agents, Affiliates or Eligible
Recipients, or by actions taken by CIGNA at the Thornton Data Center.
7.4 Continuous Improvement Reviews
During the six (6) month period commencing when the Service Levels have
been established and at least annually thereafter, ACE and IBM shall
review the Service Levels and the performance data collected and reported
by IBM and shall: (i) to the extent required, add new Service Levels to
permit further measurement or monitoring of the Services; (ii) modify or
increase the Service Levels to reflect changes in the architecture,
standards, strategies, needs or objectives defined by ACE; or (v) modify
or increase the Service Levels to reflect agreed upon changes in the
manner in which the Services are performed by IBM. As part of this review
process, the Parties shall jointly determine and agree on additions to or
modifications of the Service Levels and allocation of Service Level
Credits to be specified in Schedule G.
----------
7.5 Measurement and Monitoring
IBM shall implement measurement and monitoring tools and metrics as well
as standard reporting procedures to measure and report IBM's performance
of the Services against the applicable Service Levels. IBM shall provide
ACE with read-only access to on-line change and problem management
databases which shall be limited to ACE databases, in accordance with
Schedule E, containing up-to-date information regarding the status of
----------
service problems, service requests and user inquiries. IBM also shall
provide ACE with information and access to the measurement and monitoring
tools and procedures utilized by IBM for purposes of audit verification.
ACE shall not be required to pay for such measurement and monitoring tools
or the resource utilization associated with their use.
7.6 ACE Satisfaction Surveys
Within three (3) months of the Commencement Date and at annual intervals
thereafter, IBM and/or independent third parties engaged by IBM shall
conduct the satisfaction surveys of ACE's management and End Users
described in Schedule S in accordance with the survey protocols and
----------
procedures specified therein. To the extent IBM engages an independent
third party to perform all or any part of any satisfaction survey, such
third party shall be approved in advance by ACE. If the results of any
satisfaction survey indicate that the level of satisfaction with IBM's
performance is less than the target level specified in Schedule S, IBM
----------
shall promptly: (i) analyze and report on the root cause of the management
or user dissatisfaction; (ii) develop an action plan to address and
improve the level of satisfaction; (iii) present such plan to ACE for its
review, comment and approval and (iv) take action in accordance with the
approved plan and as necessary to improve the level of satisfaction. ACE
and IBM shall establish a schedule for completion of the root cause
analysis and the preparation and approval of the action plan which shall
be reasonable and consistent with the severity and materiality of the
problem; provided, that the time for completion of such tasks shall not
--------
exceed thirty (30) days from the date such user survey results are
finalized and reported unless such tasks cannot be completed through use
of continuous diligent efforts, in which case such tasks shall be
completed as soon as possible. IBM's action plan developed hereunder shall
specify the specific measures to be taken by IBM and the dates by
which
Ace/IBM Proprietary Information
24
<PAGE>
each such action shall be completed. Following implementation of such
action plan, IBM will conduct follow-up surveys with the affected ACE End
Users and management to confirm that the cause of any dissatisfaction has
been addressed and that the level of satisfaction has improved.
8. PROJECT PERSONNEL
8.1 Transitioned Personnel
(a) IBM shall extend offers of employment to those ACE Personnel
identified on Schedule M and shall waive any preconditions to such
----------
offers, including background checks, and/or drug testing. Such offers
shall be for employment with IBM or a subcontractor in positions
comparable to those held by such employees at ACE, and with initial
base wages or salaries, variable compensation, and employee benefits
in the aggregate, at least equal to that paid or provided by ACE as
of the date of such offers. Unless otherwise specified in Schedule M
----------
or agreed by the Parties, ACE employees accepting such offers shall
be hired by IBM or a subcontractor effective as of the Commencement
Date.
(b) With respect to any individual who is among the ACE Personnel
identified on Schedule M who on the Commencement Date is in a leave
----------
status, including without limitation on medical, disability,
industrial or sick leave, such employee shall remain an employee of
ACE until the first day that such employee actually returns to work,
with physician's release or other appropriate documentation stating
that such employee may resume his or her prior work schedule, and
upon such return shall be added to IBM's or a subcontractor's payroll
system so long as such return date is within six (6) months after the
Commencement Date. If such return date is not within such period,
then IBM shall have no obligation to accept such employee as a
Transitioned Employee hereunder.
(c) All ACE Personnel who accept IBM's offer of employment and begin work
with IBM or a subcontractor pursuant to the foregoing paragraphs are
herein referred to as "Transitioned Employees". Each such
----------------------
Transitioned Employee's "Employment Effective Date" shall be the date
-------------------------
on which such employee is first added to IBM's payroll system.
(d) During the six (6) months following the Commencement Date, the
Parties may agree upon, additional ACE Personnel to whom offers of
employment are to be extended by IBM or a subcontractor. Such offers
of employment shall be consistent with the provisions as set forth in
this Article 8 and ACE Personnel accepting such offers shall be
---------
treated as Transitioned Employees for all purposes.
(e) During the first twelve (12) months after the Employment Effective
Date, neither IBM nor a subcontractor shall assign a Transitioned
Employee, without ACE's prior written approval, to a work location
other than the ACE Site at which he or she was employed prior to the
Employment Effective Date or to the provision of services to a
customer other than ACE.
(f) All Transitioned Employees will participate in IBM's or
subcontractor's severance pay plan(s) on the same terms and
conditions as similarly situated employees of IBM or subcontractor,
as applicable. In determining benefits under IBM's and the
subcontractor's severance program, for the period ending December 31,
2001, IBM and the subcontractor shall provide CIGNA service credit to
Transitioned Employees (thus, in determining the severance benefit,
IBM and the subcontractor shall provide such Transitioned Employees
with credit for combined CIGNA and IBM or subcontractor service time
up to the CIGNA plan maximum of 52 weeks). In the event IBM or
subcontractor terminates the employment of a Transitioned Employee
prior to December 31, 2001 for any reason other than "cause" or
"performance," ACE and IBM or a subcontractor shall share the cost of
severance equally with IBM's total liability per employee limited to
26 weeks of the then current
Ace/IBM Proprietary Information
25
<PAGE>
salary. For purposes of this Section 8.1(f), "cause" means the
-------------- -----
flagrant disregard of the rules and regulations of IBM,
insubordination, negligence, misconduct, or commission of a felony.
"Performance" means that the Transitioned Employee's level of
-----------
performance is at a level that would justify dismissal under the
human resource policies of IBM and that after having completed a
performance improvement program of at least 90 days, the level of
performance has not improved sufficiently to avoid dismissal.
(g) During the six (6) months following the Commencement Date, ACE may
designate, or the Parties may agree upon, one or more Transitioned
Employees to whom ACE may extend offers of reemployment. Neither IBM
nor a subcontractor shall interfere with ACE's efforts to reemploy
any such Transitioned Employee.
8.2 Employee Benefit Plans
(a) General. Except as otherwise provided in this Article 8, IBM shall
---------
offer to enroll the Transitioned Employee and his or her eligible
dependents, effective as of the Transitioned Employee's Employment
Effective Date, in the employee plans of IBM or a subcontractor that
are made available to similarly situated employees of IBM or the
subcontractor. IBM has listed all of such employee plans on Schedule
--------
M and provided ACE with true and complete copies of the most recent
-
summary plan descriptions and summary of material modifications for
such employee plans or has provided a written summary where no
current summary plan description exists. During the Term of this
Agreement and any extension thereof, compensation and benefits
provided by IBM or a subcontractor to the Transitioned Employees
shall, in the aggregate, be no less favorable than the compensation
and benefits generally available to IBM's or its subcontractor's
employees.
(b) Years of Service Credit. In addition to service credited under
Section 8.1(f) with respect to IBM's and subcontractor's severance
program, the service of a Transitioned Employee prior to his
Employment Effective Date, which is recognized by ACE or CIGNA, shall
be recognized for purposes of vacation eligibility. If ACE wishes IBM
or a subcontractor to recognize prior ACE or CIGNA service for
vesting, and/or immediate participation, in the personal pension
account, and/or immediate participation or opening account balances
in the Future Health Account, IBM will price those options for ACE.
(c) Employee Welfare Benefit Plans. Each Transitioned Employee shall be
eligible as of his or her Employment Effective Date to participate
immediately in IBM's or a subcontractor's employee welfare benefit
plans ("welfare plans"), provided that the Transitioned Employee
-------------
enrolls in such plan within the time period established by IBM or
subcontractor, which shall include medical care, hospitalization,
life, accidental death and dismemberment, prescription drug, dental,
short term disability and long term disability. Transitioned
Employees and their beneficiaries who, as of the applicable
Employment Effective Date, are undergoing a course of treatment or
are hospitalized shall remain covered by the applicable ACE medical
or dental plan until the earlier of the end of the course of
treatment or hospitalization or the expiration of 60 days from the
Employment Effective Date, provided that the 60 day period may be
extended at the discretion of ACE. Subject to the general
comparability requirements in Section 8.2(a), eligibility for, the
-------------
benefits of, and the amount, if any, of employee contributions toward
welfare plan coverage will be determined by IBM or the subcontractor;
provided, however, that each of IBM's welfare plans (except for
optional Group Universal Life Insurance), shall (i) waive all pre-
existing condition exceptions, exclusionary provisions and/or waiting
periods for each such Transitioned Employee and any eligible spouse
or
Ace/IBM Proprietary Information
26
<PAGE>
covered dependents, and (ii) grant credit for years of service in
accordance with Section 8.2(b). In addition, medical deductibles paid
--------------
in the calendar year of the Employment Effective Date by any
Transitioned Employee shall be applied toward medical deductibles
required by IBM's and subcontractor's group insurance program for the
calendar year of the Employment Effective Date.
(d) Paid-Time-Off (Vacation/Sick Leave). Beginning on the Employment
Effective Date, IBM shall make available to all Transitioned
Employees paid-time-off benefits for vacation and absence from the
workplace due to illness under its applicable plans, subject to and
in accordance with the terms and conditions of such plans in effect
from time to time, and shall recognize for purposes of accrual the
years of service of such Transitioned Employees prior to their
Employment Effective Dates determined in accordance with Section
-------
8.2(b). The paid-time-off benefits provided by IBM shall be no less
------
favorable than those provided under the applicable ACE plan as of the
Employment Effective Date and no less favorable than the vacation and
absence from the workplace due to illness benefits generally
available to IBM's employees. Vendor shall recognize vacation plans
made by the Transitioned Employees and approved by ACE prior to the
Employment Effective Date.
(e) Savings Plans. IBM agrees to provide Transitioned Employees from
their respective Employment Effective Dates with the opportunity to
participate in a defined contribution plan which is qualified under
Section 401(a) of the Code (the "IBM Savings Plan"), which complies
----------------
with the requirements of Sections 8.2(a) and 8.2(b). IBM shall review
--------------------------
the plan documents for the Savings and Investment Plan of CIGNA and
any other qualified defined contributions plan maintained by CIGNA in
which any of the Transitioned Employees participated prior to the
Commencement Date (collectively, "the defined contribution plans"),
and any other documents related to the defined contribution plans
that it deems relevant, to determine whether a trust-to-trust
transfer of the account balances, or any portion of the account
balances of the Transitioned Employees under the defined contribution
plans from the trust funds maintained pursuant thereto to the trust
fund maintained pursuant to the IBM Tax Deferred Savings Plan
("TDSP") would be consistent with the provisions and policies of
TDSP. IBM shall notify ACE of its determination and, if applicable,
shall specify the conditions that must be satisfied in advance of
such transfer and the portion, if any, of the account balances of the
Transitioned Employees that would not be included in such transfer.
In the event that IBM notifies ACE and CIGNA that a trust-to-trust
transfer of the account balances of the Transitioned Employees under
one or more of the defined contribution plans, upon such conditions
and subject to such exclusions as IBM may specify, would be
consistent with the provisions and policies of TDSP, then ACE,
together with CIGNA, shall determine whether any of the defined
contribution plans will undertake such a transfer and, if so, whether
the Transitioned Employees will be given the opportunity to make an
election as to whether their account balance under such defined
contribution plan, or any portion thereof, will be included in the
transfer. In the event that IBM and ACE agree to a trust-to-trust
transfer from one of the defined contributions plans to TDSP, then
the parties shall use commercially reasonable efforts to cause such a
transfer to take place within 120 days of the hire date for the
Transitioned Employees. It is expressly understood that neither IBM
nor ACE (with CIGNA) shall have an obligation to agree to a transfer
of assets from the trust fund maintained pursuant to any of the
defined contribution plans to the trust fund maintained pursuant to
TDSP or to a rollover of account balances to the TDSP, if either
party determines in good faith and it its sole discretion that such a
transfer would be unduly burdensome, or could jeopardize the tax
qualified status of its plan, or would otherwise be inconsistent with
applicable legal and regulatory requirements.
(f) Reimbursement Account Plans. As of the Effective Date, IBM shall
provide dependent care and health care reimbursement account plans
for the benefit of the Transitioned Employees.
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(g) Tuition Assistance. Transitioned Employees shall be eligible to
participate in all tuition assistance programs provided by IBM to its
similarly situated employees. Courses which are in progress as of the
enrolled Transitioned Employee's Employment Effective Date and for
which tuition assistance has been approved by ACE, and courses which
have been approved by ACE and paid for by the Transitioned Employee
prior to the Employment Effective Date shall be reimbursed by IBM at
the completion of the course, provided all of the requisites for
reimbursement under the ACE program have been approved. "Course"
------
refers to specific classes in progress or scheduled to start during a
particular term and does not refer to a degree program. IBM's
obligation to reimburse for the Courses is limited to those employees
and Courses which were previously identified prior to the
Commencement Date.
(h) Bonus Programs. IBM shall provide to the Transitioned Employees bonus
programs no less favorable than the bonus programs available to
similarly situated employees of IBM.
(i) Retiree Medical. Transitioned Employees will participate in IBM's or
subcontractor's retiree medical benefit plan(s) on the same terms and
conditions as similarly situated employees of IBM or subcontractor.
(j) Restricted Stock. ACE may, in its discretion, grant awards of
restricted stock to individuals who become Transitioned Employees.
Any such grant shall be effective as of a date on or before the date
the Transitioned Employee becomes an employee of IBM or a
subcontractor. In ACE's discretion, any such grant may provide that
the Transitioned Employee's right to vest in such award or awards
will be dependent on continued employment with IBM or a subcontractor
for a specified period, and the identity of the Transitioned
Employees holding such awards shall be provided to IBM by ACE. IBM
shall notify ACE, not less frequently than quarterly, of the
employment status and other information that ACE reasonably requires
with respect to such individuals to determine the vesting status of
such awards (or otherwise to administer the awards).
8.3 Other Employee Matters
IBM shall be responsible for funding and distributing benefits under the
benefit plans in which Transitioned Employees participate on or after the
Employment Effective Date and for paying any compensation and remitting
any income, disability, withholding and other employment taxes for such
Transitioned Employees beginning on the Employment Effective Date. Unless
otherwise agreed, ACE shall be responsible for funding and distributing
benefits under the ACE benefit plans in which Transitioned Employees
participated prior to the Employment Effective Date and for paying any
compensation and remitting any income, disability, withholding and other
employment taxes for such Transitioned Employees for the period prior to
the Employment Effective Date. ACE shall provide IBM with information in
ACE's possession reasonably required by IBM to fulfill its obligations
under this Article 8.
---------
8.4 Key IBM Personnel
(a) Approval of Key IBM Personnel
(i) Before assigning an individual to act as one of the Key IBM
Personnel whether as an initial assignment or a subsequent
assignment, IBM shall notify ACE of the proposed assignment,
shall introduce the individual to appropriate ACE
representatives, shall provide reasonable opportunity for ACE
representatives to interview the individual, and shall provide
ACE with a resume and such other information about the
individual as may be reasonably requested
Ace/IBM Proprietary Information
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by ACE. If ACE in good faith objects to the proposed assignment
for a specified lawful reason, the Parties shall attempt to
resolve ACE's concerns on a mutually agreeable basis. If the
Parties have not been able to resolve ACE's concerns within ten
(10) business days, IBM shall not assign the individual to that
position and shall propose to ACE the assignment of another
individual of suitable ability and qualifications.
(ii) The Key IBM Personnel that have been approved as of the
Effective Date are listed in Schedule C.
----------
(iii) The Parties may from time to time change the positions
designated as Key IBM Personnel under this Agreement.
(b) Continuity of Key IBM Personnel
IBM shall cause each of the Key IBM Personnel to devote substantially
full time and effort for the period specified in Schedule C to the
----------
provision of the Services under this Agreement. IBM shall not
transfer, reassign or remove any of the Key IBM Personnel (except
where the Key Personnel (i) voluntarily resigns from IBM, (ii) is
dismissed by IBM for violations of conditions of employment (e.g.,
fraud, drug abuse, theft), (iii) fails to perform his or her duties
and responsibilities pursuant to this Agreement in IBM's reasonable
judgment or (iv) dies or is unable to work due to his or her
disability) or announce its intention to do so during the specified
period without ACE's prior approval, which approval shall not be
unreasonably withheld. IBM shall transfer, reassign or remove one of
its Key IBM Personnel only after (i) giving ACE at least ninety (90)
days prior written notice of such action, and (ii) complying with the
requirement of Article 8.4(a)(i) above.
(c) Continuity of Critical Support Personnel
For periods up to six (6) months commencing on the as agreed to by
the parties, IBM shall not transfer, reassign or remove any of the
Critical Support Personnel (except as a result of voluntary
resignation, involuntary termination for cause, illness, disability,
or death) without ACE's prior approval, which ACE may not
unreasonably withhold.
8.5 IBM Project Executive
IBM shall designate a "IBM Project Executive" for ACE. Each IBM Project
---------------------
Executive shall (i) be one of the Key IBM Personnel; (ii) be a full time
employee of IBM; (iii) devote substantially his or her full time and
effort to managing the Services for a minimum period of two (2) years;
(iv) serve as the single point of accountability for the Services, and (v)
have day-to-day authority for ensuring customer satisfaction and achieving
attainment of all Service Levels and Performance Standards.
8.6 IBM Personnel Are Not ACE Employees
Except as otherwise expressly set forth in this Agreement, the Parties
intend to create an independent contractor relationship and nothing in
this Agreement shall operate or be construed as making ACE or IBM
partners, joint venturers, principals, agents or employees of the other.
No officer, director, employee, agent, Affiliate, contractor or
subcontractor retained by IBM to perform work on ACE's behalf hereunder
shall be deemed to be an officer, director, employee, agent, Affiliate,
contractor or subcontractor of ACE. IBM, not ACE, has the right, power,
authority and duty to supervise and direct the activities of the IBM
Personnel and to compensate such IBM Personnel for any work performed by
them on ACE's behalf pursuant to this Agreement.
Ace/IBM Proprietary Information
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8.7 Replacement, Qualifications, and Retention of IBM Personnel
(a) IBM shall assign sufficient IBM personnel (including Subcontractors)
to provide the Services in accordance with this Agreement and such
IBM personnel shall possess suitable competence, ability and
qualifications and shall be properly educated and trained for the
Services they are to perform.
(b) In the event that ACE determines reasonably, lawfully and in good
faith that the continued assignment to ACE of any IBM personnel
(including Key IBM Personnel and IBM Subcontractors) is not in the
best interests of ACE, then ACE shall give IBM written notice to that
effect specifying the reason for its position and requesting that
such IBM Personnel be replaced. Promptly after its receipt of such a
request by ACE, IBM shall investigate the matters stated in the
request and discuss its findings with ACE. If IBM determines that
ACE's request is reasonable, lawful and in good faith, IBM shall take
appropriate action. If requested to do so by ACE, IBM shall
immediately remove the individual in question from all ACE Sites
pending completion of IBM's investigation and discussions with ACE.
If, following discussions with IBM, ACE still in good faith requests
replacement of such IBM Personnel, IBM shall promptly replace such
IBM Personnel with an individual of suitable ability and
qualifications. Nothing in this provision shall operate or be
construed to limit IBM's responsibility for the acts or omission of
the IBM Personnel.
(c) If ACE determines that IBM's turnover rate is excessive and so
notifies IBM, IBM shall provide reasonable data concerning its
turnover rate and shall meet with ACE to discuss the reasons for the
turnover rate. IBM shall submit to ACE for its approval a proposal
for reducing the turnover rate to an acceptable level.
Notwithstanding any transfer or turnover of IBM Personnel, IBM shall
remain obligated to perform the Services without degradation and in
accordance with the Performance Standards.
8.8 Training/Career Opportunities
IBM shall offer training, skills development and career growth
opportunities to Transitioned Employees that are at least as favorable as
those offered generally to employees of similar rank and position.
8.9 Conduct of IBM Personnel
(a) While at the ACE Sites, IBM Personnel shall (i) comply with the rules
and regulations that ACE or the Eligible Recipients sets regarding
personal and professional conduct, safety and security practices and
procedures of which ACE provides notice (including compliance with
ACE's dress code, the wearing of an identification badge provided by
ACE, and adherence to ACE's regulations and general safety practices
and procedures) generally applicable to such ACE Facilities and (ii)
otherwise conduct themselves in a businesslike manner.
(b) At all times during this Agreement, all IBM Personnel shall clearly
identify themselves as IBM Personnel and not employees of ACE. This
shall include any and all communications, oral, written or
electronic. Each of the IBM Personnel shall wear a badge provided by
ACE indicating that he or she is not an employee of ACE. It is the
responsibility of IBM and the IBM Personnel to avoid any confusion
regarding whether the IBM Personnel are employees of ACE.
8.10 Substance Abuse
Ace/IBM Proprietary Information
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<PAGE>
IBM agrees to immediately remove any IBM Personnel who engage in substance
abuse while on ACE Facilities, in a ACE vehicle or while performing
Services. Substance abuse includes the sale, attempted sale, possession or
use of illegal drugs, drug paraphernalia, or alcohol, or the misuse of
prescription or non-prescription drugs. Each Party shall notify the other
Party of any suspected substance abuse by any IBM Personnel providing
Services to ACE. IBM represents and warrants that it has and will maintain
a screening program for substance abuse and that such program will be
applicable to all IBM Personnel performing Services under this Agreement.
9. IBM RESPONSIBILITIES
9.1 Policy and Procedures Manual
(a) As part of the Services, and at no additional cost to ACE, IBM shall
deliver to ACE for its review, comment and approval, which shall not
be unreasonably withheld (i) an outline of the topics to be addressed
in the Policy and Procedures Manual within thirty (30) days of the
Commencement Date, and (ii) a final draft of the Policy and
Procedures Manual within one hundred and eighty (180) days of the
Commencement Date (the "Policy and Procedures Manual"). At a minimum,
----------------------------
the Policy and Procedures Manual shall include the following:
(1) a detailed description of the Services and the manner in which
each will be performed by IBM, including (i) documentation
(including operations manuals, user guides, specifications,
policies/procedures and disaster recovery plans) providing
further details regarding such Services; (ii) the specific
activities to be undertaken by IBM in connection with each
Service, including, where appropriate, monitoring, reporting,
planning and oversight activities to be performed by IBM under
this Agreement; and
(2) the procedures for ACE/IBM interaction and communication,
including (i) call lists; (ii) procedures for and limits on
direct communication by IBM with ACE personnel other than the
ACE computer operations and programming staff; (iii) problem
management and escalation procedures; (iv) priority and project
procedures; (v) acceptance testing; and (vi) quality assurance
procedures and checkpoint reviews.
IBM shall incorporate any reasonable comments or suggestions of ACE
into the Policy and Procedures Manual and shall deliver a final
version to ACE within fifteen (15) days after its receipt of such
comments and suggestions. The Parties shall agree on the final form
of the Policy and Procedures Manual.
(b) IBM shall perform the Services in accordance with the Policy and
Procedures Manual. In the event of a conflict between the provisions
of this Agreement and the Policy and Procedures Manual, the
provisions of this Agreement shall control unless the Parties
expressly agree otherwise and such agreement is set forth in the
relevant portion of a Policy and Procedures Manual approved by ACE in
writing.
(c) IBM shall perform the Services in accordance with ACE's then current
reasonable policies and procedures which policies and procedures
shall be provided to IBM until the Policy and Procedures Manual is
finalized and agreed upon by the Parties. Thereafter, IBM shall
perform the Services in accordance with the Policy and Procedures
Manual. In the event of a conflict between the provisions of this
Agreement and the Policy and Procedures Manual, the provisions of
this Agreement shall control unless the Parties expressly agree
otherwise.
Ace/IBM Proprietary Information
31
<PAGE>
(d) IBM shall promptly modify and update the Policy and Procedures Manual
to reflect changes in the operations or procedures described therein,
and shall provide the proposed changes in the manual to ACE for
review and comment. To the extent any change would increase the cost
of the Services to ACE or could have an material adverse impact on
the scope, accuracy, speed, responsiveness or quality of the
Services, such change shall not take effect until it has been
approved by ACE
9.2 Cooperation with ACE Third Party Contractors
ACE may hire contractors, subcontractors, consultants, and/or other third
parties ("ACE Third Party Contractors") to perform any New Services or
---------------------------
Non-Exclusive Services. IBM shall reasonably cooperate with and work in
good faith with ACE Third Party Contractors as directed by ACE. Such
cooperation may include: (i) providing access to any portion of facilities
being used to provide the Services, as necessary for ACE Third Party
Contractors to perform the work assigned to them; (ii) providing access to
the Equipment, Software and systems to the extent permitted under any
underlying agreements with third party vendors of such Equipment, Software
or systems; or (iii) providing written requirements, standards, policies
or other documentation for the Services and for the Equipment, Software or
systems procured, operated, supported or used by IBM in connection
therewith. ACE Third Party Contractors shall comply with IBM's reasonable
security and confidentiality requirements, and shall, to the extent
performing work on Software or Equipment for which IBM has operational
responsibility, comply with IBM's reasonable standards, methodologies, and
procedures. IBM shall immediately notify ACE if an act or omission of a
ACE Third Party Contractor will cause, or has caused, a problem or delay
in providing the Services, and shall work with ACE to prevent or
circumvent such problem or delay. IBM shall be relieved of Service Levels
to the extent of such delay. IBM will coordinate with ACE and the ACE
Third Party Contractors to resolve differences and conflicts arising
between the Services and other activities undertaken by ACE or any of the
ACE Third Party Contractors. ACE shall be responsible for any failure of
ACE Third Party Contractors to comply with ACE's obligations under this
Agreement, as applicable.
9.3 Reports
(a) Reports. IBM shall provide to ACE the Reports described in Schedule R
----------
at the frequencies provided therein. Within thirty (30) days of the
Commencement Date, IBM shall provide to ACE proposed Report formats,
for ACE's approval. In addition, from time to time, the Parties may
mutually agree on additional reports to be generated by IBM and
delivered to ACE on an ad hoc or periodic basis and the costs
associated therewith. All Reports specified in Schedule R shall be
----------
provided to ACE as part of the Services and at no additional charge
to ACE.
The Reports to be provided by IBM will include:
(1) monthly performance report(s) documenting IBM's performance with
respect to the Performance Standards in a mutually agreeable
format;
(2) monthly report(s) describing ACE's utilization of each
particular type of resource unit, and comparing such utilization
to the then applicable baseline for each resource unit;
(3) other periodic reports agreed to by the Parties that the Parties
reasonably determine are necessary and related to the use and
understanding of the Services;
Ace/IBM Proprietary Information
32
<PAGE>
(4) reports that contain resource unit utilization data at a level
of detail, and any other information that the Parties reasonably
determine is necessary, to enable ACE to verify and allocate
accurately IBM's Charges under this Agreement to the various
business units and divisions of ACE and the other Eligible
Recipients, all in accordance with and subject to Schedule J.
----------
(b) Back-Up Documentation. As part of the Services, IBM shall provide ACE
with such documentation and other information available to IBM as may
be reasonably requested by ACE from time to time in order to verify
the accuracy of the Reports provided by IBM. In addition, IBM shall
provide ACE with documentation and other information reasonably
requested by ACE from time to time to verify that IBM's performance
of the Services is in compliance with the Performance Standards and
this Agreement.
(c) Correction of Errors. As part of the Services and at no additional
charge to ACE, IBM shall promptly correct any errors or inaccuracies
in or with respect to the Reports, ACE Data or other contract
deliverables caused by IBM or its agents, Subcontractors or third
party product or service providers.
9.4 Meetings
(a) During the Term, representatives of the Parties shall meet
periodically to discuss matters arising under this Agreement. Such
meetings shall include the following:
(1) a periodic meeting at least monthly of the Steering Committee to
review performance and monthly reports, planned or anticipated
activities and changes that might materially and adversely
affect performance, and such other matters as appropriate;
(2) quarterly management meeting to review the monthly reports for
the quarter, review IBM's overall performance under the
Agreement, review progress on the resolution of issues, provide
a strategic outlook for ACE's information systems requirements,
and discuss such other matters as appropriate;
(3) an annual meeting of senior management of both Parties to review
relevant contract and performance issues; and
(4) such other meetings of ACE and IBM Personnel, including senior
management of IBM, as either Party may reasonably request.
(b) For each such meeting, upon ACE request, IBM shall prepare and
distribute an agenda, which will incorporate the topics designated by
ACE. IBM shall distribute such agenda in advance of each meeting so
that the meeting participants may prepare for the meeting. In
addition, upon ACE request, IBM shall record and promptly distribute
minutes for every meeting.
(c) IBM shall notify the ACE Project Executive in advance of scheduled
meetings with End Users or Eligible Recipients (other than meetings
pertaining to the provision of specific Services on a day-to-day
basis) and shall invite the ACE Project Executive to attend such
meetings or to designate a representative to do so.
9.5 Quality Assurance
Ace/IBM Proprietary Information
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<PAGE>
IBM shall develop and implement quality assurance processes and procedures
to perform the Services in an accurate and timely manner, in accordance
with the Performance Standards and best practices of the information
technology industry and in compliance with (a) the Laws applicable to ACE
and the Eligible Recipients to the extent that ACE has provided to IBM
notice of the same, and (b) the Laws applicable to the provision of
Services or to IBM. IBM shall submit such processes and procedures to ACE
for its review, comment and approval within thirty (30) days of the
Commencement Date. Upon ACE's approval, such processes and procedures
shall be included in the Policy and Procedures Manual. However, no failure
or inability of the quality assurance procedures to disclose any errors or
problems with the Services shall excuse IBM's failure to comply with the
Performance Standards and other terms of this Agreement.
9.6 Architecture, Standards and Information Technology Planning
(a) As requested by ACE and as a New Service, IBM shall assist ACE in
defining information technology architectures and standards on an
ongoing basis and in preparing long-term strategic information
technology plans and short-term implementation plans on an annual
basis (each an "Information Systems Plan"). The assistance to be
------------------------
provided by IBM shall include (i) participation with ACE
representatives on permanent and ad-hoc committees and working groups
addressing such issues; (ii) assessments of the then-current
information technology architectures, standards and systems; (iii)
analyses of the appropriate direction for such architectures,
standards and systems in light of business priorities, business
strategies and competitive market forces; and (iv) recommendations
regarding information technology architectures and platforms,
software and hardware products, information technology strategies and
directions, and other enabling technologies. With respect to each
recommendation, IBM shall provide: (i) cost projections and
cost/benefit analyses; (ii) the changes, if any, in the personnel and
other resources required to operate and support the changed
environment; (iii) the resulting impact on ACE's information
technology costs; (iv) the expected performance, quality,
responsiveness, efficiency, reliability and other service levels; and
(v) general plans and projected time schedules for development and
implementation.
(b) ACE shall have final authority to promulgate information technology
architectures, standards and plans and to modify or grant waivers
from such architectures, standards or plans. IBM shall subject to
mutual agreement through the Change Control process (i) comply with
and enforce the information technology architectures, standards and
plans established by ACE, (ii) modify the Services as and to the
extent necessary to conform to such architectures, standards and
plans, and (iii) obtain ACE's prior approval for any deviations from
such architectures, standards or plans.
(c) IBM shall provide the following information to ACE for its
forecasting and budgeting processes: (i) base utilization; (ii)
changes to the environment impacting ACE costs or utilization; and
(iii) opportunities to modify or improve the Services to reduce the
charges, pass-through expenses or retained expenses incurred by ACE.
Such information shall be provided at ACE's request and in accordance
with the schedule mutually agreed by the Parties.
9.7 Change Control
(a) Prior to making any System Change or using any item of Software or
Equipment to provide the Services, IBM shall have verified by
appropriate testing that the change or item has been properly
installed, is operating in accordance with its specifications, is
performing its intended functions in a reliable manner.
Ace/IBM Proprietary Information
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<PAGE>
(b) If IBM desires to make a System Change, IBM shall provide reasonable
notice to ACE and coordinate such change with ACE To the extent
initiated by IBM solely for its own benefit, IBM shall bear all
charges, fees and costs associated with such System Change, including
all charges, fees and costs associated with (i) the design,
installation, implementation, testing and rollout of such System
Change, (ii) any modification or enhancement to, or substitution for,
any impacted Software or Equipment, (iii) any increase in the cost of
operating, maintaining or supporting any impacted system, Software or
Equipment, and (iv) any increase in resource usage.
(c) IBM shall make no System Change which (i) may increase ACE's total
cost of receiving the Services; (ii) may require material changes to
ACE facilities, systems, software or equipment; or (iii) may
materially and adversely impact the functionality, interoperability,
performance or resource efficiency of the Services, without first
obtaining ACE's approval, which approval ACE may withhold in its sole
discretion. If IBM desires to make such a System Change, it shall
provide to ACE a written proposal describing in detail the extent to
which the desired System Change may affect the functionality,
performance or resource efficiency of the Services and the benefits,
savings and risks to ACE associated with such System Change.
(d) IBM shall make no System Change that may require ACE to install a new
version, release or upgrade of, or replacement for, any Software or
Equipment or to modify any Software or Equipment without first
obtaining ACE's approval, which approval ACE may withhold in its sole
discretion.
(e) Notwithstanding the foregoing, IBM may make temporary System Changes
required by an emergency if it has been unable to contact the ACE
Project Executive to obtain approval after making reasonable efforts.
IBM shall document and report such emergency changes to ACE not later
than the next business day after the change is made.
(f) IBM will schedule and implement all System Changes so as not to (i)
materially and unnecessarily disrupt or adversely impact the business
or operations of ACE or the Eligible Recipients, (ii) materially
degrade the Services then being received by them, or (iii) interfere
with their ability to obtain the full benefit of the Services.
(g) On a monthly basis, IBM will prepare a rolling quarterly "look ahead"
schedule for ongoing and planned System Changes for the next three
(3) months. The status of System Changes will be monitored and
tracked against the applicable schedule.
(h) For any System Change, IBM shall, upon ACE's request, perform a
comparison at a reasonable and mutually agreed level of detail,
between the amount of resources required by the affected Software or
Equipment to perform a representative sample of the processing being
performed for ACE immediately prior to the System Change and
immediately after the System Change. ACE shall not be required to pay
for increased resource usage due to a System Change for a Steady
State Operation except to the extent that such System Change is
requested by ACE with notice of the increased usage or changes in ACE
usage based on additional or changed functionality.
9.8 Software Currency
(a) Currency of Software. Subject to and in accordance with Sections
--------
6.2, 9.6, 9.7 and 9.8(b), IBM agrees to maintain reasonable currency
------------------------
for Software for which IBM is financially, operationally and
administratively responsible and to provide help desk and other
support for new releases and versions of such Software. For purposes
of this Section, "reasonable currency" shall mean that, unless
-------------------
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<PAGE>
otherwise directed by ACE, IBM shall maintain Software within one
Major Release of the then current Major Release and shall do so
within twelve (12) months of such then current Major Release becoming
publicly available. "Reasonable currency" also shall mean that,
-------------------
unless otherwise directed by ACE, IBM shall promptly install Minor
Releases as they become publicly available. Prior to installing a new
Major Release or Minor Release, IBM shall evaluate and test such
Release to verify that it will perform in accordance with the
specifications and the architectures and standards established by ACE
and that it will not without ACE's prior approval (i) increase ACE's
total cost of receiving the Services; (ii) require material changes
to ACE facilities, systems, software or equipment; or (iii)
materially and adversely impact the functionality, interoperability,
performance or resource efficiency of the Services. Notwithstanding
Sections 9.7 (c), IBM shall confer with ACE prior to installing any
----------------
Major Release or Minor Release, shall provide ACE with the results of
its testing and evaluation of such Release and shall not install such
Release if directed not to do so by ACE, notwithstanding, in the
event that ACE directs IBM not to install such Release, IBM will
continue to support the currently installed version of the Software
provided that the manufacturer of the such installed version
continues to provide a standard maintenance offering for such
installed version. If ACE requires IBM to use a Major Release or
Minor Release for which maintenance offerings are not available and
for which source code is not available, IBM shall be relieved of
Service Levels to the extent that failure to achieve such Service
Levels is caused by such Major Release or Minor Release.
(b) Applications Software. ACE and the Eligible Recipients shall maintain
Software currency for Applications Software or other Software for
which ACE is financially responsible under this Agreement. Subject to
9.8(a), IBM shall not install new Software releases or make other
Software changes if doing so would require ACE or the Eligible
Recipients to install new releases of, replace, or make other changes
to Applications Software or other Software for which ACE is
financially responsible unless ACE consents in writing to such
change.
9.9 Year 2000 Compliance
(a) General. "Year 2000 Compliant" or "Year 2000 Compliance" means that a
------------------- --------------------
product, when used in accordance with its associated documentation,
is capable of correctly processing, providing and/or receiving date
data within and between the twentieth and twenty-first centuries,
provided that all products (for example, hardware, software and
firmware) used with such product properly exchanges accurate date
data with it.
(b) Year 2000 Coordination. IBM shall reasonably cooperate with ACE in
the execution of the "ACE Group Year 2000 Compliance Guidelines"
dated April 17, 1998, to the extent such cooperation is reasonably
related to IBM's performance of the Services and to the extent
consistent with the terms and conditions of this Agreement.
(c) Emergency Access to Year 2000 Services, Personnel and Resources. Upon
ACE's request and subject to availability of resources, IBM shall
provide ACE with access to those IBM services, personnel and
resources required to respond on an emergency basis to Year 2000
Compliance problems. The Parties acknowledge that the provision of
such services, personnel and resources, in addition to the assigned
personnel and resources, constitutes a New Service for which IBM may
be entitled to additional compensation.
(d) IBM Procurement Responsibilities. IBM shall obtain assurances of Year
2000 Compliance from each third party vendor from whom IBM procures
new third party Equipment or Software to be
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<PAGE>
operated, maintained, supported or used by IBM to provide the
Services under this Agreement. Except at the direction of ACE or an
Eligible Recipient, or any authorized agent of either, IBM shall not
procure any Equipment or Software not having such assurances of Year
2000 Compliance without ACE's prior approval.
(e) IBM Software, Equipment and Infrastructure. IBM shall ensure that any
new Equipment or Software in production and manufactured by IBM and
used to provide the Services (including the Developed Materials) is
Year 2000 Compliant. IBM shall have no obligation under this
Agreement to correct Year 2000 problems in Equipment or Software not
manufactured by IBM, including any of the same included in ACE
Software.
(f) Disclaimer of Warranty for year 2000 Services.
(i) IBM is not providing any year 2000 services (for example, year
2000 assessment, conversion or testing) under the Agreement.
(ii) Under the Agreement, IBM is not responsible for:
(1) ACE's or its Affiliates' or Eligible Recipients' products,
(2) a Third Party's products, or
(3) IBM Products not provided and selected by IBM under the
Agreement, ((1), (2), and (3), collectively, "Other
-----
Products") to correctly process or properly exchange
--------
accurate date data.
(iii) IBM will be relieved of its obligations under the Agreement
(including meeting Service Levels) due to the inability of such
Other Products to correctly process or properly exchange
accurate date data.
(iv) ACE acknowledges that it is responsible for assessing its
current systems and taking appropriate action to migrate to
year 2000-ready systems.
9.10 Access to Specialized IBM Skills and Resources
Upon ACE's request and subject to availability of resources, IBM shall
promptly provide ACE with equal access to IBM's specialized technical
services, personnel and resources (the "Specialized Services"). The
--------------------
Parties intend that ACE shall receive such Specialized Services in a
reasonable period of time after an appropriate work authorization has been
signed by both Parties. The Parties acknowledge that the provision of such
Specialized Services may, in some cases, constitute New Services for which
IBM is entitled to additional compensation, but in no event will IBM
perform, or be entitled to any additional compensation for, such
Specialized Services, unless a New Services work authorization has been
signed by both Parties.
9.11 Audit Rights
(a) IBM Records. IBM shall maintain and provide access upon request to
the portion of records, documents and other information required to
meet ACE's audit rights under this Agreement ("IBM Records"). IBM
-----------
shall retain IBM Records in accordance with IBM's records retention
policy as it may be reasonably adjusted from time to time and
provided to ACE in writing upon request;
Ace/IBM Proprietary Information
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<PAGE>
provided, however, that IBM shall at all times comply fully with all
Laws applicable to ACE regarding records retention, to the extent
that ACE provides IBM with prior written notice of the same.
(b) Operational Audits. Upon reasonable notice from ACE, and subject to
IBM or IBM's agents' reasonable security requirements and upon
execution of IBM's standard Confidentiality Agreements, IBM shall,
and shall cause its Subcontractors and suppliers to, provide to ACE
(and internal and external auditors, inspectors, regulators and other
representatives that ACE may designate from time to time) access at
reasonable hours to IBM Personnel, to the facilities at or from which
Services are then being provided and to IBM records and other
pertinent information, all to the extent relevant to the Services and
IBM's obligation under this Agreement. Such access shall be provided
for the purpose of performing audits and inspections of ACE and its
businesses and to examine IBM's performance of the Services,
including (i) verifying the integrity of ACE Data, (ii) examining the
systems that process, store, support and transmit that data, (iii)
examining the controls (e.g., organizational controls, input/output
controls, system modification controls, processing controls, system
design controls, and access controls) and the security, disaster
recovery and back-up practices and procedures; (iv) examining IBM's
measurement, monitoring and management tools; and (v) enabling ACE
and the Eligible Recipients to meet applicable legal, regulatory and
contractual requirements. IBM shall provide any assistance reasonably
requested by ACE or its designee in conducting any such audit,
including installing and operating audit software.
(c) Financial Audits. Upon reasonable notice from ACE, and subject to IBM
or IBM agents' security requirements and execution of IBM's standard
Confidentiality Agreements, IBM shall, and shall cause its
Subcontractors and suppliers to, provide to ACE (and internal and
external auditors, inspectors, regulators and other representatives
that ACE may designate from time to time) access at reasonable hours
to IBM Personnel and to IBM Records and other pertinent information,
all to the extent relevant to the performance of IBM's financial
obligations under this Agreement. Such access shall be provided for
the sole purpose of performing audits and inspections relating to the
Services to verify the accuracy of IBM's Charges to see that IBM is
exercising reasonable procedures to control the resources provided by
IBM to ACE, and that the Services are being provided in accordance
with the Service Levels. IBM shall provide any assistance reasonably
requested by ACE or its designee in conducting any such audit and
shall make requested personnel, records and information available
during the Term and thereafter, during the period specified in IBM's
records retention policy, as it may be reasonably adjusted from time
to time. If any such audit reveals an overcharge or undercharge by
IBM, and IBM or ACE, as applicable, does not successfully dispute the
amount questioned by such audit, IBM or ACE, as applicable, shall
promptly pay to the other Party the amount of such overcharge or
undercharge as the case may be, together with interest at the rate
specified in Section 12.2.
------------
(d) General Procedures.
(i) ACE shall not be given access to the proprietary information of
other IBM customers or to IBM locations that are not related to
ACE or the Services or to information that is not reasonably
necessary to perform the audit.
(ii) In performing audits, ACE shall endeavor to avoid unnecessary
disruption of IBM's operations and unnecessary interference
with IBM's ability to perform the Services in accordance with
the Performance Standards. In the event that ACE disrupts IBM's
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operations or interferes with IBM's ability to perform the
Services, IBM shall be relieved of Service Levels.
(iii) Following any audit, ACE shall conduct (in the case of an
internal audit), or request its external auditors or examiners
to conduct, an exit conference with IBM to obtain factual
concurrence with issues identified in the review.
(iv) Access by ACE shall not be requested more than once each
calendar year unless required by Law or regulatory agencies and
IBM shall be given 72 hour written notice prior to such access.
(v) ACE shall use reasonable efforts to conduct the audit
efficiently and expeditiously and at reasonable business hours.
(e) IBM Response. IBM and ACE shall meet to review each audit report
promptly after the issuance thereof. IBM will respond to each audit
report in writing within thirty (30) days from receipt of such
report, unless a shorter response time is specified in such report.
IBM and ACE shall develop and agree upon an action plan to promptly
address and resolve any deficiencies, concerns and/or recommendations
in such audit report and IBM, at its own expense, shall undertake
remedial action in accordance with such action plan and the dates
specified therein.
(f) Response to Government Audits. If an audit by a governmental body or
regulatory authority having jurisdiction over ACE, an Eligible
Recipient or IBM results in a finding that IBM or ACE is not in
compliance with any generally accepted accounting principle or, with
respect to the following that are either ordinary course of business
for property casualty insurance companies or of which ACE provides to
IBM prior written notice, other audit requirement or any rule,
regulation or law relating to the performance of its obligations
under this Agreement, IBM or ACE, as the case may be, shall, at its
own expense and within the time period specified by such auditor,
address and resolve the deficiency(ies) identified by such
governmental body or regulatory authority. The Parties believe such
other audit requirements, rules, regulations and laws that are not
ordinary course of business for property casualty insurance companies
are prohibitions, and the Parties do not intend that IBM will be
required to make substantial expenditures to comply with the same.
(g) Audit Costs. IBM and its Subcontractors and suppliers shall provide
the Services described in this Section 9.11 at no additional charge
------------
to ACE, to the extent that the audit occurs in the ordinary course of
business (e.g., periodic, regular regulatory audits).
9.12 Agency and Disbursements
(a) Disbursements. Beginning on the Commencement Date, IBM shall make
payments to those certain agreed upon lessors, licensors and vendors
specified in Schedule F as paying agent of ACE or the Eligible
----------
Recipients, or shall reimburse ACE for payments made by ACE or the
Eligible Recipients to such lessors, licensors and vendors.
(b) Limited Agency. ACE hereby appoints IBM as its limited agent during
the Term solely for the purposes of the administration of and payment
of Pass-Through Expenses and amounts for which IBM is responsible
under Third Party Contracts, Equipment Leases and Third Party
Software licenses. ACE shall provide, on a timely basis, such
affirmation of IBM's authority to such lessors, licensors, vendors,
and other third parties as IBM may reasonably request.
Ace/IBM Proprietary Information
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<PAGE>
(c) Reimbursement for Substitute Payment. If either Party in error pays
to a third party an amount for which the other Party is responsible
under this Agreement, the Party that is responsible for such payment
shall reimburse the paying Party for such amount.
(d) Notice of Decommissioning. IBM agrees to notify ACE as soon as
reasonably possible when IBM determines that it will no longer use
to provide the Services any ACE Owned Equipment or ACE leased
Equipment. Notification will be in writing and include the
identification of the Equipment, and the date it will no longer be
needed by IBM. Upon receipt of any such notice, ACE may (or may
cause the applicable Eligible Recipient to), in its sole discretion,
terminate the Equipment Lease for such leased Equipment as of the
date specified in such notice and sell or otherwise dispose of or
redeploy such ACE Owned Equipment that is the subject of such a
notice as of the date specified in such notice. Upon IBM ceasing to
use any Equipment (or, in the case of leased Equipment, upon the
last day ACE is obligated to make such leased Equipment available to
IBM, if earlier), IBM shall return the same to ACE in condition at
least as good as the condition thereof on the Commencement Date,
ordinary wear and tear excepted..
9.13 Subcontractors
(a) Use of Subcontractors. IBM shall not subcontract any of its material
responsibilities without ACE's prior written approval.
Notwithstanding the forgoing, IBM's use in the ordinary course of
business of third party services or products that are not dedicated
to ACE, that are not material to any particular function
constituting a part of the Services, that do not result in a
material change in the way IBM conducts its business or that do not
make any work product specifically for ACE, shall not constitute a
delegation or subcontracting of IBM's responsibilities covered by
this Section 9.13. A list of pre-approved subcontractors is set
------------
forth in Schedule D. Prior to entering into a subcontract with a
----------
third party for the Services, IBM shall (i) give ACE reasonable
prior written notice specifying the components of the Services
affected, the scope of the proposed subcontract, the identity and
qualifications of the proposed Subcontractor.
(b) IBM Responsibility for Subcontractors. IBM shall remain responsible
for obligations performed by Subcontractors and the conduct of
Subcontractor personnel to the same extent as if such obligations
were performed by IBM's employees. IBM shall be ACE's sole point of
contact regarding the Services, including with respect to payment.
10. ACE RESPONSIBILITIES
10.1 Responsibilities
In addition to ACE's responsibilities as expressly set forth elsewhere in
this Agreement, ACE shall be responsible for the following:
(a) ACE shall designate, prior to commencement of the Services by IBM,
one individual to whom all IBM communications concerning this
Agreement may be addressed (the "ACE Project Executive"), who shall
---------------------
have the authority to act on behalf of ACE in all day-to-day matters
pertaining to this Agreement. ACE may change the designated ACE
Project Executive from time to time by providing notice to IBM.
Additionally, ACE will have the option, but will not be obligated,
to designate additional representatives who will be authorized to
make certain decisions (e.g., regarding emergency maintenance) if
the ACE Project Executive is not available.
Ace/IBM Proprietary Information
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<PAGE>
(b) ACE shall cooperate with IBM by, among other things, making
available, as reasonably requested by IBM, management decisions,
information, approvals and acceptances so that IBM may accomplish
its obligations and responsibilities hereunder.
10.2 Savings Clause
IBM's failure to perform its responsibilities under this Agreement or to
meet the Service Levels shall be excused if and to the extent such IBM
non-performance results from ACE's, ACE's agents', ACE's Affiliates',
Eligible Recipients' or CIGNA's wrongful actions or failure to perform any
of their respective responsibilities. IBM shall provide ACE with
reasonable notice in writing of any such non-performance and IBM shall use
commercially reasonable efforts to perform notwithstanding such wrongful
actions or any such failures to perform. ACE also agrees to reimburse IBM
for any reasonable additional costs, charges and expenses incurred as a
result of such delay and ACE shall pay IBM the full amounts of all
undisputed Charges set forth herein.
11. CHARGES
11.1 General
(a) In consideration of IBM's performance of the Services, ACE agrees to
pay IBM the applicable Charges set forth in Schedule J.
----------
(b) The charges for Transition Services, as set forth in Schedule J,
----------
from ACE to IBM provided by or for IBM under this Agreement are
included in the Charges set forth in Schedule J and there are no
----------
separate or additional charges for such Transition Services.
(c) Except as agreed to in writing by the Parties, ACE shall not pay any
amounts for the Services or Transition Service from ACE to IBM in
addition to those set forth in this Article 11 or Schedule J or
---------- ----------
elsewhere in this Agreement. Any costs incurred by IBM prior to the
Commencement Date are included in the Charges set forth in Schedule
--------
J and are not to be separately paid or reimbursed by ACE.
-
(d) IBM shall reperform, at no additional expense to ACE, any Services
that result in incorrect outputs to the extent caused by an error or
breach by IBM, and the resources required for such performance shall
not be counted in calculating the Charges payable or resources
utilized by ACE hereunder.
11.2 Retained and Pass-Through Expenses
(a) ACE shall retain and pay all Retained Expenses directly to the
applicable vendors.
(b) As part of the Services, IBM shall pay all Pass-Through Expenses
directly to the applicable suppliers and shall invoice ACE for
amounts paid to such suppliers. Before paying an invoice for any
Pass-Through Expense, IBM shall review and validate the invoiced
charges, identify and correct any errors or omissions and resolve
any questions or changes with the applicable supplier. IBM shall
deliver to ACE the original supplier invoice, together with any
documentation supporting such invoice and a statement that IBM has
reviewed and validated the invoiced charges, prior to or in
connection with the IBM invoice containing such Pass-Through
Expense. To the extent IBM fails to comply with its obligations
hereunder, it shall be financially responsible for any discounts
lost or any late fees, interest charges or other costs or expenses
incurred by ACE.
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<PAGE>
(c) All Retained Expenses and Pass-Through Expenses as of the Effective
Date are set forth on Schedule J. No new Retained Expenses may be
----------
added without ACE's prior written consent, which it may withhold in
its sole discretion. ACE may agree to add Retained Expenses and
Pass-Through Expenses to Schedule J and may re-designate a Retained
----------
Expense as a Pass-Through Expense with IBM's consent, which consent
shall not be withheld unreasonably.
(d) IBM will continually seek to identify methods of reducing and
minimizing ACE's Retained and Pass-Through Expenses and will notify
ACE of such methods and the estimated potential savings associated
with each such method.
11.3 Incidental Expenses
IBM acknowledges that, except as expressly provided otherwise in the
Agreement, expenses that IBM incurs in performing the Services are
included in IBM's charges and rates set forth in this Agreement.
Accordingly, such IBM expenses are not separately reimbursable by ACE
unless ACE has agreed in advance and in writing to reimburse IBM for the
expense
11.4 Taxes
The Parties' respective responsibilities for taxes arising under or in
connection with this Agreement shall be as follows:
(a) Each Party shall be responsible for any franchise or privilege taxes
on its business and for any taxes based on its net income or gross
receipts.
(b) Each Party shall be responsible for any sales, lease, use, personal
property or other such taxes on Equipment, Software or property it
owns or leases from a third party and/or for which it is financially
responsible under Schedule F of this Agreement.
----------
(c) IBM shall be responsible for all sales, service, value-added, lease,
use, personal property, excise, consumption, and other taxes and
duties payable by IBM on any goods or services acquired and used or
consumed by IBM in providing the Services where the tax is imposed
on IBM's acquisition or use of such goods or services.
(d) ACE shall be responsible for all sales, use, excise, value added,
consumption, service or other taxes assessed on the receipt of the
Services as a whole, or on any particular Service received by ACE or
the Eligible Recipients from IBM.
(e) The Parties agree to cooperate fully with each other to enable each
to more accurately determine its own tax liability and to minimize
such liability to the extent legally permissible. IBM's invoices
shall separately state the Charges that are subject to taxation and
the amount of taxes included therein. Each Party will provide and
make available to the other any resale certificates, information
regarding out-of-state or out-of-country sales or use of equipment,
materials, or services, and other exemption certificates or
information reasonably requested by either Party.
(f) Each Party will promptly notify the other of, and reasonably
coordinate with the other, the response to and settlement of, any
claim for taxes asserted by applicable taxing authorities for which
the other Party is responsible hereunder. With respect to any claim
arising out of a form or return signed by a Party to this Agreement,
such Party will have the right to elect to control the response to
and
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42
<PAGE>
settlement of the claim, but the other Party will have all rights to
participate in the responses and settlements that are appropriate to
its potential responsibilities or liabilities. If either Party
requests the other to challenge the imposition of any tax, the
requesting Party will reimburse the other for the reasonable legal
fees and expenses it incurs. A Party will be entitled to a
proportional share of any tax refunds or rebates granted to the
extent such refunds or rebates are of taxes that were paid by it.
(g) Each Party represents, warrants and covenants that it will file
appropriate tax returns, and pay applicable taxes owed arising from
or related to the Services in applicable jurisdictions.
11.5 New Services
(a) If ACE requests that IBM perform any New Services, IBM shall
promptly prepare a New Services proposal for ACE's consideration.
Unless otherwise agreed by the Parties, IBM shall prepare such New
Services proposal at no additional charge to ACE and shall deliver
such proposal to ACE within fourteen (14) days of its receipt of
ACE's request. Such New Services proposal shall include, among other
things, (i) a project plan and fixed price or cost estimate for the
New Service; (ii) a breakdown of the cost buildup for such pricing
or estimate, (iii) a description of the service levels to be
associated with such New Service; (iv) a schedule for commencing and
completing the New Service; (v) a description of any new hardware or
software to be provided by IBM in connection with the New Service;
(vi) a description of any software and hardware resources and
runtime requirements necessary to provide the New Service; and (vii)
the human resources necessary to provide the New Service. ACE may
accept or reject any New Services proposal in its sole discretion.
If ACE accepts IBM's proposal and IBM agrees to provide the New
Services, IBM will perform the New Services in accordance with the
provisions set forth herein and therein, and will be paid in
accordance with the proposal submitted by IBM and the provisions of
this Agreement. At such time, the scope of the Services will be
expanded to include such New Services unless the Parties agree in
writing to the contrary. The Parties shall agree in writing as to
whether New Services are Exclusive Services or Non-Exclusive
Services. Notwithstanding any provision to the contrary, the pricing
proposed by IBM shall take into account the existing and future
volume of business between ACE and IBM.
(b) ACE may elect to solicit and receive bids from third parties to
perform any New Services. If ACE elects to use third parties to
perform New Services, (i) such New Services shall not be deemed
Services under the provisions of this Agreement and (ii) IBM shall
reasonably cooperate with such third parties as provided in Section
-------
9.2 to the extent such cooperation does not impact IBM's ability to
---
provide the Services. ACE shall reimburse IBM for reasonable costs
of complying with this Section 11.5(b).
---------------
(c) The Parties anticipate that the Services will evolve and be
supplemented, modified, enhanced or replaced over time to keep pace
with technological advancements and improvements in the methods of
delivering services, and the Parties acknowledge that these
evolutionary changes may modify the "Services" and will not
necessarily be deemed to result in New Services.
(d) IBM will promptly inform the ACE Project Executive of requests for
New Services from End Users or Eligible Recipients, and shall submit
any proposals for New Services to the ACE Project Executive or his
or her designee. IBM shall not agree to provide New Services to any
End Users or Eligible Recipients without the prior written approval
of the ACE Project Executive or his or her designee.
(e) If ACE requests that IBM provide Services to Entities other than
Eligible Recipients, the requested Services shall be treated as New
Services. Unless otherwise agreed by the Parties, such Services
shall
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43
<PAGE>
be performed in accordance with the terms and conditions governing
the provision of the same Services to existing Eligible Recipients;
provided, however, that to the extent Services are to be provided
outside the United States, the Parties may modify or add necessary
terms and conditions.
11.6 Extraordinary Events
(a) As used in this Agreement, an "Extraordinary Event" shall mean a
-------------------
circumstance in which an event or discrete set of events has
occurred or is planned with respect to the business of ACE that
results or will result in a change in the scope, nature or volume of
the Services that ACE will require from IBM, and which is expected
to cause the estimated average aggregate monthly amount of
chargeable resource used to provide the Services to increase or
decrease by twenty percent (20%) or more. Examples of the kinds of
events that might cause such substantial increases or decreases
include:
(1) changes in locations where ACE operates;
(2) changes in products of, or in markets served by, ACE;
(3) mergers, acquisitions or divestitures of ACE;
(4) changes in the method of service delivery, excluding delivery
of the Services by ACE or its Eligible Recipients or by any
provider other than IBM;
(5) changes in market priorities; or
(6) changes in the number of business units being serviced by IBM
that were not anticipated as of the Effective Date.
(b) If an Extraordinary Event occurs, ACE may, at its option, request a
reduction in the unit charges specified in Schedule J in accordance
----------
with the following:
(1) As appropriate, IBM and ACE shall mutually determine on a
reasonable basis the resulting efficiencies and economies
and/or the resources no longer required by IBM to provide the
Services ("Targeted Resource Reductions"). IBM shall identify
----------------------------
in writing to ACE any costs (including appropriate indirect
and overhead costs) and any profit that can be eliminated or
reduced in connection with the Targeted Resource Reductions
(the "Targeted Cost Reductions").
------------------------
(2) Promptly upon determination of any Targeted Resource
Reductions, IBM shall proceed to eliminate the Targeted
Resource Reductions as quickly as feasible and in accordance
with the agreed upon schedule.
(3) When the Targeted Resource Reductions are eliminated, the
Charges specified on Schedule J shall be reduced by any
----------
amount of the corresponding Targeted Cost Reductions and any
affected Resource Baselines shall be equitably adjusted, as
appropriate.
(4) If an Extraordinary Event occurs, and ACE chooses to have IBM
provide additional Services related to such Extraordinary
Event ("Increased Services"), then IBM shall provide such
------------------
Increased Services as soon as possible in light of the amount
of advance notice of such increase. The Parties will review
the volume of the Increased Services and agree to equitably
adjust the Base Charges, ARCs and RRCs and the Resource
Baselines and the
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44
<PAGE>
related terms under this Agreement. Further, to the extent
that IBM can reasonably demonstrate to ACE that the Increased
Services adversely affect IBM's ability to meet the Service
Levels, then after IBM provides ACE written notice of such
impact, IBM shall be relieved of any Service Level applicable
to IBM's inability to meet such Service Levels for an amount
of time in which IBM can reasonably place additional
equipment in service to meet the Service Levels, but in no
event shall the period for such relief exceed three (3)
months, unless otherwise agreed in writing by the Parties.
If an Extraordinary Event would cause a Resource Baseline to exceed 35% of
the then current Baseline, IBM reserves the right to include additional
fixed cost in the form of one-time charges or other variable charges to
the Charges and/or the applicable ARC. If the Parties are unable to agree
upon an appropriate adjustment after reasonable efforts, ACE is not
obligated to procure such services from IBM and IBM is not obligated to
provide such additional services to ACE.
In no event may an Extraordinary Event which does not cause a Resource
Baseline to exceed 35% of the then current Resource Baseline result in the
Charges to ACE being higher than such Charges would have been if the ARCs
and RRCs specified in Schedule J had been applied. ACE may, at its sole
----------
option, elect at any time to forego its rights under this Section 11.6 and
------------
instead, apply such ARCs and RRCs to adjust the Charges.
11.7 Technology
(a) Subject to Section 9.8, IBM shall maintain the currency level of
-----------
software that will enable ACE to take advantage of technological
advancements in its industry and support ACE's efforts to maintain
competitiveness in the markets in which it competes. In the event of
a significant and unanticipated change in technology that materially
reduces IBM's costs beyond those reasonably anticipated by IBM in
providing the Services, the Parties shall equitably adjust the
Charges. To the extent necessary and appropriate, the Parties shall
equitably modify and adjust the Resource Units to be measured and
the Resource Baselines associated with such Resource Units to be
consistent with such technological advancements.
(b) If IBM develops new or enhanced services, software, tools, products
or methodologies to be offered to such customers (collectively, "New
---
Technology"), IBM shall (i) offer ACE the opportunity to serve as a
----------
pilot customer in connection with the implementation of such New
Technology; and (ii) offer to implement such New Technology on an
orderly and planned schedule taking into consideration the
investments in the current environment.
(c) IBM shall meet with ACE semi-annually to brief ACE regarding
technological developments and advances as well as new or enhanced
services, software, tools, products or methodologies of possible
interest or applicability to ACE. Such briefing shall include IBM's
reasonable assessment of the business impact, performance
improvements and cost savings associated with each.
11.8 Projects
(a) As part of New Services, IBM shall perform projects authorized by
the ACE Project Executive or his or her designee. The IBM Personnel
assigned to perform such projects shall possess the training,
experience, competence and skill to perform such work.. The ACE
Project Executive or his or her designee shall define and set the
priority for such projects. ACE shall pay IBM for such authorized
hours at the rates specified in Schedule J.
----------
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<PAGE>
(b) To the extent a requested project is expected to take more than
eighty (80) hours and unless otherwise agreed by the Parties, IBM
shall prepare a project proposal in accordance with Section 11.5(a)
---------------
prior to beginning such project. ACE may accept or reject such
project proposal in its sole discretion.
(c) In addition to the hours provided for in Section 11.8(a), the ACE
---------------
Project Executive or his or her designee may identify new or
additional work activities to be performed by IBM Personnel
(including work activities that would otherwise be treated as New
Services) or reprioritize or reset the schedule for existing work
activities to be performed by such IBM Personnel. IBM shall use
commercially reasonable efforts to perform such work activities
without impacting the established schedule for other tasks or the
performance of the Services in accordance with the Service Levels.
If it is not possible to avoid such an impact, IBM shall notify ACE
of the anticipated impact and obtain its consent prior to proceeding
with such work activities. ACE, in its sole discretion, may
temporarily adjust the work to be performed by IBM, the schedules
associated therewith or the Service Levels to permit the performance
by IBM of such work activities.
11.9 Proration
Periodic charges under this Agreement are to be computed on a calendar
month basis, and shall be prorated for any partial month on a calendar day
basis.
11.10 Refundable Items
(a) Prepaid Amounts. Where ACE has prepaid for a service or function for
which IBM is assuming financial responsibility under this Agreement,
IBM shall refund to ACE, upon either Party identifying the
prepayment, that portion of such prepaid expense which is
attributable to periods on and after the Commencement Date. ACE
shall reimburse IBM, when the Term ends, for that portion of any
amounts prepaid by IBM (or its Approved Subcontractors) that are
attributable to periods on and after the Term ends to the extent
that: (a) such prepayment is for a period of less than one (1) year;
or (b) ACE approved such prepayment in advance.
(b) Refunds and Credits. If either Party should receive a refund,
credit, discount or other rebate for goods or services paid for by
the other Party, then the Party receiving such refund, credit,
discount or other rebate shall (i) notify the other Party of such
refund, credit, discount or rebate and (ii) pay the full amount of
such refund, credit, discount or rebate to the other Party.
11.11 ACE Benchmarking Reviews
(a) Not more than once every two years during the Term and commencing
July 1, 2002, ACE may, subject to this Section 11.11, engage the
-------------
services of a mutually agreeable independent third party (a
"Benchmarker") to compare the totality of the Services (including
-----------
the quality and cost of the Services) against the standard of well-
managed operations performing similar services under similar
conditions, prices, terms and environments ("Benchmarking"). Any
------------
Benchmarker shall agree in writing to be bound by the
confidentiality and security provisions specified in this Agreement.
IBM shall reasonably cooperate with ACE and the Benchmarker and will
provide reasonable access to the Benchmarker during such effort, all
at ACE's cost and expense. ACE shall provide IBM with a copy of the
Benchmarker's report and IBM shall have a reasonable opportunity to
review the Benchmarker's report and contest the Benchmarker's
findings. If the Parties are unable to agree upon the validity of
such findings, the matter shall be resolved pursuant to the
procedures set forth in
Ace/IBM Proprietary Information
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<PAGE>
Article 19. The Parties may agree on the results and, if
----------
appropriate, a plan to adjust the price. If the Parties are unable
to agree after using the procedures set forth in Article 19, then
----------
ACE may terminate this Agreement or any Tower for convenience at the
rates specified for termination under this Section 11.11. in
-------------
Schedule J-1.
-------------
11.12 Changes in Laws
(a) At no additional charge, IBM shall comply with, and IBM shall notify
ACE of any change in Law applicable to the delivery of the Services.
ACE shall have the right to notify IBM of changes not previously
communicated by IBM and IBM shall comply with such changes. IBM
shall implement any necessary modifications to the Services prior to
the deadline imposed by the regulatory or other governmental body
having jurisdiction for such requirement or change. Except to the
extent caused by ACE or the Eligible Recipients or agents, or the
exercise by CIGNA of CIGNA's rights under the Systems Facilities
Agreement, IBM shall be responsible for any fines or penalties
imposed on IBM, ACE or the Eligible Recipients resulting from any
failure by IBM or its agents, Subcontractors or third party product
or service providers to comply with applicable Laws or respond in a
timely manner to changes in such Laws.
(b) ACE shall comply with, and ACE shall notify IBM of any change in Law
applicable to the receipt of the Services. IBM shall have the right
to notify ACE of changes not previously communicated by ACE and ACE
shall comply with such changes. ACE shall implement any necessary
modifications to the receipt of Services prior to the deadline
imposed by the regulatory or other governmental body having
jurisdiction for such requirement or change. Except to the extent
caused by IBM or its agents, ACE shall be responsible for any fines
or penalties imposed on ACE, IBM or its agents resulting from any
failure by ACE or its agents, subcontractors or third party product
or service providers to comply with applicable Laws or respond in a
timely manner to changes in such Laws.
12. INVOICING AND PAYMENT
12.1 Invoicing
(a) IBM will invoice ACE during the Term the proportional amount of the
Charges for that month in advance. The invoice will state separately
applicable taxes owed by ACE, if any, by tax jurisdiction. If IBM
invoices ACE by the first (1st) day of a month, ACE shall pay IBM
for all undisputed invoiced Charges (subject to Section 12.4) on or
------------
before the last day of that month; otherwise, ACE will pay all
undisputed invoiced Charges (subject to Section 12.4) within thirty
------------
(30)days after the date of ACE's receipt of the invoice. All
periodic charges under this Agreement are to be computed on a
calendar-month basis and will be prorated for any partial month,
unless specifically stated otherwise in this Agreement. Each invoice
shall be accompanied by details as to Charges as reasonably
necessary (a) to meet ACE's requirements under government accounting
rules and regulations (which rules and regulations will be
identified by ACE and provided to IBM), and (b) to validate volumes
and fees. The Parties will reasonably agree upon a means to satisfy
ACE's internal accounting and chargeback requirements. IBM shall
include the calculations, resource utilization information and
variable charge rates used to calculate the amounts shown on the
invoice.
(b) Beginning one month following the establishment of the Resource
Baselines or as otherwise set forth in Schedule J, IBM will invoice
----------
ACE monthly for the ARCs and RRCs for the preceding month.
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(c) To the extent a credit may be due to ACE pursuant to this Agreement,
IBM shall provide ACE with an appropriate credit against amounts
then due and owing; if no further payments are due to IBM, IBM shall
pay such amounts to ACE on the following invoice, but no less than
thirty (30) days later.
12.2 Payment Due
ACE shall pay each invoice by wire funds transfer or other electronic
means acceptable to IBM to an account specified by IBM. Such payment shall
be made in U.S. currency In the event that any payments are not received
by IBM within five days following the due date, ACE shall also pay a late
fee equal to the lesser of:
(1) one and one half percent of the amount of such payment per
month; or
(2) the maximum amount permissible by law.
12.3 Set Off
With respect to any amount to be paid or reimbursed by ACE hereunder, ACE
may set off against such amount any amount that IBM is obligated to pay
ACE hereunder, or, at IBM's option, ACE may pay IBM such amount within
thirty (30) days thereafter.
12.4 Disputed Charges
(a) ACE shall pay undisputed Charges when such payments are due under
this Article 12 and Schedule J. However, ACE may withhold payment of
---------- ----------
variable Charges that ACE reasonably disputes in good faith provided
that in no event will such withholding exceed the monthly invoice or
cumulatively exceed two (2) months of current base Charges. Any
amounts due above this limitation shall be paid to IBM under protest
without waiver of any rights. If ACE in good faith disputes any
Charges under this Agreement, ACE shall promptly notify IBM in
writing of such disputed amount and the basis for ACE's dispute
together with any appropriate information supporting ACE's position.
If ACE withholds any disputed charges, such amount shall be promptly
deposited in an interest-bearing escrow account. To the extent it is
ultimately determined that such disputed amount is payable to IBM,
ACE shall pay interest on such amount to the extent earned on such
escrowed account. ACE and IBM shall address disputes in accordance
with the procedures set forth in Article 19.
----------
(b) Neither the failure to dispute any Charges or amounts prior to
payment nor the failure to withhold any amount shall constitute,
operate or be construed as a waiver of any right ACE may otherwise
have to dispute any Charge or amount or recover any amount
previously paid, with interest.
(c) Beginning one month following the establishment of the Resource
Baselines or as otherwise set forth in Schedule J, IBM will invoice
----------
ACE monthly for the ARCs and RRCs for the preceding month. In
addition, IBM will invoice ACE and ACE agrees to pay IBM a cost of
living adjustment ("COLA") in accordance with Schedule J, starting
---- ----------
in January following the Commencement Date and monthly thereafter.
12.5 No Implied Charges
Each Party shall be solely responsible for all the costs and expenses of
performing such Party's obligations under this Agreement, and no payment
shall be due from the other Party for the performance of such obligations
unless such payment is expressly specified in this Agreement.
Ace/IBM Proprietary Information
48
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13. ACE DATA AND OTHER PROPRIETARY INFORMATION.
13.1 ACE Ownership of ACE Data
ACE Data is and shall remain the property of ACE. IBM shall, at IBM's
expense for the first delivery and at ACE's expense for each delivery
thereafter, promptly deliver to ACE in the available format and on the
media then used by IBM to provide the Services: (a) a copy of all ACE
Owned Materials and ACE Data (or such portions as shall be specified by
ACE) and (b) a copy of all Developed Materials (or such portions as shall
be specified by ACE) to the extent that ACE has paid all undisputed
Charges (in accordamce with Section 12.4) expressly associated with such
------------
Developed Materials. Such deliveries shall occur: (i) at any time at ACE's
request, (ii) at the end of the Term and the completion of all requested
Transfer Assistance Services, or (iii) with respect to particular ACE Data
or ACE Owned Materials, at such earlier date that ACE requests such data
because it is no longer required by IBM to perform the Services.
Thereafter, if requested by ACE, IBM shall destroy or securely erase all
copies of the ACE Data and ACE Owned Materials in IBM's possession or
under IBM's control. IBM shall not withhold any ACE Data or any of the
items specified in this Section as a means of resolving any dispute. IBM
may retain one (1) copy of the ACE Data and ACE Owned Developed Materials
to determine IBM's or its agents rights under this Agreement. IBM shall be
relieved of its obligations to provide the Services to the extent that its
performance is prevented or hindered by the return, erasure or destruction
of ACE Data or ACE Owned Materials or reports prepared pursuant to this
Section 13.1. Except to the extent expressly permitted under this
------------
Agreement, ACE Data and ACE Owned Materials shall not be utilized by IBM
for any purpose other than the performance of Services under this
Agreement and shall not be disclosed (except as provided in Section 13.3),
------------
sold, assigned, leased, or otherwise provided to third parties by IBM or
commercially exploited by or on behalf of IBM or any IBM Personnel. IBM
shall not possess or assert any lien or other right against or to ACE
Data.
13.2 Safeguarding ACE Data
(a) IBM shall establish and maintain environmental, safety and facility
procedures, data security procedures and other safeguards against
the destruction, loss, or alteration of ACE Data in the possession
of IBM which are (i) no less rigorous than those that are
commercially reasonable, documented and enforced by ACE as of the
Commencement Date, which ACE will provide to IBM, and (ii) no less
rigorous than those maintained by IBM for its own information of a
similar nature. ACE shall have the right to establish backup
security for ACE Data and to keep backup copies of the ACE Data in
ACE's possession at ACE's expense if ACE so chooses. No media on
which ACE Data is stored may be used simultaneously to store data of
any other customer of IBM.
(b) As part of the Services, IBM shall be responsible for developing and
maintaining procedures for the reconstruction of lost ACE Data. IBM
shall correct, at ACE's request and sole discretion and at no charge
to ACE, any destruction, loss or alteration of any ACE Data to the
extent caused by IBM or any IBM Personnel.
13.3 Confidentiality
(a) Proprietary Information. IBM and ACE each acknowledge that the other
possesses and will continue to possess information that has been
developed or received by it, has commercial value in its or its
customer's business and is not in the public domain. Except as
otherwise specifically agreed in writing by the Parties,
"Proprietary Information" of ACE or IBM, or their respective
-----------------------
Affiliates, and Eligible Recipients, shall mean all information and
documentation of ACE and IBM and such Affiliates, Eligible
Recipients or agents, respectively, whether disclosed to or accessed
by such entity
Ace/IBM Proprietary Information
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or Party in connection with this Agreement and that: (1) has been
marked "confidential" or "proprietary" or with words of similar
meaning at the time of disclosure by such entity or Party, or (2) if
disclosed orally or not marked "confidential" or "proprietary" or
with words of similar meaning at the time of disclosure, was
subsequently summarized in writing within sixty (60) days after
disclosure by the disclosing entity or Party and marked
"confidential" or "proprietary" or with words of similar meaning, or
(3) consists of information and documentation included within any of
the following categories: (a) customer, supplier or contractor
lists, (b) customer, supplier or contractor information, (c)
information regarding business plans (strategic and tactical),
markets and operations (including performance), (d) information
regarding administrative, financial or marketing activities or
results, (e) pricing information, (f) personnel information, (g)
products and product and service offerings (including specifications
and designs), (h) processes (e.g., logistical and engineering), (i)
budgets and financial results, (j) premium data and loss
information, (k) identities of agents and brokers and the nature of
ACE's agreements with them, (l) ACE's third party contracts to which
IBM has had access, and (m) any business information derived from
such information,
(b) Obligations
(1) IBM and ACE shall not disclose, and shall maintain the
confidentiality of, all Proprietary Information of the other
Party. ACE and IBM shall each use the same degree of care to
safeguard and to prevent disclosing to third parties the
Proprietary Information of the other as it employs to avoid
unauthorized disclosure, publication, dissemination,
destruction, loss, or alteration of its own information (or
information of its customers) of a similar nature, but not
less than reasonable care. The Parties may disclose
Proprietary Information to their Affiliates, auditors,
attorneys, accountants, consultants and Subcontractors, where
(i) use by such person or entity is authorized under this
Agreement, (ii) such disclosure is necessary for the
performance of such person's or entity's obligations under or
with respect to this Agreement or otherwise naturally occurs
in such person's or entity's scope of responsibility, (iii)
the person or entity (and its applicable officers and
employees) agree in writing to assume the obligations
substantially similar to those described in this Section 13.3,
------------
and (iv) the disclosing Party assumes full responsibility for
the acts or omissions of such person or entity and takes
reasonable measures to ensure that the Proprietary Information
is not disclosed or used in contravention of this Agreement.
Each Party's Proprietary Information shall remain the property
of such Party.
(2) Neither Party shall (i) make any copies of, or use, the
Proprietary Information of the other Party except as
contemplated by this Agreement, (ii) acquire any right in or
assert any lien against the Proprietary Information of the
other Party, (iii) sell, assign, transfer, lease, or otherwise
dispose of Proprietary Information to third parties or
commercially exploit such information, including through
derivative works, or (iv) refuse for any reason (including a
default or material breach of this Agreement by the other
Party) to promptly provide the other Party's Proprietary
Information (including copies thereof) to the other Party if
requested to do so (in the case of ACE Data, in the form
reasonably requested if ACE is paying for their return). Upon
expiration or any termination of this Agreement and completion
of each Party's obligations under this Agreement, each Party
shall return or destroy, as the other Party may direct, all
documentation in any medium that contains, refers to, or
relates to the other Party's Proprietary Information, and
retain no copies. In addition, the Parties shall take
reasonable steps to ensure that their employees comply with
these confidentiality provisions
Ace/IBM Proprietary Information
50
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(c) Exclusions. Section 13.3(b) shall not apply to any particular
---------------
information which the receiving Party can demonstrate (i) is, at the
time of disclosure to it, in the public domain; (ii) after
disclosure to it, is published or otherwise becomes part of the
public domain through no fault of the receiving Party; (iii) is in
the possession of the receiving Party at the time of disclosure to
it; (iv) is received from a third party having a lawful right to
disclose such information; or (v) is independently developed by the
receiving Party without subsequent reference to Proprietary
Information of the furnishing Party. In addition, the receiving
Party shall not be considered to have breached its obligations under
this Section 13.3 for disclosing Proprietary Information of the
------------
other Party as required to satisfy any legal requirement of a
competent government body, provided that, promptly upon receiving
any such request and to the extent that it may legally do so, such
Party advises the other Party of the Proprietary Information to be
disclosed and the identity of the third party requiring such
disclosure prior to making such disclosure in order that the other
Party may interpose an objection to such disclosure, take action to
assure confidential handling of the Proprietary Information, or take
such other action as it deems appropriate to protect the Proprietary
Information. It is understood that the receipt of Proprietary
Information under this Agreement will not limit or restrict
assignment or reassignment of employees of ACE and IBM within or
between the respective Parties and their Affiliates
(d) Residual Information. Notwithstanding anything to the contrary
contained in this Agreement, either Party which receives Proprietary
Information ("Recipient") may disclose, publish, disseminate, and
---------
use the ideas, concepts, know-how and techniques, related to
Recipient's business activities in such Party's respective industry
(i.e., the IBM Business for IBM and the ACE Business for ACE), which
are contained in the disclosing Party's Proprietary Information, but
solely to the extent retained in the memories of the receiving
Party's employees who have had access to the Proprietary Information
pursuant to this Agreement (the "Residual Information"). Nothing
--------------------
contained in this Section gives the Recipient the right to use,
disclose, publish, or disseminate:
(1) the source of Residual Information;
(2) if the Recipient is IBM, any ideas, concepts, know-how or
techniques only related to the ACE Business, or, if the
Recipient is ACE, any ideas, concepts, know-how or techniques
only related to the IBM Business; or
(3) the business plans of the disclosing Party.
(e) Loss of Proprietary Information. Each Party shall: (i) promptly
notify the other Party in writing of any possession, use, knowledge,
disclosure, or loss of such other Party's Proprietary Information in
contravention of this Agreement; (ii) promptly furnish to the other
Party all known details and reasonably assist such other Party in
investigating and/or preventing the reoccurrence of such possession,
use, knowledge, disclosure, or loss; (iii) reasonably cooperate with
the other Party in any investigation or litigation deemed necessary
by such other Party to protect its rights; and (iv) promptly use all
commercially reasonable efforts to prevent further possession, use,
knowledge, disclosure, or loss
Ace/IBM Proprietary Information
51
<PAGE>
of Proprietary Information in contravention of this Agreement. Each
party shall bear any costs it incurs in complying with this Section
-------
13.3(e)
------
(f) No Implied Rights. Nothing contained in this Section 13.3 shall be
------------
construed as obligating a Party to disclose its Proprietary
Information to the other Party, or as granting to or conferring on a
Party, expressly or impliedly, any rights or license to any
Proprietary Information of the other Party.
(g) Survival. The Parties' obligations of non-disclosure and
confidentiality shall survive the expiration or termination of this
Agreement for a period of five (5) years.
(h) Limitation. Neither Party shall be responsible for the loss,
corruption, damage or mistransmission of data during the
transmission of such data by a third party telecommunications
provider unless to the extent such loss, damage or mistransmission
is attributable to error or either Party's failure to perform its
obligations under this Agreement.
13.4 File Access
ACE will have unrestricted access to, and the right to review and retain
the relevant portion of all computer or other files containing ACE Data.
At no time will any of such files or other materials or information be
stored or held in a form or manner not readily accessible to ACE. IBM will
provide to the ACE Project Executive all passwords, codes, comments, keys,
documentation and the locations of any such files and other materials
promptly upon the request of ACE, including Equipment and Software keys
and such information as to format, encryption (if any) and any other
specification or information necessary for ACE to retrieve, read, revise
and/or maintain such files and information. Upon the request of the ACE
Project Executive, IBM will confirm that, to the best of its knowledge,
all files and other information provided to ACE are complete and that no
material element, amount, or other fraction of such files or other
information to which ACE may request access or review has been deleted,
withheld, disguised or encoded in a manner inconsistent with the purpose
and intent of providing full and complete access to ACE as contemplated by
this Agreement.
14. OWNERSHIP OF MATERIALS
14.1 ACE Owned Materials
ACE shall be the sole and exclusive owner of the ACE Owned Materials.
14.2 Developed Materials
(a) Unless the Parties agree otherwise in writing, all ACE Owned
Developed Materials shall be considered works made for hire (as that
term is used in Section 101 of the Copyright Act) owned by ACE or
such Eligible Recipient. If any such ACE Owned Developed Materials
may not be considered a work made for hire under applicable law, IBM
hereby irrevocably assigns, and shall assign, to ACE or the
appropriate Eligible Recipient, without further consideration, all
of IBM's right, title and interest in and to such ACE Owned
Developed Materials, including United States and foreign
intellectual property rights. IBM acknowledges that ACE and the
Eligible Recipients and their successors and assigns shall have the
right to obtain and hold in their own name any intellectual property
rights in and to such ACE Owned Developed Materials. IBM agrees to
execute any documents and take any other reasonable actions
reasonably requested by ACE to effectuate the purposes of this
Section 14.2. ACE grants to IBM a non-exclusive, non-transferable,
------------
worldwide, limited right and license to use, execute, reproduce,
display, perform, modify and distribute the ACE
Ace/IBM Proprietary Information
52
<PAGE>
Owned Developed Materials for the sole purpose of providing the
Services during the Term and the Transfer Assistance Period pursuant
to this Agreement; provided, that this license does not give IBM the
--------
right, and IBM is not authorized, to sublicense such ACE Owned
Developed Materials or use them for the benefit of other customers
or for any other purpose without ACE's prior written consent. ACE
may, in its sole discretion and upon such terms and at such prices
as ACE and IBM may agree, grant IBM a license to use the ACE Owned
Developed Materials for other purposes and to sublicense the ACE
Owned Developed Materials.
(b) IBM shall provide ACE with the source code and documentation for all
such Developed Materials. IBM represents and warrants that: (i) the
source code and documentation for such Developed Materials will be
sufficient to allow a reasonably knowledgeable and experienced
systems programmer to maintain and support such Materials; and (ii)
the user documentation for such Materials will accurately describe
in terms understandable by a typical end user the functions and
features of such Materials and the procedures for exercising such
functions and features.
14.3 IBM Owned Materials
(a) IBM shall be the sole and exclusive owner of the IBM Owned
Materials, including United States and foreign intellectual property
rights in such IBM Owned Materials.
(b) IBM shall not use any IBM Owned Materials other than those listed in
Schedule B to provide the Services without providing written notice
----------
to, and obtaining the prior written consent of, ACE. IBM hereby
grants to ACE and the Eligible Recipients a perpetual, irrevocable,
unlimited, fully paid-up, transferable, global, royalty-free
license, with the right to grant sublicenses, to use, execute,
reproduce, display, perform, modify, enhance, distribute and create
derivative works of all IBM Owned Developed Materials as is
necessary for ACE to provide to itself and the Eligible Recipients,
or obtain from third parties, the Services.
(c) IBM shall not embed any IBM Owned Materials in any Developed
Materials, or create any Developed Materials that require the use of
any IBM Owned Materials to which ACE does not have a license
pursuant to Section 14.3(b), without providing written notice to,
--------------
and obtaining the prior written consent of, ACE. The Parties shall
negotiate the terms and conditions of a license for ACE with respect
to any such Materials.
14.4 Other Materials
This Agreement shall not confer upon either Party intellectual property
rights in Materials of the other Party (to the extent not covered by this
Article 14) unless otherwise so provided elsewhere in this Agreement.
----------
14.5 General Rights
(a) Copyright Legends. The Parties agree to reproduce copyright legends
which appear on any portion of the Materials which may be owned by
third parties.
(b) No Implied Licenses. Except as expressly specified in this
Agreement, nothing in this Agreement shall be deemed to grant to one
Party, by implication, estoppel or otherwise, license rights,
ownership rights or any other intellectual property rights in any
Materials owned by the other Party or any Affiliate of the other
Party (or, in the case of IBM, any Eligible Recipient).
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53
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14.6 ACE Rights Upon Expiration or Termination of Agreement
As part of the Transfer Assistance Services, IBM shall provide the
following to ACE and the Eligible Recipients with respect to Materials and
Software:
(a) ACE Owned Materials and Developed Materials. IBM shall, at no cost
to ACE:
(1) deliver to ACE all Developed Materials in the format and
medium in use by IBM in connection with the Services as of the
date of such expiration or termination to the extent that ACE
has paid all undisputed Charges (in accordance with Section
-------
12.4) expressly associated with such Developed Materials; and
----
(2) following confirmation by ACE that the copies of the ACE Owned
Materials delivered by IBM are acceptable and the completion
by IBM of any Transfer Assistance Services for which such
Materials are required, destroy or securely erase all other
copies of such Materials then in IBM's possession and cease
using such Materials for any purpose; provided, however, that
IBM may retain one (1) copy of the ACE Data to determine IBM's
rights under this Agreement.
(b) IBM Owned Materials. With respect to those Materials (other than IBM
Owned Developed Materials) owned by IBM or IBM Affiliates or
Subcontractors and used by them to provide the Services, IBM shall,
at its then current terms and prices for similarly situated
customers:
(1) grant to ACE a, non-exclusive, non-transferable, internal-use
license to use, execute, reproduce, display, perform,
distribute, modify, enhance and create derivative works and to
permit a third party to use, execute, reproduce, display,
perform, distribute, modify, enhance and create derivative
works on ACE's behalf, and solely for the benefit or use of
ACE and the Eligible Recipients or such licenses as are then
provided by IBM to similarly situated customers;
(2) deliver to ACE a copy of such Materials, including related
documentation; and
(3) offer to provide to ACE maintenance, support and other
services for such Materials on IBM's then-current standard
terms and conditions for such services.
(c) Third Party Software and Materials. With respect to Third Party
Software and Materials licensed by IBM or IBM Affiliates or
Subcontractors and used by them to provide the Services, IBM shall,
subject to any applicable vendor terms, conditions and payment by
ACE of any transfer fee, license fee or other charges imposed by
such vendor:
(1) assign to ACE or its designee the licenses for such Third
Party Software and Materials where IBM is using such Third
Party Software solely to provide the Services to ACE as of the
date of such expiration or termination;
(2) reasonably assist ACE in obtaining licenses for such Third
Party Software; and
(3) deliver to ACE a copy of such Third Party Software and
Materials (including source code, to the extent it has been
available to IBM) and related documentation and shall cause
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<PAGE>
maintenance, support and other services to continue to be
available to ACE (to the extent it has been available to IBM).
ACE shall be obligated to make any payments due following its
receipt of such licenses and attributable to periods after such
receipt to the extent IBM would have been obligated to make such
payments if it had continued to hold the licenses in question.
(d) Substitute Materials. As to any Third Party licenses to be assigned
or obtained, IBM shall have the right to license, or cause to be
licensed, to ACE or otherwise obtain for ACE, or a third party on
ACE's behalf, in place of Third Party Software and Materials and
Third Party licenses, any other Materials which are sufficient to
perform, without additional cost, support or resources and at the
levels of efficiency required by this Agreement, the functions of
the Third Party Software and Materials necessary to enable ACE or
its designee to provide the Services after the expiration or
termination of this Agreement.
15. REPRESENTATIONS AND WARRANTIES
15.1 Work Standards
IBM represents and warrants that the Services shall be executed in a
timely and workmanlike manner, in accordance with the practices of the
information technology outsourcing industry and the Performance Standards.
IBM covenants that it shall use qualified individuals with experience,
competence and skill necessary to perform the Services.
15.2 Maintenance
IBM covenants that to the extent received in such condition from ACE and
to the extent IBM is responsible to do so hereunder and unless otherwise
agreed, it shall maintain the Equipment and Software (i)in good operating
condition, subject to normal wear and tear, (ii) undertaking repairs and
preventive maintenance on Equipment for which IBM is designated to be
responsible hereunder in accordance with the applicable Equipment
manufacturer's recommendations and requirements, and (iii) performing
Software maintenance in accordance with the applicable Software vendor's
written documentation,. For Third Party Equipment and Software no longer
supported by the licensor or manufacturer and for which IBM is designated
to be responsible hereunder, IBM shall use commercially reasonable efforts
to perform maintenance as required. For Equipment and Software for which
IBM has financial responsibility, IBM will replace such Equipment or
Software as necessary, at no additional cost to ACE. For Software for
which ACE has retained financial responsibility, ACE shall be responsible
for such maintenance as performed by third parties on a Pass-Through
Expenses basis and shall bear the cost of replacing such Software.
15.3 Efficiency and Cost Effectiveness
IBM shall use commercially reasonable efforts to provide the Services in a
cost-effective manner consistent with the Performance Standards. Without
limiting the generality of the foregoing, such actions shall include:
(a) considering the economic circumstances in which the Services are
provided, including the impact upon ACE and the Eligible Recipients
of alternative technologies, applicable economies of scale, costs
associated with compliance with Laws and IBM's projections of ACE's
retained resource requirements;
Ace/IBM Proprietary Information
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<PAGE>
(b) making adjustments in the timing of actions (consistent with ACE's
priorities and schedules for the Services and IBM's obligation to
meet the Performance Standards);
(c) delaying or accelerating, as appropriate, the performance of
noncritical functions within limits acceptable to ACE;
(d) tuning or optimizing the systems, including memory, used to perform
the Services (including providing advice and suggestions to ACE to
assist ACE in ACE's tuning of Applications Software to optimize
performance and minimize costs);
(e) controlling its use of the ACE data network by scheduling usage,
where possible, to low utilization periods;
(f) using alternative technologies to perform the Services; and
(g) efficiently using resources for which ACE is charged hereunder,
consistent with industry norms, and compiling data concerning such
efficient use in segregated and auditable form whenever possible.
Prior to implementing any proposed change to the procedures, Equipment,
Software or other assets or resources that IBM uses to provide the
Services which may materially affect ACE's Retained Expenses or the use of
the Applications Software, IBM agrees to (i) provide written notice to ACE
which reasonably details IBM's proposed change and the potential impacts
on ACE, (ii) discuss with ACE any objections ACE may have to IBM's
proposed change, and (iii) obtain ACE's consent to such proposed change.
To the extent that ACE does not consent, IBM shall be relieved of Service
Levels to the extent that the failure to perform changes causes IBM to
fail to meet Service Levels.
15.4 Technology
IBM shall, without an increase in Charges to ACE, provide the Services
using current technology that may enable ACE to take advantage of
technological advancements in its industry and support ACE efforts to
maintain competitiveness in the markets in which it competes.
15.5 Software
(a) IBM represents and warrants that it is either the owner of, or
authorized to use, any and all Software used by IBM in providing the
Services, subject to, the responsible Party under Article 5,
---------
obtaining the Required Consents. As to any such Software that IBM
does not own but is authorized to use, IBM shall advise ACE as to
the ownership and extent of IBM's rights with regard to such
Software. ACE represents and warrants that ACE is either the owner
of, or authorized to use, any and all Software provided to IBM
hereunder.
(b) IBM represents and warrants that the Software, other than Third
Party Software, provided or developed by IBM under this Agreement
will perform in conformance with its specifications.
(c) IBM shall use commercially reasonable efforts to evaluate any Third
Party Software selected by or for ACE to provide Services to
determine whether such Software will perform in accordance with its
published specifications. With respect to all products and services
purchased by IBM for ACE on a cost-plus, cost-reimbursement or Pass-
Through Expense basis during the course of performing the Services,
IBM shall pass-through to ACE all benefits offered by the
manufacturers and/or vendors of such products and services
(including, without limitation, all warranties, refunds, credits,
rebates,
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discounts, training, technical support and other consideration
offered by such manufacturers and vendors) except to the extent
otherwise agreed by ACE.
(d) IBM does not assure uninterrupted or error-free operation of the
Materials or Services or that IBM will correct all defects therein.
Except as otherwise provided herein, IBM does not warrant the
accuracy of any Materials, advice, report, data or other product
delivered to ACE hereunder if, and to the extent, produced with or
from data, materials or software provided by ACE. Except as
otherwise expressly provided herein, such products are delivered 'AS
IS,' and IBM will not be liable for any inaccuracy thereof.
15.6 Non-Infringement
Each Party represents and warrants that it shall perform its
responsibilities under this Agreement in a manner that does not infringe,
or constitute an infringement or misappropriation of, any U.S. patent,
copyright, trademark or similar proprietary rights conferred by contract
or by common law or by the law of the U.S. or any state therein of any
third party; provided, however, that the performing Party shall not have
--------
any obligation or liability to the extent any infringement or
misappropriation is caused by (i) modifications or misuse made by the
other Party or its subcontractors without the knowledge or approval of the
performing Party, (ii) the other Party's combination of the performing
Party's work product or Materials with items not furnished or specified by
the performing Party or contemplated by this Agreement, (iii) a breach of
this Agreement by the other Party, or (iv) Third Party Software, except to
the extent that such infringement or misappropriation arises from the
failure of the performing Party to obtain the necessary licenses or
Required Consents or to abide by the limitations of the applicable Third
Party Software licenses. In addition, IBM represents and warrants that it
will use commercially reasonable efforts to obtain intellectual property
indemnification for ACE pursuant to any agreements that IBM enters into
after the Commencement Date in connection with providing the Services with
respect to Third Party Software, from the suppliers of such Software, that
is comparable to the intellectual property indemnification provided by IBM
to ACE under this Agreement, and will use reasonable efforts to notify ACE
of all failures to obtain such indemnification.
15.7 Authorization
Each Party represents and warrants to the other that:
(a) It is a corporation duly incorporated, validly existing and in good
standing under the laws of its State of incorporation;
(b) It has the requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement;
(c) It has obtained all licenses, authorizations, approvals, consents or
permits required to perform its obligations under this Agreement
under all applicable federal, state or local laws and under all
applicable rules and regulations of all authorities having
jurisdiction over the Services;
(d) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement have
been duly authorized by the requisite corporate action on the part
of such Party; and
(e) The execution, delivery, and performance of this Agreement shall not
constitute a violation of any judgment, order, or decree; a material
default under any material contract by which it or any of its
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material assets are bound; or an event that would, with notice or
lapse of time, or both, constitute such a default.
15.8 Inducements
IBM represents and warrants that it has not given and will not give
commissions, payments, kickbacks, lavish or extensive entertainment, or
other inducements of more than minimal value to any employee or agent of
ACE in connection with this contract. IBM also represents and warrants
that, to the best of its knowledge, no officer, director, employee, agent
or representative of IBM has given any such payments, gifts, entertainment
or other thing of value to any employee or agent of ACE. IBM also
acknowledges that the giving of any such payments, gifts, entertainment,
or other thing of value is strictly in violation of ACE's policy on
conflicts of interest.
15.9 Malicious Code
Each Party represents and warrants that it shall take commercially
reasonable actions and precautions to prevent the introduction and
proliferation, and reduce the effects, of any Malicious Code into ACE's
information technology environment or any system used by IBM to provide
the Services. Without limiting IBM's other obligations under this
Agreement, IBM covenants that, in the event any Malicious Code is found in
the systems used to provide the Services, if such Malicious Code was
introduced into the Equipment, Software or other resources provided by IBM
or any IBM Personnel under this Agreement, or if IBM fails to take such
commercially reasonable actions or precautions, IBM shall remove such
Malicious Code at its expense and indemnify ACE for all Losses incurred by
ACE as a result of such Malicious Code.
15.10 Disabling Code
Neither Party shall without the prior written consent of the other Party
insert into the Software any code which could be invoked to disable or
otherwise shut down all or any portion of the Services. With respect to
any disabling code that may be part of the Software, neither Party shall
invoke or cause to be invoked such disabling code at any time, including
upon expiration or termination of this Agreement for any reason, without
the other Party's prior written consent.
15.11 Compliance With Laws
Each Party represents and warrants that the Software, Materials and
Services provided by such Party shall be in compliance with all applicable
Laws on the Commencement Date and shall remain in compliance with such
Laws for the entire Term of the Agreement. IBM shall comply with all Laws
applicable to the provision of Services. ACE shall comply with all Laws
applicable to the receipt of Services.
15.12 Ownership of ACE Machines
ACE represents that ACE is either the owner of each ACE Machine or is
authorized by its owner to include it under this Agreement.
15.13 Environmental Warranty
(a) ACE covenants that during the Term, ACE Facilities do not and will
not contain any unsafe condition or Hazardous Materials. If ACE
becomes aware of the existence of any unsafe condition or Hazardous
Material at an ACE Facility, ACE will promptly provide IBM with
written notice
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specifying the nature and location of such unsafe condition or
Hazardous Material. IBM reserves the right to discontinue
performance of the Services affected by such unsafe condition or the
presence of Hazardous Materials until the unsafe condition or
presence of Hazardous Materials has been remedied.
(b) ACE will remedy any violation of law with respect to the presence of
Hazardous Materials. The investigation, detection, abatement and
remediation of any Hazardous Materials present at ACE Facilities are
not within the scope of this Agreement. IBM will not be liable or
responsible for any expenses incurred by ACE with respect to
Hazardous Materials, except and only to the extent that the presence
of Hazardous Materials was caused by IBM's misconduct.
15.14 Remedy
In the event of any breach by IBM of any of the warranties set forth in
this Article 15, IBM shall promptly correct or cause the correction of
----------
the deficiencies giving rise to the breach without charge to ACE. In the
event of any breach by ACE of any of the warranties set forth in this
Article 15, ACE shall promptly correct or cause the correction of the
----------
deficiencies giving rise to the breach without charge to IBM. In the event
of any breach of a warranty set forth in this Article 15 that causes a
----------
significant impact on ACE's ability to perform a material function
required by ACE's business, IBM shall use its diligent efforts to correct
the deficiency within twenty-four (24) hours after IBM discovers or
receives notice of the deficiency; if failure to restore begins to
materially affect ACE's business, IBM will use its commercially reasonable
efforts, including the use of non-account personnel and contracted
disaster recovery resources, to restore critical production functions as
soon as possible.
15.15 Disclaimer
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, NEITHER PARTY MAKES ANY
REPRESENTATIONS OR WARRANTIES TO THE OTHER, WHETHER EXPRESS OR IMPLIED,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
16. INSURANCE AND RISK OF LOSS
16.1 Insurance
(a) Requirements. IBM agrees to keep in full force and effect and
maintain at its sole cost and expense the following policies of
insurance during the term of this Agreement:
(1) Workers' Compensation and Employer's Liability Insurance:
(i) Statutory Worker's Compensation including occupational
disease in accordance with the law.
(ii) Employer's Liability Insurance with minimum limits of
$5,000,000.00 per employee by accident /
$5,000,000.00 per employee by disease / $5,000,000.00
policy limit by disease.
(2) Commercial General Liability Insurance and Umbrella Liability
Insurance (including contractual liability insurance)
providing coverage for bodily injury and property damage
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with combined single limits of not less than twenty-five
million dollars ($25,000,000) per occurrence.
(3) Commercial Business Automobile Liability Insurance including
coverage for all owned, non-owned, leased, and hired vehicles
providing coverage for bodily injury and property damage
liability with combined single limits of not less than one
million dollars ($1,000,000) per occurrence.
(4) Employee Dishonesty and Computer Fraud Insurance covering
losses arising out of or in connection with any fraudulent or
dishonest acts committed by IBM Personnel, acting alone or
with others, in an amount not less than ten million dollars
($10,000,000) per occurrence.
(b) Approved Companies. If applicable, IBM may self insure to the
extent allowed by law.
(c) Endorsements. With respect to subsections (a)(2) and (a)(3) above,
----------------------------
IBM's insurance policies as required herein shall name ACE and all
of its subsidiaries, Affiliates, officers, directors, agents,
servants and employees as Additional Insureds for any and all
liability arising at any time in connection with IBM's performance
under this Agreement. Such insurance afforded to ACE shall be
primary insurance and any other valid insurance existing for ACE's
benefit shall be excess of such primary insurance. IBM shall obtain
such endorsements to its policy or policies of insurance as are
necessary to cause the policy or policies to comply with the
requirements stated herein.
(d) Certificates. IBM shall, upon ACE's request provide ACE with
certificates of insurance evidencing compliance with this Article 16
----------
(including evidence of renewal of insurance) signed by authorized
representatives of the respective carriers for each year that this
Agreement is in effect. Each certificate of insurance shall include
a statement that the issuing company shall not cancel, nonrenew,
reduce, or otherwise change the insurance afforded under the above
policies unless thirty (30) days' notice of such cancellation,
nonrenewal, reduction or change has been provided to:
ACE INA Holdings, Inc.
Two Liberty Place
Philadelphia, Pennsylvania
Attention: General Counsel
(e) No Implied Limitation. The obligation of IBM to provide the
insurance specified herein shall not limit in any way any obligation
or liability of IBM provided elsewhere in this Agreement.
16.2 Risk of Loss
Each Party shall be responsible for risk of loss of, and damage to, any
Equipment, Software or other materials in its possession or on its
premises at the time of such loss or damage. Each Party shall promptly
notify the other of any damage (except normal wear and tear), destruction,
loss, theft, or governmental taking of any item of Equipment, Software or
other materials in the possession of such Party or on its premises of such
Party, whether or not insured against by such Party, whether partial or
complete, which is caused by any act, omission, fault or neglect of such
Party ("Event of Loss"). Such Party shall be responsible for the cost of
-------------
any necessary repair or replacement of such Equipment, Software or other
materials due to an Event of Loss; in the event of a ACE Event of Loss,
such repair or replacement shall not be considered part of IBM's
maintenance obligations. For a ACE Event of Loss, IBM shall coordinate and
oversee repair or replacement performed by a third-party on a Pass-Through
Expenses basis, or by IBM at agreed-upon prices.
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17. INDEMNITIES
17.1 Indemnity by IBM
IBM agrees to indemnify, defend and hold harmless ACE and the Eligible
Recipients and their respective officers, directors, employees, agents,
Affiliates, successors, and assigns from any and all Losses and
threatened Losses due to third party claims arising from or in
connection with any of the following:
(a) IBM's breach of any of the material representations and
warranties set forth in this Agreement;
(b) IBM's decision to terminate or failure to observe or perform
any duties or obligations to be observed or performed on or
after the Commencement Date by IBM under any of the contracts
assigned to IBM or for which IBM has assumed financial,
administrative, or operational responsibility;
(c) IBM's failure to observe or perform any duties or obligations
to be observed or performed on or after the Commencement Date
by IBM under Third Party Software licenses, Equipment Leases
or Third Party Contracts assigned to IBM pursuant to this
Agreement, or any duties or obligations to be observed or
performed by IBM after the Commencement Date;
(d) IBM's breach of its material obligations with respect to ACE
Proprietary Information;
(e) Occurrences that IBM is required to insure against pursuant to
Section 16.1, to the extent of IBM's actual coverage under its
------------
insurance policies, or in the event IBM fails to obtain the
applicable insurance policy pursuant to Section 16.1, to the
------------
extent of the coverage required therein; provided, however,
that this provision shall not limit ACE's right to indemnity
under any other provision of this Article 17;
----------
(f) Infringement or alleged infringement of a patent, trade
secret, copyright or other proprietary rights conferred by
contract, common law or by the law of the U.S. or any state
therein in contravention of IBM's representations and
warranties in Sections 15.5 and 15.6 provided that IBM shall
----------------------
have no obligation with respect to any Losses to the extent
the same arises out of or in connection with ACE's
modification or misuse of Equipment, systems, programs or
products, or ACE's combination, operation or use with devices,
data, Equipment, systems, programs or products not furnished
by IBM or its subcontractors or agents; provided further that
if such a claim is made or appears likely to be made, ACE
agrees to permit IBM to obtain the right for ACE to continue
to use such Equipment, system, program or product, or to
modify it or replace it with one that is at least functionally
equivalent;
(g) IBM's acts or omissions during the interview, hiring or
transition process with respect to any ACE Personnel or former
ACE Personnel listed in Schedule M;
----------
(h) Claims by government regulators or agencies for fines,
penalties, sanctions or other remedies arising from or in
connection with IBM's failure to perform its responsibilities
under this Agreement to the extent such fines, penalties,
sanctions or other remedies related to such failure were
caused by IBM and not by ACE or at ACE's direction and to the
extent that ACE provides to IBM advance written notice of the
Law that is the basis of the same;
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(i) Taxes assessed against ACE, together with interest and
penalties, that are the responsibility of IBM under Section
-------
11.4; and
----
(j) Products, services or systems provided by IBM or its
Subcontractors or authorized distributors directly to a third
party, unless or to the extent such claim arises from the acts
or omissions of ACE or Subcontractors or agents, or from the
ACE Owned Software.
(k) IBM shall also indemnify ACE and the Eligible Recipients for
any Losses incurred by them as a result of any failure by IBM
to perform fully and completely those obligations of ACE for
which IBM has responsibility under Schedule F of the Agreement
----------
under Software licenses or Third Party Contracts to the extent
that IBM has the obligation to do so and IBM's failure to
perform such obligations is not caused by ACE or the Eligible
Recipients or CIGNA.
17.2 Indemnity by ACE
ACE agrees to indemnify, defend and hold harmless IBM and its officers,
directors, employees, agents, Affiliates, successors, and assigns from
any Losses and threatened Losses due to third party claims arising from
or in connection with any of the following:
(a) ACE's breach of any of the material representations and
warranties set forth in this Agreement;
(b) ACE's decision to terminate or failure to observe or perform
any duties or obligations to be observed or performed before
and/or after the Commencement Date by ACE under any of the
contracts for which ACE has retained financial,
administrative, or operational responsibility;
(c) ACE's failure to observe or perform any duties or obligations
to be observed or performed prior to, on or after, the
Commencement Date by ACE under any of the applicable Third
Party Software licenses, Equipment Leases or Third Party
Service Contracts;
(d) ACE's breach of its material obligations with respect to IBM's
Proprietary Information;
(e) Infringement or alleged infringement of a patent, trade
secret, copyright or other proprietary rights conferred by
contract, common law or by the law of the U.S. or any state
therein in contravention of ACE's representations and
warranties in Sections 15.5 and 15.6 provided that ACE shall
----------------------
have no obligation with respect to any Losses to the extent
the same arises out of or in connection with IBM's
modification or misuse of Equipment, systems, programs or
products, or IBM's combination, operation or use with devices,
data, Equipment, systems, programs or products not furnished
by ACE or its subcontractors or agents; provided further that
if such a claim is made or appears likely to be made, IBM
agrees to permit ACE to obtain the right for IBM to continue
to use such Equipment, system, program or product, or to
modify it or replace it with one that is at least functionally
equivalent;
(f) Taxes assessed against IBM or its agents, together with
interest and penalties, that are the responsibility of ACE
under Section 11.4;
------------
(g) Relating to any environmental claim arising out of this
Agreement or as a result of the Services at the ACE
Facilities;
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(h) ACE acts or omissions during the interview, hiring or
transition process with respect to any former ACE Personnel;
(i) Products, services, or systems provided by ACE or its
Subcontractors to a third party, unless and to the extent such
claim arises from IBM's conduct;
(j) Claims by government regulators or agencies for fines,
penalties, sanctions or other remedies arising from or in
connection with ACE's failure to perform its responsibilities
under this Agreement to the extent such fines, penalties,
sanctions or other remedies related to such failure were
caused by ACE and not by IBM or at IBM's direction;
(k) Claims by Eligible Recipients or divested ACE Entities
relating to the provision of Services to the same pursuant to
this Agreement; and
(l) Claims by CIGNA arising from IBM's provision of the Services
to ACE under this Agreement (other than claims that ACE,
through IBM's breach of Section 6.12 of this Agreement, has
denied to CIGNA use or access to which CIGNA is entitled under
Section 3.1 of the Systems Facilities Agreement).
-----------
17.3 Additional Indemnities
IBM and ACE each agree to indemnify, defend and hold harmless the
other, and the Eligible Recipients and their respective Affiliates,
officers, directors, employees, agents, successors, and assigns, from
any and all Losses and threatened Losses to the extent they arise from
or in connection with any of the following: (a) the death or bodily
injury of any agent, employee, customer, business invitee, business
visitor or other person caused by the negligence or other tortuous
conduct of the indemnitor; (b) the damage, loss or destruction of any
real or tangible personal property caused by the negligence or other
tortious conduct of the indemnitor; and (c) any claim, demand, charge,
action, cause of action, or other proceeding asserted against the
indemnitee but resulting from an act or omission of the indemnitor in
its capacity as an employer or potential employer of a person.
17.4 Infringement
(a) If any item used by IBM to provide the Services becomes, or in
IBM's reasonable opinion is likely to become, the subject of
an infringement or misappropriation claim or proceeding, IBM
shall, unless such item was provided by ACE or an Eligible
Recipient or was used at their request, promptly take the
following actions at no additional charge to ACE: (i) secure
the right to continue using the item; or (ii) replace or
modify the item to make it non-infringing, provided that any
such replacement or modification will not materially degrade
the performance or quality of the affected component of the
Services. If alternatives (i) and (ii) are not feasible, IBM
shall remove the item from the Services and equitably adjust
the Charges, if appropriate, to reflect such removal.
(b) If any item provided by ACE to IBM in its provision of the
Services becomes, or in ACE's reasonable opinion is likely to
become, the subject of an infringement or misappropriation
claim or proceeding, ACE shall promptly take the following
actions at no charge to IBM: (i) secure the right to continue
using the item; or (ii) replace or modify the item to make it
non-infringing, provided that any such replacement or
modification will not materially degrade the performance or
quality of the affected component of the Services.
17.5 Environmental
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(a) ACE shall (i) notify IBM of the procedures and precautions to
be taken at ACE sites where Hazardous Materials are used or
produced in operations performed by ACE or its agents or
Affiliates or Eligible Recipients, (ii) provide at its expense
any special equipment or training required by IBM to perform
safely and properly the Services in the presence of such
Hazardous Materials; (iii) be responsible for complying with
all material applicable Laws concerning the treatment,
storage, registration, handling or disposal of or reporting
about, Hazardous Materials used or produced in operations
performed by ACE or its Affiliates, Eligible Recipients, or
the agents of each, at the ACE sites; and (iv) be responsible
for remedying any violation of Law with respect to the
treatment, storage, registration, handling or disposal of or
reporting about Hazardous Materials used or produced in
operations performed by ACE at the ACE sites.
(b) IBM shall (i) notify ACE of the procedures and precautions to
be taken at ACE or IBM facilities where Hazardous Materials
are used or produced in operations performed by IBM or its
Affiliates or Subcontractors in the performance of the
Services, (ii) provide at its expense any special equipment or
training required by ACE to perform its operations safely and
properly in the presence of such Hazardous Materials; (iii) be
responsible for complying with all material applicable Laws
concerning the treatment, storage, registration, handling or
disposal of or reporting about Hazardous Materials used or
produced by IBM or its Affiliates or Subcontractors in the
performance of the Services; and (iv) be responsible for
remedying any violation of Law with respect to the treatment,
storage, registration, reporting, handling or disposal of any
Hazardous Materials used or produced in the performance of the
Services.
(c) In the event that Hazardous Materials are present at any ACE
site during the Term of this Agreement, IBM may cease
performance of any affected portion of the Services if and to
the extent IBM's ability to perform such portion of the
Services safely is impacted by the presence of such Hazardous
Materials and the unsafe condition cannot reasonably be
circumvented by IBM through the use of alternative approaches,
workaround plans or other means.
(d) ACE shall be liable for and indemnify IBM against all costs,
expenses or other Losses incurred or suffered by IBM as a
result of the treatment, storage, registration, handling,
disposal or release of or reporting about Hazardous Materials
used or produced by operations performed by ACE at the ACE
sites, except to the extent that such costs, expenses or
Losses were caused by the conduct of IBM or IBM's employees,
subcontractors, agents or representatives . IBM shall be
liable for and indemnify ACE and the Eligible Recipients
against all costs, expenses or other Losses incurred or
suffered by ACE or any Eligible Recipient as a result of the
treatment, storage, registration, handling, disposal or
release of or reporting about Hazardous Materials used or
produced by IBM in the performance of the Services, except to
the extent such costs, expenses or Losses were caused by the
conduct of ACE, Eligible Recipients, Subcontractors, CIGNA,
agents or representatives or other persons for whom ACE is
legally responsible (which specifically excludes IBM or IBM's
employees, subcontractors, agents or representatives). Neither
IBM nor ACE shall be liable to the other for any special,
indirect, incidental or consequential damages.
17.6 Indemnification Procedures
With respect to third party claims (other than those covered by
Sections 17.1(h) and 17.2(j)), the following procedures shall apply:
-----------------------------
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(a) Notice. Promptly after receipt by any entity entitled to
indemnification (under Sections 17.1 through 17.5) of notice
------------- ----
of the commencement or threatened commencement of any civil,
criminal, administrative, or investigative action or
proceeding involving a claim in respect of which the
indemnitee will seek indemnification pursuant to any such
Section, the indemnitee shall notify the indemnitor of such
claim in writing. No delay or failure to so notify an
indemnitor shall relieve it of its obligations under this
Agreement except to the extent that such indemnitor has been
harmed by such delay or failure. Within fifteen (15) days
following receipt of written notice from the indemnitee
relating to any claim, but no later than five (5) days before
the date on which any response to a complaint or summons is
due, the indemnitor shall notify the indemnitee in writing
that the indemnitor elects to assume control of the defense
and settlement of that claim (a "Notice of Election").
------------------
(b) Procedure Following Notice of Election. If the indemnitor
delivers a Notice of Election within the required notice
period, the indemnitor shall assume sole control over the
defense and settlement of the claim; provided, however, that
--------
(i) the indemnitor shall keep the indemnitee fully apprised at
all times as to the status of the defense, and (ii) the
indemnitor shall obtain the prior written approval of the
indemnitee before entering into any settlement of such claim
imposing any obligations or restrictions on the indemnitee or
ceasing to defend against such claim. The indemnitor shall not
be liable for any legal fees or expenses incurred by the
indemnitee following the delivery of a Notice of Election;
provided, however, that (i) the indemnitee shall be entitled
--------
to employ counsel at its own expense to participate in the
handling of the claim, and (ii) the indemnitor shall pay the
fees and expenses associated with such counsel if, in the
reasonable judgment of the indemnitee, based on an opinion of
counsel, there is a conflict of interest with respect to such
claim. The indemnitor shall not be obligated to indemnify the
indemnitee for any amount paid or payable by such indemnitee
in the settlement of any claim if (x) the indemnitor has
delivered a timely Notice of Election and such amount was
agreed to without the written consent of the indemnitor, (y)
the indemnitee has not provided the indemnitor with notice of
such claim and a reasonable opportunity to respond thereto, or
(z) the time period within which to deliver a Notice of
Election has not yet expired.
(c) Procedure Where No Notice of Election Is Delivered. If the
indemnitor does not deliver a Notice of Election relating to
any claim within the required notice period, the indemnitee
shall have the right to defend the claim in such manner as it
may deem appropriate, at the reasonable cost and expense of
the indemnitor. The indemnitor shall promptly reimburse the
indemnitee for all such reasonable costs and expenses.
17.7 Indemnification Procedures -- Governmental Claims
(a) Section 17.1 (h) Procedures. With respect to claims covered by
Section 17.1(h) the following procedures shall apply:
---------------
(1) Notice. Promptly after receipt by ACE of notice of
the commencement or threatened commencement of any
action or proceeding involving a claim in respect of
which the indemnitee will seek indemnification
pursuant to Section 17.1(h) ACE shall notify IBM of
---------------
such claim in writing. No delay or failure to so
notify IBM shall relieve IBM of its obligations under
this Agreement except to the extent that IBM has been
harmed by such delay or failure.
(2) Procedure for Defense. ACE shall be entitled to have
sole control over the defense and settlement of such
claim; provided, however, ACE shall obtain the prior
--------
approval of IBM
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before entering into any settlement of such claim
involving the payment of moneys for which IBM will
ultimately be financially response under Section
-------
17.1(h).
-------
(b) Section 17.2 (j) Procedures. With respect to claims covered by
Section 17.2(j) the following procedures shall apply:
---------------
(1) Notice. Promptly after receipt by IBM of notice of
the commencement or threatened commencement of any
action or proceeding involving a claim in respect of
which the indemnitee will seek indemnification
pursuant to Section 17.2(j) IBM shall notify ACE of
---------------
such claim in writing. No delay or failure to so
notify ACE shall relieve ACE of its obligations under
this Agreement except to the extent that ACE has been
harmed by such delay or failure.
(2) Procedure for Defense. IBM shall be entitled to have
sole control over the defense and settlement of such
claim; provided, however, IBM shall obtain the prior
--------
approval of ACE before entering into any settlement
of such claim involving the payment of moneys for
which ACE will ultimately be financially response
under Section 17.2(j).
---------------
17.8 Subrogation
In the event that an indemnitor shall be obligated to indemnify an
indemnitee pursuant to Sections 17.1 through 17.5 or any other
------------- ----
provision of this Agreement, the indemnitor shall, upon payment of such
indemnity in full, be subrogated to all rights of the indemnitee with
respect to the claims to which such indemnification relates.
18. LIABILITY
18.1 General Intent
Subject to the specific provisions of this Article 18, it is the intent
----------
of the Parties that each Party shall be liable to the other Party for
any actual damages incurred by the non-breaching Party as a result of
the breaching Party's failure to perform its obligations in the manner
required by this Agreement.
18.2 Force Majeure
(a) Subject to Section 18.2(d), no Party shall be liable for any
---------------
default or delay in the performance of its obligations under
this Agreement if and to the extent such default or delay is
caused, directly or indirectly, by fire, flood, earthquake,
elements of nature or acts of God; wars, riots, civil
disorders, rebellions or revolutions, failure of
telecommunications carriers, strikes or lockouts or labor
disputes by third parties, or any other similar cause beyond
the reasonable control of such Party; provided, that the non-
--------
performing Party can not reasonably circumvent the delay
through the use of commercially reasonable alternate sources,
workaround plans or other means. A labor dispute involving a
Party (or, in the case of IBM, a Subcontractor) and its own
personnel shall not excuse such Party from its obligations
hereunder.
(b) In such event the non-performing Party shall be excused from
further performance or observance of the obligation(s) so
affected for as long as such circumstances prevail and such
Party continues to use commercially reasonable efforts to
recommence performance or observance whenever and to whatever
extent possible without delay. Any Party so prevented,
hindered or delayed in its performance shall immediately
notify the Party to whom performance is due by telephone (to
be
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confirmed in writing within five (5) days of the inception
of such delay) and describe at a reasonable level of detail
the circumstances of such force majeure event.
(c) If any event described in Section 18.2(a) substantially
---------------
prevents, hinders, or delays the performance by IBM or one of
its Subcontractors of Services associated with critical ACE
functions (i.e., functions the non-performance of which has a
material adverse effect on the conduct of ACE's business) for
more than the initial recovery period specified in the IBM
disaster recovery plan under this Agreement, or, if no
disaster recovery plan exists, for ten (10) consecutive days,
ACE may procure such Services from an alternate source, and
IBM shall be liable for payment for such reasonable expenses
for services from the alternate source for so long as the
delay in performance shall continue, up to the charges
actually paid to IBM for the Services with respect to the
period of non-performance. In addition, if any event described
in Section 18.2(a) substantially prevents, hinders, or delays
---------------
the performance by IBM or one of its Subcontractors of
Services associated with critical ACE functions for one
hundred and eighty (180) days, ACE will terminate any portion
of this Agreement so affected without payment of Termination
Charges and ACE will pay IBM any reasonable unrecovered start-
up costs and Out-of-Pocket Expenses associated with ramp down
transition costs.
(d) Upon the occurrence of a force majeure event, IBM shall, to
the extent possible, implement promptly, as appropriate, its
disaster recovery plan and provide disaster recovery services
therewith. The occurrence of a force majeure event shall not
relieve IBM of its obligation to implement its disaster
recovery plan and provide disaster recovery services.
(e) Except as stated in Section 18.2(c), nothing in this Section
---------------
shall limit or otherwise relieve ACE's obligation to pay any
moneys due IBM under the terms of this Agreement; provided,
--------
that if IBM fails to provide Services in accordance with this
Agreement due to the occurrence of a force majeure event, all
amounts payable to IBM hereunder shall be equitably adjusted
in a manner such that ACE is not required to pay any amounts
for Services that it is not receiving.
(f) Without limiting IBM's obligations under this Agreement,
whenever a force majeure event causes IBM to allocate limited
resources between or among IBM's customers and Affiliates, ACE
shall be treated at least as favorably as other similarly
situated customers expending comparable amounts on an annual
basis for the same or substantially similar services.
18.3 Limitation of Liability
(a) NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT,
INCIDENTAL, COLLATERAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR
SPECIAL DAMAGES, INCLUDING LOST PROFITS, REGARDLESS OF THE
FORM OF THE ACTION OR THE THEORY OF RECOVERY, EVEN IF SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
This Section 18.3(a) shall not limit IBM's right to recover
---------------
any amounts becoming due for Services provided under the
Agreement.
(b) Except as provided below, the total aggregate liability of
either Party for claims for actual, direct damages asserted by
the other Party under or in connection with this Agreement,
regardless of the form of the action or the theory of
recovery, shall be limited, in aggregate to an amount equal to
the total payments received by IBM pursuant to this Agreement
for four (4) months prior to the month in which the first
event giving rise to the liability occurred.
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(c) The limitations of liability set forth in Section 18.3(b)
---------------
shall not apply with respect to (i) any obligation or failure
by ACE to pay any amounts due or past due and owing to IBM
pursuant to the terms of the Agreement; (ii) Losses by either
Party for bodily injury or damage to real property or tangible
personal property; (iii) Termination Charges assessed under
Sections 11.11, 20.3 or 20.4; and (iv) either Party's
----------------------------
obligation to indemnify the other Party as provided in
Sections 17.1(d), 17.1(f), 17.1(i), 17.2(d), 17.2(e), 17.2(f),
-------------------------------------------------------------
17.2(k) and 17.2(l).
-------------------
(d) Notwithstanding Section 18.3(b), the total aggregate liability
---------------
of either Party for claims for actual, direct damages for
gross negligence or willful misconduct asserted by the other
Party under or in connection with this Agreement or for
indemnification under Sections 17.1(h) or 17.2(j), regardless
---------------------------
of the form of the action or the theory of recovery, shall be
limited, in aggregate to an amount equal to the total payments
received by IBM pursuant to this Agreement for twelve (12)
months prior to the month in which the first event giving rise
to the liability occurred.
(e) Failure by a Party to pay valid and accurate charges due and
payable hereunder will not be counted toward the liability
cap.
19. CONTRACT GOVERNANCE AND DISPUTE RESOLUTION
19.1 Informal Dispute Resolution
Prior to the initiation of formal dispute resolution procedures, the
Parties shall first attempt to resolve their dispute informally, as
follows:
(a) The Parties agree that the ACE Contract Executive and the IBM
Project Executive will attempt in good faith to resolve all
disputes. In the event the ACE Contract Executive and the IBM
Project Executive are unable to resolve a dispute in an amount
of time that either Party deems reasonable under the
circumstances, such party may refer the dispute for resolution
to the senior managers specified in Section 19.1(b) below upon
---------------
written notice to the other Party.
(b) Within five (5) business days of a notice under Section
-------
19.1(a) above referring a dispute for resolution by senior
-------
managers, the ACE Contract Executive and the IBM Project
Executive will each prepare and provide to an IBM Director of
Services Delivery, Insurance Industry and an ACE Chief
Information Officer or their designate, respectively,
summaries of the relevant information and background of the
dispute, along with any appropriate supporting documentation,
for their review. The designated representatives will confer
as often as they deem reasonably necessary in order to gather
and furnish to the other all information with respect to the
matter in issue which the parties believe to be appropriate
and germane in connection with its resolution. The
representatives shall discuss the problem and negotiate in
good faith in an effort to resolve the dispute without the
necessity of any formal proceeding. The specific format for
the discussions will be left to the discretion of the
designated representatives, but may include the preparation of
agreed-upon statements of fact or written statements of
position.
(c) During the course of negotiations under Section 19.1(a) or
---------------
19.1(b) above, all reasonable requests made by one Party to
-------
another for non-privileged information, reasonably related to
the dispute, will be honored in order that each of the parties
may be fully advised of the other's position.
(d) Formal proceedings for the resolution of a dispute may not be
commenced until the earlier of:
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(1) the senior managers under Section 19.1(b) above
---------------
concluding in good faith that amicable resolution
through continued negotiation of the matter does not
appear likely;
(2) thirty (30) days after the notice under Section
-------
19.1(a) above referring the dispute to senior
-------
managers.
(3) the dispute is submitted to non-binding mediation in
accordance with Section 19.2.
------------
This provision will not be construed to prevent a Party from
instituting, and a Party is authorized to institute, formal
proceedings earlier (i) to avoid the expiration of any
applicable limitations period, or (ii) to preserve a superior
position with respect to other creditors.
19.2 Mediation
If after good faith negotiations conclude, the Parties are still unable
to resolve a dispute, the dispute will be submitted to non-binding
mediation by a mutually acceptable mediator to be chosen by the Parties
within twenty (20) days after written notice by a Party demanding
mediation. If the Parties cannot agree on a mediator, a mediator will
be designated by the American Arbitration Association. Neither Party
shall unreasonably withhold consent to the selection of the mediator
and the Parties shall share the costs of the mediation equally. Any
dispute which cannot be resolved between the Parties through
negotiation or mediation shall be subject to the commencement of formal
proceedings by either Party in court.
19.3 Jurisdiction
Each Party irrevocably agrees that any legal action, suit or proceeding
brought by it in any way arising out of this Agreement must be brought
solely and exclusively in New York City, New York and each Party
irrevocably submits to the sole and exclusive jurisdiction of the
courts of the State of New York in personam, generally and
unconditionally with respect to any action, suit or proceeding brought
by it or against it by the other Party.
19.4 Continued Performance
Each Party agrees that it shall, unless otherwise directed by the other
Party, continue performing its obligations under this Agreement
(including payment by ACE for the Services and providing all Services
and Transfer Assistance Services) while any dispute is being resolved
unless and until the Term ends.
19.5 Governing Law
This Agreement and performance under it shall be governed by and
construed in accordance with the applicable laws of the State of New
York, without giving effect to the principles thereof relating to
conflicts of laws.
19.6 Expiration of Claims
No claims may be asserted by either Party more than two (2) years after
the later of (i) the date ACE received the invoice containing the
disputed charge(s) or amount(s), (ii) the date on which the act or
omission giving rise to the claim occurred, or (iii) the date on which
such act or omission was or should have been discovered. Failure to
make such a claim within such two-year period shall forever bar the
claim.
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20. TERMINATION
20.1
(a) If IBM:
(1) commits a material breach of this Agreement, which
breach is not cured within thirty (30) days after
written notice of the breach from ACE, unless such
breach cannot be reasonably cured in such 30 day
period, in which case ACE shall not have the right to
terminate if IBM promptly proceeds within such 30 day
period to commence curing the breach and thereafter
provides a reasonable workaround, or functionally
cures the breach, within 60 days from receipt of the
cure notice; or
(2) commits numerous breaches of its duties or
obligations which collectively constitute a material
breach of this Agreement, which breaches are not
cured within thirty (30) days after written notice of
the breaches from ACE, unless such breaches cannot be
reasonably cured in such 30 day period, in which case
ACE shall not have the right to terminate if IBM
promptly proceeds within such 30 day period to
commence curing the breach and thereafter provides a
reasonable workaround, or functionally cures the
breach, within 60 days from receipt of the cure
notice;
then ACE may, by giving written notice to IBM, terminate the
Term with respect to all of the Services, or, beginning July
1, 2002, with respect to any or all individual Towers, as of a
date specified in the notice of termination. IBM shall not be
entitled to any Termination Charges in connection with a
Termination for Cause.
At such time that the environment has reached the target
Resource Baselines and ACE and IBM have concluded the Service
Level Measurement Period, ACE and IBM will establish
thresholds setting forth criteria for Termination for Cause
for failure to meet certain Service Levels. The criteria to be
used in setting the thresholds shall include multiple
concurrent Service Level Category Failures during consecutive
months, or during an aggregate number of months in any twelve
month period, which, at a minimum, exceeds the number of
months required to maximize the progressive credits available
pursuant to Schedule E.
----------
(b) If ACE commits a material breach of this Agreement (except for
material breaches caused by ACE's failure to make undisputed
payments as set forth in Section 20.1(c) below), which breach
---------------
is not cured within thirty (30) days after written notice of
the breach from IBM, unless such breach cannot be reasonably
cured in such 30 day period, in which case IBM shall not have
the right to terminate if ACE promptly proceeds within such 30
day period to commence curing the breach and thereafter
provides a reasonable workaround, or functionally cures the
breach, within 60 days from receipt of the cure notice; then
IBM may, by giving written notice to ACE, terminate the Term
with respect to all of the Services, or, beginning July 1,
2002, with respect to any or all individual Towers, as of a
date specified in the notice of termination. IBM shall not be
entitled to any Termination Charges in connection with a
Termination for Cause.
(c) If ACE commits a material breach of this Agreement by failing
to make an undisputed payment to IBM which is due and payable
hereunder (in accordance with Section 12.4), which breach is
============
not cured within thirty (30) days after such payment becomes
due and payable, then IBM may, by giving written notice to
ACE, terminate the Term with respect to all of the Services,
or, beginning July 1,
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2002, with respect to any or all individual Towers, as of a
date specified in the notice of termination. IBM shall not be
entitled to any Termination Charges in connection with a
Termination for Cause.
20.2 Critical Services
Without limiting ACE's rights under Section 20.1, if IBM commits a
------------
material breach which has a significant impact on ACE's ability to
perform a material function required by ACE's business, and IBM is
unable to provide a reasonable workaround or functionally cure such
breach within three (3) ACE business days, or such longer period if
such breach requires disaster recovery services as soon as such
services are available, ACE may, in addition to its other remedies at
law and in equity, obtain from a third party or provide for itself such
services which will allow ACE to conduct ACE's business until IBM has
cured the breach or this Agreement is terminated. To the extent ACE
continues to pay the Annual Service Charges to IBM during the period of
breach, IBM shall reimburse ACE for all costs and expenses of obtaining
or providing such services for up to one hundred eighty (180) days..
The express inclusion of this remedy in this Section 20.2 does not
------------
limit ACE's right to use a similar remedy for other breaches by IBM of
this Agreement.
20.3 Termination for Convenience
ACE may terminate the Agreement for convenience and without cause at
any time by giving IBM at least one hundred eighty (180) days prior
written notice designating the termination date, or, beginning July 1,
2002, with respect to any or all individual Towers. On the effective
date of termination, ACE shall pay to IBM a Termination Charge
calculated in accordance with Schedule J. In the event that a purported
----------
termination for cause by ACE under Section 20.1 is determined by a
------------
competent authority not to be properly a termination for cause, then
such termination by ACE shall be deemed to be a termination for
convenience under this Section 20.3.
------------
20.4 Termination Upon IBM Change of Control
In the event of a Change in Control of IBM, ACE may terminate this
Agreement by giving IBM notice of the termination at least 90 days
prior to the termination date specified in the notice. In the event of
a termination of Change in Control of IBM, ACE shall pay to IBM, in
addition to all Fees owing under this Agreement, the applicable amount
set forth in Schedule J for termination for Change in Control of IBM.
----------
20.5 ACE's Right to Extend the Termination Date
Except in the case of a valid termination for cause by IBM (unless ACE
agrees to pay for Services provided by or for IBM in advance and cures
any payment default that causes such termination), ACE may elect, upon
sixty (60) days prior written notice, to extend the effective date of
any expiration/termination or Transfer Assistance one time, at its sole
discretion, provided that the total of such extension will not exceed
one hundred and eighty (180) days following the originally specified
effective date without IBM's prior written consent. For any notice or
notices of such extensions provided to IBM within thirty (30) days
prior to the actual date of termination, ACE shall reimburse IBM for
additional expenses reasonably incurred by IBM as a result thereof.
20.6 Equitable Remedies
IBM acknowledges that, in the event it breaches (or attempts or
threatens to breach) its obligation to provide ACE Transfer Assistance
Services as provided in Section 4.3, ACE will be irreparably harmed. In
-----------
such a circumstance, ACE may proceed directly to court. In such event,
IBM agrees that it will not utilize as a defense that ACE did not
suffer harm due to IBM's breach of its obligations to provide ACE with
Transfer Assistance Services.
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21. GENERAL
21.1 Binding Nature and Assignment
(a) Binding Nature. This Agreement will be binding on the Parties
and their respective successors and permitted assigns.
(b) Assignment. Neither Party may, or will have the power to,
assign this Agreement without the prior written consent of the
other, except in the following circumstances:
(1) Either Party may assign its rights and obligations
under this Agreement, without the approval of the
other Party, to an Affiliate which expressly assumes
such Party's obligations and responsibilities
hereunder and is not a direct competitor of the other
Party; provided, that the assigning Party shall
--------
remain fully liable for and shall not be relieved
from the full performance of all obligations under
this Agreement. Any Party assigning its rights or
obligations to an Affiliate in accordance with this
Agreement shall, within three (3) business days after
such assignment, provide written notice thereof to
the other Party together with a copy of the
assignment document.
(2) Either Party may assign its rights and obligations
under this Agreement to an Entity acquiring, directly
or indirectly, Control of such Party, an Entity into
which such Party is merged, or an Entity acquiring
all or substantially all of such Party's assets,
without the approval of the other Party. The acquirer
or surviving Entity shall agree in writing to be
bound by the terms and conditions of this Agreement.
Any Entity receiving the Services shall show evidence
that it can satisfy its obligations under the
Agreement.
(c) Impermissible Assignment. Any attempted assignment that does
not comply with the terms of this Section shall be null and
void.
21.2 Entire Agreement; Amendment
This Agreement, including any Schedules and Exhibits referred to herein
and attached hereto, each of which is incorporated herein for all
purposes, constitutes the entire agreement between the Parties with
respect to the subject matter hereof. There are no agreements,
representations, warranties, promises, covenants, commitments or
undertakings other than those expressly set forth herein. This
Agreement supersedes all prior agreements, representations, warranties,
promises, covenants, commitments or undertaking, whether written or
oral, with respect to the subject matter contained in this Agreement.
No amendment, modification, change, waiver, or discharge hereof shall
be valid unless in writing and signed by an authorized representative
of the Party against which such amendment, modification, change,
waiver, or discharge is sought to be enforced. Work performed pursuant
to the letter agreement between the Parties dated May 27, 1999 shall be
deemed work performed pursuant to this Agreement and shall be governed
by the terms of this Agreement.
21.3 Compliance with Laws and Regulations
(a) IBM shall perform its obligations in a manner that complies
with applicable Laws, including without limitation identifying
and procuring required permits, certificates, approvals and
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<PAGE>
inspections. If a charge of non-compliance by IBM with any
such Laws occurs, IBM shall promptly notify ACE of such
charges in writing.
(b) ACE shall perform its obligations under this Agreement in a
manner that complies with applicable Laws. If a charge of non-
compliance by ACE with any such Laws occurs, ACE shall
promptly notify IBM of such charges in writing.
21.4 Notices
All notices, requests, demands, and determinations under this Agreement
(other than routine operational communications), shall be in writing
and shall be deemed duly given (i) when delivered by hand, (ii) one (1)
day after being given to an express courier with a reliable system for
tracking delivery, (iii) when sent by confirmed facsimile with a copy
sent by another means specified in this Section 21.4, or (iv) six (6)
------------
days after the day of mailing, when mailed by registered or certified
mail, return receipt requested, postage prepaid, and addressed as
follows:
In the case of ACE:
ACE INA HOLDINGS, INC.
1601 Chestnut Street
Two Liberty Place
Philadelphia, Pennsylvania 19192-2211
Attention: General Counsel
With a copy to:
Mayer, Brown & Platt
190 South La Salle Street
Chicago, Illinois 60603
Attention: Michael E. Bieniek, Esq.
Telephone No. (312) 782-0600
Telecopy No. (312) 701-7711, and
In the case of IBM:
Vice President, Associate General Counsel
IBM Global Services
Route 100
Somers, NY 10589
Telecopy (914) 766-8444
With a copy to:
Vice President, Insurance
IBM Global Services
Route 100
Somers, NY 10589
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A Party may from time to time change its address or designee for
notification purposes by giving the other prior written notice of the
new address or designee and the date upon which it will become
effective.
21.5 Counterparts
This Agreement may be executed in several counterparts, all of which
taken together shall constitute one single agreement between the
Parties hereto.
21.6 Headings
The article and section headings and the table of contents used herein
are for reference and convenience only and shall not be considered in
the interpretation of this Agreement.
21.7 Relationship of Parties
IBM, in furnishing services to ACE hereunder, is acting as an
independent contractor, and IBM has the sole obligation to supervise,
manage, contract, direct, procure, perform or cause to be performed,
all work to be performed by IBM under this Agreement. IBM is not an
agent of ACE and has no right, power or authority, expressly or
impliedly, to represent or bind ACE as to any matters, except as
expressly authorized in this Agreement.
21.8 Severability
In the event that any provision of this Agreement conflicts with the
law under which this Agreement is to be construed or if any such
provision is held invalid or unenforceable by a court with jurisdiction
over the Parties, such provision shall be deemed to be restated to
reflect as nearly as possible the original intentions of the Parties in
accordance with applicable law. The remaining provisions of this
Agreement and the application of the challenged provision to persons or
circumstances other than those as to which it is invalid or
unenforceable shall not be affected thereby, and each such provision
shall be valid and enforceable to the full extent permitted by law.
21.9 Consents and Approval
Except where expressly provided as being in the sole discretion of a
Party, where agreement, approval, acceptance, consent, confirmation,
notice or similar action by either Party is required under this
Agreement, such action shall not be unreasonably delayed or withheld.
For purposes of this Section 21.9, unreasonably delayed shall not be
------------
longer than seven (7) days unless otherwise agreed by the Parties. An
approval or consent given by a Party under this Agreement shall not
relieve the other Party from responsibility for complying with the
requirements of this Agreement, nor shall it be construed as a waiver
of any rights under this Agreement, except as and to the extent
otherwise expressly provided in such approval or consent.
21.10 Waiver of Default; Cumulative Remedies
(a) A delay or omission by either Party hereto to exercise any
right or power under this Agreement shall not be construed to
be a waiver thereof. A waiver by either of the Parties hereto
of any of the covenants to be performed by the other or any
breach thereof shall not
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be construed to be a waiver of any succeeding breach thereof
or of any other covenant herein contained. All waivers must be
in writing and signed by the Party waiving its rights.
(b) Except as otherwise expressly provided herein, all remedies
provided for in this Agreement shall be cumulative and in
addition to and not in lieu of any other remedies available to
either Party at law, in equity or otherwise.
21.11 Survival
Any provision of this Agreement which contemplates performance or
observance subsequent to any termination or expiration of this
Agreement shall survive any termination or expiration of this Agreement
and continue in full force and effect. Additionally, all provisions of
this Agreement will survive the expiration or termination of this
Agreement to the fullest extent necessary to give the Parties the full
benefit of the bargain expressed herein.
21.12 Publicity
Neither Party shall use the other Party's name or mark or refer to the
other Party directly or indirectly in any media release, public
announcement, or public disclosure relating to this Agreement,
including in any promotional or marketing materials, customer lists or
business presentations without the prior written consent of the other
Party to each such use or release. Notwithstanding the foregoing, IBM
may list ACE as a customer in proposals and other marketing materials.
21.13 Service Marks
The Parties agree that they shall not, without the other Party's prior
written consent, use any of the names, service marks or trademarks of
ACE or the Eligible Recipients or Affiliates in any of their respective
advertising or marketing materials.
21.14 Export
The Parties acknowledge that certain Software and technical data to be
provided hereunder and certain transactions hereunder may be subject to
export controls under the laws and regulations of the United States and
other countries. No Party shall export or re-export any such items or
any direct product thereof or undertake any transaction in violation of
any such laws or regulations. To the extent within IBM's control, IBM
shall be responsible for, and shall coordinate and oversee, compliance
with such export laws in respect of such items exported or imported
hereunder.
21.15 Third Party Beneficiaries
Except as expressly provided herein, this Agreement is entered into
solely between, and may be enforced only by, ACE and IBM. This
Agreement shall not be deemed to create any rights or causes of action
in or on behalf of any third parties, including without limitation
employees, vendors and customers of a Party, or to create any
obligations of a Party to any such third parties.
21.16 Order of Precedence
In the event of a conflict, this Agreement shall take precedence over
the Schedules attached hereto, and the Schedules shall take precedence
over any attached Exhibits.
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<PAGE>
21.17 Hiring of Employees
Except as expressly set forth herein, during the Term, IBM will not, by
IBM's employees that are directly involved in the performance of IBM's
obligations under this Agreement, solicit or cause to be solicited for
employment, nor employ, any current employee of ACE or an Eligible
Recipient without the prior written consent of ACE. Except as expressly
set forth herein in connection with the expiration or termination of
this Agreement, during the Term, ACE will not, by ACE's employees that
are directly involved in the performance of ACE's obligations under
this Agreement, solicit or cause to be solicited for employment
directly, nor employ, any current employee of IBM or its Affiliates or
subcontractors involved in the performance of IBM's obligations under
this Agreement without the prior consent of IBM.
21.18 Further Assurances
Each Party covenants and agrees that, subsequent to the execution and
delivery of this Agreement and without any additional consideration,
each Party shall execute and deliver any further legal instruments and
perform any acts that are or may become necessary to effectuate the
purposes of this Agreement.
21.19 Liens
IBM will not file, or by its sole action or inaction intentionally
permit, any mechanics or materialman's liens to be filed on or against
property or realty of ACE or any Eligible Recipient. In the event that
any such Liens arise as a result of IBM's action or inaction, IBM will
take commercially reasonable efforts to remove such Liens at its sole
cost and expense.
21.20 Covenant of Good Faith
Each Party agrees that, in its respective dealings with the other Party
under or in connection with this Agreement, it shall act in good faith.
21.21 Acknowledgment
The Parties each acknowledge that the terms and conditions of this
Agreement have been the subject of active and complete negotiations,
and that such terms and conditions should not be construed in favor of
or against any Party by reason of the extent to which any Party or its
professional advisors participated in the preparation of this
Agreement.
21.22 Related Entities
ACE shall cause Eligible Recipients and any divested entities to whom
IBM provides or has provided the Services to perform and comply with
provisions of confidentiality, representations and warranties,
limitation of liabilities and other responsibilities of ACE that may be
applicable.
21.23 Remarketing
ACE may not remarket all or any portion of the Services provided under
the Agreement, or make all or any portion of the Services available to
any Entity other than the Eligible Recipients, without the prior
written consent of IBM.
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21.24 Right to Perform Services for Others
Each Party recognizes that IBM personnel providing Services to ACE
under this Agreement may perform similar services for others and this
Agreement shall not prevent IBM from using the personnel and equipment
provided to ACE under this Agreement for such purposes. IBM may perform
its obligations through its subsidiaries, Affiliates or through the use
of IBM-selected independent contractors; provided, however, that IBM
shall not be relieved of its obligations under this Agreement by use of
such subsidiaries, Affiliates, or subcontractors.
21.25 Geographic Scope of Services
The Services provided under this Agreement are for Equipment and ACE
Facilities located within the United States, Puerto Rico and Guam.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized representatives as of the Effective Date.
ACE INA HOLDINGS INC. INTERNATIONAL BUSINESS MACHINES
CORPORATION
By:______________________ By:_______________________
Title:___________________ Title:____________________
Date:____________________ Date:_____________________
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Exhibit 99.2
ACE COMPLETES ACQUISITION OF CIGNA'S P&C BUSINESSES;
ACE ANNOUNCES EXPENSE SAVINGS TARGETS;
ACE OUTSOURCES INFORMATION TECHNOLOGY OPERATIONS TO IBM
HAMILTON, Bermuda -- July 2, 1999--ACE Limited (NYSE:ACL) announced today
that its subsidiary, ACE INA Holdings, Inc. (ACE INA) has completed the
acquisition of the international and U.S. property and casualty insurance
businesses of CIGNA Corporation for the previously announced price of $3.45
billion in cash. The transaction is initially being financed with $1.025
billion of available cash, $400 million from a hybrid trust preferred security
and the remainder with commercial paper issuance. Ultimately, the commercial
paper will be replaced with a combination of newly issued equity, senior debt
and trust preferred securities.
Also put in place at the closing was the previously announced reinsurance
arrangement with National Indemnity Company (a subsidiary of Berkshire Hathaway)
providing $ 1.25 billion in protection against adverse development in the run-
off operations and certain asbestos and environmental exposures of ACE INA.
Brian Duperreault, chairman, president and chief executive officer of ACE
Limited, said: "I am extremely pleased that we have completed this historic
transaction. ACE is now a truly global specialty insurance group positioned as a
premier player in the world's insurance markets. We are focused on improving the
company's combined ratio to bring the businesses managed by ACE INA more in line
with the balance of ACE's operations, which are highly profitable."
Dominic Frederico, ACE INA's chairman, president and chief executive
officer stated: "We are now poised to establish ACE INA as a strong, lean,
efficient company. We have assembled an excellent team and organized the company
for the future. Our management team is truly excited by the opportunities that
lie ahead."
ACE also announced that it expects to achieve significant expense savings,
which together with the elimination of under-performing units should produce
combined ratios for the acquired companies of well below 100%.
ACE INA has targeted an expense ratio for the U.S. businesses below 30%
compared with 38% currently. Internationally, cost reductions should reduce the
expense ratio by two to three percentage points.
Savings are expected to result from a combination of staff and corporate
overhead reductions together with the outsourcing of the information technology
(IT) function. ACE expects that personnel reductions for the acquired companies
will be in the range of 15% and will
<PAGE>
follow a measured process that will begin immediately. Announcements regarding
staff changes will be made over the next few months and should be completed by
year-end 1999.
ACE also announced today that it has reached a 10-year agreement with IBM
Global Services (IBM) to manage the transition and integration of the IT
infrastructure for the U.S. property casualty operations acquired from CIGNA and
to provide ongoing IT support for these operations. The outsourcing agreement
will transfer approximately 350 employees to IBM together with the software,
hardware and other facilities necessary to provide these services. These
employees are not included in the 15% referred to in the personnel reductions
above. The IBM agreement will reduce IT service costs before tax by
approximately $45 million annually. This will position ACE INA to meet existing
business commitments and take on future challenges and directions.
The aggregate expense savings from the foregoing changes before tax are
expected to be approximately $195 million for ACE INA on an annual basis
beginning in the calendar year 2000.
Christopher Marshall, chief financial officer of ACE Limited commented:
"The potential profitability of ACE INA, including the expense reductions, is
expected to be accretive to earnings. However, there is the potential of a
reduction in operating income from other areas of our group that could offset a
substantial portion of the accretion if the current challenging conditions in
the property and casualty insurance markets continue."
ACE has decided to change its fiscal year-end to December 31st, which will
align ACE's fiscal year-end with the statutory year-ends of the majority of its
subsidiaries.
ACE INA also announced a series of organizational changes and management
appointments, which are set forth in the attached exhibit.
The ACE Group of Companies provides insurance and reinsurance for a diverse
group of international clients. At March 31, 1999, ACE Limited had approximately
$8.9 billion in assets and approximately $4.0 billion in shareholders' equity.
Following today's acquisition, operating subsidiaries are now based in nearly
fifty countries and the total assets of the combined companies are approximately
$30 billion.
Application of the Safe Harbor of the Private Securities Litigation Reform Act
of 1995:
Certain statements made in this press release, including those relating to
projected reductions of the Company's expenses, estimated combined ratios, the
accretion of the acquisition and the Company's financing plans, are forward-
looking statements, reflecting the Company's current views with respect to
future events and financial performance and are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
<PAGE>
Such statements involve risks and uncertainties which may cause actual results
to differ from those set forth in these statements. Among other things, expense
reductions may not be achieved at projected levels to the extent that it takes
longer than anticipated to integrate the acquired business, to consolidate work
functions, to implement more efficient procedures or to sell or wind up lines of
business which do not fit within ACE's business plan or to the extent that ACE
determines that performance requires more employees, administrative expenditures
or locations than it now anticipates. Market conditions could affect financing
plans. ACE's forward-looking statements could also be affected by the levels of
new and renewal business achieved as well as market conditions affecting ACE's
investments. Also, competition in the industry, actual loss experience and
economic, regulatory, insurance and reinsurance business conditions and other
factors identified in the Company's filings with the Securities and Exchange
Commission could affect the forward-looking statements contained in this press
release. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the dates on which they are made. The
Company undertakes no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise.
Exhibits:
The ACE Group of Companies
- --------------------------
The ACE Group of Companies is one of the world's largest providers of
insurance and reinsurance products and services. On a pro forma basis, for the
12 months ending September 30, 1998, ACE had approximately $3.9 billion in net
premiums written, half of which were earned outside of North America.
Established in Bermuda in 1985 by some of the world's largest corporations
to provide excess liability coverage, the ACE Group has grown rapidly and today
provides insurance and reinsurance to a diverse group of international clients,
including many Fortune 500 companies.
The holding company for the ACE Group is ACE Limited, a company listed on
the New York Stock Exchange (NYSE:ACL) and headquartered in Hamilton, Bermuda.
Chairman, President and Chief Executive Officer is Brian Duperreault. ACE
Limited's insurance and reinsurance operations comprise the following:
-- ACE INA Holdings which includes ACE USA and ACE International;
-- ACE Bermuda, which includes ACE European Markets;
-- Tempest Re;
-- ACE Global Markets.
ACE INA is a U.S. holding company, which owns the U.S. and international
property and casualty (P&C) operations acquired from CIGNA on July 2, 1999.
Today, ACE INA consists of
<PAGE>
two operating divisions; ACE USA and ACE International. Chairman, President and
Chief Executive Officer is Dominic Frederico. Deputy Chairman is John Charman.
ACE International is the international P&C and accident and health business
acquired from CIGNA. The operation is headed by Kingsley Schubert, President and
Chief Executive Officer, and is divided into four regional areas:
-- ACE Europe, based in London;
-- ACE Far East, based in Tokyo;
-- ACE Asia Pacific, based in Singapore; and
-- ACE Latin America.
ACE USA is the combined business of ACE USA, formerly Westchester
Specialty, which was acquired by ACE Limited in 1998, and the U.S. P&C
operations acquired from CIGNA in 1999. The operation is headed by President and
Chief Executive Officer, Dennis Reding. Today, ACE USA is organized into 11
business units:
-- Special Risk Facilities, which includes Major Casualty, Standard
Casualty, Financial Products, Risk Solutions, and Power Products
businesses;
-- Property, which includes teams for general property and power
generation property risks;
-- Aerospace, which includes U.S. satellite, general aviation, non-flag
airlines, manufacturers' products, and airports;
-- Marine, which includes commercial and recreational marine lines;
-- Diversified Products, which includes Special Programs from both ACE
USA and CIGNA, as well as Select Markets, including Farms;
-- Warranty, which includes underwriting and service for extended service
contracts for autos and other goods, home office equipment, home
warranty, and commercial products;
-- Professional Risk Services, including D&O, E&O, Financial
Institutions, Surety and Specialty Products;
-- Westchester Specialty, which focuses on the wholesale distribution of
excess & surplus lines for the property, casualty and inland marine
markets;
-- U.S. International, which focuses on U.S.-based multi-nationals;
-- Commercial Insurance Services, the middle market and guaranteed cost
workers' compensation businesses; and finally
-- Brandywine Holdings, which manages run-off operations.
ACE Bermuda provides high-level excess liability insurance, directors and
officers liability insurance and excess property insurance coverage to a
worldwide client base. ACE Bermuda is a market leader in satellite and aviation
coverage, and its financial lines division is at the forefront of providing
innovative, finance-based solutions to the insurance needs of large corporations
with complex exposures. Through a joint venture established in 1997, ACE
<PAGE>
Bermuda is also involved in the provision of political risk insurance to
multinationals investing in the developing world. Gary Schmalzriedt will be
President and Chief Executive Officer as of August 1, 1999.
Tempest Re is a leading provider of property catastrophe reinsurance, a
position that was strengthened with the 1998 acquisition of CAT Limited, a
Bermuda-based property catastrophe reinsurer. Tempest Re's product range
includes aggregate covers, multi-year contracts and options for future coverage,
all of which use sophisticated catastrophe modeling techniques. President and
Chief Executive Officer is John Engestrom.
ACE Global Markets, based in London and doing business at Lloyd's writes an
extensive range of insurance and reinsurance risks, including liability, marine,
energy, war and political risks, fraud, property, aviation, satellite and
accident. ACE Global Markets is ACE's primary location for the writing of
petroleum property and major flag airlines. Chairman is William Loschert and
Chief Executive Officer is John Charman.
ACE INA HOLDINGS, INC.
This document provides an overview of the structure of ACE INA Holdings, Inc.
and the people responsible for management of the holding company and business
units.
ACE INA Holdings, Inc.
- ----------------------
Dominic Frederico
Chairman, President and Chief Executive Officer
Dominic Frederico joined the ACE Group of Companies in January, 1995 to
establish the financial lines division at ACE Bermuda. Frederico was promoted to
the position of President and Chief Executive Officer of ACE Bermuda in July,
1997. His position as Chairman, President and Chief Executive Officer of ACE INA
was announced in May, 1999.
John Charman
Deputy Chairman
John Charman joined ACE as Chief Executive Officer of ACE Global Markets in
1998 following the acquisition of Tarquin Plc by ACE Limited. Charman is also
active underwriter for syndicates 488 and 2488. His role on the board of ACE INA
will be to foster global cooperation among ACE's operating units to create a
unique competitive advantage, no matter how customers approach the ACE Group.
<PAGE>
Other ACE INA board members will include:
Brian Duperreault, Chairman, President and CEO of ACE Limited;
Dennis Reding, President and CEO of ACE USA;
Kingsley Schubert, President and CEO of ACE International;
Gary Schmalzriedt, who becomes President and CEO of ACE Bermuda on August 1;
Chris Marshall, Chief Financial Officer of ACE Limited; and
Peter Mear, General Counsel of ACE Limited.
The senior executive team includes:
Bob Jefferson
Chief Financial Officer
Jefferson brings more than 30 years of international insurance and
accounting experience, most recently serving as controller for Prudential's
group life and disability operations. Before that, he served as a consultant for
international operations after serving with Reliance National's international
operations and as chief financial and administrative officer for American Life
Insurance Company in Europe. He began his career with Coopers & Lybrand.
Bill Siegle
Chief Information Officer
Siegle will have responsibility for managing IT for U.S. and international
operations, including managing the critical outsourcing relationship with IBM
Global Services. He most recently served as the chief information officer for
CIGNA International for the past 6 years and has been with CIGNA for 21 years.
Jamie English
Chief Internal Audit Officer
English will manage the internal audit function for the ACE Group of
Companies. He joined ACE in 1996 after more than 6 years with Coopers & Lybrand
in Bermuda and London and two years with AIG. He began his career in auditing
with Deloitte Haskins & Sells in New York in 1985.
Peter O'Connor will establish and manage a global Government Affairs
function headquartered in Washington. O'Connor has more than 26 years of
experience with CIGNA, most recently as senior vice president of the Asia
Pacific region for CIGNA International. He has a total of 36 years of global
insurance experience, with the Home, AIG, and AFIA, a CIGNA predecessor in the
international arena.
<PAGE>
ACE International
- -----------------
The headquarters for ACE International, located in Philadelphia, will
operate as a lean and efficient team providing overall leadership and approval
of the regional business strategies and plans. The team will include:
Bob Pulka, International Property and Casualty;
Edward Clancy, International Accident and Health and Direct Marketing;
John Jones, Planning and Finance;
Dave Wisniewski, International Human Resources;
Herman Nieuwenhuizen, ACE International's P&C and A&H Claims; and
Doug Maag, ACE International Legal
The Regional Business Management structure has four components:
ACE Europe will be headed by Steve Schleisman, Chairman and Chief Executive
Officer. Schleisman will be based in London, effective August 1, 1999. He joined
the ACE Group of Companies in 1998 as executive vice president. Prior to that
position, he was with MMI Companies, a healthcare service corporation, where he
was executive vice president and president of the MMI Insurance Group from 1995
to 1998. Before MMI, he spent 23 years with American International Group.
ACE Far East will be headed by Tom Rowe, President and Chief Executive
Officer. Based in Tokyo, Rowe previously served as head of CIGNA International's
Japan business. He has more than 22 years with CIGNA and the Insurance Company
of North America. In addition to his most recent post in Tokyo, he also has held
senior management positions with CIGNA International in London and Philadelphia.
ACE Asia Pacific will be headed by Brian Anstey, Chief Executive Officer.
Anstey will join ACE August 1, 1999, in Singapore, with more than 24 years of
international insurance experience in the Asia Pacific region. In the interim,
John Bassetto will manage the ACE Asia Pacific region. After the post is filled,
Bassetto will become the Regional COO for P&C business in addition to his role
as CEO of ACE Insurance in Australia.
Management for ACE Latin America has not been finalized; Steve Schleisman
will provide interim management for Latin America.
ACE USA
Leadership of ACE USA's businesses include:
<PAGE>
Jim Engel will lead Brandywine Holdings, which includes the run-off
operations of CIGNA P&C and ACE USA. Engel, who has nearly 30 years of
experience in claims and operations at INA and CIGNA, has successfully managed
Brandywine since it was created in 1996.
Brian Dowd will lead the Property business. Dowd will relocate to
Philadelphia from ACE Bermuda, where he has headed the excess property team for
the past two years. He joined ACE in 1995 after seven years with Arkwright
Mutual Insurance as senior underwriting officer.
Jeff Cassidy will lead the Aerospace business, Cassidy will move to
Philadelphia from ACE Bermuda, where he has managed the company's satellite
product line for the past two years. Cassidy previously served as vice president
for United States Aviation Underwriters, Inc. He has more than 9 years in the
aviation insurance field and another 10 years in the engineering and consulting
field.
Roy Salley will lead the Marine business. Salley has been a marine
underwriter for CIGNA P&C and INA for more than 25 years, and has managed the
marine and aviation business for the past seven years. He also is the vice-
chairman of the American Institute of Marine Underwriters.
Bob Gaffney will head Diversified Products. Gaffney served as the chief
financial officer for ACE USA since 1996. He brings more than 28 years of
executive experience with Pennsylvania Manufacturers Corporation, USF&G and 13
years with INA in Philadelphia in various financial positions.
Marc Vivori will manage our Warranty business, headquartered in Duluth, GA.
He joined ACE USA in March 1998 after heading AIG's North American Extended
Service Contract division in New York.
Elaine Trischetta will lead Professional Risk Services. Trischetta joins
ACE USA from Reliance National, where she served as executive vice president of
the Excess & Surplus Lines Division. She brings more than 17 years of experience
in excess and surplus lines, professional liability, and excess casualty
business.
Marshall Turner will head Westchester Specialty, w hich will remain in
Atlanta. Turner has headed the property line for ACE USA since 1996 and has more
than 18 years of experience with The Hartford, Zurich, and ACE USA.
Sam Cupp will lead U.S. International. He joined CIGNA in 1979 and has
headed the North American operations of CIGNA International for the past 2
years.
<PAGE>
The product line leaders in Special Risk Facilities will report directly to
Dennis Reding until a new leader is named for this strategic large-risk business
specializing in casualty and financial lines.
Also, a leader will be named later for Commercial Insurance Services, which
will be managed profitably while exploring all alternatives, including a
possible sale.
The rest of the ACE USA management team will include the following support
areas:
<TABLE>
<S> <C>
Mark Bender, Administration Rick Gieryn, General Counsel
Eric Drummond-Hay, Actuarial Ted Hitchcock, Human Resources
Jim Ely, Communications John Intondi, Claims, including ESIS
Rich Franklin, Business Research & Development Tom Valerio, Transition Management
Bill Garrigan, Finance
</TABLE>
# # #
<PAGE>
EXECUTION COPY
REMARKETING AND CONTINGENT PURCHASE AGREEMENT
among
ACE LIMITED,
ACE INA HOLDINGS INC.,
ACE RHINOS TRUST
and
BANC OF AMERICA SECURITIES LLC
Dated as of June 30, 1999
<PAGE>
REMARKETING AND CONTINGENT PURCHASE AGREEMENT
REMARKETING AND CONTINGENT PURCHASE AGREEMENT dated as of June 30, 1999
among ACE Limited, a Cayman Islands company limited by shares (the "Guarantor"),
ACE RHINOS Trust, a Delaware statutory business trust (the "Trust"), ACE INA
Holdings Inc., a Delaware corporation (the "Company"), and Banc of America
Securities LLC, as remarketing agent (the "Remarketing Agent").
WITNESSETH:
WHEREAS, the Trust shall issue 400,000 preferred securities (the "Preferred
Securities") in an aggregate stated liquidation amount of $400,000,000 and
12,372 common securities (the "Common Securities", and together with the
Preferred Securities, the "Trust Securities") in an aggregate stated liquidation
amount of $12,372,000 under the Amended and Restated Trust Agreement dated as of
June 30, 1999 by and among the Company, the Administrative Trustees, the
Delaware Trustee and the Property Trustee, (as the same may be amended from time
to time, the "Trust Agreement");
WHEREAS, the sole assets of the Trust, consisting of $412,372,000 aggregate
principal amount of Auction Rate Reset Subordinated Notes Series A (the
"Subordinated Notes") of the Company shall be purchased by the Trust from the
Company with the proceeds of the sale of the Trust Securities;
WHEREAS, upon the occurrence of a Trigger Event (as defined herein), the
Preferred Securities (or, following the distribution of Subordinated Notes to
holders of Preferred Securities upon the termination of the Trust, the
Subordinated Notes), may be remarketed in accordance with the terms hereof;
WHEREAS, the Company and the Trust have requested that Bank of America
Securities LLC ("BAS") act as the Remarketing Agent and, as such, perform the
duties described herein;
WHEREAS, the Guarantor is willing to unconditionally guarantee the
obligations of the Company hereunder; and
<PAGE>
WHEREAS, BAS is willing to act as Remarketing Agent and, as such, to
perform such duties on the terms and conditions expressly set forth herein;
NOW, THEREFORE, in consideration of the covenants herein made, and subject
to the conditions herein set forth, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used and not defined in this
Agreement shall have the meanings assigned to them in the Trust Agreement. In
addition, as used in this Agreement, the following terms shall have the
following definitions:
"1934 Act Reports" has the meaning set forth in Section 2(b)(iv).
"Affiliated Bidder" has the meaning set forth in Section 5(b).
"Associated Person" has the meaning set forth in Article 1(ee) of the By-
Laws of the National Association of Securities Dealers, Inc.
"BAS" has the meaning set forth in the fourth recital hereto.
"Bid" means an irrevocable offer to purchase the aggregate outstanding
Liquidation Amount of Preferred Securities at the Remarketing Price or,
following any distribution of Subordinated Notes to holders of Preferred
Securities, the aggregate outstanding principal amount of such Subordinated
Notes, as the case may be, with a Distribution Rate or interest rate, as
applicable, equal to the Bid Rate specified in such Bid and with a redemption
date or maturity date, as the case may be, on the Remarketed Maturity Date.
"Bid Rate" means the proposed Distribution Rate on the Preferred Securities
or interest rate on Subordinated Notes specified in a Bid.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banking institutions in The City of New York or Wilmington, Delaware are
authorized or required by law, regulation or executive order to close.
"Commission" means the Securities and Exchange Commission.
"Company" has the meaning set forth in the initial paragraph hereto.
2
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Act Regulations" means the rules and regulations promulgated
under the Exchange Act.
"Expected Reset Date" has the meaning set forth in Section 5(a)(i).
A "Failed Remarketing" shall be deemed to have occurred if, following the
giving of notice by the Requesting Holders to the Remarketing Agent as
contemplated by Section 5(a)(i), the settlement of a purchase and sale of the
Trust Securities (or, if applicable, the Subordinated Notes) shall not have
occurred within the applicable time limit specified in this Agreement and in any
event if such a settlement shall not have occurred by the 27th Business Day
following the giving of such notice by the Requesting Holders.
"Final Reset Date" has the meaning set forth in Section 5(a)(iii).
"Former Holders" has the meaning set forth in Section 5(i).
"Guarantee Agreement" means the Preferred Securities Guarantee Agreement,
dated as of June 30, 1999 executed by the Company for the benefit of the holders
of Preferred Securities, as amended, supplemented, modified or superseded from
time to time.
"Guarantor" has the meaning set forth in the initial paragraph hereto.
"Indenture" means the Indenture dated as of June 15, 1999 among the
Company, the Guarantor and The First National Bank of Chicago, as Indenture
Trustee, as supplemented by the First Supplemental Indenture dated as of June
30, 1999, and as further amended, supplemented, modified or superceded from time
to time.
"Indenture Trustee" means the Trustee pursuant to the Indenture.
"Letter Agreement" means the Letter Agreement dated as of June 29, 1999
between the Guarantor and BAS.
3
<PAGE>
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Material Adverse Change" means any development that could be reasonably
expected to result in a material adverse change in the business, properties or
financial condition of the Guarantor and its subsidiaries, taken as a whole.
"Offering Memorandum" has the meaning set forth in Section 13.
"Preferred Securities" has the meaning set forth in the first recital
hereto.
"Reference Corporate Dealer" means a leading dealer, which shall be a
Qualified Institutional Buyer (as defined in Rule 144A under the Securities Act)
and which shall not include BAS, its Affiliates (as such term is defined in Rule
405 under the Securities Act) or its Associated Persons, of publicly traded debt
securities, to be selected by the Company.
"Remarketed Maturity Date" means the later of (i) the first anniversary of
the Remarketing Settlement Date on which Replacement Securities are issued and
(ii) September 30, 2001.
"Remarketing" means a remarketing of Preferred Securities or Subordinated
Notes pursuant to Section 5.
"Remarketing Fee" has the meaning set forth in Section 8.
"Remarketing Notice" has the meaning set forth in Section 5(a)(i).
"Remarketing Price" means (i) with respect to the Preferred Securities, a
price equal to 100.25% of the aggregate outstanding Liquidation Amount of the
Preferred Securities plus accrued and unpaid Distributions thereon (including
any Additional Distributions) (if any) and (ii) with respect to the Subordinated
Notes, a price equal to 100.25% of the aggregate outstanding principal amount of
such Subordinated Notes, plus accrued and unpaid interest thereon (including any
Additional Interest) (if any), in either case, to and including the Remarketing
Settlement Date.
4
<PAGE>
"Remarketing Settlement Date" means the third Business Day immediately
following the Reset Date.
"Renewed Remarketing" has the meaning set forth in Section 7.
"Replacement Securities" has the meaning set forth in Section 5(j).
"Representation Date" has the meaning set forth in Section 2(a).
"Requesting Holders" has the meaning set forth in Section 5(a).
"Reset Date" means any date established as a Reset Date pursuant to Section
5.
"Reset Rate" means the Winning Bid Rate.
"Secondary Purchase Agreement" means (i) with respect to the Preferred
Securities, an agreement to be dated as of the Reset Date (or such other date
permitted by applicable law) among the Company, the Trust, the Guarantor, the
Remarketing Agent and the Secondary Purchaser (selected in the manner provided
in Section 5(c)) providing for the purchase of the Preferred Securities by the
Secondary Purchaser, substantially in the form of Exhibit A hereto, or as
otherwise agreed among the Company, the Trust, the Guarantor, the Remarketing
Agent and the Secondary Purchaser and (ii) with respect to the Subordinated
Notes, an agreement to be dated as of the Reset Date (or such other date
permitted by applicable law) among the Company, the Guarantor, the Remarketing
Agent and the Secondary Purchaser (selected in accordance with Section 5(c))
providing for the purchase of the Subordinated Notes by the Secondary Purchaser,
substantially in the form of Exhibit A hereto, or as otherwise agreed among the
Subordinated Notes Issuer, the Remarketing Agent and the Secondary Purchaser.
"Secondary Purchaser" has the meaning set forth in Section 5(c).
"Securities Act" means the Securities Act of 1933, as amended.
"Subordinated Notes" has the meaning set forth in the second recital
hereto.
"Trading Day" has the meaning set forth in the Trust Agreement.
5
<PAGE>
"Transaction Documents" has the meaning set forth in the Purchase
Agreement.
"Trigger Event" has the meaning set forth in Section 5.
"Trigger Price" has the meaning set forth in Section 10.
"Trust" has the meaning set forth in the initial paragraph hereto.
"Trust Agreement" has the meaning set forth in the initial paragraph
hereto.
"Trust Securities" has the meaning set forth in the first recital hereto.
"Winning Bid Rate" has the meaning set forth in Section 5(b).
Section 2. Representations and Warranties. (a) Basic Warranties. Each
party represents and warrants to the other party as of the date hereof, the
Reset Date and the Remarketing Settlement Date (each of the foregoing dates
being hereinafter referred to as a ARepresentation Date") that:
(1) Status. It is a duly and validly existing entity under the laws
of the jurisdiction of its creation, formation or incorporation and, if
relevant under such laws, in good standing.
(2) Powers. It has the power and authority to execute, enter into and
perform its obligations under, or contemplated under, this Agreement and
consummate the transactions contemplated hereby.
(3) No Violation or Conflict. The execution, delivery and performance
by such party of this Agreement, the consummation of the transactions
herein contemplated and compliance by such party with its obligations
hereunder (A) do not violate or conflict with (1) any provision of its
organizational documents, (2) any law applicable to it, any order or
judgment of any court or other agency of government applicable to it or any
of its assets that affects the legality, validity or enforceability of this
Agreement and (B) do not and will not conflict with or constitute a breach
of any contractual restriction binding on or affecting it or any of its
assets, except, in the case of
6
<PAGE>
clauses (A)(2) and (B), for such violations or conflicts that would not
result in a Material Adverse Change.
(4) Consents. All governmental and other consents that are required
to have been obtained by it with respect to the performance by each party
of its obligations under this Agreement have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with.
(5) Obligations Binding. Its obligations under this Agreement
constitute its legal, valid and binding obligations, enforceable against it
in accordance with the terms of this Agreement, subject to bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting the enforcement of creditors' rights or by general
equitable principles.
(6) Absence of Litigation. There is not pending or, to the best of
its knowledge, threatened against or affecting it or any of its Affiliates
any action, suit or proceeding at law or in equity or before any court,
tribunal, governmental body, agency or official or any arbitrator that
could reasonably be expected to materially and adversely affect the
legality, validity or enforceability against it of this Agreement or its
ability to perform its obligations under this Agreement.
(7) Non-Reliance. It is acting for its own account, and it has made
its own independent decision to enter into this Agreement and as to whether
this Agreement is appropriate or proper for it based upon its own judgment
and upon advice from such advisers as it has deemed necessary. It is not
relying on any communication (written or oral) of any other party as
investment advice or as a recommendation to enter into this Agreement, it
being understood that information and explanations related to the terms and
conditions of this Agreement shall not be considered investment advice or a
recommendation to enter into this Agreement. No communication (written or
oral) received from any other party shall be deemed to be an assurance or
guarantee as to the expected results of this Agreement. No other party is
acting as a fiduciary for or an adviser to it with respect to this
Agreement.
7
<PAGE>
(8) Assessment and Understanding. It is capable of assessing the
merits of and understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms, conditions
and risks of this Agreement. It is also capable of assuming, and assumes,
the risks of this Agreement.
(2) Representations and Warranties of the Company, the Subordinated Notes
Issuer and the Trust. Each of the Company, the Guarantor and the Trust further
represents and warrants to the Remarketing Agent as of each Representation Date,
as applicable to each such entity, that:
(1) Securities Validly Issued. The Preferred Securities and
Subordinated Notes have been, and the Replacement Preferred Securities and
the Replacement Subordinated Notes will be, validly authorized and executed
by the Trust or the Company, as the case may be, and authenticated, issued
and delivered in the manner provided for in the Trust Agreement or the
Indenture, as the case may be, and delivered against payment of the
purchase price therefor as provided in the Purchase Agreement, and
constitute, or will constitute, legally binding obligations of the Trust or
the Company, as the case may be, entitled to the benefits of the Trust
Agreement and Indenture.
(2) No Event of Default. No Event of Default under the Trust
Agreement and no Event of Default under the Indenture has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement.
(3) Compliance with Exchange Act Requirements. The Guarantor has made
all the filings with the Commission that it is required to make under the
periodic reporting requirements of the Exchange Act and the Exchange Act
Regulations, and each such filing complied as to form, at the time it was
filed, in all material respects with the requirements of the Exchange Act
and Exchange Act Regulations.
(4) No Material Misstatements. The Guarantor's most recent Annual
Report on Form 10-K, and its Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K filed after the end of the fiscal year to which such
Annual Report relates (collectively, the "1934 Act Reports"), as
supplemented by material press releases, at the time they were filed did
not,
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and, after giving effect to the transactions contemplated by the
Transaction Documents do not, contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(5) No Material Adverse Change. Since the respective dates as of
which information is given in the 1934 Act Reports, except as otherwise
stated therein, there has been no Material Adverse Change.
(6) Not an Investment Company. None of the Company, the Guarantor and
the Trust is an "investment company" as defined in the Investment Company
Act.
Section 3. Covenants. (a) Each of the Company and the Guarantor hereby
covenants with the Remarketing Agent as follows:
(1) Maintain Authorizations. It shall use its reasonable best efforts
to maintain in full force and effect all consents of any governmental or
other authority that are required to be obtained by it with respect to this
Agreement and shall use its reasonable best efforts to obtain any such
consents that may become necessary in the future.
(2) Comply with Laws. It shall comply in all material respects with
all applicable laws and orders to which it may be subject if failure so to
comply would materially impair its ability to perform its obligations under
this Agreement.
(3) Furnish Documentation. It will furnish to the Remarketing Agent:
(i) unless available to the Remarketing Agent on EDGAR or the Guarantor's
website, each document filed after the date hereof by the Guarantor
pursuant to the periodic reporting requirements of the Exchange Act and
(ii) in connection with the remarketing of the Preferred Securities or
Subordinated Notes, as the case may be, such other information as the
Remarketing Agent may reasonably request from time to time. Notwithstanding
the foregoing sentence, the Guarantor agrees to provide the Remarketing
Agent with as many copies of the foregoing written materials and other
Guarantor-approved information as the Remarketing Agent may reasonably
request for use in connection with the remarketing of the Preferred
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Securities or Subordinated Notes, as the case may be, and consents to the
use thereof for such purpose.
(4) Notification. If, at any time after a Trigger Event and prior
to the Remarketing Settlement Date, any event or condition known to the
Company or the Guarantor relating to or affecting the Company, the
Guarantor, the Preferred Securities or the Subordinated Notes shall occur
that could reasonably be expected to cause any of the reports, documents,
materials or information referred to in Section 3(a)(iii) or any document
incorporated therein by reference to contain an untrue statement of a
material fact or omit to state a material fact, it shall promptly notify
the Remarketing Agent in writing of the circumstances and details of such
event or condition.
(5) Comply with Securities Laws. It will comply with the Exchange
Act and the Exchange Act Regulations in connection with the remarketing of
the Preferred Securities or Subordinated Notes, as the case may be, as
contemplated in this Agreement.
(6) No Purchase of Securities. Neither it nor any of its
subsidiaries or Affiliates shall purchase or otherwise acquire, or enter
into any agreement to purchase or otherwise acquire, any of the Preferred
Securities or Subordinated Notes prior to the remarketing thereof by the
Remarketing Agent, other than pursuant to this Agreement.
(vi) Notification of Rating Agency Action. It will provide prompt
notice by telephone, and if requested will confirm such notice in writing
(which may include facsimile or other electronic transmission), to the
Remarketing Agent of any notification or announcement by a "nationally
recognized statistical rating organization" (as defined by the Commission
for purposes of Rule 436(g)(2) under the Securities Act) with regard to a
downgrade or withdrawal of the rating of any security of the Company or the
Guarantor or the placement on what is currently called a Awatch list"or a
Acredit watch" with negative implications of any security of the Company or
the Guarantor.
(vii) Restriction on Debt Issuance. During the period commencing on
the date on which the Remarketing Agent delivers a Remarketing Notice in
accordance with Section 5(a)(i) and ending on the earlier of (A) the
related
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Remarketing Settlement Date or (B) the date of the related Failed
Remarketing, it will not, without the consent of the Remarketing Agent,
offer, sell or contract to sell, or otherwise dispose of, directly or
indirectly, or announce the offering of, any debt securities with a
maturity of more than one year but fewer than three years.
(ix) Best Efforts. It shall use its reasonable best efforts to assist
the Remarketing Agent in remarketing the Preferred Securities or the
Subordinated Notes, as the case may be, in the manner contemplated in this
Agreement.
(2) The Remarketing Agent hereby covenants with the Company, the Guarantor
and the Trust as follows:
(1) Maintain Authorizations. The Remarketing Agent will use all of
its reasonable efforts to maintain in full force and effect all consents of
any governmental or other authority that are required to be obtained by it
with respect to this Agreement and shall use all reasonable efforts to
obtain any that may become necessary in the future.
(2) Comply with Laws. The Remarketing Agent shall comply in all
material respects with all applicable laws and orders which it may be
subject if failure so to comply would materially impair its ability to
perform its obligations under this Agreement.
Section 4. Appointment and Obligations of Remarketing Agent and
Calculation Agent; Secondary Purchaser. (a) The Trust and the Company hereby
appoint BAS as Remarketing Agent and as Calculation Agent under the Trust
Agreement and the Indenture (i) to determine, in accordance with the terms
described in Section 5(b), the Reset Rate that, when applied to the Preferred
Securities (or, following the distribution of the Subordinated Notes to holders
of the Preferred Securities upon termination of the Trust, the Subordinated
Notes), shall result in the resale of all outstanding Preferred Securities (or,
if applicable, all outstanding Subordinated Notes) at a sales price equal to the
Remarketing Price; provided that the Reset Rate shall in no event exceed the
rate permitted by applicable law, (ii) to conduct a private auction of all
outstanding Preferred Securities or Subordinated Notes, as the case may be, and
(iii) to enter into a Secondary Purchase Agreement
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with respect to the Preferred Securities or the Subordinated Notes, as the case
may be.
(3) Pursuant to the Secondary Purchase Agreement, the Secondary
Purchaser, either as the sole purchaser or as the representative of a syndicate
of purchasers designated by the Remarketing Agent, shall agree, subject to the
terms and conditions set forth therein, that the Secondary Purchaser and any
such other purchasers shall purchase such Preferred Securities or Subordinated
Notes, as the case may be, from the holders thereof at a price equal to the
Remarketing Price.
Section 4. Determination of Reset Date; Remarketing Procedures.
(a) (i) Subject to Section 7, if the Closing Price of the Ordinary
Shares on any Trading Day is less than the Trigger Price (a "Trigger
Event"), the Holders of a Majority in Liquidation Amount of the Trust
Securities, acting together as a single class, (or, if applicable, the
holders of a majority in principal amount of the Subordinated Notes)
(the "Requesting Holders") will have the right to require remarketing
of the Trust Securities (or, if applicable, the Subordinated Notes).
The Requesting Holders may exercise this right by delivering a written
notice to the Remarketing Agent at any time on or prior to the sixth
Business Day following the date such Trigger Event occurs. Upon
receipt of such notice, the Remarketing Agent shall immediately
deliver a written notice to the Company on behalf of the Requesting
Holders (a "Remarketing Notice"). If the Requesting Holders exercise
their option to require the remarketing of the Preferred Securities
(or, if applicable, the Subordinated Notes), the Reset Date shall be
the sixth Business Day after the date on which the Remarketing Notice
is delivered by the Remarketing Agent (the "Expected Reset Date").
(1) If the Requesting Holders do not exercise their right to
require the remarketing the Preferred Securities (or, if applicable,
the Subordinated Notes), pursuant to Section 5(a)(i) above with
respect to any Trigger Event, the Requesting Holders shall have the
right to require the remarketing of the Preferred Securities (or, if
applicable, the Subordinated Notes) in accordance with Section 5(a)(i)
with respect to any subsequent Trigger Event.
(2) Notwithstanding Section 5(a)(i):
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(1) the Company may, by notice to the Remarketing Agent, direct
that the Reset Date be delayed if the Company believes it will be
unable to meet the conditions to Remarketing in the absence of such a
delay; and
(2) the Remarketing Agent may, by notice to the Company direct
that the Reset Date be delayed if the Remarketing Agent believes that
a Remarketing will not be successful in the absence of such a delay,
provided that the Company and the Remarketing Agent, in either such event,
will use their reasonable best efforts to establish a delayed Reset Date
that is within five Business Days after the Expected Reset Date, but in no
event later than the 15th Business Day following the date on which the
related Remarketing Notice was delivered, or the 24th Business Day in the
case of a Renewed Remarketing to which the provisions of Section 7 apply
(as applicable, the "Final Reset Date").
(3) If the Company and the Remarketing Agent have not agreed, on or
prior to the sixth Business Day preceding the Final Reset Date, to a Reset
Date that is not later than the Final Reset Date, a Failed Remarketing
shall be deemed to have occurred.
(2) The Company shall, by notice to the Remarketing Agent no later than
five Business Days prior to the Reset Date, select and specify five Reference
Corporate Dealers. By 3:00 p.m., New York City time, on the Reset Date, the
Remarketing Agent shall request Bids from such Reference Corporate Dealers. The
Remarketing Agent or an Affiliate or Associated Person thereof (any such person,
an
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<PAGE>
"Affiliated Bidder") may, at its option, enter a Bid. The Remarketing Agent
shall disclose to the Company the Bids obtained and determine the lowest Bid
Rate (the "Winning Bid Rate") from among the Bids obtained on the Reset Date. By
approximately 4:30 p.m., New York City time, on the Reset Date, the Remarketing
Agent shall notify the Company, the Indenture Trustee and the Property Trustee
of the Winning Bid Rate. If on a Reset Date, Bids are not submitted by at least
two Reference Corporate Dealers, or if the lowest Bid submitted would result in
a Winning Bid Rate in excess of the rate permitted by applicable law, the
Remarketing shall be deemed to be a Failed Remarketing on the corresponding
Remarketing Settlement Date. The Winning Bid Rate determined by the Remarketing
Agent, absent manifest error, shall be binding and conclusive upon the holders
of the Trust Securities, the holders of the Subordinated Notes, the Company, the
Guarantor and the Trust.
(3) On the Reset Date, the Remarketing Agent shall designate as the
Secondary Purchaser (the "Secondary Purchaser") the Reference Corporate Dealer
providing the Bid containing the Winning Bid Rate. If the Winning Bid Rate is
specified in the Bids submitted by two or more bidders, the Remarketing Agent
shall, in consultation with the Company, designate one of such bidders as the
Secondary Purchaser.
(4) On the Reset Date, the Secondary Purchaser shall enter into a
Secondary Purchase Agreement for the purchase by such Secondary Purchaser at the
Remarketing Price of the aggregate Liquidation Amount of the Preferred
Securities, with (A) a Distribution Rate equal to the Winning Bid Rate (or, if
Subordinated Notes shall have been distributed to holders of the Trust
Securities, the aggregate principal amount of Subordinated Notes with an
interest rate equal to the Winning Bid Rate) and (B) a Mandatory Redemption Date
(or, in the case of Subordinated Notes, a maturity date) on the Remarketed
Maturity Date.
(5) If a Remarketing shall have occurred pursuant to this Section 5 but
settlement of the purchase and sale of the Preferred Securities or Subordinated
Notes, as the case may be, does not occur on the corresponding Remarketing
Settlement Date, then, unless the provisions of Section 7 with respect to a
Renewed Remarketing shall apply, a Failed Remarketing shall be deemed to have
occurred on such Remarketing Settlement Date.
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(6) At the time and in the manner specified in the Secondary Purchase
Agreement, the Secondary Purchaser shall pay to the Remarketing Agent on behalf
of the holders of the Preferred Securities or Subordinated Notes, as the case
may be, on the Remarketing Settlement Date, an amount of cash equal to the
Remarketing Price.
(7) Unless otherwise agreed among the Remarketing Agent, the paying agent
(under the Trust Agreement or Indenture, as applicable) and any Former Holder,
the Remarketing Agent shall promptly pay the Remarketing Price, less the
Remarketing Fee, to the paying agent, acting solely as agent for the Former
Holders, and the paying agent shall pay such amount to the Former Holders on the
Remarketing Settlement Date in the manner specified in the Trust Agreement or
the Indenture, as the case may be. Any amounts held by the paying agent for
payment to the Former Holders shall not be property of the Trust or the Company,
as the case may be.
(8) The obligation of the Remarketing Agent to make payment to the Former
Holders in connection with the Remarketing shall be limited to the extent that
the Secondary Purchaser has delivered the Remarketing Price therefor to the
Remarketing Agent.
(9) Any outstanding Preferred Securities (or, if applicable, Subordinated
Notes) purchased on the Remarketing Settlement Date shall be deemed to be
transferred to the Secondary Purchaser and shall be replaced in the manner
provided in Section 5(j). On and after the Remarketing Settlement Date (except
in the event of a Failed Remarketing), (A) the Trust (or the Company, in the
case of the Subordinated Notes) shall make no further payments to, and the Trust
(or the Company, in the case of the Subordinated Notes) shall have no further
obligations under the Trust Agreement (or the Indenture, in the case of the
Subordinated Notes) in respect of, the holders of such replaced securities (the
"Former Holders"), (B) the Trust (or the Company, in the case of the
Subordinated Notes) shall only be obligated to make payments to the holders of
Replacement Securities and (C) the Preferred Securities (or, if applicable, the
Subordinated Notes) of the Former Holders shall no longer represent an
obligation of, or interest in, the Trust (or the Company, in the case of the
Subordinated Notes) but shall only represent a right to receive the proceeds of
the Remarketing from the paying agent under the Trust Agreement or the
Indenture, as the case may be.
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(10) (i) The Company shall cause replacement certificates evidencing the
remarketed Preferred Securities (the "Replacement Preferred Securities") to be
executed by an Administrative Trustee on behalf of the Trust and authenticated
by the Property Trustee and (ii) the Company shall cause replacement
certificates evidencing the Subordinated Notes (the "Replacement Subordinated
Notes", and together with the Replacement Preferred Securities, the "Replacement
Securities") to be executed by an authorized signatory and authenticated by the
Indenture Trustee, in each case, in accordance with the provisions of Section 5.
If the Preferred Securities are to be purchased on the Remarketing Settlement
Date, (A) the Replacement Preferred Securities shall be delivered to the
purchaser of the remarketed Preferred Securities in accordance with the terms of
the Secondary Purchase Agreement and (B) the Replacement Subordinated Notes
shall be delivered to the Trust. If the Subordinated Notes are to be purchased
on the Remarketing Settlement Date, the Replacement Subordinated Notes shall be
delivered to the purchaser of the remarketed Subordinated Notes in accordance
with the terms of the Secondary Purchase Agreement.
Section 5. Reset of Distribution Rate, Mandatory Redemption Date,
Interest Rate and Maturity Date. From and including the Reset Settlement Date on
which Replacement Securities are issued, (A) the Distribution Rate on the Trust
Securities and the interest rate on the Subordinated Notes shall be the Winning
Bid Rate and (B) the Mandatory Redemption Date of the Trust Securities and the
maturity date of the Subordinated Notes shall be the Remarketed Maturity Date.
Section 6. Renewed Remarketing. If a Remarketing has occurred pursuant
to Section 5 that would be a Failed Remarketing pursuant to Section 5(e),
because the purchase and sale of the Preferred Securities (or, if applicable,
the Subordinated Notes) do not take place on the corresponding Remarketing
Settlement Date, and the reason for such failure shall, in the good faith
determination of the Remarketing Agent (made after consultation with the
Company), result from facts or circumstances that are not due to the action or
inaction of the Company, then the provisions of Section 5 shall apply to a
second remarketing (a "Renewed Remarketing") of the Preferred Securities (or, if
applicable, the Subordinated Notes), except that the Expected Reset Date shall
be the sixth Business Day following such corresponding Remarketing Settlement
Date; provided that only one Renewed Remarketing can occur pursuant to this
Section 7, and no Renewed Remarketing shall occur after the Final Reset Date.
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Section 7. Remarketing Fee. With respect to the Remarketing, the
Remarketing Agent shall retain as a remarketing fee (the "Remarketing Fee") an
amount equal to 25 basis points (.25%) of the aggregate Liquidation Amount of
the remarketed Preferred Securities or 25 basis points (.25%) of the aggregate
principal amount of the Subordinated Notes, as the case may be, from the
purchase price received in connection with such Remarketing.
Section 8. Failed Remarketing; Contingent Purchase Obligation. The
Remarketing Agent shall give notice of any Failed Remarketing on the date such
Failed Remarketing occurs, or is deemed to occur, by 4:00 p.m., New York City
time, on the date of such Failed Remarketing, to the Company, the Property
Trustee, the Indenture Trustee and the paying agent under the Indenture. In the
case of any Failed Remarketing, the Holders of a Majority in Liquidation Amount
of the Trust Securities (or, if applicable, the holders of a majority in
principal amount of the Subordinated Notes) may, by notice in writing to the
Company not later than 15 days after the occurrence of such Failed Remarketing,
require the Company to purchase from the holders thereof, on a Pro Rata basis in
accordance with Section 9 of Annex I to the Trust Agreement, all outstanding
Trust Securities (or, if applicable, all outstanding Subordinated Notes) for a
purchase price equal to the aggregate Liquidation Amount of such Trust
Securities plus accrued but unpaid Distributions thereon (or, if applicable, the
aggregate principal amount of such Subordinated Notes plus accrued but unpaid
interest thereon). Payment of such purchase price shall be made directly to each
such holder on the tenth Business Day following the date of the notice to the
Company pursuant to the preceding sentence. Such purchase shall be without
recourse of any kind to any such holder. The parties recognize that the
occurrence of a Failed Remarketing indicates that it would not be commercially
reasonable under the circumstances to require Holders of Trust Securities (or,
if applicable, Subordinated Notes) to attempt to resell such securities
otherwise then pursuant to this Section, and that therefore in the event of any
default by the Company in its obligations under this Section, a Holder shall be
entitled to recover the price of the securities specified herein.
Section 9. Adjustments to Trigger Price. The "Trigger Price" shall
initially be equal to the product of 66 2/3% times the Closing Price for the
Ordinary Shares on the Closing Date. Following the determination by the
Remarketing Agent in its reasonable discretion that a Potential Adjustment Event
has occurred, the Remarketing Agent shall determine (after consultation with the
Company) whether such Potential Adjustment Event has a diluting or concentrative
effect on the
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theoretical value of the Ordinary Shares and, if so, shall make the
corresponding adjustment(s), if any, to the Trigger Price. The Company shall
promptly notify the Remarketing Agent of any Potential Adjustment Event. The
Remarketing Agent may, but need not, determine the appropriate adjustment(s) by
reference to the adjustment(s) in respect of such Potential Adjustment Event
made by an options exchange to options on the Ordinary Shares traded on that
options exchange. In the event of any merger, consolidation or reorganization of
the Company, the Remarketing Agent shall determine (after consultation with the
Company) the appropriate Trigger Price as a result of such event.
Section 10. Replacement and Resignation of Remarketing Agent. (a) The
Company shall not have the right to replace BAS as the Remarketing Agent, except
in the case of bad faith, gross negligence or willful misconduct by BAS.
(1) BAS may resign at any time for good reason (after consultation with
the Company) and, subject to the following sentence, shall be discharged from
its duties and obligations hereunder or as Calculation Agent under the Trust
Agreement and the Indenture by giving no less than 10 days' notice. Any such
resignation shall become effective upon the Company's appointment of a successor
to perform the services that would otherwise be performed hereunder by the
Remarketing Agent or the Calculation Agent under the Trust Agreement and the
Indenture, as the case may be, and the agreement of any such successor so to
serve. Upon receiving notice from the Remarketing Agent that it wishes to resign
hereunder or as Calculation Agent under the Trust Agreement and the Indenture
stating the reasons for such resignation, the Company shall appoint such a
successor and enter into a new remarketing agreement with it as soon as
reasonably practicable.
Section 11. Dealing in the Securities. BAS, when acting as Remarketing
Agent hereunder or under the Secondary Purchase Agreement or when acting in its
individual or any other capacity, may, to the extent permitted by law, buy,
sell, hold or deal in any of the Preferred Securities or Subordinated Notes. The
Remarketing Agent may exercise any vote or join in any action with respect to
any Preferred Securities or Subordinated Notes owned by it as if it did not act
in any capacity hereunder. BAS, in its individual capacity, either as principal
or agent, may also engage in or have an interest in any financial or other
transaction with the Company as freely as if it did not act in any capacity
hereunder.
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Section 12. Offering Memorandum. Promptly following a Trigger Event, the
Company shall furnish an offering memorandum (the "Offering Memorandum") to the
Remarketing Agent, in form and substance reasonably satisfactory to the
Remarketing Agent, to be used in the remarketing by the Secondary Purchaser
under the Secondary Purchase Agreement, and shall pay all expenses relating
thereto.
Section 14. Conditions to the Remarketing Agent's Obligations. (a) The
obligations of the Remarketing Agent, the Secondary Purchaser and any other
purchasers to perform their respective obligations hereunder and under the
Secondary Purchase Agreement shall be subject to the terms and conditions of the
Secondary Purchase Agreement.
(1) If at any time during the term of this Agreement, any Event of Default
under the Indenture or any Event of Default under the Trust Agreement, or event
that with the passage of time or the giving of notice or both would become an
Event of Default under the Indenture or an Event of Default under the Trust
Agreement, has occurred and is continuing under the Indenture or the Trust
Agreement, then the obligations and duties of the Remarketing Agent under this
Agreement shall be suspended until such default or event has been cured. The
Company shall cause the Property Trustee to provide to the Remarketing Agent
notice of all such defaults and events of which the Property Trustee is aware,
and the Subordinated Notes Issuer shall cause the Indenture Trustee to provide
to the Remarketing Agent notice of all such defaults and events of which the
Indenture Trustee is aware.
Section 15. Indemnification. The Company shall indemnify and hold
harmless the Remarketing Agent and its officers and employees from and against
all actions, claims, damages, liabilities and losses, and costs and expenses
related thereto (including reasonable legal fees and costs) relating to or
arising out of actions or omissions in any capacity hereunder and in any
capacity as Calculation Agent under the Trust Agreement and the Indenture,
except actions, claims, damages, liabilities, losses, costs and expenses to the
extent caused by (a) the bad faith, gross negligence or wilful misconduct of
such indemnified party or (b) the breach by the Remarketing Agent of its
representations, warranties and covenants hereunder. This Section 15 shall
survive the termination of the Agreement, the Trust Agreement, the Indenture and
the payment in full of all obligations under the Preferred Securities or the
Subordinated Notes, as the case may be, and this Agreement, whether by purchase,
repurchase, redemption or otherwise.
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Section 13. Termination of Remarketing Agreement. This Agreement shall
terminate as to any Remarketing Agent that is replaced on the effective date of
its replacement pursuant to Section 12(b). Notwithstanding any such termination,
the obligations of the Company set forth in Section 15 shall survive and remain
in full force and effect until all amounts payable under said Section 15 shall
have been paid in full.
Section 14. Remarketing Agent's Performance: Duty of Care; Power of
Attorney. The duties and obligations of the Remarketing Agent hereunder shall be
determined solely by the express provisions of this Agreement and the Secondary
Purchase Agreement.
The Remarketing Agent hereby accepts the obligation set forth in the Trust
Agreement and the Indenture to act as attorney-in-fact for the holders of the
Preferred Securities or Subordinated Notes, as the case may be.
Section 15. Expenses. The Company shall pay the reasonable fees and
disbursements of the Remarketing Agent's counsel incurred in connection with any
remarketing, including any Renewed Remarketing and any Failed Remarketing and
the Company shall pay the reasonable fees, expenses and disbursements of the
Remarketing Agent and its counsel in connection with the execution and delivery
of the Secondary Purchase Agreement.
Section 16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to the choice of law rules thereof.
Section 17. Term of Agreement. Except as otherwise provided herein, this
Agreement shall remain in full force and effect from the date hereof until 30
days after the earlier of (i) the date all Preferred Securities (or, if
applicable, Subordinated Notes) shall have been redeemed or purchased pursuant
to Section 9 hereof and (ii) the Reset Date in connection with a Remarketing
which is not a Failed Remarketing.
Section 18. Successors and Assigns. The rights and obligations of the
Company and the Guarantor hereunder may not be assigned or delegated to any
other person without the prior written consent of the Remarketing Agent. Subject
to the provisions of Section 12, the rights and obligations of the Remarketing
Agent
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hereunder may not be assigned or delegated to any other person without the prior
written consent of the Company. This Agreement shall inure to the benefit of and
be binding upon the Trust, the Company, the Guarantor, the Remarketing Agent and
their respective successors and assigns. The terms "successors" and "assigns"
shall not include any purchaser of Preferred Securities or Subordinated Notes
merely as a result of such purchase. This Agreement shall inure to the benefit
of the Holders of the Preferred Securities (or, if applicable the Subordinated
Notes).
Section 19. Headings. Section headings have been inserted in this
Agreement as a matter of convenience of reference only, and it is agreed that
such section headings are not a part of this Agreement and shall not be used in
the interpretation of any provision of this Agreement.
Section 20. Severability. If any provision of this Agreement shall be held
or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as
applied in any particular case in any or all jurisdictions because it conflicts
with any provisions of any constitution, statute, rule or public policy or for
any other reason, such circumstances shall not have the effect of rendering the
provision in question invalid, inoperative or unenforceable in any other case,
circumstances or jurisdiction, or of rendering any other provision or provisions
of this Agreement invalid, inoperative or unenforceable to any extent
whatsoever.
Section 21. Counterparts. This Agreement may be executed in counterparts,
each of which shall be regarded as an original and all of which shall constitute
one and the same document.
Section 22. Amendments. This Agreement may be amended by any instrument in
writing signed by the parties hereto; provided that Sections 9, 27 and 28 may
not be amended in a manner adverse to the Holders of the Preferred Securities
without the consent of each such Holder.
Section 23. Notices. Unless otherwise specified, any notices, requests,
consents or other communications given or made hereunder or pursuant hereto
shall be made in writing or transmitted by any standard form of
telecommunication, including telephone, telegraph or telecopy, and confirmed in
writing. All written notices and confirmations of notices by telecommunication
shall be deemed to have been validly given or made when delivered or mailed,
registered or certified mail,
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return receipt requested and postage prepaid. All such notices, requests,
consents or other communications shall be addressed as follows:
if to the Guarantor, to:
ACE Limited
The ACE Building
30 Woodbourne Avenue
Hamilton, HM08, Bermuda
Facsimile: (441) 296-7799
Attention: Peter N. Mear
if to the Company, to:
ACE INA Holdings Inc.
c/o ACE USA, Inc.
Six Concourse Parkway
Suite 2500
Atlanta, GA 30328
Facsimile: (770) 393-0888
Attention: Richard T. Gieryn, Jr.
if to the Trust, to:
ACE RHINOS Trust
c/o ACE USA, Inc.
Six Concourse Parkway
Suite 2500
Atlanta, GA 30328
Facsimile: (770) 393-0888
Attention: Richard T. Gieryn, Jr.
and if to the Remarketing Agent, to:
Banc of America Securities LLC
9 West 57th Street
New York, NY 10019
Facsimile: (212) 847-5124
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Attention: William Caccamise
or to such other address as any of the above shall specify to the other in
writing.
Section 24. Guarantee. The Guarantor hereby unconditionally guarantees to
the Remarketing Agent and each holder of a Trust Security (or, if applicable, of
a Subordinated Note) the due and punctual payment of all amounts payable by the
Company pursuant to this Agreement, when and as the same shall become due and
payable in accordance with the terms hereof, and the due and punctual
performance by the Company of all other obligations of the Company under this
Agreement. In case of the failure of the Company punctually to pay any amount
payable by it hereunder, the Guarantor hereby agrees to cause such payment to be
made punctually when and as the same shall become due and payable, as if such
payment were made by the Company.
Section 25. Senior Obligations. The obligations of the Company and the
Guarantor hereunder constitute senior unsecured obligations, and shall rank pari
passu with all other senior unsecured obligations of the Company and the
Guarantor, respectively. Such obligations are not subject to, and shall not be
affected by, the provisions of Articles 16 and 18 of the Indenture.
Section 26. Submission to Jurisdiction. The Guarantor agrees that any
judicial proceedings instituted in relation to any matter arising under any
Transaction Document may be brought in any United States Federal or New York
State court sitting in the Borough of Manhattan, The City of New York, New York
to the extent that such court has subject matter jurisdiction over the
controversy, and, by execution and delivery of this Agreement, the Guarantor
hereby irrevocably accepts, generally and unconditionally, the jurisdiction of
the aforesaid courts, acknowledges their competence and irrevocably agrees to be
bound by any judgement rendered in such proceeding. The Guarantor also
irrevocably and unconditionally waives for the benefit of the Remarketing Agent
and the Holders from time to time of the Securities (or, if applicable, the
Subordinated Notes) any immunity from jurisdiction and any immunity from legal
process (whether through service or notice, attachment prior to judgement,
attachment in the aid of execution, execution or otherwise) in respect of any
Transaction Document. The Guarantor hereby irrevocably designates and appoints
for the benefit of the Remarketing Agent and the Holders from time to time of
the Securities for the term of this Agreement ACE USA, Inc, Six Concourse
Parkway, Suite 2500, Atlanta, GA, 30328, facsimile: (770) 393-0888, Attention:
23
<PAGE>
Richard T. Gieryn, Jr as its agent to receive on its behalf service of all
process (with a copy of all such service of process to be delivered to ACE
Limited, The ACE Building, 30 Woodbourne Avenue, Hamilton, HM08, Bermuda,
facsimile: (441) 296-7799, Attention: Peter N. Mear) brought against it with
respect to any such proceeding in any such court in The City of New York, such
service being hereby acknowledged by the Guarantor to be effective and binding
service on it in every respect whether or not the Guarantor, as the case may be,
shall then be doing or shall have at any time done business in New York. Such
appointment shall be irrevocable so long as any of the obligations of the
Guarantor hereunder remain outstanding, or until the appointment of a successor
by the Guarantor, as the case may be, and such successor's acceptance of such
appointment. Upon such acceptance, the Guarantor shall notify the Remarketing
Agent of the name and address of such successor. The Guarantor further agrees
for the benefit of the Remarketing Agent and the Holders from time to time of
the Securities to take any and all action, including the execution and filing of
any and all such documents and instruments, as may be necessary to continue such
designation and appointment of said agent in full force and effect so long as
any of the obligations of the Guarantor hereunder shall be outstanding. The
Remarketing Agent shall not be obligated and shall have no responsibility with
respect to any failure by the Guarantor to take any such action. Nothing herein
shall affect the right to serve process in any other manner permitted by any law
or limit the right of the Remarketing Agent or any Holder to institute
proceedings against the Guarantor in the courts of any other jurisdiction or
jurisdictions.
Section 27. Judgment Currency. All payments by the Company or the
Guarantor hereunder shall be made in lawful currency of the United States of
America ("Dollars"). The Guarantor agrees, to the fullest extent that it may
effectively do so under applicable law, that (a) if for the purpose of obtaining
judgment in any court it is necessary to convert the sum due in Dollars into a
currency in which a judgment will be rendered (the "Judgment Currency"), the
rate of exchange used shall be the rate at which in accordance with normal
banking procedures the Remarketing Agent could purchase in The City of New York
the requisite amount of Dollars with the Judgment Currency on the Business Day
preceding the day on which a final unappealable judgment is given and (b) its
obligations under this Agreement to make payments in Dollars (i) shall not be
discharged or satisfied by any tender, or any recovery pursuant to any judgment
(whether or not entered in accordance with clause (a)), in any currency other
than the Dollars, except to the extent that such tender or recovery shall result
in the actual receipt, by the payee, of the full amount of the Dollars expressed
to be payable in
24
<PAGE>
respect of such payments, (ii) shall be enforceable as an alternative or
additional cause of action for the purpose of recovering in Dollars the amount,
if any, by which such actual receipt shall fall short of the full amount of
Dollars so expressed to be payable and (iii) shall not be affected by judgment
being obtained for any other sum due under this Agreement.
Section 28. Net Payments. All payments hereunder by the Guarantor
("Guarantee Payments") shall be made by the Guarantor without withholding or
deduction at source for, or on account of, any present or future taxes, fees,
duties, assessments or governmental charges of whatever nature imposed or levied
by or on behalf of the Cayman Islands or Bermuda (each, a taxing jurisdiction@)
or any political subdivision or taxing authority thereof or therein, unless such
taxes, fees, duties, assessments or governmental charges are required to be
withheld or deducted by (i) the laws (or any regulations or ruling promulgated
thereunder) of a taxing jurisdiction or any political subdivision or taxing
authority thereof or therein or (ii) an official position regarding the
application, administration, interpretation or enforcement of any such laws,
regulations or rulings (including, without limitation, a holding by a court of
competent jurisdiction or by a taxing authority in a taxing jurisdiction or any
political subdivision thereof). If a withholding or deduction at source is
required, the Guarantor shall, subject to certain limitations and exceptions set
forth below, pay to the Holder of any Security (or, if applicable, Subordinated
Note) such Additional Amounts (as defined below) as may be necessary so that
every net Guarantee Payment, after such withholding or deduction, shall not be
less than the amount due and payable pursuant to this Agreement; provided,
--------
however, that the Guarantor shall not be required to make payment of such
- -------
Additional Amounts for or on account of:
(1) any tax, fee, duty, assessment or governmental change of whatever
nature which would not have been imposed but for the fact that such Holder: (A)
was a resident, domiciliary or national of, or engaged in business or maintained
a permanent establishment or was physically present in, the relevant taxing
jurisdiction or any political subdivision thereof or otherwise had some
connection with the relevant taxing jurisdiction other than by reason of the
mere ownership of such Security or receipt of a Guarantee Payment; (B) presented
such Security for payment in the relevant taxing jurisdiction or any political
subdivision thereof, unless such Security could not have been presented for
payment elsewhere; or (C) presented such Security more than 30 days after the
date on which the payment in respect of such Security first became due and
payable or provided for, whichever is later, except to
25
<PAGE>
the extent that the Holder would have been entitled to such Additional Amounts
if it had presented such Security for payment on any day within such period of
30 days;
(2) any estate, inheritance, gift, sale, transfer, personal property or
similar tax, assessment or other governmental charge;
(3) any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure by the Holder or the beneficial owner of such
Security to comply with any reasonable request by the Guarantor addressed to the
Holder within 90 days of such request (A) to provide information concerning the
nationality, residence or identity of the Holder or such beneficial owner or (B)
to make any declaration or other similar claim or satisfy any information or
reporting requirement, which, in the case of (A) or (B), is required or imposed
by statute, treaty, regulation or administrative practice of the relevant taxing
jurisdiction or any political subdivision thereof as a precondition to exemption
from all or part of such tax, assessment or other governmental charge; or
(4) any combination of items (1), (2) and (3);
nor shall Additional Amounts be paid with respect to any Guarantee Payment to
any Holder who is a fiduciary or partnership or other than the sole beneficial
owner of such Security to the extent such payment would be required by the laws
of the relevant taxing jurisdiction (or any political subdivision or relevant
taxing authority thereof or therein) to be included in the income for tax
purposes of a beneficiary or partner or settlor with respect to such fiduciary
or a member of such partnership or a beneficial owner who would not have been
entitled to such Additional Amounts had it been the holder of the Security.
If any withholding for or on account of any tax, fee, duty, assessment or
other governmental charge described in this Section 31 shall be required in
connection with a Guarantee Payment, the Guarantor shall specify, in a
certificate to the Holder, by taxing jurisdiction the amount, if any, required
to be withheld on such payments to such Holder, and the Guarantor agrees to pay
to such Holder the additional amounts required by this Section 31. The Guarantor
covenants to indemnify each Holder for, and to hold it harmless against, any
loss, liability or expense reasonably incurred without negligence or bad faith
on its part arising out of or in connection with actions taken or omitted by it
in reliance on any such certificate furnished pursuant to this Section 31.
26
<PAGE>
"Additional Amounts" means any additional amounts which are required
hereby, under circumstances specified herein, to be paid by the Guarantor in
respect of certain taxes, assessments or other governmental charges imposed on
Holders and which are owing to such Holders.
27
<PAGE>
IN WITNESS WHEREOF, each of the Company, the Trust, the Subordinated Notes
Issuer and the Remarketing Agent has caused this Remarketing Agreement to be
executed in its name and on its behalf by one of its duly authorized officers as
of the date first above written.
ACE LIMITED
By:___________________________________________
Name: Peter N. Mear
Title: Secretary
ACE RHINOS TRUST
By:___________________________________________
Name: Peter N. Mear
Title: Administrative Trustee
ACE INA HOLDINGS INC.
By:___________________________________________
Name: Peter N. Mear
Title: Secretary
28
<PAGE>
Accepted and Agreed as of
the date first above written:
BANC OF AMERICA SECURITIES LLC,
not individually, but solely as Remarketing Agent
By:__________________________________
Name:
Title:
29
<PAGE>
June 29, 1999
Banc of America Securities LLC
600 Montgomery Street
San Francisco, California 91444
Ladies and Gentlemen:
1. Introduction. This letter agreement (the "Letter Agreement") confirms
our agreement with you ("BAS") relating to the issuance and sale of ordinary
shares, par value $0.041666667 per share (the "Ordinary Shares"), of ACE
Limited, a Cayman Islands company limited by shares (the "Company"), and certain
related matters.
2. Underwriting. (a) The Company shall designate by written notice to BAS
one or more target dates (each, a "Targeted Purchase Date") during the 36-month
period following the date hereof and ending on June 30, 2002 (the "Underwriting
Period") for the issuance and sale (an "Underwriting") by BAS (and potentially
other underwriters as contemplated below) of a number of Ordinary Shares (the
"Offered Shares" with respect to such Underwriting) having an aggregate Public
Offering Price (as defined below) with respect to such Underwriting equal to or
less than the Underwriting Commitment (as defined below), and the Company agrees
that it shall designate Targeted Purchase Dates so that the aggregate offering
price for all Underwritings shall equal the Initial Underwriting Commitment (as
defined below). If Underwritings having an aggregate public offering price of at
least the Initial Underwriting Commitment have not been completed prior to the
60th day preceding the end of the Underwriting Period, BAS shall be entitled to
designate a Targeted Purchase Date for an Underwriting of Offered Shares having
an aggregate Public Offering Price equal to the Underwriting Commitment by
written notice to the Company, which Targeted Purchase Date shall not be later
than the last day of the Underwriting Period.
"Underwriting Commitment" means the excess, if any, of (i)
$400,000,000 (the "Initial Underwriting Commitment") over (ii) the
<PAGE>
aggregate Public Offering Price (as defined below) of all Ordinary Shares
(including any Additional Shares purchased pursuant to Section 2(c) below)
sold in any Underwriting that has been completed prior to such date.
(b) Prior to each Targeted Purchase Date, each of the Company and BAS will
cooperate with the other party and use its reasonable best efforts to market the
Offered Shares. Once marketing is complete, each of the Company and the
Underwriter will use its reasonable best efforts to agree to the terms,
including without limitation any pricing terms, of a firm commitment
underwriting and upon such agreement, enter into a Firm Commitment Underwriting
Agreement (the "Firm Commitment Underwriting Agreement") with respect to such
Offered Shares, substantially in the form of the Underwriting Agreement attached
hereto, with such changes as are mutually agreed to by BAS and the Company to
reflect the terms of the firm commitment underwriting and changed circumstances
and practices; provided that (i) so long as Offerings are consummated hereunder
during the Underwriting Period for an aggregate Public Offering Price at least
equal to the Initial Underwriting Commitment, the Company shall be under no
obligation to accept the proposed terms of any particular Offering and (ii) the
Company may designate additional underwriters, as provided for below.
Notwithstanding anything herein to the contrary, either the Company or BAS may
decline to enter into such Firm Commitment Underwriting Agreement if it believes
that doing so might result in any violation of applicable law or regulation.
(c) In the Firm Commitment Underwriting Agreement with respect to any
Underwriting, the Company will grant to the underwriters in such Firm Commitment
Underwriting Agreement the right to purchase at the Purchase Price (as defined
below) a number of additional Ordinary Shares (the "Additional Shares") not to
exceed 15% of the Offered Shares to be sold in such Underwriting.
(d) Subject to Section 2(e) below, the purchase price per Offered Share
(the "Purchase Price") to be paid by BAS to the Company pursuant to any Firm
Commitment Underwriting Agreement shall be equal to 97.50% of the price at which
each Offered Share is initially to be offered to the public (the "Public
Offering Price").
(e) The parties contemplate that any Underwritings hereunder will be
solely underwritten by BAS. The Company may elect to include another broker-
dealer as a joint book-running manager together with BAS in any Underwriting
hereunder and one or more co-managing underwriters; provided that in such event,
the Purchase Price in such Underwriting shall be equal to 97.0% of the
2
<PAGE>
Public Offering Price, and BAS shall be entitled to at least 50% of any
applicable management fees, underwriting discounts and commissions (1.50% of the
Public Offering Price); provided further that BAS shall be entitled to at least
25% of such fees, discounts and commissions (0.75% of the Public Offering Price)
if, in the reasonable judgment of the Company prior to the marketing of such
offering, BAS is unable to meet the standards of other nationally recognized
investment banks in connection with such Underwriting, it being understood that
BAS shall be deemed to be unable to meet the standards of other nationally
recognized investment banks in connection with such an Underwriting only if a
significant decline in BAS's current equity distribution capabilities occurs.
3. Shelf Registration. The Company has prepared and filed with the
Securities and Exchange Commission a registration statement on Form S-3
("Registration Statement") relating to the offer and sale of Ordinary Shares and
other securities, with a proposed aggregate public offering price equal to
$4,000,000,000, on a continuous or delayed basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "1933 Act"). The Company shall use its
reasonable best efforts to (i) if necessary, cause the Registration Statement to
become effective under the 1933 Act as soon as practicable after such filing and
(ii) keep the Registration Statement effective with unused capacity at least
equal to 115% of the Underwriting Commitment until the conclusion of the
Underwriting Period.
4. Termination. This Letter Agreement will terminate on the earliest of
(i) the date on which the underwritings contemplated hereby are completed, (ii)
the last day of the Underwriting Period and (iii) July 9, 1999 if the closing
under the Placement Agreement dated as of June 29, 1999 among the Company, ACE
INA Holdings Inc., a Delaware corporation, ACE RHINOS Trust, a Delaware business
trust, and Intrepid Funding Master Trust, a Delaware business trust, has not
occurred.
5. Expenses. Except as otherwise provided in each Firm Commitment
Underwriting Agreement, all costs and expenses (including any fees,
disbursements and expenses of counsel) incurred in connection with this Letter
Agreement and the Underwritings contemplated hereby shall be paid by the party
incurring such expenses; provided that if the underwritings contemplated hereby
are not completed prior to conclusion of the Underwriting Period, the Company
will pay all such expenses incurred by BAS or any of its affiliates.
6. Governing Law. This Letter Agreement shall be governed by and
construed in accordance with the substantive law of the State of New York.
3
<PAGE>
7. Binding Obligation; Reasonable Best Efforts. It is understood that
this Letter Agreement constitutes a legally binding obligation of the parties
hereto. The parties agree to use their reasonable best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary to
consummate the transactions contemplated by this Letter Agreement.
8. Counterparts. This Letter Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
9. Purchase for Resale. BAS confirms its intention that any Ordinary
Shares purchased by it pursuant to this Letter Agreement will be purchased for
resale to third parties pursuant to a bona fide public offering.
4
<PAGE>
Please confirm your agreement with the foregoing by signing and returning a
copy of this Letter Agreement to the undersigned.
Very truly yours,
ACE LIMITED
By:____________________________________
Name: Peter N. Mear
Title: Secretary
Accepted and Agreed as of
the date first above written:
BANC OF AMERICA SECURITIES LLC
By:____________________________
Name: Trevor Ganshaw
Title: Managing Director
<PAGE>
EXHIBIT 99.5
ACE INA HOLDINGS INC.,
Issuer
and
ACE LIMITED,
Guarantor
to
THE FIRST NATIONAL BANK OF CHICAGO,
Trustee
_______________
INDENTURE
_______________
Dated as of June 15, 1999
Subordinated Debt Securities
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
Definitions and Other Provisions of General Application 2
<S> <C>
Section 1.1. Definitions.................................................................................. 2
ACE Trusts............................................................................................... 2
Act...................................................................................................... 2
Additional Amounts....................................................................................... 2
Additional Interests..................................................................................... 2
Additional Sums.......................................................................................... 3
Additional Taxes......................................................................................... 3
Affiliate................................................................................................ 3
Authenticating Agent..................................................................................... 3
Authorized Newspaper..................................................................................... 3
Authorized Officer....................................................................................... 3
Bearer Security.......................................................................................... 3
Board of Directors....................................................................................... 3
Board Resolution......................................................................................... 3
Business Day............................................................................................. 4
Capital Stock............................................................................................ 4
Capitalized Lease Obligation............................................................................. 4
Commission............................................................................................... 4
Common Securities........................................................................................ 4
Common Stock............................................................................................. 4
Company.................................................................................................. 4
Company Request.......................................................................................... 4
Company Senior Indebtedness.............................................................................. 4
Conversion Event......................................................................................... 5
Corporate Trust Office................................................................................... 5
Corporation.............................................................................................. 5
Coupon................................................................................................... 5
Currency................................................................................................. 5
CUSIP number............................................................................................. 5
Defaulted Interest....................................................................................... 5
Direct Action............................................................................................ 5
Distributions............................................................................................ 5
Dollar................................................................................................... 5
Event of Default......................................................................................... 5
Extension Period......................................................................................... 6
Foreign Currency......................................................................................... 6
Government Obligations................................................................................... 6
Guarantee................................................................................................ 6
Guarantee Agreement...................................................................................... 6
Guarantor................................................................................................ 6
Guarantor's Board of Directors........................................................................... 6
Guarantor's Board Resolution............................................................................. 6
Guarantor's Officer's Certificate........................................................................ 7
Guarantor Request"and "Guarantor Order................................................................... 7
Guarantor Senior Indebtedness............................................................................ 7
Holder................................................................................................... 7
Indebtedness............................................................................................. 7
Indenture................................................................................................ 8
Independent Public Accountants........................................................................... 8
Indexed Security......................................................................................... 8
</TABLE>
i
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<TABLE>
<S> <C>
Interest................................................................................................. 8
Interest Payment Date.................................................................................... 8
Investment Company Event................................................................................. 8
Judgment Currency........................................................................................ 8
Lien..................................................................................................... 9
Maturity................................................................................................. 9
New York Banking Day..................................................................................... 9
1940 Act................................................................................................. 9
Office................................................................................................... 9
Original Issue Discount Security......................................................................... 9
Outstanding.............................................................................................. 9
Person................................................................................................... 11
Place of Payment......................................................................................... 11
Preferred Securities..................................................................................... 11
Preferred Securities Guarantee........................................................................... 11
Predecessor Security..................................................................................... 11
Preferred Stock.......................................................................................... 11
Property Trustee......................................................................................... 11
Redemption Date.......................................................................................... 11
Redemption Price......................................................................................... 12
Registered Security...................................................................................... 12
Regular Record Date...................................................................................... 12
Required Currency........................................................................................ 12
Responsible Officer...................................................................................... 12
Security................................................................................................. 12
Security Register........................................................................................ 12
Senior Indebtedness...................................................................................... 12
Special Event............................................................................................ 12
Special Record Date...................................................................................... 12
Stated Maturity.......................................................................................... 12
Subsidiary............................................................................................... 13
Tax Event................................................................................................ 13
Trust Agreement.......................................................................................... 13
Trust Indenture Act...................................................................................... 13
Trust Securities......................................................................................... 13
Trustee.................................................................................................. 13
United States............................................................................................ 14
United States Alien...................................................................................... 14
U.S. Depositor........................................................................................... 14
Vice President........................................................................................... 14
Section 1.2. Compliance Certificates and Opinions......................................................... 14
Section 1.3. Form of Documents Delivered to Trustee....................................................... 15
Section 1.4. Acts of Holders.............................................................................. 15
Section 1.5. Notices, etc. to Trustee, Company and Guarantor.............................................. 18
Section 1.6. Notice to Holders of Securities; Waiver...................................................... 18
Section 1.7. Language of Notices.......................................................................... 19
Section 1.8. Conflict with Trust Indenture Act............................................................ 19
Section 1.9. Effect of Headings and Table of Contents..................................................... 19
Section 1.10. Successors and Assigns....................................................................... 19
Section 1.11. Separability Clause.......................................................................... 20
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 1.12. Holders of Preferred Securities as Third Party Beneficiaries................................. 20
Section 1.13. Benefits of Indenture........................................................................ 20
Section 1.14. Governing Law................................................................................ 20
Section 1.15. Legal Holidays............................................................................... 20
Section 1.16. Counterparts................................................................................. 21
Section 1.17. Judgment Currency............................................................................ 21
Section 1.18. No Security Interest Created................................................................. 21
Section 1.19. Limitation on Individual Liability........................................................... 22
Section 1.20. Submission to Jurisdiction................................................................... 22
ARTICLE 2
Securities Forms
Section 2.1. Forms Generally.............................................................................. 23
Section 2.2. Form of Trustee's Certificate of Authentication.............................................. 24
Section 2.3. Securities in Global Form.................................................................... 24
ARTICLE 3
The Securities
Section 3.1. Amount Unlimited; Issuable in Series......................................................... 25
Section 3.2. Currency; Denominations...................................................................... 29
Section 3.3. Execution, Authentication, Delivery and Dating............................................... 29
Section 3.4. Temporary Securities......................................................................... 32
Section 3.5. Registration, Transfer and Exchange.......................................................... 32
Section 3.6. Mutilated, Destroyed, Lost and Stolen Securities............................................. 36
Section 3.7. Payment of Interest and Certain Additional Amounts; Rights to Interest and Certain
Additional Amounts Preserved................................................................. 37
Section 3.8. Persons Deemed Owners........................................................................ 39
Section 3.9. Cancellation................................................................................. 39
Section 3.10. Computation of Interest...................................................................... 40
Section 3.11. Extension of Interest Payment Period......................................................... 40
Section 3.12. Right of Set-Off............................................................................. 41
Section 3.13. Agreed Tax Treatment......................................................................... 41
Section 3.14. Extension of Stated Maturity; Adjustment of Stated Maturity Upon an Exchange................. 41
</TABLE>
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ARTICLE 4
Satisfaction and Discharge of Indenture
<TABLE>
<S> <C>
Section 4.1. Satisfaction and Discharge................................................................... 42
Section 4.2. Defeasance and Covenant Defeasance........................................................... 43
Section 4.3. Application of Trust Money................................................................... 48
ARTICLE 5
Remedies
Section 5.1. Events of Default............................................................................ 48
Section 5.2. Acceleration of Maturity; Rescission and Annulment........................................... 50
Section 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.............................. 52
Section 5.4. Trustee May File Proofs of Claim............................................................. 53
Section 5.5. Trustee May Enforce Claims without Possession of Securities or Coupons....................... 54
Section 5.6. Application of Money Collected............................................................... 54
Section 5.7. Limitations on Suits......................................................................... 55
Section 5.8. Unconditional Right of Holders to Receive Principal and any Premium, Interest and
Additional Amounts........................................................................... 55
Section 5.9. Restoration of Rights and Remedies........................................................... 56
Section 5.10. Rights and Remedies Cumulative............................................................... 56
Section 5.11. Delay or Omission Not Waiver................................................................. 56
Section 5.12. Control by Holders of Securities............................................................. 57
Section 5.13. Waiver of Past Defaults...................................................................... 57
Section 5.14. Waiver of Usury, Stay or Extension Laws...................................................... 57
Section 5.15. Undertaking for Costs........................................................................ 58
ARTICLE 6
The Trustee
Section 6.1. Certain Rights of Trustee.................................................................... 58
Section 6.2. Notice of Defaults........................................................................... 60
Section 6.3. Not Responsible for Recitals or Issuance of Securities....................................... 60
Section 6.4. May Hold Securities.......................................................................... 60
Section 6.5. Money Held in Trust.......................................................................... 61
Section 6.6. Compensation and Reimbursement............................................................... 61
Section 6.7. Corporate Trustee Required; Eligibility...................................................... 62
Section 6.8. Resignation and Removal; Appointment of Successor............................................ 62
</TABLE>
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<TABLE>
<S> <C>
Section 6.9. Acceptance of Appointment by Successor....................................................... 64
Section 6.10. Merger, Conversion, Consolidation or Succession to Business.................................. 65
Section 6.11. Appointment of Authenticating Agent.......................................................... 65
ARTICLE 7
Holders Lists and Reports by Trustee, Guarantor and Company
Section 7.1. Company and Guarantor to Furnish Trustee Names and Addresses of Holders...................... 67
Section 7.2. Preservation of Information; Communications to Holders....................................... 68
Section 7.3. Reports by Trustee........................................................................... 68
Section 7.4. Reports by Company and Guarantor............................................................. 68
ARTICLE 8
Consolidation, Amalgamations, Merger and Sales
Section 8.1. Company May Consolidate, Etc., Only on Certain Terms......................................... 69
Section 8.2. Successor Person Substituted for Company..................................................... 70
Section 8.3. Guarantor May Consolidate, Etc., Only on Certain Terms....................................... 71
Section 8.4. Successor Person Substituted for Guarantor................................................... 71
ARTICLE 9
Supplemental Indentures
Section 9.1. Supplemental Indentures without Consent of Holders........................................... 72
Section 9.2. Supplemental Indentures with Consent of Holders.............................................. 73
Section 9.3. Execution of Supplemental Indentures......................................................... 75
Section 9.4. Effect of Supplemental Indentures............................................................ 75
Section 9.5. Reference in Securities to Supplemental Indentures........................................... 76
Section 9.6. Conformity with Trust Indenture Act.......................................................... 76
Section 9.7. Effect on Senior Indebtedness................................................................ 76
Section 9.8. Notice of Supplemental Indenture............................................................. 76
ARTICLE 10
Covenants
Section 10.1. Payment of Principal, any Premium, Interest and Additional Amounts........................... 76
Section 10.2. Maintenance of Office or Agency.............................................................. 77
Section 10.3. Money for Securities Payments to Be Held in Trust............................................ 78
Section 10.4. Additional Amounts........................................................................... 80
</TABLE>
v
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<TABLE>
<S> <C>
Section 10.5. Corporate Existence.......................................................................... 81
Section 10.6. Waiver of Certain Covenants.................................................................. 81
Section 10.7. Company Statement as to Compliance; Notice of Certain Defaults............................... 81
Section 10.8. Guarantor Statement as to Compliance; Notice of Certain Defaults............................. 82
Section 10.9. Additional Sums.............................................................................. 82
Section 10.10. Prohibition Against Dividends, etc........................................................... 83
Section 10.11. Payment of Expenses of each ACE Trust........................................................ 84
Section 10.12. Ownership of Common Securities............................................................... 84
ARTICLE 11
Redemption of Securities
Section 11.1. Applicability of Article..................................................................... 84
Section 11.2. Election to Redeem; Notice to Trustee........................................................ 84
Section 11.3. Selection by Trustee of Securities to be Redeemed............................................ 85
Section 11.4. Notice of Redemption......................................................................... 85
Section 11.5. Deposit of Redemption Price.................................................................. 87
Section 11.6. Securities Payable on Redemption Date........................................................ 87
Section 11.7. Securities Redeemed in Part.................................................................. 88
Section 11.8. Right of Redemption of Securities Issued to an ACE Trust..................................... 88
ARTICLE 12
Sinking Funds
Section 12.1. Applicability of Article..................................................................... 89
Section 12.2. Satisfaction of Sinking Fund Payments with Securities........................................ 89
Section 12.3. Redemption of Securities for Sinking Fund.................................................... 90
ARTICLE 13
Repayment at the Option of Holders
Section 13.1. Applicability of Article..................................................................... 90
ARTICLE 14
Securities in Foreign Currencies
Section 14.1. Applicability of Article..................................................................... 91
ARTICLE 15
Meetings of Holders of Securities
Section 15.1. Purposes for Which Meetings May Be Called.................................................... 91
</TABLE>
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<TABLE>
<S> <C>
Section 15.2. Call, Notice and Place of Meetings.......................................................... 91
Section 15.3. Persons Entitled to Vote at Meetings........................................................ 92
Section 15.4. Quorum; Action.............................................................................. 92
Section 15.5. Determination of Voting Rights; Conduct and Adjournment of Meetings......................... 93
Section 15.6. Counting Votes and Recording Action of Meetings............................................. 94
ARTICLE 16
Subordination Of Securities
Section 16.1. Agreement to Subordinate.................................................................... 94
Section 16.2. Default on Company Senior Indebtedness...................................................... 95
Section 16.3. Liquidation; Dissolution; Bankruptcy........................................................ 95
Section 16.4. Subrogation................................................................................. 96
Section 16.5. Trustee to Effectuate Subordination......................................................... 98
Section 16.6. Notice by the Company....................................................................... 98
Section 16.7. Rights of the Trustee; Holders of Company Senior Indebtedness............................... 99
Section 16.8. Subordination May Not Be Impaired........................................................... 99
ARTICLE 17
Guarantee And Indemnity
Section 17.1. The Guarantee............................................................................... 100
Section 17.2. Net Payments................................................................................ 100
Section 17.3. Guarantee Unconditional, etc................................................................ 102
Section 17.4. Reinstatement............................................................................... 103
Section 17.5. Subrogation................................................................................. 103
Section 17.6 Indemnity.................................................................................... 103
ARTICLE 18
Subordination Of Guarantee
Section 18.1. Agreement to Subordinate Guarantee........................................................... 104
Section 18.2. Default on Guarantor Senior Indebtedness..................................................... 104
Section 18.3. Liquidation; Dissolution; Bankruptcy......................................................... 105
Section 18.4. Subrogation.................................................................................. 106
Section 18.5. Trustee to Effectuate Subordination.......................................................... 107
Section 18.6. Notice by the Guarantor...................................................................... 107
Section 18.7. Rights of the Trustee; Holders of Guarantor Senior Indebtedness.............................. 108
</TABLE>
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<TABLE>
<S> <C>
Section 18.8. Subordination May Not Be Impaired............................................................ 109
</TABLE>
viii
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INDENTURE, dated as of June 15, 1999 (the "Indenture"), among ACE INA
HOLDINGS INC., a corporation duly organized and existing under the laws of the
State of Delaware (hereinafter called the "Company"), having its principal
executive office located at c/o ACE USA Inc., Six Concourse Parkway, Suite 2500,
Atlanta, Georgia 30328, ACE LIMITED, a company duly organized and existing under
the laws of the Cayman Islands (hereinafter called the "Guarantor"), having its
principal executive office at The ACE Building, 30 Woodbourne Avenue, Hamilton
HM 08, Bermuda, and THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association duly organized and existing under the laws of the United States of
America (hereinafter called the "Trustee"), having its Corporate Trust Office
located at One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126.
Recitals
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its subordinated
unsecured debentures, notes or other evidences of indebtedness (hereinafter
called the "Securities"), including, without limitation, Securities issued to
evidence loans made to the Company of the proceeds from the issuance from time
to time by one or more ACE Trusts (as defined herein) of preferred beneficial
interests in the assets of such Trusts (the "Preferred Securities") and common
beneficial interests in the assets of such Trusts (the "Common Securities" and,
collectively with the Preferred Securities, the "Trust Securities"), unlimited
as to principal amount, to bear such rates of interest, to mature at such time
or times, to be issued in one or more series and to have such other provisions
as shall be fixed as hereinafter provided.
The Company has duly authorized the execution and delivery of this
Indenture. All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
For value received, the Guarantor has duly authorized the execution and
delivery of this Indenture to provide for the issuance of the Guarantee and the
indemnity provided for herein. All things necessary to make this Indenture a
valid agreement of the Guarantor, in accordance with its terms, have been done.
This Indenture is subject to the provisions of the Trust Indenture Act of
1939, as amended, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder that are required to be part of this Indenture
and, to the extent applicable, shall be governed by such provisions.
Now, Therefore, This Indenture Witnesseth:
For and in consideration of the premises and the purchase of the Securities
by the Holders (as herein defined) thereof, it is mutually covenanted and
agreed, for the equal and proportionate benefit of all Holders of the Securities
or of any series thereof and any Coupons (as herein defined), as follows:
<PAGE>
ARTICLE 1
Definitions and Other Provisions of General Application
Section 1.1. Definitions.
Except as otherwise expressly provided in or pursuant to this Indenture or
unless the context otherwise requires, for all purposes of this Indenture:
(1) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United States of America and, except as otherwise herein
expressly provided, the terms "generally accepted accounting principles" or
"GAAP" with respect to any computation required or permitted hereunder
shall mean such accounting principles as are generally accepted in the
United States of America at the date or time of such computation;
(4) the words "herein," "hereof," "hereto" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision; and
(5) the word "or" is always used inclusively (for example, the phrase
"A or B" means "A or B or both," not "either A or B but not both").
Certain terms used principally in certain Articles hereof are defined in
those Articles.
"ACE Trusts" means, collectively, ACE Capital Trust I, ACE Capital Trust
II, ACE Capital Trust III and ACE RHINOS Trust, each a statutory business trust
formed under the laws of the State of Delaware, or any other similar trust
created to issue Trust Securities and to use the proceeds from the sale thereof
to purchase Securities issued under this Indenture.
"Act," when used with respect to any Holders, has the meaning specified in
Section 1.4.
"Additional Amounts" means any additional amounts which are required hereby
or by any Security, under circumstances specified herein or therein, to be paid
by the Company or the Guarantor in respect of certain taxes, assessments or
other governmental charges imposed on Holders specified therein and which are
owing to such Holders.
"Additional Interest" means the interest, if any, that shall accrue on any
interest on the Securities of any series the payment of which has not been made
on the applicable Interest
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Payment Date and which shall accrue at the rate per annum specified or
determined as specified in such Security.
"Additional Sums" has the meaning specified in Section 10.9.
"Additional Taxes" means the sum of any additional taxes, duties and other
governmental charges to which an ACE Trust has become subject from time to time
as a result of a Tax Event.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Company or the Guarantor, as the case may be, shall not be deemed to include any
ACE Trust to which Securities and the Guarantee in respect thereof have been
issued. For the purposes of this definition, "control," when used with respect
to any specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have the meanings correlative to the foregoing.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 6.11 to act on behalf of the Trustee to authenticate Securities of
one or more series.
"Authorized Newspaper" means a newspaper, in an official language of the
place of publication or in the English language, customarily published on each
day that is a Business Day in the place of publication, whether or not published
on days that are Legal Holidays in the place of publication, and of general
circulation in each place in connection with which the term is used or in the
financial community of each such place. Where successive publications are
required to be made in Authorized Newspapers, the successive publications may be
made in the same or in different newspapers in the same city meeting the
foregoing requirements and in each case on any day that is a Business Day in the
place of publication.
"Authorized Officer" means, when used with respect to the Company, the
Chairman of the Board of Directors, a Vice Chairman, the President, any Vice
President, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company.
"Bearer Security" means any Security in the form established pursuant to
Section 2.1 which is payable to bearer.
"Board of Directors" means the board of directors of the Company or any
committee of that board duly authorized to act generally or in any particular
respect for the Company hereunder.
"Board Resolution" means a copy of one or more resolutions, certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, delivered to the Trustee.
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"Business Day," with respect to any Place of Payment or other location,
means, unless otherwise specified with respect to any Securities pursuant to
Section 3.1, any day other than a Saturday, Sunday or other day on which banking
institutions in such Place of Payment or other location are authorized or
obligated by law, regulation or executive order to close.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligation" means an obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
generally accepted accounting principles, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with such principles.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, as amended,
or, if at any time after the execution of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Common Securities" has the meaning specified in the first recital of this
Indenture.
"Common Stock" in respect of any Corporation means Capital Stock of any
class or classes (however designated) which has no preference as to the payment
of dividends, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Corporation, and which is not
subject to redemption by such Corporation.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person, and any other obligor upon the Securities.
"Company Request" and "Company Order" mean, respectively, a written request
or order, as the case may be, signed in the name of the Company by an Authorized
Officer, and delivered to the Trustee.
"Company Senior Indebtedness" means, with respect to the Securities of any
particular series, all Indebtedness of the Company outstanding at any time,
except (a) the Securities of such series, (b) Indebtedness as to which, by the
terms of the instrument creating or evidencing the same, it is provided that
such Indebtedness is subordinated to or pari passu with the Securities of such
series, (c) Indebtedness of the Company to an Affiliate of the Company, (d)
interest accruing after the filing of a petition initiating any proceeding
relating to the Company referred to in Section 5.1(7) and 5.1(8) unless such
interest is an allowed claim enforceable against the Company in a proceeding
under federal or state bankruptcy laws, (e) trade accounts payable and
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(f) any Indebtedness, including all other debt securities and guaranties in
respect of those debt securities, initially issued to (x) any ACE Trust or (y)
any trust, partnership or other entity affiliated with the Guarantor which is a
financing vehicle of the Guarantor or any Affiliate of the Guarantor in
connection with the issuance by such entity of Preferred Securities or other
securities which are similar to Preferred Securities that are guaranteed by the
Company pursuant to an instrument that ranks pari passu with or junior in right
of payment to the Preferred Securities Guarantees.
"Conversion Event" means the cessation of use of (i) a Foreign Currency
both by the government of the country or the confederation which issued such
Foreign Currency and for the settlement of transactions by a central bank or
other public institutions of or within the international banking community or
(ii) any currency unit or composite currency for the purposes for which it was
established.
"Corporate Trust Office" means the principal corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of original execution of this Indenture
is located at One First National Plaza, Suite 0126, Chicago, Illinois 60670-
0126.
"Corporation" includes corporations and limited liability companies and,
except for purposes of Article 8, associations, companies and business trusts.
"Coupon" means any interest coupon appertaining to a Bearer Security.
"Currency," with respect to any payment, deposit or other transfer in
respect of the principal of or any premium or interest on or any Additional
Amounts with respect to any Security, means Dollars or the Foreign Currency, as
the case may be, in which such payment, deposit or other transfer is required to
be made by or pursuant to the terms hereof or such Security and, with respect to
any other payment, deposit or transfer pursuant to or contemplated by the terms
hereof or such Security, means Dollars.
"CUSIP number" means the alphanumeric designation assigned to a Security by
Standard & Poor's Ratings Service, CUSIP Service Bureau.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Direct Action" has the meaning specified in Section 5.8.
"Distributions," with respect to any ACE Trust, has the meaning specified
in the applicable Trust Agreement of such ACE Trust.
"Dollars" or "$" means a dollar or other equivalent unit of legal tender
for payment of public or private debts in the United States of America.
"Event of Default" has the meaning specified in Section 5.1.
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<PAGE>
"Extension Period" has the meaning specified in Section 3.11.
"Foreign Currency" means any currency, currency unit or composite currency,
including, without limitation, the euro, issued by the government of one or more
countries other than the United States of America or by any recognized
confederation or association of such governments.
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the other government or governments which
issued the Foreign Currency in which the principal of or any premium or interest
on such Security or any Additional Amounts in respect thereof shall be payable,
in each case where the payment or payments thereunder are supported by the full
faith and credit of such government or governments or (ii) obligations of a
Person controlled or supervised by and acting as an agency or instrumentality of
the United States of America or such other government or governments, in each
case where the timely payment or payments thereunder are unconditionally
guaranteed as a full faith and credit obligation by the United States of America
or such other government or governments, and which, in the case of (i) or (ii),
are not callable or redeemable at the option of the issuer or issuers thereof,
and shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such Government Obligation or a specific payment
of interest on or principal of or other amount with respect to any such
Government Obligation held by such custodian for the account of the holder of a
depository receipt, provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the Government Obligation or the specific payment of interest on or principal of
or other amount with respect to the Government Obligation evidenced by such
depository receipt.
"Guarantee" means the unconditional guarantee of the payment of the
principal of, any premium or interest on, and any Additional Amounts with
respect to the Securities by the Guarantor, as more fully set forth in Article
17.
"Guarantee Agreement" means the Guarantee Agreement with respect to the
Preferred Securities of an ACE Trust, substantially in such form as may be
specified as contemplated by Section 3.1 with respect to the Securities of any
series, in each case as amended from time to time.
"Guarantor" means the Person named as the "Guarantor" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Guarantor" shall mean such successor Person.
"Guarantor's Board of Directors" means the board of directors of the
Guarantor or any committee of that board duly authorized to act generally or in
any particular respect for the Guarantor hereunder.
"Guarantor's Board Resolution" means a copy of one or more resolutions,
certified by the Secretary or an Assistant Secretary of the Guarantor to have
been duly adopted by the
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<PAGE>
Guarantor's Board of Directors and to be in full force and effect on the date of
such certification, delivered to the Trustee.
"Guarantor's Officer's Certificate" means a certificate signed by the
Chairman of the Guarantor's Board of Directors, a Vice Chairman, the President,
the Chief Financial Officer, the Chief Investment Officer, the Chief Accounting
Officer, the General Counsel or the Secretary of the Guarantor, that complies
with the requirements of Section 314(e) of the Trustee Indenture Act and is
delivered to the Trustee.
"Guarantor Request" and "Guarantor Order" mean, respectively, a written
request or order, as the case may be, signed in the name of the Guarantor by the
Chairman of the Guarantor's Board of Directors, a Vice Chairman, the President,
the Chief Financial Officer, the Chief Investment Officer, the Chief Accounting
Officer, the General Counsel or the Secretary of the Guarantor, and delivered to
the Trustee.
"Guarantor Senior Indebtedness" means, with respect to the Securities of
any particular series, all Indebtedness of the Guarantor outstanding at any
time, except (a) the Guarantor's obligations under the Guarantee in respect of
the Securities of such series, (b) Indebtedness as to which, by the terms of the
instrument creating or evidencing the same, it is provided that such
Indebtedness is subordinated to or pari passu with the Guarantor's obligations
under the Guarantee in respect of the Securities of such series, (c)
Indebtedness of the Guarantor to an Affiliate of the Guarantor, (d) interest
accruing after the filing of a petition initiating any proceeding relating to
the Guarantor referred to in Section 5.1(7) and 5.1(8) unless such interest is
an allowed claim enforceable against the Guarantor in a proceeding under federal
or state bankruptcy laws and (e) trade accounts payable.
"Holder," in the case of any Registered Security, means the Person in whose
name such Security is registered in the Security Register and, in the case of
any Bearer Security, means the bearer thereof and, in the case of any Coupon,
means the bearer thereof.
"Indebtedness" means, with respect to any Person, (i) the principal of and
any premium and interest on (a) indebtedness of such Person for money borrowed
and (b) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable; (ii)
all Capitalized Lease Obligations of such Person; (iii) all obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business); (iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in (i) through (iii) above)
entered into in the ordinary course of business of such Person to the extent
such letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit); (v) all obligations of the type referred to in clauses (i)
through (iv) of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person
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<PAGE>
is responsible or liable as obligor, guarantor or otherwise; (vi) all
obligations of the type referred to in clauses (i) through (v) of other Persons
secured by any Lien on any property or asset of such Person (whether or not such
obligation is assumed by such Person), the amount of such obligation being
deemed to be the lesser of the value of such property or assets or the amount of
the obligation so secured; and (vii) any amendments, modifications, refundings,
renewals or extensions of any indebtedness or obligation described as
Indebtedness in clauses (i) through (vi) above.
"Indenture" means this instrument as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof and, with respect to any
Security, by the terms and provisions of such Security and any Coupon
appertaining thereto established pursuant to Section 3.1 (as such terms and
provisions may be amended pursuant to the applicable provisions hereof).
"Independent Public Accountants" means accountants or a firm of accountants
that, with respect to the Company, the Guarantor and any other obligor under the
Securities or the Coupons, are independent public accountants within the meaning
of the Securities Act of 1933, as amended, and the rules and regulations
promulgated by the Commission thereunder, who may be the independent public
accountants regularly retained by the Company or the Guarantor or who may be
other independent public accountants. Such accountants or firm shall be
entitled to rely upon any Opinion of Counsel as to the interpretation of any
legal matters relating to this Indenture or certificates required to be provided
hereunder.
"Indexed Security" means a Security the terms of which provide that the
principal amount thereof payable at Stated Maturity may be more or less than the
principal face amount thereof at original issuance.
"Interest," with respect to any Original Issue Discount Security which by
its terms bears interest only after Maturity, means interest payable after
Maturity and, when used with respect to a Security which provides for the
payment of Additional Amounts pursuant to Section 10.4 or 17.2, includes such
Additional Amounts.
"Interest Payment Date," with respect to any Security, means the Stated
Maturity of an installment of interest on such Security.
"Investment Company Event" means, in respect of an ACE Trust, the receipt
by such ACE Trust of an Opinion of Counsel, rendered by a law firm experienced
in such matters, to the effect that, as a result of the occurrence of a change
in law or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), such ACE Trust is or will be considered
an investment company that is required to be registered under the 1940 Act,
which Change in 1940 Act Law becomes effective on or after the date of original
issuance of the Preferred Securities of such ACE Trust.
"Judgment Currency" has the meaning specified in Section 1.16.
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"Lien" means any mortgage, pledge, lien, security interest or other
encumbrance.
"Maturity," with respect to any Security, means the date on which the
principal of such Security or an installment of principal becomes due and
payable as provided in or pursuant to this Indenture, whether at the Stated
Maturity or by declaration of acceleration, notice of redemption or repurchase,
notice of option to elect repayment or otherwise, and includes the Redemption
Date.
"New York Banking Day" has the meaning specified in Section 1.16.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Office" or "Agency," with respect to any Securities, means an office or
agency of the Company and the Guarantor maintained or designated in a Place of
Payment for such Securities pursuant to Section 10.2 or any other office or
agency of the Company and the Guarantor maintained or designated for such
Securities pursuant to Section 10.2 or, to the extent designated or required by
Section 10.2 in lieu of such office or agency, the Corporate Trust Office of the
Trustee.
"Officer's Certificate" means a certificate signed by the Chairman of the
Board of Directors, a Vice Chairman, the President, a Vice President, the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
the Company, that complies with the requirements of Section 314(e) of the Trust
Indenture Act and is delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of or counsel for the Company or the Guarantor, as the case may be, or
other counsel who shall be reasonably acceptable to the Trustee, that, if
required by the Trust Indenture Act, complies with the requirements of Section
314(e) of the Trust Indenture Act.
"Original Issue Discount Security" means a Security issued pursuant to this
Indenture which provides for declaration of an amount less than the principal
face amount thereof to be due and payable upon acceleration pursuant to Section
5.2.
"Outstanding," when used with respect to any Securities, means, as of the
date of determination, all such Securities theretofore authenticated and
delivered under this Indenture, except:
(a) any such Security theretofore cancelled by the Trustee or the
Security Registrar or delivered to the Trustee or the Security
Registrar for cancellation;
(b) any such Security for whose payment at the Maturity thereof money
in the necessary amount has been theretofore deposited pursuant
hereto (other than pursuant to Section 4.2) with the Trustee or
any Paying Agent (other than the Company or the Guarantor) in
trust or set aside and segregated in
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trust by the Company or the Guarantor (if the Company shall act
as its own, or authorize the Guarantor to act as, Paying Agent)
for the Holders of such Securities and any Coupons appertaining
thereto, provided that, if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has
been made;
(c) any such Security with respect to which the Company or the
Guarantor has effected defeasance pursuant to the terms hereof,
except to the extent provided in Section 4.2;
(d) any such Security which has been paid pursuant to Section 3.6 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, unless
there shall have been presented to the Trustee proof satisfactory
to it that such Security is held by a bona fide purchaser in
whose hands such Security is a valid obligation of the Company;
and
(e) any such Security converted or exchanged as contemplated by this
Indenture into securities of the Company or the Guarantor or
another issuer, if the terms of such Security provide for such
conversion or exchange pursuant to Section 3.1;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or are present at
a meeting of Holders of Securities for quorum purposes, (i) the principal amount
of an Original Issue Discount Security that may be counted in making such
determination and that shall be deemed to be Outstanding for such purposes shall
be equal to the amount of the principal thereof that pursuant to the terms of
such Original Issue Discount Security would be declared (or shall have been
declared to be) due and payable upon a declaration of acceleration thereof
pursuant to Section 5.2 at the time of such determination, and (ii) the
principal amount of any Indexed Security that may be counted in making such
determination and that shall be deemed Outstanding for such purposes shall be
equal to the principal face amount of such Indexed Security at original
issuance, unless otherwise provided in or pursuant to this Indenture, and (iii)
the principal amount of a Security denominated in a Foreign Currency shall be
the Dollar equivalent, determined on the date of original issuance of such
Security, of the principal amount (or, in the case of an Original Issue Discount
Security, the Dollar equivalent on the date of original issuance of such
Security of the amount determined as provided in (i) above) of such Security,
and (iv) Securities owned by the Company, the Guarantor or any other obligor
upon the Securities or any Affiliate of the Company, the Guarantor or such other
obligor, shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in making any such
determination or relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which a Responsible
Officer of the Trustee actually knows to be so owned shall be so
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<PAGE>
disregarded. Securities so owned which shall have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee (A) the pledgee's right so to act with respect to such Securities and
(B) that the pledgee is not the Company, the Guarantor or any other obligor upon
the Securities or any Coupons appertaining thereto or an Affiliate of the
Company, the Guarantor or such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of, or any premium or interest on, or any Additional Amounts with
respect to, any Security or any Coupon on behalf of the Company.
"Person" means any individual, Corporation, partnership, joint venture,
joint-stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Place of Payment," with respect to any Security, means the place or places
where the principal of, or any premium or interest on, or any Additional Amounts
with respect to such Security are payable as provided in or pursuant to this
Indenture or such Security.
"Preferred Securities" has the meaning specified in the first recital of
this Indenture.
"Preferred Securities Guarantee" means the guarantee by ACE INA Holdings
Inc., in its capacity as guarantor with respect to the Preferred Securities of
an ACE Trust, of distributions on such Preferred Securities to the extent
provided in the Guarantee Agreement.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same Indebtedness as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.6 in exchange for or in
lieu of a lost, destroyed, mutilated or stolen Security or any Security to which
a mutilated, destroyed, lost or stolen Coupon appertains shall be deemed to
evidence the same Indebtedness as the lost, destroyed, mutilated or stolen
Security or the Security to which a mutilated, destroyed, lost or stolen Coupon
appertains.
"Preferred Stock" in respect of any Corporation means Capital Stock of any
class or classes (however designated) which 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 Corporation, over shares of Capital Stock of
any other class of such Corporation.
"Property Trustee," with respect to any ACE Trust, means the entity acting
in the capacity of Property Trustee pursuant to the related Trust Agreement.
"Redemption Date," with respect to any Security or portion thereof to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture or such Security.
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"Redemption Price," with respect to any Security or portion thereof to be
redeemed, means the price at which it is to be redeemed as determined by or
pursuant to this Indenture or such Security.
"Registered Security" means any Security established pursuant to Section
2.1 which is registered in a Security Register.
"Regular Record Date" for the interest payable on any Registered Security
on any Interest Payment Date therefor means the date, if any, specified in or
pursuant to this Indenture or such Security as the "Regular Record Date".
"Required Currency" has the meaning specified in Section 1.16.
"Responsible Officer" means any vice president, any assistant vice
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, or any 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 means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Security" or "Securities" means any note or notes, bond or bonds,
debenture or debentures, or any other evidences of Indebtedness, as the case may
be, authenticated and delivered under this Indenture; provided, however, that,
if at any time there is more than one Person acting as Trustee under this
Indenture, "Securities," with respect to any such Person, shall mean Securities
authenticated and delivered under this Indenture, exclusive, however, of
Securities of any series as to which such Person is not Trustee.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 3.5.
"Senior Indebtedness," with respect to the Securities of any particular
series, means, collectively, Company Senior Indebtedness with respect to the
Securities of such series and Guarantor Senior Indebtedness with respect to the
Securities of such series.
"Special Event" means an Investment Company Event or a Tax Event.
"Special Record Date" for the payment of any Defaulted Interest on any
Registered Security means a date fixed by the Company pursuant to Section 3.7.
"Stated Maturity," with respect to any Security or any installment of
principal thereof or interest thereon or any Additional Amounts with respect
thereto, means the date established by or pursuant to this Indenture or such
Security as the fixed date on which the principal of such Security or such
installment of principal or interest is, or such Additional Amounts are, due and
payable.
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"Subsidiary" means, in respect of any Person, any Corporation, limited or
general partnership or other business entity of which at the time of
determination more than 50% of the voting power of the shares of its 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 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.
"Tax Event " means, in respect of an ACE Trust, the receipt by such ACE
Trust or the Company of an Opinion of Counsel experienced in such matters to the
effect that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein, or
as a result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of original issuance of the Preferred Securities of such ACE Trust, there is
more than an insubstantial risk that (i) such ACE Trust is, or will be within 90
days of the date of such Opinion of Counsel, subject to United States Federal
income tax with respect to income received or accrued on the corresponding
series of Securities, (ii) interest payable by the Company on the corresponding
series of Securities is not, or within 90 days of the date of such Opinion of
Counsel will not be, deductible by the Company, in whole or in part, for United
States Federal income tax purposes or (iii) such ACE Trust is, or will be within
90 days of the date of such Opinion of Counsel, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.
"Trust Agreement" means the Trust Agreement substantially in the form
attached hereto as Annex A, as amended by an Amended and Restated Trust
Agreement substantially in such form as may be specified as contemplated by
Section 3.1 with respect to the Securities of any series, in each case as
amended from time to time.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended,
and any reference herein to the Trust Indenture Act or a particular provision
thereof shall mean such Act or provision, as the case may be, as amended or
replaced from time to time or as supplemented from time to time by rules or
regulations adopted by the Commission under or in furtherance of the purposes of
such Act or provision, as the case may be.
"Trust Securities," with respect to any ACE Trust, means, collectively, the
Common Securities and Preferred Securities issued by such ACE Trust.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such with respect to
one or more series of Securities pursuant to the applicable provisions of this
Indenture, and thereafter "Trustee" shall mean each Person who is then a Trustee
hereunder; provided, however, that if at any time there is more than one such
Person, "Trustee" shall mean each such Person and as used with respect to the
Securities of any series shall mean the Trustee with respect to the Securities
of such series.
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"United States," except as otherwise provided in or pursuant to this
Indenture or any Security, means the United States of America (including the
states thereof and the District of Columbia), its territories and possessions
and other areas subject to its jurisdiction.
"United States Alien," except as otherwise provided in or pursuant to this
Indenture or any Security, means any Person who, for United States Federal
income tax purposes, is a foreign corporation, a non-resident alien individual,
a non-resident alien fiduciary of a foreign estate or trust, or a foreign
partnership one or more of the members of which is, for United States Federal
income tax purposes, a foreign corporation, a non-resident alien individual or a
non-resident alien fiduciary of a foreign estate or trust.
"U.S. Depository" or "Depository" means, with respect to any Security
issuable or issued in the form of one or more global Securities, the Person
designated as U.S. Depository or Depository by the Company in or pursuant to
this Indenture, which Person must be, to the extent required by applicable law
or regulation, a clearing agency registered under the Securities Exchange Act of
1934, as amended, and, if so provided with respect to any Security, any
successor to such Person. If at any time there is more than one such Person,
"U.S. Depository" or "Depository" shall mean, with respect to any Securities,
the qualifying entity which has been appointed with respect to such Securities.
"Vice President," when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "Vice President".
Section 1.2. Compliance Certificates and Opinions.
Except as otherwise expressly provided in this Indenture, upon any
application or request by the Company or the Guarantor to the Trustee to take
any action under any provision of this Indenture, the Company or the Guarantor,
as the case may be, shall furnish to the Trustee an Officer's Certificate or a
Guarantor's Officer's Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents or any of them is specifically required by any provision of
this Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that the individual signing such certificate or
opinion has read such condition or covenant and the definitions herein
relating thereto;
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(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 condition or covenant
has been complied with; and
(4) a statement as to whether, in the opinion of such individual,
such condition or covenant has been complied with.
Section 1.3. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company or the Guarantor
may be based, insofar as it relates to legal matters, upon an Opinion of
Counsel, provided that such officer, after reasonable inquiry, has no reason to
believe and does not believe that the Opinion of Counsel with respect to the
matters upon which his certificate or opinion is based is erroneous. Any such
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Company or the Guarantor, as the case may be, stating that the information
with respect to such factual matters is in the possession of the Company or the
Guarantor, as the case may be, provided that such counsel, after reasonable
inquiry, has no reason to believe and does not believe that the certificate or
opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture or any Security, they may, but need not, be
consolidated and form one instrument.
Section 1.4. Acts of Holders.
(1) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by or pursuant to this Indenture
to be given or taken by Holders or by holders of Preferred Securities may
be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders or holders of Preferred Securities, as
applicable, in person or by an agent duly appointed in writing. If, but
only if, Securities of a series are issuable as Bearer Securities, any
request, demand, authorization, direction, notice, consent, waiver or other
action provided in or pursuant to this Indenture to be given or taken by
Holders of Securities of such series may,
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alternatively, be embodied in and evidenced by the record of Holders of
Securities of such series voting in favor thereof, either in person or by
proxies duly appointed in writing, at any meeting of Holders of Securities
of such series duly called and held in accordance with the provisions of
Article 15, or a combination of such instruments and any such record.
Except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments or record or both are
delivered to the Trustee and, where it is hereby expressly required, to the
Company or the Guarantor or both of them. Such instrument or instruments
and any such record (and the action embodied therein and evidenced thereby)
are herein sometimes referred to as the "Act" of the Holders or holders of
Preferred Securities signing such instrument or instruments or so voting at
any such meeting. Proof of execution of any such instrument or of a writing
appointing any such agent, or of the holding by any Person of a Security,
shall be sufficient for any purpose of this Indenture and (subject to
Section 315 of the Trust Indenture Act) conclusive in favor of the Trustee,
the Company and the Guarantor and any agent of the Trustee, the Company or
the Guarantor, if made in the manner provided in this Section. The record
of any meeting of Holders of Securities shall be proved in the manner
provided in Section 15.6.
Without limiting the generality of this Section 1.4, unless otherwise
provided in or pursuant to this Indenture, a Holder, including a U.S.
Depository that is a Holder of a global Security, may make, give or take,
by a proxy or proxies, duly appointed in writing, any request, demand,
authorization, direction, notice, consent, waiver or other Act provided in
or pursuant to this Indenture to be made, given or taken by Holders, and a
U.S. Depository that is a Holder of a global Security may provide its proxy
or proxies to the beneficial owners of interests in any such global
Security through such U.S. Depository's standing instructions and customary
practices.
The Company shall fix a record date for the purpose of determining the
Persons who are beneficial owners of interest in any permanent global
Security held by a U.S. Depository entitled under the procedures of such
U.S. Depository to make, give or take, by a proxy or proxies duly appointed
in writing, any request, demand, authorization, direction, notice, consent,
waiver or other Act provided in or pursuant to this Indenture to be made,
given or taken by Holders. If such a record date is fixed, the Holders on
such record date or their duly appointed proxy or proxies, and only such
Persons, shall be entitled to make, give or take such request, demand,
authorization, direction, notice, consent, waiver or other Act, whether or
not such Holders remain Holders after such record date. No such request,
demand, authorization, direction, notice, consent, waiver or other Act
shall be valid or effective if made, given or taken more than 90 days
after such record date.
(2) The fact and date of the execution by any Person of any such
instrument or writing referred to in this Section 1.4 may be proved in any
reasonable manner; and the Trustee may in any instance require further
proof with respect to any of the matters referred to in this Section.
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(3) The ownership, principal amount and serial numbers of Registered
Securities held by any Person, and the date of the commencement and the
date of the termination of holding the same, shall be proved by the
Security Register.
(4) The ownership, principal amount and serial numbers of Bearer
Securities held by any Person, and the date of the commencement and the
date of the termination of holding the same, may be proved by the
production of such Bearer Securities or by a certificate executed, as
depositary, by any trust company, bank, banker or other depositary
reasonably acceptable to the Company and the Guarantor, wherever situated,
if such certificate shall be deemed by the Company, the Guarantor and the
Trustee to be satisfactory, showing that at the date therein mentioned such
Person had on deposit with such depositary, or exhibited to it, the Bearer
Securities therein described; or such facts may be proved by the
certificate or affidavit of the Person holding such Bearer Securities, if
such certificate or affidavit is deemed by the Trustee to be satisfactory.
The Trustee, the Company and the Guarantor may assume that such ownership
of any Bearer Security continues until (i) another certificate or affidavit
bearing a later date issued in respect of the same Bearer Security is
produced, or (ii) such Bearer Security is produced to the Trustee by some
other Person, or (iii) such Bearer Security is surrendered in exchange for
a Registered Security, or (iv) such Bearer Security is no longer
Outstanding. The ownership, principal amount and serial numbers of Bearer
Securities held by the Person so executing such instrument or writing and
the date of the commencement and the date of the termination of holding the
same may also be proved in any other manner which the Company, the
Guarantor and the Trustee deem sufficient.
(5) If the Company or the Guarantor shall solicit from the Holders of
any Registered Securities any request, demand, authorization, direction,
notice, consent, waiver or other Act, the Company or the Guarantor, as the
case may be, may at its option (but is not obligated to), by Board
Resolution or Guarantor's Board Resolution, as the case may be, fix in
advance a record date for the determination of Holders of Registered
Securities entitled to give such request, demand, authorization, direction,
notice, consent, waiver or other Act. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent, waiver or other
Act may be given before or after such record date, but only the Holders of
Registered Securities of record at the close of business on such record
date shall be deemed to be Holders for the purpose of determining whether
Holders of the requisite proportion of Outstanding Securities have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for that purpose the
Outstanding Securities shall be computed as of such record date; provided
that no such authorization, agreement or consent by the Holders of
Registered Securities shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than six
months after the record date.
(6) Any request, demand, authorization, direction, notice, consent,
waiver or other Act by the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof
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or in exchange therefor or in lieu thereof in respect of anything done or
suffered to be done by the Trustee, any Security Registrar, any Paying
Agent, the Guarantor or the Company in reliance thereon, whether or not
notation of such Act is made upon such Security.
Section 1.5. Notices, etc. to Trustee, Company and Guarantor.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of Holders or other document provided or permitted by this Indenture
to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder, the Guarantor or the Company shall
be sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office, or
(2) the Company or the Guarantor, as the case may be, by the
Trustee or any Holder shall be sufficient for every purpose hereunder
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to the Company or the Guarantor, as the case
may be, addressed to the attention of its Treasurer, with a copy to the
attention of its General Counsel, at the address of its principal office
specified in the first paragraph of this instrument or at any other address
previously furnished in writing to the Trustee by the Company or the
Guarantor, as the case may be.
Section 1.6. Notice to Holders of Securities; Waiver.
Except as otherwise expressly provided in or pursuant to this Indenture,
where this Indenture provides for notice to Holders of Securities of any event,
(1) such notice shall be sufficiently given to Holders of
Registered Securities if in writing and mailed, first-class postage
prepaid, to each Holder of a Registered Security affected by such event, at
his address as it appears in the Security Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the
giving of such notice; and
(2) such notice shall be sufficiently given to Holders of Bearer
Securities, if any, if published in an Authorized Newspaper in The City of
New York and, if such Securities are then listed on any stock exchange
outside the United States, in an Authorized Newspaper in such city as the
Company shall advise the Trustee that such stock exchange so requires, on a
Business Day at least twice, the first such publication to be not earlier
than the earliest date and the second such publication not later than the
latest date prescribed for the giving of such notice.
In any case where notice to Holders of Registered Securities is given by
mail, neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder of a Registered Security shall affect the
sufficiency of such notice with respect to other Holders of
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Registered Securities or the sufficiency of any notice to Holders of Bearer
Securities given as provided herein. Any notice which is mailed in the manner
herein provided shall be conclusively presumed to have been duly given or
provided. In the case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
In case by reason of the suspension of publication of any Authorized
Newspaper or Authorized Newspapers or by reason of any other cause it shall be
impracticable to publish any notice to Holders of Bearers Securities as provided
above, then such notification to Holders of Bearer Securities as shall be given
with the approval of the Trustee shall constitute sufficient notice to such
Holders for every purpose hereunder. Neither failure to give notice by
publication to Holders of Bearer Securities as provided above, nor any defect in
any notice so published, shall affect the sufficiency of any notice mailed to
Holders of Registered Securities as provided above.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders of Securities shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
Section 1.7. Language of Notices.
Any request, demand, authorization, direction, notice, consent, election or
waiver required or permitted under this Indenture shall be in the English
language, except that, if the Company or the Guarantor, as the case may be, so
elects, any published notice may be in an official language of the country of
publication.
Section 1.8. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with any duties
under any required provision of the Trust Indenture Act imposed hereon by
Section 318(c) thereof, such required provision shall control.
Section 1.9. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 1.10. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not. All covenants and
agreements in this Indenture by the Guarantor shall bind its successors and
assigns, whether so expressed or not.
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Section 1.11. Separability Clause.
In case any provision in this Indenture, any Security or any Coupon shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 1.12. Holders of Preferred Securities as Third Party
Beneficiaries.
The Company and the Guarantor hereby acknowledge that, to the extent
specifically set forth herein, the holders of the Preferred Securities of an ACE
Trust shall expressly be third party beneficiaries of this Indenture. The
Company and the Guarantor further acknowledge that, if an Event of Default has
occurred and is continuing and is attributable to the failure of the Company and
the Guarantor to pay the principal of or premium, if any, or interest on or
Additional Amounts with respect to the Securities of the series held by such ACE
Trust, any holder of the Preferred Securities of such ACE Trust may institute a
Direct Action against the Company or the Guarantor.
Section 1.13. Benefits of Indenture.
Except as other expressly provided herein with respect to holders of
Preferred Securities, nothing in this Indenture, any Security or any Coupon,
express or implied, shall give to any Person, other than the parties hereto and
the holders of Senior Indebtedness, any Security Registrar, any Paying Agent,
any Authenticating Agent and their successors hereunder and the Holders of
Securities or Coupons, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
Section 1.14. Governing Law.
This Indenture, the Securities and any Coupons shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made or instruments entered into and, in each case, performed in said
state.
Section 1.15. Legal Holidays.
Unless otherwise specified in or pursuant to this Indenture or any
Securities, in any case where any Interest Payment Date, Stated Maturity or
Maturity of any Security, or the last date on which a Holder has the right to
convert or exchange Securities of a series that are convertible or exchangeable,
shall not be a Business Day at any Place of Payment, then (notwithstanding any
other provision of this Indenture, any Security or any Coupon other than a
provision in any Security or Coupon that specifically states that such provision
shall apply in lieu hereof) payment need not be made at such Place of Payment on
such date, and such Securities need not be converted or exchanged on such date,
but such payment may be made, and such Securities may be converted or exchanged,
on the next succeeding day that is a Business Day at such Place of Payment, and
no interest shall accrue on the amount payable on such date or at such time for
the period from and after such Interest Payment Date, Stated Maturity, Maturity
or last day for
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conversion or exchange, as the case may be, to such next succeeding Business
Day, except that if such next succeeding Business Day is in the next succeeding
calendar year, such payment may be made, and such Securities may be converted or
exchanged, on the immediately preceding Business Day (in the case of each of the
foregoing, with the same force and effect as if made on such Interest Payment
Date or at such Stated Maturity or Maturity or on such last day for conversion
or exchange, as the case may be).
Section 1.16. Counterparts.
This Indenture may be executed in several counterparts, each of which shall
be an original and all of which shall constitute but one and the same
instrument.
Section 1.17. Judgment Currency.
The Company and the Guarantor each agrees, to the fullest extent that it
may effectively do so under applicable law, that (a) if for the purpose of
obtaining judgment in any court it is necessary to convert the sum due in
respect of the principal of, or premium or interest, if any, or Additional
Amounts on the Securities of any series (the "Required Currency") into a
currency in which a judgment will be rendered (the "Judgment Currency"), the
rate of exchange used shall be the rate at which in accordance with normal
banking procedures the Trustee could purchase in The City of New York the
requisite amount of the Required Currency with the Judgment Currency on the New
York Banking Day preceding the day on which a final unappealable judgment is
given and (b) its obligations under this Indenture to make payments in the
Required Currency (i) shall not be discharged or satisfied by any tender, or any
recovery pursuant to any judgment (whether or not entered in accordance with
clause (a)), in any currency other than the Required Currency, except to the
extent that such tender or recovery shall result in the actual receipt, by the
payee, of the full amount of the Required Currency expressed to be payable in
respect of such payments, (ii) shall be enforceable as an alternative or
additional cause of action for the purpose of recovering in the Required
Currency the amount, if any, by which such actual receipt shall fall short of
the full amount of the Required Currency so expressed to be payable and (iii)
shall not be affected by judgment being obtained for any other sum due under
this Indenture. For purposes of the foregoing, "New York Banking Day" means any
day except a Saturday, Sunday or a legal holiday in The City of New York or a
day on which banking institutions in The City of New York are authorized or
obligated by law, regulation or executive order to be closed.
Section 1.18. No Security Interest Created.
Nothing in this Indenture or in any Securities, express or implied, shall
be construed to constitute a security interest under the Uniform Commercial Code
or similar legislation, as now or hereafter enacted and in effect in any
jurisdiction where property of the Company, the Guarantor or their respective
Subsidiaries is or may be located.
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Section 1.19. Limitation on Individual Liability.
No recourse under or upon any obligation, covenant or agreement contained
in this Indenture or in any Security, or for any claim based thereon or
otherwise in respect thereof, shall be had against any incorporator, shareholder
(except in a shareholder's corporate capacity as Guarantor), officer or
director, as such, past, present or future, of the Company or the Guarantor, as
the case may be, either directly or through the Company or the Guarantor, as the
case may be, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the obligations issued hereunder are solely
corporate obligations, and that no such personal liability whatever shall attach
to, or is or shall be incurred by, the incorporators, shareholders, officers or
directors, as such, of the Company or the Guarantor, as the case may be, or any
of them, because of the creation of the indebtedness hereby authorized, or under
or by reason of the obligations, covenants or agreements contained in this
Indenture or in any Security or implied therefrom; and that any and all such
personal liability of every name and nature, either at common law or in equity
or by constitution or statute, of, and any and all such rights and claims
against, every such incorporator, shareholder, officer or director, as such,
because of the creation of the indebtedness hereby authorized, or under or by
reason of the obligations, covenants or agreements contained in this Indenture
or in any Security or implied therefrom, are hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture and the issuance of such Security.
Section 1.20. Submission to Jurisdiction.
The Company and the Guarantor each agrees that any judicial proceedings
instituted in relation to any matter arising under this Indenture, the
Securities or any Coupons appertaining thereto may be brought in any United
States Federal or New York State court sitting in the Borough of Manhattan, The
City of New York, New York to the extent that such court has subject matter
jurisdiction over the controversy, and, by execution and delivery of this
Indenture, the Company and the Guarantor each hereby irrevocably accepts,
generally and unconditionally, the jurisdiction of the aforesaid courts,
acknowledges their competence and irrevocably agrees to be bound by any
judgement rendered in such proceeding. The Company and the Guarantor each also
irrevocably and unconditionally waives for the benefit of the Trustee and the
Holders of the Securities and Coupons any immunity from jurisdiction and any
immunity from legal process (whether through service or notice, attachment prior
to judgement, attachment in the aid of execution, execution or otherwise) in
respect of this Indenture. The Company and the Guarantor each hereby irrevocably
designates and appoints for the benefit of the Trustee and the Holders of the
Securities and Coupons for the term of this Indenture ACE USA, Inc., 1133 Avenue
of the Americas, 32/nd/ Floor, New York, New York 10036, as its agent to receive
on its behalf service of all process (with a copy of all such service of process
to be delivered to Peter N. Mear, General Counsel and Secretary, ACE Limited,
The ACE Building, 30 Woodbourne Avenue, Hamilton, HM 08, Bermuda) brought
against it with respect to any such proceeding in any such court in The City of
New York, such service being hereby acknowledged by each of the Company and the
Guarantor to be effective and binding service on it in every respect whether or
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not the Company or the Guarantor, as the case may be, shall then be doing or
shall have at any time done business in New York. Such appointment shall be
irrevocable so long as any of the Securities or Coupons or the respective
obligations of the Company and the Guarantor hereunder remain outstanding, or
until the appointment of a successor by the Company or the Guarantor, as the
case may be, and such successor's acceptance of such appointment. Upon such
acceptance, the Company or the Guarantor, as the case may be, shall notify the
Trustee of the name and address of such successor. The Company and the Guarantor
each further agrees for the benefit of the Trustee and the Holders of the
Securities and the Coupons to take any and all action, including the execution
and filing of any and all such documents and instruments, as may be necessary to
continue such designation and appointment of said ACE USA, Inc. in full force
and effect so long as any of the Securities or Coupons or the respective
obligations of the Company and the Guarantor hereunder shall be outstanding. The
Trustee shall not be obligated and shall have no responsibility with respect to
any failure by the Company or the Guarantor to take any such action. Nothing
herein shall affect the right to serve process in any other manner permitted by
any law or limit the right of the Trustee or any Holder to institute proceedings
against the Company or the Guarantor in the courts of any other jurisdiction or
jurisdictions.
ARTICLE 2
Securities Forms
Section 2.1. Forms Generally.
Each Registered Security, Bearer Security, Coupon and temporary or
permanent global Security issued pursuant to this Indenture shall be in the form
established by or pursuant to a Board Resolution or in one or more indentures
supplemental hereto, shall have such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by or pursuant
to this Indenture or any indenture supplemental hereto and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Security or Coupon as evidenced by their execution of
such Security or Coupon.
Unless otherwise provided in or pursuant to this Indenture or any
Securities, the Securities shall be issuable in registered form without Coupons
and shall not be issuable upon the exercise of warrants.
Definitive Securities and definitive Coupons shall be printed, lithographed
or engraved or produced by any combination of these methods on a steel engraved
border or steel engraved borders or may be produced in any other manner, all as
determined by the officers of the Company executing such Securities or Coupons,
as evidenced by their execution of such Securities or Coupons.
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Section 2.2. Form of Trustee's Certificate of Authentication.
Subject to Section 6.11, the Trustee's certificate of authentication shall
be in substantially the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By ______________________________________________
Authorized Officer
Section 2.3. Securities in Global Form.
Unless otherwise provided in or pursuant to this Indenture or any
Securities, the Securities shall not be issuable in temporary or permanent
global form. If Securities of a series shall be issuable in global form, any
such Security may provide that it or any number of such Securities shall
represent the aggregate amount of all Outstanding Securities of such series (or
such lesser amount as is permitted by the terms thereof) from time to time
endorsed thereon and may also provide that the aggregate amount of Outstanding
Securities represented thereby may from time to time be increased or reduced to
reflect exchanges. Any endorsement of any Security in global form to reflect
the amount, or any increase or decrease in the amount, or changes in the rights
of Holders, of Outstanding Securities represented thereby shall be made in such
manner and by such Person or Persons as shall be specified therein or in the
Company Order to be delivered pursuant to Section 3.3 or 3.4 with respect
thereto. Subject to the provisions of Section 3.3 and, if applicable, Section
3.4, the Trustee shall deliver and redeliver, in each case at the Company's
expense, any Security in permanent global form in the manner and upon
instructions given by the Person or Persons specified therein or in the
applicable Company Order. If a Company Order pursuant to Section 3.3 or 3.4 has
been, or simultaneously is, delivered, any instructions by the Company with
respect to a Security in global form shall be in writing but need not be
accompanied by or contained in an Officer's Certificate and need not be
accompanied by an Opinion of Counsel.
Notwithstanding the provisions of Section 3.7, unless otherwise specified
in or pursuant to this Indenture or any Securities, payment of principal of, any
premium and interest on, and any Additional Amounts in respect of, any Security
in temporary or permanent global form shall be made to the Person or Persons
specified therein.
Notwithstanding the provisions of Section 3.8 and except as provided in the
preceding paragraph, the Company, the Guarantor, the Trustee and any agent of
the Company, the Guarantor or the Trustee shall treat as the Holder of such
principal amount of Outstanding Securities represented by a global Security (i)
in the case of a global Security in registered form,
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the Holder of such global Security in registered form, or (ii) in the case of a
global Security in bearer form, the Person or Persons specified pursuant to
Section 3.1.
ARTICLE 3
The Securities
Section 3.1. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited. The Securities may be issued in one
or more series. The Securities of each series shall be subordinated in right of
payment to all Company Senior Indebtedness with respect to such series as
provided in Article 16. The Securities of each series shall be guaranteed by
the Guarantor, which Guarantee shall be subordinated in right of payment to all
Guarantor Senior Indebtedness with respect to such series as provided in Article
18.
With respect to any Securities to be authenticated and delivered hereunder,
there shall be established in or pursuant to a Board Resolution and set forth in
an Officer's Certificate, or established in one or more indentures supplemental
hereto,
(1) the title of such Securities and the series in which such
Securities shall be included;
(2) any limit upon the aggregate principal amount of the Securities
of such title or the Securities of such series which may be authenticated
and delivered under this Indenture (except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Securities of such series pursuant to Section 3.4, 3.5, 3.6, 9.5
or 11.7, upon repayment in part of any Registered Security of such series
pursuant to Article 13, upon surrender in part of any Registered Security
for conversion into other securities of the Company or exchange for
securities of the Guarantor or another issuer pursuant to its terms, or
pursuant to or as contemplated by the terms of such Securities);
(3) if such Securities are to be issuable as Registered Securities,
as Bearer Securities or alternatively as Bearer Securities and Registered
Securities, and whether the Bearer Securities are to be issuable with
Coupons, without Coupons or both, and any restrictions applicable to the
offer, sale or delivery of the Bearer Securities and the terms, if any,
upon which Bearer Securities may be exchanged for Registered Securities and
vice versa;
(4) if any of such Securities are to be issuable in global form, when
any of such Securities are to be issuable in global form and (i) whether
such Securities are to be issued in temporary or permanent global form or
both, (ii) whether beneficial owners of interests in any such global
Security may exchange such interests for Securities of the same series and
of like tenor and of any authorized form and denomination, and the
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circumstances under which any such exchanges may occur, if other than in
the manner specified in Section 3.5, and (iii) the name of the Depository
or the U.S. Depository, as the case may be, with respect to any such global
Security;
(5) if any of such Securities are to be issuable as Bearer Securities
or in global form, the date as of which any such Bearer Security or global
Security shall be dated (if other than the date of original issuance of the
first of such Securities to be issued);
(6) if any of such Securities are to be issuable as Bearer
Securities, whether interest in respect of any portion of a temporary
Bearer Security in global form payable in respect of an Interest Payment
Date therefor prior to the exchange, if any, of such temporary Bearer
Security for definitive Securities shall be paid to any clearing
organization with respect to the portion of such temporary Bearer Security
held for its account and, in such event, the terms and conditions
(including any certification requirements) upon which any such interest
payment received by a clearing organization will be credited to the Persons
entitled to interest payable on such Interest Payment Date;
(7) the date or dates, or the method or methods, if any, by which
such date or dates shall be determined, on which the principal of such
Securities is payable;
(8) the rate or rates at which such Securities shall bear interest,
if any, or the method or methods, if any, by which such rate or rates are
to be determined, the rate or rates and the extent to which Additional
Interest, if any, shall be payable in respect of such Securities, the date
or dates, if any, from which such interest shall accrue or the method or
methods, if any, by which such date or dates are to be determined, the
Interest Payment Dates, if any, on which such interest shall be payable and
the Regular Record Date, if any, for the interest payable on Registered
Securities on any Interest Payment Date, the right, pursuant to Section
3.11 hereof or as otherwise set forth therein, of the Company to defer or
extend an interest payment period and the duration of any such Extension
Period, including the maximum consecutive period during which interest
payment periods may be extended, whether and under what circumstances
Additional Amounts on such Securities or any of them shall be payable, the
notice, if any, to Holders regarding the determination of interest on a
floating rate Security and the manner of giving such notice, and the basis
upon which interest shall be calculated if other than that of a 360-day
year of twelve 30-day months;
(9) if in addition to or other than the Borough of Manhattan, The
City of New York, the place or places where the principal of, any premium
and interest on or any Additional Amounts with respect to such Securities
shall be payable, any of such Securities that are Registered Securities may
be surrendered for registration of transfer or exchange, any of such
Securities may be surrendered for conversion or exchange and notices or
demands to or upon the Company or the Guarantor in respect of such
Securities and this Indenture may be served, the extent to which, or the
manner in which, any interest payment or Additional Amounts on a global
Security on an Interest Payment
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Date, will be paid and the manner in which any principal of or premium, if
any, on any global Security will be paid;
(10) whether any of such Securities are to be redeemable at the option
of the Company and, if so, the date or dates on which, the period or
periods within which, the price or prices at which and the other terms and
conditions upon which such Securities may be redeemed, in whole or in part,
at the option of the Company;
(11) whether the Company is obligated to redeem or purchase any of
such Securities pursuant to any sinking fund or analogous provision or at
the option of any Holder thereof and, if so, the date or dates on which,
the period or periods within which, the price or prices at which and the
other terms and conditions upon which such Securities shall be redeemed or
purchased, in whole or in part, pursuant to such obligation, and any
provisions for the remarketing of such Securities so redeemed or purchased;
(12) the denominations in which any of such Securities that are
Registered Securities shall be issuable if other than denominations of
$1,000 and any integral multiple thereof, and the denominations in which
any of such Securities that are Bearer Securities shall be issuable if
other than the denomination of $5,000;
(13) whether the Securities of the series will be convertible into
other securities of the Company and/or exchangeable for securities of the
Guarantor or another issuer, and if so, the terms and conditions upon which
such Securities will be so convertible or exchangeable, and any deletions
from or modifications or additions to this Indenture to permit or to
facilitate the issuance of such convertible or exchangeable Securities or
the administration thereof;
(14) if other than the principal amount thereof, the portion of the
principal amount of any of such Securities that shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 5.2
or the method by which such portion is to be determined;
(15) if other than Dollars, the Foreign Currency in which payment of
the principal of, any premium or interest on or any Additional Amounts with
respect to any of such Securities shall be payable;
(16) if the principal of, any premium or interest on or any Additional
Amounts with respect to any of such Securities are to be payable, at the
election of the Company or a Holder thereof or otherwise, in Dollars or in
a Foreign Currency other than that in which such Securities are stated to
be payable, the date or dates on which, the period or periods within which,
and the other terms and conditions upon which, such election may be made,
and the time and manner of determining the exchange rate between the
Currency in which such Securities are stated to be payable and the Currency
in which such Securities or any of them are to be paid pursuant to such
election, and any deletions
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from or modifications of or additions to the terms of this Indenture to
provide for or to facilitate the issuance of Securities denominated or
payable, at the election of the Company or a Holder thereof or otherwise,
in a Foreign Currency;
(17) whether the amount of payments of principal of, any premium or
interest on or any Additional Amounts with respect to such Securities may
be determined with reference to an index, formula or other method or
methods (which index, formula or method or methods may be based, without
limitation, on one or more Currencies, commodities, equity securities,
equity indices or other indices), and, if so, the terms and conditions upon
which and the manner in which such amounts shall be determined and paid or
payable;
(18) the relative degree, if any, to which Securities of such series
and the Guarantee in respect thereof shall be senior to or be subordinated
to other series of Securities and the Guarantee in respect thereof or other
Indebtedness of the Company or the Guarantor, as the case may be, in right
of payment, whether such other series of Securities or other Indebtedness
is outstanding or not;
(19) any deletions from, modifications of or additions to the Events
of Default or covenants of the Company or the Guarantor with respect to any
of such Securities, whether or not such Events of Default or covenants are
consistent with the Events of Default or covenants set forth herein;
(20) whether either or both of Section 4.2(2) relating to defeasance
or Section 4.2(3) relating to covenant defeasance shall not be applicable
to the Securities of such series, or any covenants in addition to those
specified in Section 4.2(3) relating to the Securities of such series which
shall be subject to covenant defeasance, and any deletions from, or
modifications or additions to, the provisions of Article 4 in respect of
the Securities of such series;
(21) the form or forms of the Trust Agreement (if different from the
form attached hereto as Annex A), Amended and Restated Trust Agreement and
Guarantee Agreement;
(22) whether any of such Securities are to be issuable upon the
exercise of warrants, and the time, manner and place for such Securities to
be authenticated and delivered;
(23) if any of such Securities are to be issuable in global form and
are to be issuable in definitive form (whether upon original issue or upon
exchange of a temporary Security) only upon receipt of certain certificates
or other documents or satisfaction of other conditions, then the form and
terms of such certificates, documents or conditions;
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(24) if there is more than one Trustee, the identity of the Trustee
and, if not the Trustee, the identity of each Security Registrar, Paying
Agent or Authenticating Agent with respect to such Securities; and
(25) any other terms of such Securities and any other deletions from
or modifications or additions to this Indenture in respect of such
Securities.
All Securities of any one series and all Coupons, if any, appertaining to
Bearer Securities of such series shall be substantially identical except as to
Currency of payments due thereunder, denomination and the rate of interest
thereon, or method of determining the rate of interest, if any, Maturity, and
the date from which interest, if any, shall accrue and except as may otherwise
be provided by the Company in or pursuant to the Board Resolution and set forth
in the Officer's Certificate or in any indenture or indentures supplemental
hereto pertaining to such series of Securities. The terms of the Securities of
any series may provide, without limitation, that the Securities shall be
authenticated and delivered by the Trustee on original issue from time to time
upon written order of persons designated in the Officer's Certificate or
supplemental indenture and that such persons are authorized to determine,
consistent with such Officer's Certificate or any applicable supplemental
indenture, such terms and conditions of the Securities of such series as are
specified in such Officer's Certificate or supplemental indenture. All
Securities of any one series need not be issued at the same time and, unless
otherwise so provided, a series may be reopened for issuances of additional
Securities of such series or to establish additional terms of such series of
Securities.
If any of the terms of the Securities of any series shall be established by
action taken by or pursuant to a Board Resolution, the Board Resolution shall be
delivered to the Trustee at or prior to the delivery of the Officer's
Certificate setting forth the terms of such series.
Section 3.2. Currency; Denominations.
Unless otherwise provided in or pursuant to this Indenture, the principal
of, any premium and interest on and any Additional Amounts with respect to the
Securities shall be payable in Dollars. Unless otherwise provided in or
pursuant to this Indenture, Registered Securities denominated in Dollars shall
be issuable in registered form without Coupons in denominations of $1,000 and
any integral multiple thereof, and the Bearer Securities denominated in Dollars
shall be issuable in the denomination of $5,000. Securities not denominated in
Dollars shall be issuable in such denominations as are established with respect
to such Securities in or pursuant to this Indenture.
Section 3.3. Execution, Authentication, Delivery and Dating.
Securities shall be executed on behalf of the Company by its Chairman of
the Board, a Vice Chairman, its President, its Treasurer or a Vice President
under its corporate seal reproduced thereon and attested by its Secretary or one
of its Assistant Secretaries. Coupons shall be executed on behalf of the
Company by the Treasurer or any Assistant Treasurer of the
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Company. The signature of any of these officers on the Securities or any Coupons
appertaining thereto may be manual or facsimile.
Securities and any Coupons appertaining thereto bearing the manual or
facsimile signatures of individuals who were at any time the proper officers of
the Company shall bind the Company and the Guarantor, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Securities and Coupons or did not hold such
offices at the date of original issuance of such Securities or Coupons.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities, together with any Coupons
appertaining thereto, executed by the Company, to the Trustee for authentication
and, provided that the Board Resolution and Officer's Certificate or
supplemental indenture or indentures with respect to such Securities referred to
in Section 3.1 and a Company Order for the authentication and delivery of such
Securities have been delivered to the Trustee, the Trustee in accordance with
the Company Order and subject to the provisions hereof and of such Securities
shall authenticate and deliver such Securities. In authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities and any Coupons appertaining thereto, the Trustee
shall be entitled to receive, and (subject to Sections 315(a) through 315(d) of
the Trust Indenture Act) shall be fully protected in relying upon,
(1) an Opinion of Counsel to the effect that:
(a) the form or forms and terms of such Securities and Coupons, if
any, have been established in conformity with the provisions of this
Indenture;
(b) all conditions precedent to the authentication and delivery of
such Securities and Coupons, if any, appertaining thereto, have been
complied with and that such Securities and Coupons, when completed by
appropriate insertions, executed under the Company's corporate seal and
attested by duly authorized officers of the Company, delivered by duly
authorized officers of the Company to the Trustee for authentication
pursuant to this Indenture, and authenticated and delivered by the Trustee
and issued by the Company in the manner and subject to any conditions
specified in such Opinion of Counsel, will constitute legally valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as enforcement thereof may be subject
to or limited by bankruptcy, insolvency, reorganization, moratorium,
arrangement, fraudulent conveyance, fraudulent transfer or other similar
laws relating to or affecting creditors' rights generally, and subject to
general principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law) and will entitle the Holders thereof
to the benefits of this Indenture, including the Guarantee; such Opinion of
Counsel need express no opinion as to the availability of equitable
remedies; and
(c) all laws and requirements in respect of the execution and
delivery by the Company of such Securities and Coupons, if any, have been
complied with;
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and, to the extent that this Indenture is required to be qualified under the
Trust Indenture Act in connection with the issuance of such Securities, to the
further effect that:
(d) this Indenture has been qualified under the Trust Indenture Act;
and
(2) an Officer's Certificate and a Guarantor's Officer's Certificate, in
each case stating that, to the best knowledge of the Persons executing such
certificate, all conditions precedent to the execution, authentication and
delivery of such Securities and Coupons, if any, appertaining thereto, have been
complied with, and no event which is, or after notice or lapse of time would
become, an Event of Default with respect to any of the Securities shall have
occurred and be continuing.
If all the Securities of any series are not to be issued at one time, it
shall not be necessary to deliver an Opinion of Counsel and an Officer's
Certificate and Guarantor's Officer's Certificate at the time of issuance of
each Security, but such opinion and certificates, with appropriate
modifications, shall be delivered at or before the time of issuance of the first
Security of such series. After any such first delivery, any separate written
request by an Authorized Officer of the Company or any person designated in
writing by an Authorized Officer that the Trustee authenticate and deliver
Securities of such series for original issue will be deemed to be a
certification by the Company and the Guarantor that all conditions precedent
provided for in this Indenture relating to authentication and delivery of such
Securities continue to have been complied with and that no Event of Default with
respect to any of the Securities has occurred or is continuing.
The Trustee shall not be required to authenticate or to cause an
Authenticating Agent to authenticate any Securities if the issue of such
Securities pursuant to this Indenture will affect the Trustee's own rights,
duties or immunities under the Securities and this Indenture or otherwise in a
manner which is not reasonably acceptable to the Trustee or if the Trustee,
being advised by counsel, determines that such action may not lawfully be taken.
Each Registered Security shall be dated the date of its authentication.
Each Bearer Security and any Bearer Security in global form shall be dated as of
the date specified in or pursuant to this Indenture.
No Security or Coupon appertaining thereto shall be entitled to any benefit
under this Indenture or be valid or obligatory for any purpose, unless there
appears on such Security a certificate of authentication substantially in the
form provided for in Section 2.2 or 6.11 executed by or on behalf of the Trustee
or by the Authenticating Agent by the manual signature of one of its authorized
officers. Such certificate upon any Security shall be conclusive evidence, and
the only evidence, that such Security has been duly authenticated and delivered
hereunder. Except as permitted by Section 3.6 or 3.7, the Trustee shall not
authenticate and deliver any Bearer Security unless all Coupons appertaining
thereto then matured have been detached and cancelled.
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Section 3.4. Temporary Securities.
Pending the preparation of definitive Securities, the Company may execute
and deliver to the Trustee and, upon Company Order, the Trustee shall
authenticate and deliver, in the manner provided in Section 3.3, temporary
Securities in lieu thereof which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued, in registered form or, if authorized in or pursuant to this
Indenture, in bearer form with one or more Coupons or without Coupons and with
such appropriate insertions, omissions, substitutions and other variations as
the officers of the Company executing such Securities may determine, as
conclusively evidenced by their execution of such Securities. Such temporary
Securities may be in global form.
Except in the case of temporary Securities in global form, which shall be
exchanged in accordance with the provisions thereof, if temporary Securities are
issued, the Company shall cause definitive Securities to be prepared without
unreasonable delay. After the preparation of definitive Securities of the same
series and containing terms and provisions that are identical to those of any
temporary Securities, such temporary Securities shall be exchangeable for such
definitive Securities upon surrender of such temporary Securities at an Office
or Agency for such Securities, without charge to any Holder thereof. Upon
surrender for cancellation of any one or more temporary Securities (accompanied
by any unmatured Coupons appertaining thereto), the Company shall execute and
the Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Securities of authorized denominations of the same series
and containing identical terms and provisions; provided, however, that no
definitive Bearer Security, except as provided in or pursuant to this Indenture,
shall be delivered in exchange for a temporary Registered Security; and
provided, further, that a definitive Bearer Security shall be delivered in
exchange for a temporary Bearer Security only in compliance with the conditions
set forth in or pursuant to this Indenture. Unless otherwise provided in or
pursuant to this Indenture with respect to a temporary global Security, until so
exchanged the temporary Securities of any series shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities of
such series.
Section 3.5. Registration, Transfer and Exchange.
With respect to the Registered Securities of each series, if any, the
Company shall cause to be kept a register (each such register being herein
sometimes referred to as the "Security Register") at an Office or Agency for
such series in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of the Registered
Securities of such series and of transfers of the Registered Securities of such
series. Such Office or Agency shall be the "Security Registrar" for that series
of Securities. Unless otherwise specified in or pursuant to this Indenture or
the Securities, the Trustee shall be the initial Security Registrar for each
series of Securities. The Company shall have the right to remove and replace
from time to time the Security Registrar for any series of Securities; provided
that no such removal or replacement shall be effective until a successor
Security Registrar with respect to such series of Securities shall have been
appointed by the Company and shall have accepted such appointment
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by the Company. In the event that the Trustee shall not be or shall cease to be
Security Registrar with respect to a series of Securities, it shall have the
right to examine the Security Register for such series at all reasonable times.
There shall be only one Security Register for each series of Securities.
Upon surrender for registration of transfer of any Registered Security of
any series at any Office or Agency for such series, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Registered Securities of the same
series denominated as authorized in or pursuant to this Indenture, of a like
aggregate principal amount bearing a number not contemporaneously outstanding
and containing identical terms and provisions.
At the option of the Holder, Registered Securities of any series may be
exchanged for other Registered Securities of the same series containing
identical terms and provisions, in any authorized denominations, and of a like
aggregate principal amount, upon surrender of the Securities to be exchanged at
any Office or Agency for such series. Whenever any Registered Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Registered Securities which the Holder making the
exchange is entitled to receive.
If provided in or pursuant to this Indenture, with respect to Securities of
any series, at the option of the Holder, Bearer Securities of such series may be
exchanged for Registered Securities of such series containing identical terms,
denominated as authorized in or pursuant to this Indenture and in the same
aggregate principal amount, upon surrender of the Bearer Securities to be
exchanged at any Office or Agency for such series, with all unmatured Coupons
and all matured Coupons in default thereto appertaining. If the Holder of a
Bearer Security is unable to produce any such unmatured Coupon or Coupons or
matured Coupon or Coupons in default, such exchange may be effected if the
Bearer Securities are accompanied by payment in funds acceptable to the Company,
the Guarantor and the Trustee in an amount equal to the face amount of such
missing Coupon or Coupons, or the surrender of such missing Coupon or Coupons
may be waived by the Company, the Guarantor and the Trustee if there is
furnished to them such security or indemnity as they may require to save each of
them and any Paying Agent harmless. If thereafter the Holder of such Bearer
Security shall surrender to any Paying Agent any such missing Coupon in respect
of which such a payment shall have been made, such Holder shall be entitled to
receive the amount of such payment; provided, however, that, except as otherwise
provided in Section 10.2, interest represented by Coupons shall be payable only
upon presentation and surrender of those Coupons at an Office or Agency for such
series located outside the United States. Notwithstanding the foregoing, in
case a Bearer Security of any series is surrendered at any such Office or Agency
for such series in exchange for a Registered Security of such series and like
tenor after the close of business at such Office or Agency on (i) any Regular
Record Date and before the opening of business at such Office or Agency on the
next succeeding Interest Payment Date, or (ii) any Special Record Date and
before the opening of business at such Office or Agency on the related date for
payment of Defaulted Interest, such Bearer Security shall be surrendered without
the Coupon relating to such Interest Payment Date
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or proposed date of payment, as the case may be (or, if such Coupon is so
surrendered with such Bearer Security, such Coupon shall be returned to the
Person so surrendering the Bearer Security), and interest or Defaulted Interest,
as the case may be, shall not be payable on such Interest Payment Date or
proposed date for payment, as the case may be, in respect of the Registered
Security issued in exchange for such Bearer Security, but shall be payable only
to the Holder of such Coupon when due in accordance with the provisions of this
Indenture.
If provided in or pursuant to this Indenture with respect to Securities of
any series, at the option of the Holder, Registered Securities of such series
may be exchanged for Bearer Securities upon such terms and conditions as may be
provided in or pursuant to this Indenture with respect to such series.
Whenever any Securities are surrendered for exchange as contemplated by the
immediately preceding two paragraphs, the Company shall execute, and the Trustee
shall authenticate and deliver, the Securities which the Holder making the
exchange is entitled to receive.
Notwithstanding the foregoing, except as otherwise provided in or pursuant
to this Indenture, any global Security shall be exchangeable for definitive
Securities only if (i) the Depository is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not appointed
by the Company within 90 days of the date the Company is so informed in writing,
(ii) the Company executes and delivers to the Trustee a Company Order to the
effect that such global Security shall be so exchangeable, or (iii) an Event of
Default has occurred and is continuing with respect to the Securities. If the
beneficial owners of interests in a global Security are entitled to exchange
such interests for definitive Securities as the result of an event described in
clause (i), (ii) or (iii) of the preceding sentence, then without unnecessary
delay but in any event not later than the earliest date on which such interests
may be so exchanged, the Company shall deliver to the Trustee definitive
Securities in such form and denominations as are required by or pursuant to this
Indenture, and of the same series, containing identical terms and in aggregate
principal amount equal to the principal amount of such global Security, executed
by the Company. On or after the earliest date on which such interests may be so
exchanged, such global Security shall be surrendered from time to time by the
U.S. Depository or such other Depository as shall be specified in the Company
Order with respect thereto, and in accordance with instructions given to the
Trustee and the U.S. Depository or such other Depository, as the case may be
(which instructions shall be in writing but need not be contained in or
accompanied by an Officer's Certificate or be accompanied by an Opinion of
Counsel), as shall be specified in the Company Order with respect thereto to the
Trustee, as the Company's agent for such purpose, to be exchanged, in whole or
in part, for definitive Securities as described above without charge. The
Trustee shall authenticate and make available for delivery, in exchange for each
portion of such surrendered global Security, a like aggregate principal amount
of definitive Securities of the same series of authorized denominations and of
like tenor as the portion of such global Security to be exchanged, which (unless
such Securities are not issuable both as Bearer Securities and as Registered
Securities, in which case the definitive Securities exchanged for the global
Security shall be issuable only in the form in
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which the Securities are issuable, as provided in or pursuant to this Indenture)
shall be in the form of Bearer Securities or Registered Securities, or any
combination thereof, as shall be specified by the beneficial owner thereof, but
subject to the satisfaction of any certification or other requirements to the
issuance of Bearer Securities; provided, however, that no such exchanges may
occur during a period beginning at the opening of business 15 days before any
selection of Securities of the same series to be redeemed and ending on the
relevant Redemption Date; and provided, further, that (unless otherwise provided
in or pursuant to this Indenture) no Bearer Security delivered in exchange for a
portion of a global Security shall be mailed or otherwise delivered to any
location in the United States. Promptly following any such exchange in part,
such global Security shall be returned by the Trustee to such Depository or the
U.S. Depository, as the case may be, or such other Depository or U.S. Depository
referred to above in accordance with the instructions of the Company referred to
above. If a Registered Security is issued in exchange for any portion of a
global Security after the close of business at the Office or Agency for such
Security where such exchange occurs on or after (i) any Regular Record Date for
such Security and before the opening of business at such Office or Agency on the
next succeeding Interest Payment Date, or (ii) any Special Record Date for such
Security and before the opening of business at such Office or Agency on the
related proposed date for payment of interest or Defaulted Interest, as the case
may be, interest shall not be payable on such Interest Payment Date or proposed
date for payment, as the case may be, in respect of such Registered Security,
but shall be payable on such Interest Payment Date or proposed date for payment,
as the case may be, only to the Person to whom interest in respect of such
portion of such global Security shall be payable in accordance with the
provisions of this Indenture.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company and the Guarantor,
respectively, evidencing the same debt and entitling the Holders thereof to the
same benefits under this Indenture as the Securities surrendered upon such
registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of
transfer or for exchange or redemption shall (if so required by the Company or
the Security Registrar for such Security) be duly endorsed, or be accompanied by
a written instrument of transfer in form satisfactory to the Company and the
Security Registrar for such Security duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange, or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge and any other
expenses (including fees and expenses of the Trustee) that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 3.4, 9.5 or 11.7 not involving any transfer.
Except as otherwise provided in or pursuant to this Indenture, the Company
shall not be required (i) to issue, register the transfer of or exchange any
Securities during a period beginning at the opening of business 15 days before
the day of mailing of a notice of redemption of Securities of like tenor and the
same series under Section 11.3 and ending at the close of business
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on the day of such mailing, or (ii) to register the transfer of or exchange any
Registered Security selected for redemption in whole or in part, except in the
case of any Security to be redeemed in part, the portion thereof not to be
redeemed, or (iii) to exchange any Bearer Security selected for redemption
except, to the extent provided with respect to such Bearer Security, that such
Bearer Security may be exchanged for a Registered Security of like tenor and the
same series, provided that such Registered Security shall be immediately
surrendered for redemption with written instruction for payment consistent with
the provisions of this Indenture or (iv) to issue, register the transfer of or
exchange any Security which, in accordance with its terms, has been surrendered
for repayment at the option of the Holder, except the portion, if any, of such
Security not to be so repaid.
Section 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security or a Security with a mutilated Coupon
appertaining to it is surrendered to the Trustee, subject to the provisions of
this Section 3.6, the Company shall execute and the Trustee shall authenticate
and deliver in exchange therefor a new Security of the same series containing
identical terms and of like principal amount and bearing a number not
contemporaneously outstanding, with Coupons appertaining thereto corresponding
to the Coupons, if any, appertaining to the surrendered Security.
If there be delivered to the Company, the Guarantor and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
or Coupon, and (ii) such security or indemnity as may be required by them to
save each of them and any agent of either of them harmless, then, in the absence
of notice to the Company, the Guarantor or the Trustee that such Security or
Coupon has been acquired by a bona fide purchaser, the Company shall execute
and, upon the Company's request the Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Security or in exchange for the Security to which a destroyed, lost or stolen
Coupon appertains with all appurtenant Coupons not destroyed, lost or stolen, a
new Security of the same series containing identical terms and of like principal
amount and bearing a number not contemporaneously outstanding, with Coupons
appertaining thereto corresponding to the Coupons, if any, appertaining to such
destroyed, lost or stolen Security or to the Security to which such destroyed,
lost or stolen Coupon appertains.
Notwithstanding the foregoing provisions of this Section 3.6, in case any
mutilated, destroyed, lost or stolen Security or Coupon has become or is about
to become due and payable, the Company in its discretion may, instead of issuing
a new Security, pay such Security or Coupon; provided, however, that payment of
principal of, any premium or interest on or any Additional Amounts with respect
to any Bearer Securities shall, except as otherwise provided in Section 10.2, be
payable only at an Office or Agency for such Securities located outside the
United States and, unless otherwise provided in or pursuant to this Indenture,
any interest on Bearer Securities and any Additional Amounts with respect to
such interest shall be payable only upon presentation and surrender of the
Coupons appertaining thereto.
Upon the issuance of any new Security under this Section 3.6, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be
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imposed in relation thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith.
Every new Security, with any Coupons appertaining thereto issued pursuant
to this Section 3.6 in lieu of any destroyed, lost or stolen Security, or in
exchange for a Security to which a destroyed, lost or stolen Coupon appertains
shall constitute a separate obligation of the Company and the Guarantor, whether
or not the destroyed, lost or stolen Security and Coupons appertaining thereto
or the destroyed, lost or stolen Coupon shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities of such series and any
Coupons, if any, duly issued hereunder.
The provisions of this Section 3.6, as amended or supplemented pursuant to
this Indenture with respect to particular Securities or generally, shall be
exclusive and shall preclude (to the extent lawful) all other rights and
remedies with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities or Coupons.
Section 3.7. Payment of Interest and Certain Additional Amounts; Rights to
Interest and Certain Additional Amounts Preserved.
Unless otherwise provided in or pursuant to this Indenture, any interest on
and any Additional Amounts with respect to any Registered Security which shall
be payable, and are punctually paid or duly provided for, on any Interest
Payment Date shall be paid to the Person in whose name such Security (or one or
more Predecessor Securities) is registered as of the close of business on the
Regular Record Date for such interest.
Unless otherwise provided in or pursuant to this Indenture, any interest on
and any Additional Amounts with respect to any Registered Security which shall
be payable, but shall not be punctually paid or duly provided for, on any
Interest Payment Date for such Registered Security (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder thereof on the
relevant Regular Record Date by virtue of having been such Holder; and such
Defaulted Interest may be paid by the Company or the Guarantor, at its election
in each case, as provided in Clause (1) or (2) below:
(1) The Company or the Guarantor, as the case may be, may elect to
make payment of any Defaulted Interest to the Person in whose name such
Registered Security (or a Predecessor Security thereof) shall be registered
at the close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed by the Company in the following
manner. The Company or the Guarantor, as the case may be, shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on such Registered Security, the Special Record Date therefor and the date
of the proposed payment, and at the same time the Company or the Guarantor,
as the case may be, shall deposit with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit on or prior to the date of the proposed payment, such money when so
deposited to be held in trust for the benefit of the Person
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entitled to such Defaulted Interest as in this Clause provided. The Special
Record Date for the payment of such Defaulted Interest shall be not more
than 15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after notification to the Trustee of the
proposed payment. The Trustee shall, in the name and at the expense of the
Company or the Guarantor, cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to the Holder of such Registered Security (or
a Predecessor Security thereof) at his address as it appears in the
Security Register not less than 10 days prior to such Special Record Date.
The Trustee may, in its discretion, in the name and at the expense of the
Company or the Guarantor, cause a similar notice to be published at least
once in an Authorized Newspaper of general circulation in the Borough of
Manhattan, The City of New York, but such publication shall not be a
condition precedent to the establishment of such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been mailed as aforesaid, such Defaulted
Interest shall be paid to the Person in whose name such Registered Security
(or a Predecessor Security thereof) shall be registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company or the Guarantor, as the case may be, may make
payment of any Defaulted Interest in any other lawful manner not
inconsistent with the requirements of any securities exchange on which such
Security may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company or the Guarantor, as the
case may be, to the Trustee of the proposed payment pursuant to this
Clause, such payment shall be deemed practicable by the Trustee.
Unless otherwise provided in or pursuant to this Indenture or the
Securities of any particular series pursuant to the provisions of this
Indenture, at the option of the Company or the Guarantor, interest on Registered
Securities that bear interest may be paid by mailing a check to the address of
the Person entitled thereto as such address shall appear in the Security
Register or by transfer to an account maintained by the payee with a bank
located in the United States.
Subject to the foregoing provisions of this Section and Section 3.5, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
In the case of any Registered Security of any series that is convertible
into other securities of the Company or exchangeable for securities of the
Guarantor or another issuer, which Registered Security is converted or exchanged
after any Regular Record Date and on or prior to the next succeeding Interest
Payment Date (other than any Registered Security with respect to which the
Stated Maturity is prior to such Interest Payment Date), interest with respect
to which the Stated Maturity is on such Interest Payment Date shall be payable
on such Interest Payment Date notwithstanding such conversion or exchange, and
such interest (whether or not
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punctually paid or duly provided for) shall be paid to the Person in whose name
that Registered Security (or one or more predecessor Registered Securities) is
registered at the close of business on such Regular Record Date. Except as
otherwise expressly provided in the immediately preceding sentence, in the case
of any Registered Security which is converted or exchanged, interest with
respect to which the Stated Maturity is after the date of conversion or exchange
of such Registered Security shall not be payable.
Section 3.8. Persons Deemed Owners.
Prior to due presentment of a Registered Security for registration of
transfer, the Company, the Guarantor, the Trustee and any agent of the Company
or the Guarantor or the Trustee may treat the Person in whose name such
Registered Security is registered in the Security Register as the owner of such
Registered Security for the purpose of receiving payment of principal of, any
premium and (subject to Sections 3.5 and 3.7) interest on and any Additional
Amounts with respect to such Registered Security and for all other purposes
whatsoever, whether or not any payment with respect to such Registered Security
shall be overdue, and none of the Company, the Guarantor, the Trustee or any
agent of the Company, the Guarantor or the Trustee shall be affected by notice
to the contrary.
The Company, the Guarantor, the Trustee and any agent of the Company, the
Guarantor or the Trustee may treat the bearer of any Bearer Security or the
bearer of any Coupon as the absolute owner of such Security or Coupon for the
purpose of receiving payment thereof or on account thereof and for all other
purposes whatsoever, whether or not any payment with respect to such Security or
Coupon shall be overdue, and none of the Company, the Guarantor, the Trustee or
any agent of the Company, the Guarantor or the Trustee shall be affected by
notice to the contrary.
No Holder of any beneficial interest in any global Security held on its
behalf by a Depository shall have any rights under this Indenture with respect
to such global Security, and such Depository may be treated by the Company, the
Guarantor, the Trustee, and any agent of the Company, the Guarantor or the
Trustee as the owner of such global Security for all purposes whatsoever. None
of the Company, the Guarantor, the Trustee, any Paying Agent or the Security
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Section 3.9. Cancellation.
All Securities and Coupons surrendered for payment, redemption,
registration of transfer, exchange or conversion or for credit against any
sinking fund payment shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee, and any such Securities and Coupons, as well as
Securities and Coupons surrendered directly to the Trustee for any such purpose,
shall be cancelled promptly by the Trustee. The Company or the Guarantor may at
any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company or the Guarantor may
have acquired in any manner whatsoever,
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and all Securities so delivered shall be cancelled promptly by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly permitted by or
pursuant to this Indenture. All cancelled Securities and Coupons held by the
Trustee shall be destroyed by the Trustee, unless by a Company Order or
Guarantor Order the Company or the Guarantor, as the case may be, directs their
return to it.
Section 3.10. Computation of Interest.
Except as otherwise provided in or pursuant to this Indenture or in any
Security, interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
Section 3.11. Extension of Interest Payment Period.
If specified as contemplated by Section 3.1 with respect to the Securities
of a particular series and subject to the terms, conditions and covenants, if
any, so specified, the Company shall have the right, at any time and from time
to time during the term of such series, to defer the payment of interest on such
Securities for such period or periods as may be specified as contemplated by
Section 3.1 (each, an "Extension Period"), during which Extension Periods the
Company shall have the right to make partial payments of interest on any
Interest Payment Date. No Extension Period shall end on a day other than an
Interest Payment Date. At the end of any such Extension Period, the Company
shall pay all interest then accrued and unpaid on the Securities (together with
Additional Interest thereon, if any, at the rate specified for the Securities of
such series to the extent permitted by applicable law). Prior to the
termination of any such Extension Period, the Company may further extend the
interest payment period, provided that no Extension Period shall exceed the
period or periods specified in such Securities or extend beyond the Stated
Maturity of the principal of such Securities. Upon termination of any Extension
Period and upon the payment of all accrued and unpaid interest and any
Additional Interest then due on any Interest Payment Date, the Company may elect
to begin a new Extension Period, subject to the above requirements. No interest
shall be due and payable during an Extension Period, except at the end thereof.
The Company shall give the Holders of the Securities of such series and the
Trustee notice of its election to begin any such Extension Period at least one
Business Day prior to the Interest Payment Date or, with respect to the
Securities of a series issued to an ACE Trust, prior to the earlier of (i) the
date the Distributions on the Preferred Securities of such ACE Trust are payable
or (ii) the date the trustees of such ACE Trust are required to give notice to
any securities exchange or other applicable self-regulatory organization or to
holders of such Preferred Securities of the record date or the date such
Distributions are payable, but in any event not less than one Business Day prior
to such record date.
The Trustee shall promptly give notice of the Company's election to begin
any such Extension Period to the Holders of the outstanding Securities of such
series.
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Section 3.12. Right of Set-Off.
With respect to the Securities of a series issued to an ACE Trust,
notwithstanding anything to the contrary in this Indenture, the Company or the
Guarantor, as applicable, shall each have the right to set-off any payment it is
otherwise required to make thereunder in respect of any such Security to the
extent the Company or the Guarantor, as applicable, has theretofore made, or is
concurrently on the date of such payment making, a payment under the Preferred
Securities Guarantee relating to such Security or under Section 5.8 hereof, as
applicable.
Section 3.13. Agreed Tax Treatment.
Each Security issued hereunder shall provide that the Company, the
Guarantor and, by its acceptance of a Security or a beneficial interest therein,
the Holder of, and any Person that acquires a beneficial interest in, such
Security agree that for United States Federal, state and local tax purposes it
is intended that such Security constitute indebtedness.
Section 3.14. Extension of Stated Maturity; Adjustment of Stated Maturity
Upon an Exchange.
If specified as contemplated by Section 3.1 with respect to the Securities
of a particular series, the Company shall have the right to (a) change the
Stated Maturity of the principal of the Securities of such series upon the
liquidation of the applicable ACE Trust and the exchange of such Securities for
the Preferred Securities of such ACE Trust, or (b) extend the Stated Maturity of
the principal of the Securities of such series; provided that, at the time any
election to extend such Stated Maturity is made and at the time of such
extension, (i) neither the Company nor the Guarantor is in bankruptcy, otherwise
insolvent or in liquidation, (ii) neither the Company nor the Guarantor is in
default in the payment of any interest or principal or Additional Amounts on the
Securities of such series or under the Guarantee in respect thereof, as the case
may be, and no deferred interest payments thereon have accrued, (iii) the
applicable ACE Trust is not in arrears on payments of Distributions on its
Preferred Securities and no deferred Distributions thereon have accumulated,
(iv) the Securities of such series are rated not less than BBB- by Standard &
Poor's Ratings Services or Baa3 by Moody's Investors Service, Inc. or the
equivalent by any other nationally recognized statistical rating organization
and (v) the extended Stated Maturity is no later than the 49/th/ anniversary of
the initial issuance of the Preferred Securities of the applicable ACE Trust;
provided, further, that, if the Company exercises its right to liquidate the
applicable ACE Trust and exchange the Securities of such series for the
Preferred Securities of such ACE Trust as specified in clause (a) above, any
changed Stated Maturity of the principal of the Securities of such series shall
be no earlier than the date that is five years after the initial issue date of
the Preferred Securities and no later than the date 30 years (plus an extended
term of up to an additional 19 years if the above-referenced conditions are
satisfied) after the initial issue date of the Preferred Securities of the
applicable ACE Trust.
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ARTICLE 4
Satisfaction and Discharge of Indenture
Section 4.1. Satisfaction and Discharge.
Upon the direction of the Company by a Company Order or of the Guarantor by
a Guarantor Order, this Indenture shall cease to be of further effect with
respect to any series of Securities specified in such Company Order or Guarantor
Order and any Coupons appertaining thereto, and the Trustee, on receipt of a
Company Order or a Guarantor Order, at the expense of the Company and the
Guarantor, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture as to such series, when
(1) either
(a) all Securities of such series theretofore authenticated and
delivered and all Coupons appertaining thereto (other than (i) Coupons
appertaining to Bearer Securities of such series surrendered in
exchange for Registered Securities of such series and maturing after
such exchange whose surrender is not required or has been waived as
provided in Section 3.5, (ii) Securities and Coupons of such series
which have been destroyed, lost or stolen and which have been replaced
or paid as provided in Section 3.6, (iii) Coupons appertaining to
Securities of such series called for redemption and maturing after the
relevant Redemption Date whose surrender has been waived as provided
in Section 11.7, and (iv) Securities and Coupons of such series for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company or the Guarantor and
thereafter repaid to the Company or the Guarantor, as the case may be,
or discharged from such trust, as provided in Section 10.3) have been
delivered to the Trustee for cancellation; or
(b) all Securities of such series and, in the case of (i) or
(ii) below, any Coupons appertaining thereto not theretofore delivered
to the Trustee for cancellation (i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within one
year, or (iii) if redeemable at the option of the Company, are to be
called for redemption within one year under arrangements satisfactory
to the Trustee for the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Company and the Guarantor,
and the Company or the Guarantor, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in trust for
such purpose, money in the Currency in which such Securities are payable in an
amount sufficient to pay and discharge the entire indebtedness on such
Securities and any Coupons appertaining thereto not theretofore delivered to the
Trustee for cancellation, including the principal of, any premium and interest
(including any Additional Interest) on, and any Additional Amounts with respect
to such Securities and any
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Coupons appertaining thereto, to the date of such deposit (in the case of
Securities which have become due and payable) or to the Maturity thereof, as the
case may be;
(2) the Company or the Guarantor has paid or caused to be paid all
other sums payable hereunder by the Company and the Guarantor with respect
to the Outstanding Securities of such series and any Coupons appertaining
thereto; and
(3) the Company has delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel and the Guarantor has delivered to the Trustee a
Guarantor's Officer's Certificate, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture as to such series have been complied with.
In the event there are Securities of two or more series hereunder, the
Trustee shall be required to execute an instrument acknowledging satisfaction
and discharge of this Indenture only if requested to do so with respect to
Securities of such series as to which it is Trustee and if the other conditions
thereto are met.
Notwithstanding the satisfaction and discharge of this Indenture with
respect to any series of Securities, the obligations of the Company and the
Guarantor to the Trustee under Section 6.6 and, if money shall have been
deposited with the Trustee pursuant to subclause (b) of clause (1) of this
Section, the obligations of the Company, the Guarantor and the Trustee with
respect to the Securities of such series under Sections 3.5, 3.6, 4.3, 10.2 and
10.3, with respect to the payment of Additional Amounts, if any, with respect to
such Securities as contemplated by Sections 10.4 and 17.2 (but only to the
extent that the Additional Amounts payable with respect to such Securities
exceed the amount deposited in respect of such Additional Amounts pursuant to
Section 4.1(1)(b)), and with respect to any rights to convert or exchange such
Securities into securities of the Company or the Guarantor or another issuer
shall survive.
Section 4.2. Defeasance and Covenant Defeasance.
(1) Unless pursuant to Section 3.1, either or both of (i) defeasance
of the Securities of or within a series under clause (2) of this Section
4.2 shall not be applicable with respect to the Securities of such series
or (ii) covenant defeasance of the Securities of or within a series under
clause (3) of this Section 4.2 shall not be applicable with respect to the
Securities of such series, then such provisions, together with the other
provisions of this Section 4.2 (with such modifications thereto as may be
specified pursuant to Section 3.1 with respect to any Securities), shall be
applicable to such Securities and any Coupons appertaining thereto, and the
Company may at its option by Board Resolution, at any time, with respect to
such Securities and any Coupons appertaining thereto, elect to have Section
4.2(2) or Section 4.2(3) be applied to such Outstanding Securities and any
Coupons appertaining thereto upon compliance with the conditions set forth
below in this Section 4.2.
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(2) Upon the Company's exercise of the above option applicable to
this Section 4.2(2) with respect to any Securities of or within a series,
the Company and the Guarantor shall be deemed to have been discharged from
its obligations with respect to such Outstanding Securities and any Coupons
appertaining thereto and under the Guarantee in respect thereof,
respectively, on the date the conditions set forth in clause (4) of this
Section 4.2 are satisfied (hereinafter, "defeasance"). For this purpose,
such defeasance means that the Company or the Guarantor shall be deemed to
have paid and discharged the entire Indebtedness represented by such
Outstanding Securities and any Coupons appertaining thereto, and under the
Guarantee in respect thereof, which shall thereafter be deemed to be
"Outstanding" only for the purposes of clause (5) of this Section 4.2 and
the other Sections of this Indenture referred to in clauses (i) and (ii)
below, and to have satisfied all of its other obligations under such
Securities and any Coupons appertaining thereto, and under the Guarantee in
respect thereof, and this Indenture insofar as such Securities and any
Coupons appertaining thereto, and the Guarantee in respect thereof, are
concerned (and the Trustee, at the expense of the Company and the
Guarantor, shall execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or
discharged hereunder: (i) the rights of Holders of such Outstanding
Securities and any Coupons appertaining thereto to receive, solely from the
trust fund described in clause (4) of this Section 4.2 and as more fully
set forth in such clause, payments in respect of the principal of (and
premium, if any) and interest (including any Additional Interest), if any,
on, and Additional Amounts, if any, with respect to, such Securities and
any Coupons appertaining thereto when such payments are due, and any rights
of such Holder to convert such Securities into other securities of the
Company or exchange such Securities for securities of the Guarantor or
another issuer, (ii) the obligations of the Company, the Guarantor and the
Trustee with respect to such Securities under Sections 3.5, 3.6, 10.2 and
10.3 and with respect to the payment of Additional Amounts, if any, on such
Securities as contemplated by Sections 10.4 and 17.2 (but only to the
extent that the Additional Amounts payable with respect to such Securities
exceed the amount deposited in respect of such Additional Amounts pursuant
to Section 4.2(4)(a) below), and with respect to any rights to convert such
Securities into other securities of the Company or exchange such Securities
for securities of the Guarantor or another issuer, (iii) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and (iv)
this Section 4.2. The Company may exercise its option under this Section
4.2(2) notwithstanding the prior exercise of its option under clause (3) of
this Section 4.2 with respect to such Securities and any Coupons
appertaining thereto.
(3) Upon the Company's exercise of the option to have this Section
4.2(3) apply with respect to any Securities of or within a series, the
Company and the Guarantor shall be released from their obligations under
any covenant applicable to such Securities specified pursuant to Section
3.1(20), with respect to such Outstanding Securities and any Coupons
appertaining thereto, and the Guarantee in respect thereof, on and after
the date the conditions set forth in clause (4) of this Section 4.2 are
satisfied (hereinafter, "covenant defeasance"), and such Securities and any
Coupons appertaining thereto shall
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thereafter be deemed to be not "Outstanding" for the purposes of any
direction, waiver, consent or declaration or Act of Holders (and the
consequences of any thereof) in connection with any such covenant, but
shall continue to be deemed "Outstanding" for all other purposes hereunder.
For this purpose, such covenant defeasance means that, with respect to such
Outstanding Securities and any Coupons appertaining thereto, the Company
and the Guarantor may omit to comply with, and shall have no liability in
respect of, any term, condition or limitation set forth in any such Section
or such other covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such Section or such other covenant or by
reason of reference in any such Section or such other covenant to any other
provision herein or in any other document and such omission to comply shall
not constitute a default or an Event of Default under Section 5.1(4) or
5.1(8) or otherwise, as the case may be, but, except as specified above,
the remainder of this Indenture and such Securities and Coupons
appertaining thereto and the Guarantee in respect thereof shall be
unaffected thereby.
(4) The following shall be the conditions to application of clause
(2) or (3) of this Section 4.2 to any Outstanding Securities of or within a
series and any Coupons appertaining thereto and the Guarantee in respect
thereof:
(a) The Company or the Guarantor shall irrevocably have
deposited or caused to be deposited with the Trustee (or another
trustee satisfying the requirements of Section 6.7 who shall agree to
comply with the provisions of this Section 4.2 applicable to it) as
trust funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Securities and any Coupons appertaining
thereto, (1) an amount in Dollars or in such Foreign Currency in which
such Securities and any Coupons appertaining thereto are then
specified as payable at Stated Maturity, or (2) Government Obligations
applicable to such Securities and Coupons appertaining thereto
(determined on the basis of the Currency in which such Securities and
Coupons appertaining thereto are then specified as payable at Stated
Maturity) which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment of
principal of (and premium, if any) and interest (including any
Additional Interest), if any, on such Securities and any Coupons
appertaining thereto, money in an amount, or (3) a combination
thereof, in any case, in an amount, sufficient, without consideration
of any reinvestment of such principal and interest, in the opinion of
a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee,
to pay and discharge, and which shall be applied by the Trustee (or
other qualifying trustee) to pay and discharge, (y) the principal of
(and premium, if any) and interest (including any Additional
Interest), if any, on such Outstanding Securities and any Coupons
appertaining thereto at the Stated Maturity of such principal or
installment of principal or premium or interest and (z) any mandatory
sinking fund payments or analogous payments applicable to
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such Outstanding Securities and any Coupons appertaining thereto on
the days on which such payments are due and payable in accordance with
the terms of this Indenture and of such Securities and any Coupons
appertaining thereto.
(b) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture
or any other material agreement or instrument to which the Company or
the Guarantor is a party or by which either of them is bound.
(c) No Event of Default or event which with notice or lapse of
time or both would become an Event of Default with respect to such
Securities and any Coupons appertaining thereto shall have occurred
and be continuing on the date of such deposit and, with respect to
defeasance only, at any time during the period ending on the 123rd day
after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period).
(d) In the case of an election under clause (2) of this Section
4.2, the Company or the Guarantor shall have delivered to the Trustee
an Opinion of Counsel stating that (i) the Company or the Guarantor
has received from the Internal Revenue Service a letter ruling, or
there has been published by the Internal Revenue Service a Revenue
Ruling, or (ii) since the date of execution 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 shall confirm
that, the Holders of such Outstanding Securities and any Coupons
appertaining thereto 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.
(e) In the case of an election under clause (3) of this Section
4.2, the Company or the Guarantor shall have delivered to the Trustee
an Opinion of Counsel to the effect that the Holders of such
Outstanding Securities and any Coupons appertaining thereto 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.
(f) The Company or the Guarantor shall have delivered to the
Trustee an Opinion of Counsel to the effect that, after the 123rd day
after the date of deposit, all money and Government Obligations (or
other property as may be provided pursuant to Section 3.1) (including
the proceeds thereof) deposited or caused to be deposited with the
Trustee (or other qualifying trustee) pursuant to this clause (4) to
be held in trust will not be subject to any case or proceeding
(whether voluntary or involuntary) in respect of the Company or the
Guarantor under any Federal or State bankruptcy, insolvency,
reorganization or other similar
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law, or any decree or order for relief in respect of the Company or
the Guarantor issued in connection therewith.
(g) The Company and the Guarantor shall have delivered to the
Trustee an Officer's Certificate and a Guarantor's Officer's
Certificate and the Company or the Guarantor shall have delivered to
the Trustee an Opinion of Counsel, each stating that all conditions
precedent to the defeasance or covenant defeasance under clause (2) or
(3) of this Section 4.2 (as the case may be) have been complied with.
(h) Notwithstanding any other provisions of this Section 4.2(4),
such defeasance or covenant defeasance shall be effected in compliance
with any additional or substitute terms, conditions or limitations
which may be imposed on the Company or the Guarantor in connection
therewith pursuant to Section 3.1.
(5) Unless otherwise specified in or pursuant to this Indenture or
any Security, if, after a deposit referred to in Section 4.2(4)(a) has been
made, (a) the Holder of a Security in respect of which such deposit was
made is entitled to, and does, elect pursuant to Section 3.1 or the terms
of such Security to receive payment in a Currency other than that in which
the deposit pursuant to Section 4.2(4)(a) has been made in respect of such
Security, or (b) a Conversion Event occurs in respect of the Foreign
Currency in which the deposit pursuant to Section 4.2(4)(a) has been made,
the indebtedness represented by such Security and any Coupons appertaining
thereto shall be deemed to have been, and will be, fully discharged and
satisfied through the payment of the principal of (and premium, if any),
and interest (including any Additional Interest), if any, on, and
Additional Amounts, if any, with respect to, such Security as the same
becomes due out of the proceeds yielded by converting (from time to time as
specified below in the case of any such election) the amount or other
property deposited in respect of such Security into the Currency in which
such Security becomes payable as a result of such election or Conversion
Event based on (x) in the case of payments made pursuant to clause (a)
above, the applicable market exchange rate for such Currency in effect on
the second Business Day prior to each payment date, or (y) with respect to
a Conversion Event, the applicable market exchange rate for such Foreign
Currency in effect (as nearly as feasible) at the time of the Conversion
Event.
The Company and the Guarantor (without duplication) shall pay and indemnify
the Trustee (or other qualifying trustee, collectively for purposes of this
Section 4.2(5) and Section 4.3, the "Trustee") against any tax, fee or other
charge, imposed on or assessed against the Government Obligations deposited
pursuant to this Section 4.2 or the principal or interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of such Outstanding Securities and any Coupons
appertaining thereto.
Anything in this Section 4.2 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request, or
the Guarantor upon Guarantor Request, as the case may be, any money or
Government Obligations (or other property and any
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proceeds therefrom) held by it as provided in clause (4) of this Section 4.2
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect a defeasance or covenant defeasance, as applicable, in
accordance with this Section 4.2.
Section 4.3. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all money
and Government Obligations (or other property as may be provided pursuant to
Section 3.1) (including the proceeds thereof) deposited with the Trustee
pursuant to Section 4.1 or 4.2 in respect of any Outstanding Securities of any
series and any Coupons appertaining thereto shall be held in trust and applied
by the Trustee, in accordance with the provisions of such Securities and any
Coupons appertaining thereto and this Indenture, to the payment, either directly
or through any Paying Agent (including the Company acting as its own Paying
Agent or the Guarantor acting as Paying Agent) as the Trustee may determine, to
the Holders of such Securities and any Coupons appertaining thereto of all sums
due and to become due thereon in respect of principal (and premium, if any) and
interest (including any Additional Interest) and Additional Amounts, if any; but
such money and Government Obligations need not be segregated from other funds
except to the extent required by law.
ARTICLE 5
Remedies
Section 5.1. Events of Default.
"Event of Default," wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body),
unless such event is specifically deleted or modified in or pursuant to the
supplemental indenture, Board Resolution or Officer's Certificate establishing
the terms of such Series pursuant to this Indenture:
(1) default in the payment of any interest on any Security of such
series, including any Additional Interest in respect thereof, or any
Additional Amounts payable with respect thereto, when such interest becomes
or such Additional Amounts become due and payable, and continuance of such
default for a period of 30 days (subject to any deferral of any due date in
the case of an Extension Period); or
(2) default in the payment of the principal of or any premium on any
Security of such series, or any Additional Amounts payable with respect
thereto, when such principal or premium becomes or such Additional Amounts
become due and payable at their Maturity; or
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(3) default in the deposit of any sinking fund payment when and as
due by the terms of a Security of such series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company or the Guarantor in this Indenture or the
Securities (other than a covenant or warranty a default in the performance
or the breach of which is elsewhere in this Section specifically dealt with
or which has been expressly included in this Indenture solely for the
benefit of a series of Securities other than such series), and continuance
of such default or breach for a period of 60 days after there has been
given, by registered or certified mail, to the Company and the Guarantor by
the Trustee or to the Company, the Guarantor and the Trustee by the Holders
of at least 25% in principal amount of the Outstanding Securities of such
series or, if that series of Securities is held by an ACE Trust, the
holders of at least 25% in liquidation amount of the Preferred Securities
of that ACE Trust then outstanding, a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(5) if any event of default as defined in any mortgage, indenture or
instrument under which there may be issued, or by which there may be
secured or evidenced, any Indebtedness of the Company or the Guarantor
(including, in each case, an Event of Default under any other series of
Securities), whether such Indebtedness now exists or shall hereafter be
created or incurred, shall happen and shall consist of default in the
payment of more than $50,000,000 in principal amount of such Indebtedness
at the maturity thereof (after giving effect to any applicable grace
period) or shall result in such Indebtedness in principal amount in excess
of $50,000,000 becoming or being declared due and payable prior to the date
on which it would otherwise become due and payable, and such default shall
not be cured or such acceleration shall not be rescinded or annulled within
a period of 30 days after there shall have been given, by registered or
certified mail, to the Company and the Guarantor by the Trustee or to the
Company, the Guarantor and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities of such series or, if that
series of Securities is held by an ACE Trust, the holders of at least 25%
in liquidation amount of the Preferred Securities of that ACE Trust then
outstanding, a written notice specifying such event of default and
requiring the Company or the Guarantor to cause such acceleration to be
rescinded or annulled or to cause such Indebtedness to be discharged and
stating that such notice is a "Notice of Default" hereunder; or
(6) the Company or the Guarantor shall fail within 60 days to pay,
bond or otherwise discharge any uninsured judgment or court order for the
payment of money in excess of $50,000,000, which is not stayed on appeal or
is not otherwise being appropriately contested in good faith; or
(7) the entry by a court having competent jurisdiction of:
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(a) a decree or order for relief in respect of the Company or
the Guarantor in an involuntary proceeding under any applicable
bankruptcy, insolvency, reorganization (other than a reorganization
under a foreign law that does not relate to insolvency) or other
similar law and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(b) a decree or order adjudging the Company or the Guarantor to
be insolvent, or approving a petition seeking reorganization (other
than a reorganization under a foreign law that does not relate to
insolvency), arrangement, adjustment or composition of the Company or
the Guarantor and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(c) a final and non-appealable order appointing a custodian,
receiver, liquidator, assignee, trustee or other similar official of
the Company or the Guarantor of any substantial part of the property
of the Company or the Guarantor or ordering the winding up or
liquidation of the affairs of the Company or the Guarantor; or
(8) the commencement by the Company or the Guarantor of a voluntary
proceeding under any applicable bankruptcy, insolvency, reorganization
(other than a reorganization under a foreign law that does not relate to
insolvency) or other similar law or of a voluntary proceeding seeking to be
adjudicated insolvent or the consent by the Company or the Guarantor to the
entry of a decree or order for relief in an involuntary proceeding under
any applicable bankruptcy, insolvency, reorganization or other similar law
or to the commencement of any insolvency proceedings against it, or the
filing by the Company or the Guarantor of a petition or answer or consent
seeking reorganization, arrangement, adjustment or composition of the
Company or relief under any applicable law, or the consent by the Company
or the Guarantor to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee
or similar official of the Company or the Guarantor or any substantial part
of the property of the Company or the Guarantor or the making by the
Company or the Guarantor of an assignment for the benefit of creditors, or
the taking of corporate action by the Company or the Guarantor in
furtherance of any such action; or
(9) any other Event of Default provided in or pursuant to this
Indenture with respect to Securities of such series.
Section 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Securities of any series at the time
Outstanding (other than an Event of Default specified in clause (7) or (8) of
Section 5.1) occurs and is continuing, then the Trustee or the Holders of not
less than 25% in principal amount of the Outstanding Securities of such series
may declare the principal of all the Securities of such series, or such lesser
amount as may be provided for in the Securities of such series, to be due
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and payable immediately, by a notice in writing to the Company and the Guarantor
(and to the Trustee if given by the Holders), and upon any such declaration such
principal or such lesser amount shall become immediately due and payable;
provided that, in the case of Securities of a series issued to an ACE Trust, if,
upon an Event of Default, the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities of such series fail to declare
the principal of all the Securities of such series, or such lesser amount as may
be provided for in the Securities of such series, to be immediately due and
payable, the holders of at least 25% in liquidation amount of the Preferred
Securities of such ACE Trust then outstanding shall have such right by a notice
in writing to the Company, the Guarantor, the Trustee and the Property Trustee;
and upon any such declaration such principal or such lesser amount and all
accrued and unpaid interest (including any Additional Interest) thereon shall
become immediately due and payable, provided that the payment of principal and
interest and all other amounts due with respect to such Securities shall remain
subordinated to the extent provided in Article 16.
If an Event of Default specified in clause (7) or (8) of Section 5.1
occurs, all unpaid principal of and accrued interest (including any Additional
Interest) on the Outstanding Securities of that series (or such lesser amount as
may be provided for in the Securities of such series) shall ipso facto become
and be immediately due and payable without any declaration or other act on the
part of the Trustee or any Holder of any Security of that series.
At any time after a declaration of acceleration with respect to the
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of not less than a majority in principal amount of
the Outstanding Securities of such series (subject to, in the case of any series
of Securities held as assets of an ACE Trust, such consent of the holders of the
Preferred Securities and the Common Securities of such ACE Trust as may be
required under the Trust Agreement of such ACE Trust), by written notice to the
Company, the Guarantor and the Trustee, may rescind and annul such declaration
and its consequences if
(1) the Company or the Guarantor has paid or deposited with the
Trustee a sum of money sufficient to pay
(a) all overdue installments of any interest (including any
Additional Interest) on and Additional Amounts with respect to all
Securities of such series and any Coupon appertaining thereto,
(b) the principal of and any premium on any Securities of such
series which have become due otherwise than by such declaration of
acceleration and interest thereon and any Additional Amounts with
respect thereto at the rate or rates borne by or provided for in such
Securities,
(c) to the extent that payment of such interest or Additional
Amounts is lawful, interest upon overdue installments of any interest
and Additional Amounts at the rate or rates borne by or provided for
in such Securities, and
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(d) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel and all other amounts due the Trustee
under Section 6.6; and
(2) all Events of Default with respect to Securities of such series,
other than the non-payment of the principal of, any premium and interest
on, and any Additional Amounts with respect to Securities of such series
which shall have become due solely by such declaration of acceleration,
shall have been cured or waived as provided in Section 5.13.
In the case of Securities of a series issued to an ACE Trust, should the
Holder of such Securities fail to rescind and annul such declaration and its
consequences, the holders of a majority in liquidation amount of the Preferred
Securities of such ACE Trust then outstanding shall have such right by written
notice to the Company, the Guarantor, the Trustee and the Property Trustee,
subject to satisfaction of the conditions set forth in clauses (1) and (2) above
of this Section 5.2.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company and the Guarantor each covenants, in each case, that if
(1) default is made in the payment of any installment of interest
(including any Additional Interest) on or any Additional Amounts with
respect to any Security or any Coupon appertaining thereto when such
interest or Additional Amounts shall have become due and payable and such
default continues for a period of 30 days, or
(2) default is made in the payment of the principal of or any premium
on any Security or any Additional Amounts with respect thereto at their
Maturity,
the Company or the Guarantor, as the case may be, shall, upon demand of the
Trustee, pay to the Trustee, for the benefit of the Holders of such Securities
and any Coupons appertaining thereto, the whole amount of money then due and
payable with respect to such Securities and any Coupons appertaining thereto,
with interest (including any Additional Interest) upon the overdue principal,
any premium and (to the extent that payment of such interest shall be legally
enforceable and, if the Securities are held by an ACE Trust, without duplication
of any other amounts paid to such ACE Trust in respect thereof) upon any overdue
installments of interest and Additional Amounts at the rate or rates borne by or
provided for in such Securities, and, in addition thereto, such further amount
of money as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel and all other amounts due to the Trustee
under Section 6.6.
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If the Company or the Guarantor fails to pay the money it is required to
pay the Trustee pursuant to the preceding paragraph forthwith upon the demand of
the Trustee, the Trustee, in its own name and as trustee of an express trust,
may institute a judicial proceeding for the collection of the money so due and
unpaid, and may prosecute such proceeding to judgment or final decree, and may
enforce the same against the Company or the Guarantor or any other obligor upon
such Securities and any Coupons appertaining thereto and collect the monies
adjudged or decreed to be payable in the manner provided by law out of the
property of the Company or the Guarantor or any other obligor upon such
Securities and any Coupons appertaining thereto, wherever situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series and any
Coupons appertaining thereto by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or such Securities or in aid of the exercise of any power granted
herein or therein, or to enforce any other proper remedy.
Section 5.4. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company, the Guarantor or any other obligor
upon the Securities of any series or the property of the Company, the Guarantor
or such other obligor or their creditors, the Trustee (irrespective of whether
the principal of the Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Company or the Guarantor for the payment of
any overdue principal, premium, interest (including any Additional Interest) or
Additional Amounts) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(1) to file and prove a claim for the whole amount, or such lesser
amount as may be provided for in the Securities of any applicable series,
of the principal and any premium, interest (including any Additional
Interest) and Additional Amounts owing and unpaid in respect of the
Securities and any Coupons appertaining thereto and to file such other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents or counsel)
and of the Holders of Securities or any Coupons appertaining thereto
allowed in such judicial proceeding, and
(2) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder of Securities or any Coupons to make such payments to the Trustee
and, in the event that the Trustee shall consent to the
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making of such payments directly to the Holders of Securities or any Coupons, to
pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel and
any other amounts due the Trustee under Section 6.6.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Security
or any Coupon any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or Coupons or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder of a
Security or any Coupon in any such proceeding.
Section 5.5. Trustee May Enforce Claims without Possession of Securities
or Coupons.
All rights of action and claims under this Indenture or any of the
Securities or Coupons may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or Coupons or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery or judgment, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, shall be for the ratable benefit of each and every Holder of the
Securities or Coupons in respect of which such judgment has been recovered.
Section 5.6. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal, or any
premium, interest (including any Additional Interest) or Additional Amounts,
upon presentation of the Securities or Coupons, or both, as the case may be, and
the notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 6.6;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities and any Coupons for principal and any premium, interest and
Additional Amounts in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority of any
kind, according to the aggregate amounts due and payable on such Securities
and Coupons for principal and any premium, interest (including any
Additional Interest) and Additional Amounts, respectively;
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
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Section 5.7. Limitations on Suits.
No Holder of any Security of any series or any Coupons appertaining thereto
shall have any right to institute any proceeding, judicial or otherwise, with
respect to this Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of such
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of such series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee such indemnity
as is reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities of such series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture or any Security to affect, disturb or prejudice the rights of
any other such Holders or Holders of Securities of any other series, or to
obtain or to seek to obtain priority or preference over any other Holders or to
enforce any right under this Indenture, except in the manner herein provided and
for the equal and ratable benefit of all such Holders.
Section 5.8. Unconditional Right of Holders to Receive Principal and any
Premium, Interest and Additional Amounts.
Notwithstanding any other provision in this Indenture, the Holder of any
Security or Coupon shall have the right, which is absolute and unconditional, to
receive payment of the principal of, any premium and (subject to Sections 3.5,
3.7 and 3.11) interest (including any Additional Interest) on, and any
Additional Amounts with respect to such Security or payment of such Coupon, as
the case may be, on the respective Stated Maturity or Maturities therefor
specified in such Security or Coupon (or, in the case of redemption, on the
Redemption Date or, in the case of repayment at the option of such Holder if
provided in or pursuant to this Indenture, on the date such repayment is due)
and to institute suit for the enforcement of any such payment, and such right
shall not be impaired without the consent of such Holder. In the case of
Securities of a series issued to an ACE Trust, any holder of Preferred
Securities issued by such ACE Trust shall have the right, upon the occurrence of
an Event of Default described in Section 5.1(1) or
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5.1(2) hereof, to institute directly a proceeding against the Company or the
Guarantor, as the case may be, for enforcement of payment to such holder of
principal of, and any premium and (subject to Sections 3.5, 3.7 and 3.11)
interest (including any Additional Interest) on, and Additional Amounts with
respect to, such Securities having a principal amount equal to the liquidation
amount of such Preferred Securities held by such holder (a "Direct Action").
Notwithstanding any payments made to a holder of Preferred Securities by the
Company or the Guarantor in connection with a Direct Action, the Company and the
Guarantor shall remain obligated to pay the principal of and premium, if any, or
interest on and Additional Amounts, if any, with respect to the related
Securities, and the Company or the Guarantor shall be subrogated to the rights
of the holder of such Preferred Securities with respect to payments on the
Preferred Securities to the extent of any payments made by the Company or the
Guarantor, as the case may be, to such holder in any Direct Action.
Section 5.9. Restoration of Rights and Remedies.
If the Trustee or any Holder of a Security or a Coupon has, or the holders
of Preferred Securities have, instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee, to
such Holder or to the holders of such Preferred Securities, then and in every
such case the Company, the Guarantor, the Trustee and each such Holder or the
holders of such Preferred Securities shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and each such
Holder or the holders of such Preferred Securities shall continue as though no
such proceeding had been instituted.
Section 5.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities or Coupons in the last paragraph
of Section 3.6, no right or remedy herein conferred upon or reserved to the
Trustee, to each and every Holder of a Security or a Coupon or to the holders of
Preferred Securities is intended to be exclusive of any other right or remedy,
and every right and remedy, to the extent permitted by law, shall be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not, to the
extent permitted by law, prevent the concurrent assertion or employment of any
other appropriate right or remedy.
Section 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security or
Coupon or of the holders of Preferred Securities to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to any
Holder of a Security or a Coupon or to the holders of Preferred Securities may
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be exercised from time to time, and as often as may be deemed expedient, by the
Trustee, by such Holder or by such holders of Preferred Securities, as the case
may be.
Section 5.12. Control by Holders of Securities.
The Holders of a majority in principal amount of the Outstanding Securities
of any series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee with respect to the Securities of
such series and any Coupons appertaining thereto, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture or with the Securities of such series,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) such direction is not unduly prejudicial to the rights of the
other Holders of Securities of such series not joining in such action.
Section 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series on behalf of the Holders of all the
Securities of such series and any Coupons appertaining thereto and, in the case
of any Securities issued to an ACE Trust, the holders of not less than a
majority in liquidation amount of the Preferred Securities issued by such ACE
Trust then outstanding, may waive any past default hereunder with respect to
such series and its consequences, except a default
(1) in the payment of the principal of, any premium or interest
(including any Additional Interest) on, or any Additional Amounts with
respect to, any Security of such series or any Coupons appertaining
thereto, or
(2) in respect of a covenant or provision hereof which under Article
9 cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
Section 5.14. Waiver of Usury, Stay or Extension Laws.
The Company and the Guarantor each covenants that (to the extent that it
may lawfully do so) it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any usury, stay or
extension law wherever enacted, now or at any time
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hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company and the Guarantor each expressly waives (to the
extent that it may lawfully do so) all benefit or advantage of any such law and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
Section 5.15. Undertaking for Costs
All parties to this Indenture agree, and each Holder of any Security by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of any
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit having due regard to the merits and good
faith of the claims or defenses made by such party litigant; but the provisions
of this Section 5.15 shall not apply to any suit instituted by the Trustee, to
any suit instituted by any Holder, or group of Holders, holding in the aggregate
more than 10% in principal amount of Outstanding Securities of any series or, if
a series of Securities is held by an ACE Trust, the holders of more than 10% in
liquidation amount of the Preferred Securities of that ACE Trust then
outstanding, or to any suit instituted by any Holder or any holder of Preferred
Securities for the enforcement of the payment of the principal of (or premium,
if any) or interest (including any Additional Interest), if any, on or
Additional Amounts, if any, with respect to any Security on or after the
respective Stated Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date, and, in the case of repayment, on
or after the date for repayment) or for the enforcement of the right, if any, to
convert or exchange any Security into other securities in accordance with its
terms.
ARTICLE 6
The Trustee
Section 6.1. Certain Rights of Trustee.
Subject to Sections 315(a) through 315(d) of the Trust Indenture Act:
(1) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, coupon or other paper or document
reasonably believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(2) any request or direction of the Company or of the Guarantor
mentioned herein shall be sufficiently evidenced by a Company Request or a
Company Order or by a Guarantor Request or Guarantor Order, as the case may
be (in each case, other than delivery of any Security, together with any
Coupons appertaining thereto, to the Trustee
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for authentication and delivery pursuant to Section 3.3 which shall be
sufficiently evidenced as provided therein) and any resolution of the Board
of Directors or of the Guarantor's Board of Directors may be sufficiently
evidenced by a Board Resolution or by a Guarantor's Board Resolution, as
the case may be;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence shall be herein specifically prescribed) may, in the absence
of bad faith on its part, rely upon an Officer's Certificate or, if such
matter pertains to the Guarantor, a Guarantor's Officer's Certificate;
(4) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by or pursuant to this Indenture at the
request or direction of any of the Holders of Securities of any series or
any Coupons appertaining thereto pursuant to this Indenture, unless such
Holders shall have offered to the Trustee such security or indemnity as is
reasonably satisfactory to it against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, coupon or other paper or document, but the Trustee, in its
discretion, may, but shall not be obligated to 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, during business hours and upon reasonable
notice, the books, records and premises of the Company and the Guarantor,
personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(8) the Trustee shall not be liable for any action taken or error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent, acted in bad faith or engaged in willful misconduct;
(9) the Authenticating Agent, Paying Agent, and Security Registrar
shall have the same protections as the Trustee set forth hereunder; and
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(10) the Trustee shall not be liable with respect to any action taken,
suffered or omitted to be taken by it in good faith in accordance with an
Act of the Holders hereunder, and, to the extent not so provided herein,
with respect to any act requiring the Trustee to exercise its own
discretion, relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture or any
Securities, unless it shall be proved that, in connection with any such
action taken, suffered or omitted or any such act, the Trustee was
negligent, acted in bad faith or engaged in willful misconduct.
Section 6.2. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder with respect
to the Securities of any series, the Trustee shall transmit by mail to all
Holders of Securities of such series entitled to receive reports pursuant to
Section 7.3(3), notice of such default hereunder actually known to a Responsible
Officer of the Trustee, unless such default shall have been cured or waived;
provided, however, that, except in the case of a default in the payment of the
principal of (or premium, if any), or interest (including any Additional
Interest), if any, on, or Additional Amounts or any sinking fund or purchase
fund installment with respect to, any Security of such series, the Trustee shall
be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that the withholding
of such notice is in the best interest of the Holders of Securities and Coupons
of such series; and provided, further, that in the case of any default of the
character specified in Section 5.1(5) with respect to Securities of such series,
no such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default with respect to Securities of such series.
Section 6.3. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's
certificate of authentication, and in any Coupons shall be taken as the
statements of the Company or the Guarantor, as the case may be, and neither the
Trustee nor any Authenticating Agent assumes any responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities or the Coupons, except that
the Trustee represents that it is duly authorized to execute and deliver this
Indenture, authenticate the Securities and perform its obligations hereunder and
that the statements made by it in a Statement of Eligibility on Form T-1
supplied to the Company are true and accurate, subject to the qualifications set
forth therein. Neither the Trustee nor any Authenticating Agent shall be
accountable for the use or application by the Company of the Securities or the
proceeds thereof.
Section 6.4. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other Person that may be an agent of the Trustee or the
Guarantor or the Company, in its individual or any other capacity, may become
the owner or pledgee of Securities or Coupons
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and, subject to Sections 310(b) and 311 of the Trust Indenture Act, may
otherwise deal with the Company or the Guarantor with the same rights it would
have if it were not the Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other Person.
Section 6.5. Money Held in Trust.
Except as provided in Section 4.3 and Section 10.3, money held by the
Trustee in trust hereunder need not be segregated from other funds except to the
extent required by law and shall be held uninvested. The Trustee shall be under
no liability for interest on any money received by it hereunder except as
otherwise agreed to in writing with the Company or the Guarantor.
Section 6.6. Compensation and Reimbursement.
The Company and the Guarantor (without duplication) each agree:
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by the Trustee hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation
of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture or arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
the Trustee's negligence or bad faith; and
(3) to indemnify the Trustee and its agents, officers, directors and
employees for, and to hold them harmless against, any loss, liability or
expense incurred without negligence or bad faith on their part, arising out
of or in connection with the acceptance or administration of the trust or
trusts hereunder, including the costs and expenses of defending themselves
against any claim or liability in connection with the exercise or
performance of any of their powers or duties hereunder, except to the
extent that any such loss, liability or expense was due to the Trustee's
negligence or bad faith.
As security for the performance of the obligations of the Company and the
Guarantor under this Section, the Trustee shall have a lien prior to the
Securities of any series upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the payment of principal of, and
premium or interest (including any Additional Interest) on or any Additional
Amounts with respect to Securities or any Coupons appertaining thereto.
To the extent permitted by law, any compensation or expense incurred by the
Trustee after a default specified in or pursuant to Section 5.1 is intended to
constitute an expense of administration under any then applicable bankruptcy or
insolvency law. "Trustee" for purposes
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of this Section 6.6 shall include any predecessor Trustee but the negligence or
bad faith of any Trustee shall not affect the rights of any other Trustee under
this Section 6.6.
The provisions of this Section 6.6 shall survive the satisfaction and
discharge of this Indenture or the earlier resignation or removal of the Trustee
and shall apply with equal force and effect to the Trustee in its capacity as
Authenticating Agent, Paying Agent or Security Registrar.
Section 6.7. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder that is a Corporation
organized and doing business under the laws of the United States of America, any
state thereof or the District of Columbia, that is eligible under Section
310(a)(1) of the Trust Indenture Act to act as trustee under an indenture
qualified under the Trust Indenture Act and that has a combined capital and
surplus (computed in accordance with Section 310(a)(2) of the Trust Indenture
Act) of at least $50,000,000, and that is subject to supervision or examination
by Federal or state authority. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
Section 6.8. Resignation and Removal; Appointment of Successor.
(1) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee pursuant to Section 6.9.
(2) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company and
the Guarantor. If the instrument of acceptance by a successor Trustee
required by Section 6.9 shall not have been delivered to the Trustee within
30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to such series.
(3) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal
amount of the Outstanding Securities of such series, delivered to the
Trustee, the Company and the Guarantor.
(4) If at any time:
(a) the Trustee shall fail to comply with the obligations
imposed upon it under Section 310(b) of the Trust Indenture Act with
respect to Securities of any series after written request therefor by
the Company, the Guarantor or any Holder of a Security of such series
who has been a bona fide Holder of a Security of such series for at
least six months, or
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(b) the Trustee shall cease to be eligible under Section 6.7 and
shall fail to resign after written request therefor by the Company,
the Guarantor or any such Holder, or
(c) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then, in any
such case, (i) the Company, by or pursuant to a Board Resolution, or
the Guarantor, by or pursuant to a Guarantor's Board Resolution, may
remove the Trustee with respect to all Securities or the Securities of
such series, or (ii) subject to Section 315(e) of the Trust Indenture
Act, any Holder of a Security who has been a bona fide Holder of a
Security of such series for at least six months may, on behalf of
himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee with respect to
all Securities of such series and the appointment of a successor
Trustee or Trustees.
(5) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
with respect to the Securities of one or more series, the Company, by or
pursuant to a Board Resolution, and the Guarantor, by or pursuant to a
Guarantor's Board Resolution, shall promptly appoint a successor Trustee or
Trustees with respect to the Securities of such series (it being understood
that any such successor Trustee may be appointed with respect to the
Securities of one or more or all of such series and that at any time there
shall be only one Trustee with respect to the Securities of any particular
series) and shall comply with the applicable requirements of Section 6.9.
If, within one year after such resignation, removal or incapacity, or the
occurrence of such vacancy, a successor Trustee with respect to the
Securities of any series shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities of such series
delivered to the Company, the Guarantor and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 6.9,
become the successor Trustee with respect to the Securities of such series
and to that extent supersede the successor Trustee appointed by the Company
and the Guarantor. If no successor Trustee with respect to the Securities
of any series shall have been so appointed by the Company and the Guarantor
or the Holders of Securities and accepted appointment in the manner
required by Section 6.9, any Holder of a Security who has been a bona fide
Holder of a Security of such series for at least six months may, on behalf
of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
(6) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and
each appointment of a successor Trustee with respect to the Securities of
any series by mailing written notice of
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such event by first-class mail, postage prepaid, to the Holders of
Registered Securities, if any, of such series as their names and addresses
appear in the Security Register and, if Securities of such series are
issued as Bearer Securities, by publishing notice of such event once in an
Authorized Newspaper in each Place of Payment located outside the United
States. Each notice shall include the name of the successor Trustee with
respect to the Securities of such series and the address of its Corporate
Trust Office.
(7) In no event shall any retiring Trustee be liable for the acts or
omissions of any successor Trustee hereunder.
Section 6.9. Acceptance of Appointment by Successor.
(1) Upon the appointment hereunder of any successor Trustee with
respect to all Securities, such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company, the Guarantor and the
retiring Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee shall become effective
and such successor Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and duties
hereunder of the retiring Trustee; but, on the request of the Company, the
Guarantor or such successor Trustee, such retiring Trustee, upon payment of
its charges, shall execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee
and, subject to Section 10.3, shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder, subject nevertheless to its claim, if any, provided for in
Section 6.6.
(2) Upon the appointment hereunder of any successor Trustee with
respect to the Securities of one or more (but not all) series, the Company,
the Guarantor, the retiring Trustee and such successor Trustee shall
execute and deliver an indenture supplemental hereto wherein each successor
Trustee shall accept such appointment and which (1) shall contain such
provisions as shall be necessary or desirable to transfer and confirm to,
and to vest in, such successor Trustee all the rights, powers, trusts and
duties of the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates,
(2) if the retiring Trustee is not retiring with respect to all Securities,
shall contain such provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series as to which
the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee, and (3) shall add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust, that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart
from any trust or trusts hereunder administered by any other such Trustee
and that no Trustee shall be responsible for any notice given to, or
received by, or any act or failure to act on the part of any other Trustee
hereunder, and, upon the
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execution and delivery of such supplemental indenture, the resignation or
removal of the retiring Trustee shall become effective to the extent
provided therein, such retiring Trustee shall have no further
responsibility for the exercise of rights and powers or for the performance
of the duties and obligations vested in the Trustee under this Indenture
with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates other than as hereinafter
expressly set forth, and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates;
but, on request of the Company, the Guarantor or such successor Trustee,
such retiring Trustee, upon payment of its charges with respect to the
Securities of that or those series to which the appointment of such
successor Trustee relates and subject to Section 10.3 shall duly assign,
transfer and deliver to such successor Trustee, to the extent contemplated
by such supplemental indenture, the property and money held by such
retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates, subject
to its claim, if any, provided for in Section 6.6.
(3) Upon request of any Person appointed hereunder as a successor
Trustee, the Company and the Guarantor shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts referred to in
paragraph (1) or (2) of this Section, as the case may be.
(4) No Person shall accept its appointment hereunder as a successor
Trustee unless at the time of such acceptance such successor Person shall
be qualified and eligible under this Article.
Section 6.10. Merger, Conversion, Consolidation or Succession to Business.
Any Corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any Corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, shall be the
successor of the Trustee hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto. In case any
Securities shall have been authenticated but not delivered by the Trustee then
in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
Section 6.11. Appointment of Authenticating Agent.
The Trustee may appoint one or more Authenticating Agents acceptable to the
Company with respect to one or more series of Securities which shall be
authorized to act on behalf of the Trustee to authenticate Securities of that or
those series issued upon original issue, exchange, registration of transfer,
partial redemption or partial repayment or pursuant to Section 3.6, and
Securities so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. Wherever reference is
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made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent.
Each Authenticating Agent must be acceptable to the Company and the
Guarantor and, except as provided in or pursuant to this Indenture, shall at all
times be a corporation that would be permitted by the Trust Indenture Act to act
as trustee under an indenture qualified under the Trust Indenture Act, is
authorized under applicable law and by its charter to act as an Authenticating
Agent and has a combined capital and surplus (computed in accordance with
Section 310(a)(2) of the Trust Indenture Act) of at least $50,000,000. If at
any time an Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, it shall resign immediately in the manner and
with the effect specified in this Section.
Any Corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any Corporation succeeding to all or substantially all of
the corporate agency or corporate trust business of an Authenticating Agent,
shall be the successor of such Authenticating Agent hereunder, provided such
Corporation shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the Trustee
or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee, the Company and the Guarantor. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent, the Company and the Guarantor. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time such Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and the Guarantor
and shall (i) mail written notice of such appointment by first-class mail,
postage prepaid, to all Holders of Registered Securities, if any, of the series
with respect to which such Authenticating Agent shall serve, as their names and
addresses appear in the Security Register, and (ii) if Securities of the series
are issued as Bearer Securities, publish notice of such appointment at least
once in an Authorized Newspaper in the place where such successor Authenticating
Agent has its principal office if such office is located outside the United
States. Any successor Authenticating Agent, upon acceptance of its appointment
hereunder, shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
The Company and the Guarantor (without duplication) each agree to pay each
Authenticating Agent from time to time reasonable compensation for its services
under this Section. If the Trustee makes such payments, it shall be entitled to
be reimbursed for such payments, subject to the provisions of Section 6.6.
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The provisions of Sections 3.8, 6.3 and 6.4 shall be applicable to each
Authenticating Agent.
If an Authenticating Agent is appointed with respect to one or more series
of Securities pursuant to this Section, the Securities of such series may have
endorsed thereon, in addition to or in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
This is one of the Securities of the series designated herein referred to
in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO, as
Trustee
By___________________________________
as Authenticating Agent
By___________________________________
Authorized Officer
If all of the Securities of any series may not be originally issued at one
time, and if the Trustee does not have an office capable of authenticating
Securities upon original issuance located in a Place of Payment where the
Company wishes to have Securities of such series authenticated upon original
issuance, the Trustee, if so requested in writing (which writing need not be
accompanied by or contained in an Officer's Certificate by the Company), shall
appoint in accordance with this Section an Authenticating Agent having an office
in a Place of Payment designated by the Company with respect to such series of
Securities.
ARTICLE 7
Holders Lists and Reports by Trustee, Guarantor and Company
Section 7.1. Company and Guarantor to Furnish Trustee Names and Addresses
of Holders.
In accordance with Section 312(a) of the Trust Indenture Act, the Company
and the Guarantor shall furnish or cause to be furnished to the Trustee
(1) semi-annually with respect to Securities of each series not later
than May 1 and November 1 of the year or upon such other dates as are set
forth in or pursuant to the Board Resolution or indenture supplemental
hereto authorizing such series, a list,
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in each case in such form as the Trustee may reasonably require, of the
names and addresses of Holders as of the applicable date, and
(2) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company or the Guarantor of any such
request, a list of similar form and content as of a date not more than 15
days prior to the time such list is furnished,
provided, however, that so long as the Trustee is the Security Registrar no such
list shall be required to be furnished.
Section 7.2. Preservation of Information; Communications to Holders.
The Trustee shall comply with the obligations imposed upon it pursuant to
Section 312 of the Trust Indenture Act.
Every Holder of Securities or Coupons, by receiving and holding the same,
agrees with the Company, the Guarantor and the Trustee that none of the Company,
the Guarantor, the Trustee, any Paying Agent or any Security Registrar shall be
held accountable by reason of the disclosure of any such information as to the
names and addresses of the Holders of Securities in accordance with Section
312(c) of the Trust Indenture Act, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Section 312(b)
of the Trust Indenture Act.
Section 7.3. Reports by Trustee.
(1) Within 60 days after September 15 of each year commencing with
the first September 15 following the first issuance of Securities pursuant
to Section 3.1, if required by Section 313(a) of the Trust Indenture Act,
the Trustee shall transmit, pursuant to Section 313(c) of the Trust
Indenture Act, a brief report dated as of such September 15 with respect to
any of the events specified in said Section 313(a) which may have occurred
since the later of the immediately preceding September 15 and the date of
this Indenture.
(2) The Trustee shall transmit the reports required by Section 313(a)
of the Trust Indenture Act at the times specified therein.
(3) Reports pursuant to this Section shall be transmitted in the
manner and to the Persons required by Sections 313(c) and 313(d) of the
Trust Indenture Act.
Section 7.4. Reports by Company and Guarantor.
The Company and the Guarantor, pursuant to Section 314(a) of the Trust
Indenture Act, shall each:
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(1) file with the Trustee, within 15 days after the Company or the
Guarantor, as the case may be, is required to file the same with the
Commission, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as
the Commission may from time to time by rules and regulations prescribe)
which the Company or the Guarantor, as the case may be, may be required to
file with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended; or, if the Company or the
Guarantor, as the case may be, is not required to file information,
documents or reports pursuant to either of said Sections, then it shall
file with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended, in respect of a security listed and registered on a national
securities exchange as may be prescribed from time to time in such rules
and regulations;
(2) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company or the Guarantor, as the case may be, with the conditions and
covenants of this Indenture as may be required from time to time by such
rules and regulations; and
(3) transmit within 30 days after the filing thereof with the
Trustee, in the manner and to the extent provided in Section 313(c) of the
Trust Indenture Act, such summaries of any information, documents and
reports required to be filed by the Company or the Guarantor, as the case
may be, pursuant to paragraphs (1) and (2) of this Section as may be
required by rules and regulations prescribed from time to time by the
Commission.
ARTICLE 8
Consolidation, Amalgamations, Merger and Sales
Section 8.1. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate or amalgamate with or merge into any
other Person (whether or not affiliated with the Company), or convey, transfer
or lease its properties and assets as an entirety or substantially as an
entirety to any other Person (whether or not affiliated with the Company), and
the Company shall not permit any other Person (whether or not affiliated with
the Company) to consolidate or amalgamate with or merge into the Company or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to the Company; unless:
(1) in case the Company shall consolidate or amalgamate with or merge
into another Person or convey, transfer or lease its properties and assets
as an entirety or substantially as an entirety to any Person, the Person
formed by such consolidation or
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amalgamation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company as an entirety or substantially as an entirety shall
be a Corporation organized and existing under the laws of the United States
of America or any state thereof or the District of Columbia and shall
expressly assume, by an indenture (or indentures, if at such time there is
more than one Trustee) supplemental hereto, executed by the successor
Person and the Guarantor and delivered to the Trustee the due and punctual
payment of the principal of, any premium and interest (including any
Additional Interest) on and any Additional Amounts with respect to all the
Securities and the performance of every obligation in this Indenture and
the Outstanding Securities on the part of the Company to be performed or
observed and shall provide for conversion or exchange rights in accordance
with the provisions of the Securities of any series that are convertible or
exchangeable into Common Stock or other securities;
(2) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or a Subsidiary
as a result of such transaction as having been incurred by the Company or
such Subsidiary at the time of such transaction, no Event of Default or
event which, after notice or lapse of time, or both, would become an Event
of Default, shall have occurred and be continuing;
(3) in the case of the Securities of a series issued to an ACE Trust,
such transaction is permitted under the related Trust Agreement and
Preferred Securities Guarantee and does not give rise to any breach or
violation of such Trust Agreement or Preferred Securities Guarantee; and
(4) either the Company or the successor Person shall have delivered
to the Trustee an Officer's Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, conveyance, transfer or lease and,
if a supplemental indenture is required in connection with such
transaction, such supplemental indenture comply with this Article and that
all conditions precedent herein provided for relating to such transaction
have been complied with.
Section 8.2. Successor Person Substituted for Company.
Upon any consolidation or amalgamation by the Company with or merger of the
Company into any other Person or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety to any Person
in accordance with Section 8.1, the successor Person formed by such
consolidation or amalgamation or into which the Company is merged or to which
such conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such successor Person had been named as the Company
herein; and thereafter, except in the case of a lease, the predecessor Person
shall be released from all obligations and covenants under this Indenture, the
Securities and the Coupons.
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Section 8.3. Guarantor May Consolidate, Etc., Only on Certain Terms.
The Guarantor shall not consolidate or amalgamate with or merge into any
other Person (whether or not affiliated with the Guarantor), or convey, transfer
or lease its properties and assets as an entirety or substantially as an
entirety to any other Person (whether or not affiliated with the Guarantor), and
the Guarantor shall not permit any other Person (whether or not affiliated with
the Guarantor) to consolidate or amalgamate with or merge into the Guarantor or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to the Guarantor; unless:
(1) in case the Guarantor shall consolidate or amalgamate with or
merge into another Person or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to any Person, the
Person formed by such consolidation or amalgamation or into which the
Guarantor is merged or the Person which acquires by conveyance or transfer,
or which leases, the properties and assets of the Guarantor as an entirety
or substantially as an entirety shall be a Corporation organized and
existing under the laws of the United States of America, any state thereof
or the District of Columbia, Bermuda or the Cayman Islands and shall
expressly assume, by an indenture (or indentures, if at such time there is
more than one Trustee) supplemental hereto, executed by the successor
Person and the Company and delivered to the Trustee the due and punctual
payment of the principal of, any premium and interest (including any
Additional Interest) on and any Additional Amounts with respect to all the
Securities and the performance of every obligation in this Indenture and
the Outstanding Securities on the part of the Guarantor to be performed or
observed and shall provide for conversion or exchange rights in accordance
with the provisions of the Securities of any series that are convertible or
exchangeable into Common Stock or other securities;
(2) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Guarantor or a
Subsidiary as a result of such transaction as having been incurred by the
Guarantor or such Subsidiary at the time of such transaction, no Event of
Default or event which, after notice or lapse of time, or both, would
become an Event of Default, shall have occurred and be continuing; and
(3) either the Guarantor or the successor Person shall have delivered
to the Trustee a Guarantor's Officer's Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, conveyance, transfer
or lease and, if a supplemental indenture is required in connection with
such transaction, such supplemental indenture comply with this Article and
that all conditions precedent herein provided for relating to such
transaction have been complied with.
Section 8.4. Successor Person Substituted for Guarantor.
Upon any consolidation or amalgamation by the Guarantor with or merger of
the Guarantor into any other Person or any conveyance, transfer or lease of the
properties and assets of the Guarantor substantially as an entirety to any
Person in accordance with Section 8.3, the
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successor Person formed by such consolidation or amalgamation or into which the
Guarantor is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Guarantor under this Indenture with the same effect as if such successor
Person had been named as the Guarantor herein; and thereafter, except in the
case of a lease, the predecessor Person shall be released from all obligations
and covenants under this Indenture, the Securities and the Coupons.
ARTICLE 9
Supplemental Indentures
Section 9.1. Supplemental Indentures without Consent of Holders.
Without the consent of any Holders of Securities or Coupons, the Company
(when authorized by or pursuant to a Board Resolution), the Guarantor (when
authorized by or pursuant to a Guarantor's Board Resolution) and the Trustee, at
any time and from time to time, may enter into one or more indentures
supplemental hereto, for any of the following purposes:
(1) to evidence the succession of another Person to the Company or
the Guarantor, and the assumption by any such successor of the covenants of
the Company or the Guarantor, as the case may be, contained herein and in
the Securities; or
(2) to add to the covenants of the Company or the Guarantor, as the
case may be, for the benefit of the Holders of all or any series of
Securities (as shall be specified in such supplemental indenture or
indentures) or to surrender any right or power herein conferred upon the
Company or the Guarantor, as the case may be; or
(3) to add to or change any of the provisions of this Indenture to
provide that Bearer Securities may be registrable as to principal, to
change or eliminate any restrictions on the payment of principal of, any
premium or interest (including any Additional Interest) on or any
Additional Amounts with respect to Securities, to permit Bearer Securities
to be issued in exchange for Registered Securities, to permit Bearer
Securities to be exchanged for Bearer Securities of other authorized
denominations or to permit or facilitate the issuance of Securities in
uncertificated form, provided any such action shall not adversely affect
the interests of the Holders of Outstanding Securities of any series or any
Coupons appertaining thereto in any material respect; or
(4) to establish the form or terms of Securities of any series and
any Coupons appertaining thereto as permitted by Sections 2.1 and 3.1; or
(5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 6.9; or
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(6) to cure any ambiguity or to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not adversely affect the
interests of the Holders of Securities of any series then Outstanding or
any Coupons appertaining thereto or, in the case of Securities of a series
issued to an ACE Trust and for so long as any of the Preferred Securities
issued by such ACE Trust shall remain outstanding, the holders of such
Preferred Securities, in any material respect; or
(7) to add to, delete from or revise the conditions, limitations and
restrictions on the authorized amount, terms or purposes of issue,
authentication and delivery of Securities, as herein set forth; or
(8) to add any additional Events of Default with respect to all or
any series of Securities (as shall be specified in such supplemental
indenture); or
(9) to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the defeasance and
discharge of any series of Securities pursuant to Article 4, provided that
any such action shall not adversely affect the interests of any Holder of
an Outstanding Security of such series and any Coupons appertaining thereto
or any other Outstanding Security or Coupon or, in the case of Securities
of a series issued to an ACE Trust and for so long as any of the Preferred
Securities issued by such ACE Trust shall remain outstanding, the holders
of such Preferred Securities, in any material respect; or
(10) to secure the Securities; or
(11) to make provisions with respect to conversion or exchange rights
of Holders of Securities of any series; or
(12) to amend or supplement any provision contained herein or in any
supplemental indenture, provided that no such amendment or supplement shall
materially adversely affect the interests of the Holders of any Securities
then Outstanding.
Section 9.2. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture (and, in the case of any series of Securities held as
assets of an ACE Trust, such consent of holders of the Preferred Securities and
the Common Securities of such ACE Trust as may be required under the Trust
Agreement of such ACE Trust), by Act of said Holders delivered to the Company,
the Guarantor and the Trustee, the Company (when authorized by or pursuant to a
Company's Board Resolution), the Guarantor (when authorized by or pursuant to a
Guarantor's Board Resolution) and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this
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Indenture or of modifying in any manner the rights of the Holders of Securities
of such series under this Indenture or of the Securities of such series;
provided, however, that no such supplemental indenture, without the consent of
the Holder of each Outstanding Security affected thereby, shall
(1) change the Stated Maturity of the principal of, or any premium or
installment of interest (including any Additional Interest) on or any
Additional Amounts with respect to, any Security, or reduce the principal
amount thereof or the rate (or modify the calculation of such rate) of
interest (including any Additional Interest) thereon or any Additional
Amounts with respect thereto, or any premium payable upon the redemption
thereof or otherwise, or change the obligation of the Company and the
Guarantor to pay Additional Amounts pursuant to the terms hereof (except as
contemplated by Section 8.1(1) and permitted by Section 9.1(1)), or reduce
the amount of the principal of an Original Issue Discount Security that
would be due and payable upon a declaration of acceleration of the Maturity
thereof pursuant to Section 5.2 or the amount thereof provable in
bankruptcy pursuant to Section 5.4, change the redemption provisions or
adversely affect the right of repayment at the option of any Holder as
contemplated by Article 13, or change the Place of Payment, Currency in
which the principal of, any premium or interest (including any Additional
Interest) on, or any Additional Amounts with respect to any Security is
payable, or impair the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date or, in the case of repayment at
the option of the Holder, on or after the date for repayment), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or reduce the requirements of Section 15.4 for quorum or voting,
or
(3) modify any of the provisions of this Indenture relating to the
subordination of the Securities or the Guarantee in respect thereof in a
manner adverse to Holders of Securities, or
(4) modify or effect in any manner adverse to the Holders the terms
and conditions of the obligations of the Guarantor in respect of the due
and punctual payments of principal of, or any premium or interest
(including any Additional Interest) on, or any sinking fund requirements or
Additional Amounts with respect to, the Securities, or
(5) modify any of the provisions of this Section, Section 5.13 or
Section 10.6, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby, or
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(6) make any change that adversely affects the right to convert or
exchange any Security into or for securities of the Company or the
Guarantor or other securities, cash or property in accordance with its
terms,
provided that, in the case of the Securities of a series issued to an ACE Trust,
so long as any of the Preferred Securities of such ACE Trust remain outstanding,
no such amendment shall be made that adversely affects the holders of such
Preferred Securities, and no termination of this Indenture shall occur, and no
waiver of any Event of Default or compliance with any covenant under this
Indenture shall be effective, without the prior consent of the holders of at
least a majority of the liquidation amount of such Preferred Securities then
outstanding unless and until the principal of, any premium or, subject to
Section 3.7, interest (including any Additional Interest) on, and any Additional
Amounts with respect to, the Securities of such series have been paid in full;
and provided further that in the case of the Securities of a series issued to an
ACE Trust, so long as any of the Preferred Securities of such ACE Trust remain
outstanding, no amendment shall be made to Section 5.8 of this Indenture without
the prior consent of the holder of each Preferred Security then outstanding
unless and until the principal of, any premium or, subject to Section 3.7,
interest (including any Additional Interest) on, and any Additional Amounts with
respect to, the Securities of such series have been paid in full.
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which shall have been included expressly and solely
for the benefit of one or more particular series of Securities, or which
modifies the rights of the Holders of Securities of such series with respect to
such covenant or other provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders of Securities or holders
of Preferred Securities under this Section to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if such Act shall
approve the substance thereof.
Section 9.3. Execution of Supplemental Indentures.
As a condition to executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trust created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 315 of the Trust Indenture Act) shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture and an
Officer's Certificate and Guarantor's Officer's Certificate stating that all
conditions precedent to the execution of such supplemental indenture have been
fulfilled. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Section 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this
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Indenture for all purposes; and every Holder of a Security theretofore or
thereafter authenticated and delivered hereunder and of any Coupon appertaining
thereto shall be bound thereby.
Section 9.5. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
Section 9.6. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.7. Effect on Senior Indebtedness.
No supplemental indenture shall directly or indirectly modify or eliminate
the provisions of Article 16 or Article 18, as the case may be, in any manner
which might terminate or impair the subordination of the Securities of any
series to Company Senior Indebtedness with respect to such series or the
subordination of the Guarantee in respect thereof to Guarantor Senior
Indebtedness with respect to such series, respectively, without the prior
written consent of the holders of such Company Senior Indebtedness or Guarantor
Senior Indebtedness, respectively.
Section 9.8. Notice of Supplemental Indenture.
Promptly after the execution by the Company, the Guarantor and the Trustee
of any supplemental indenture pursuant to Section 9.2, the Company shall
transmit to the Holders of Outstanding Securities of any series affected thereby
a notice setting forth the substance of such supplemental indenture.
ARTICLE 10
Covenants
Section 10.1. Payment of Principal, any Premium, Interest and Additional
Amounts.
The Company covenants and agrees for the benefit of the Holders of the
Securities of each series that it will duly and punctually pay the principal of,
any premium and interest (including any Additional Interest) on and any
Additional Amounts with respect to the Securities of such series in accordance
with the terms thereof, any Coupons appertaining thereto and this Indenture.
Any interest due on any Bearer Security on or before the Maturity thereof, and
any
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Additional Amounts payable with respect to such interest, shall be payable only
upon presentation and surrender of the Coupons appertaining thereto for such
interest as they severally mature.
Section 10.2. Maintenance of Office or Agency.
The Company and the Guarantor shall maintain in each Place of Payment for
any series of Securities an Office or Agency where Securities of such series
(but not Bearer Securities, except as otherwise provided below, unless such
Place of Payment is located outside the United States) may be presented or
surrendered for payment, where Securities of such series may be surrendered for
registration of transfer or exchange, where Securities of such series that are
convertible or exchangeable may be surrendered for conversion or exchange, and
where notices and demands to or upon the Company or the Guarantor in respect of
the Securities of such series relating thereto and this Indenture may be served.
If Securities of a series are issuable as Bearer Securities, the Company and the
Guarantor shall maintain, subject to any laws or regulations applicable thereto,
an Office or Agency in a Place of Payment for such series which is located
outside the United States where Securities of such series and any Coupons
appertaining thereto may be presented and surrendered for payment; provided,
however, that if the Securities of such series are listed on The Stock Exchange
of the United Kingdom and the Republic of Ireland or the Luxembourg Stock
Exchange or any other stock exchange located outside the United States and such
stock exchange shall so require, the Company and the Guarantor shall maintain a
Paying Agent in London, Luxembourg or any other required city located outside
the United States, as the case may be, so long as the Securities of such series
are listed on such exchange. The Company and the Guarantor will give prompt
written notice to the Trustee of the location, and any change in the location,
of such Office or Agency. If at any time the Company or the Guarantor shall
fail to maintain any such required Office or Agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee,
except that Bearer Securities of such series and any Coupons appertaining
thereto may be presented and surrendered for payment at the place specified for
the purpose with respect to such Securities as provided in or pursuant to this
Indenture, and the Company and the Guarantor hereby appoint the Trustee as their
agent to receive all such presentations, surrenders, notices and demands.
Except as otherwise provided in or pursuant to this Indenture, no payment
of principal, premium, interest or Additional Amounts with respect to Bearer
Securities shall be made at any Office or Agency in the United States or by
check mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States; provided, however, if
amounts owing with respect to any Bearer Securities shall be payable in Dollars,
payment of principal of, any premium or interest on and any Additional Amounts
with respect to any such Security may be made at the Corporate Trust Office of
the Trustee or any Office or Agency designated by the Company and the Guarantor
in the Borough of Manhattan, The City of New York, if (but only if) payment of
the full amount of such principal, premium, interest or Additional Amounts at
all offices outside the United States maintained for such purpose by the
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Company and the Guarantor in accordance with this Indenture is illegal or
effectively precluded by exchange controls or other similar restrictions.
The Company and the Guarantor may also from time to time designate one or
more other Offices or Agencies where the Securities of one or more series may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company or the Guarantor of its
obligation to maintain an Office or Agency in each Place of Payment for
Securities of any series for such purposes. The Company and the Guarantor shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other Office or Agency. Unless
otherwise provided in or pursuant to this Indenture, the Company and the
Guarantor hereby designate as the Place of Payment for each series of Securities
the Borough of Manhattan, The City of New York, and initially appoint the
Corporate Trust Office of the Trustee as the Office or Agency of the Company in
the Borough of Manhattan, The City of New York for such purpose. The Company
and the Guarantor may subsequently appoint a different Office or Agency in the
Borough of Manhattan, The City of New York for the Securities of any series.
Unless otherwise specified with respect to any Securities pursuant to
Section 3.1, if and so long as the Securities of any series (i) are denominated
in a Foreign Currency or (ii) may be payable in a Foreign Currency, or so long
as it is required under any other provision of this Indenture, then the Company
will maintain with respect to each such series of Securities, or as so required,
at least one exchange rate agent.
Section 10.3. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, or if the
Guarantor shall act as Paying Agent, with respect to any series of Securities,
it shall, on or before each due date of the principal of, any premium or
interest (including any Additional Interest) on or Additional Amounts with
respect to any of the Securities of such series, segregate and hold in trust for
the benefit of the Persons entitled thereto a sum in the currency or currencies,
currency unit or units or composite currency or currencies in which the
Securities of such series are payable (except as otherwise specified pursuant to
Section 3.1 for the Securities of such series) sufficient to pay the principal
or any premium, interest (including any Additional Interest) or Additional
Amounts so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and shall promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any series of
Securities, it shall, on or prior to each due date of the principal of, any
premium or interest (including any Additional Interest) on or any Additional
Amounts with respect to any Securities of such series, deposit with any Paying
Agent a sum (in the currency or currencies, currency unit or units or composite
currency or currencies described in the preceding paragraph) sufficient to pay
the principal or any premium, interest (including any Additional Interest) or
Additional Amounts so becoming due, such sum to be held in trust for the benefit
of the Persons entitled
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thereto, and (unless such Paying Agent is the Trustee) the Company will promptly
notify the Trustee of its action or failure so to act.
The Company shall cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent shall:
(1) hold all sums held by it for the payment of the principal of, any
premium or interest (including any Additional Interest) on or any
Additional Amounts with respect to Securities of such series in trust for
the benefit of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as provided in or pursuant to this
Indenture;
(2) give the Trustee notice of any default by the Company or the
Guarantor (or any other obligor upon the Securities of such series) in the
making of any payment of principal, any premium or interest (including any
Additional Interest) on or any Additional Amounts with respect to the
Securities of such series; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company or the Guarantor may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Company Order or Guarantor Order direct any Paying Agent to pay, to the
Trustee all sums held in trust by the Company, the Guarantor or such Paying
Agent, such sums to be held by the Trustee upon the same terms as those upon
which such sums were held by the Company, the Guarantor or such Paying Agent;
and, upon such payment by any Paying Agent to the Trustee, such Paying Agent
shall be released from all further liability with respect to such sums.
Except as otherwise provided herein or pursuant hereto, any money deposited
with the Trustee or any Paying Agent, or then held by the Company or the
Guarantor, in trust for the payment of the principal of, any premium or interest
(including any Additional Interest) on or any Additional Amounts with respect to
any Security of any series or any Coupon appertaining thereto and remaining
unclaimed for two years after such principal or any such premium or interest or
any such Additional Amounts shall have become due and payable shall be paid to
the Company on Company Request (or if deposited by the Guarantor, paid to the
Guarantor on Guarantor Request), or (if then held by the Company or the
Guarantor) shall be discharged from such trust; and the Holder of such Security
or any Coupon appertaining thereto shall thereafter, as an unsecured general
creditor, look only to the Company and the Guarantor for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company and the
Guarantor cause to be published once, in an Authorized Newspaper in each Place
of Payment for such series or to be mailed to Holders of Registered
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Securities of such series, or both, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication or mailing nor shall it be later than two years
after such principal and any premium or interest or Additional Amounts shall
have become due and payable, any unclaimed balance of such money then remaining
will be repaid to the Company or the Guarantor, as the case may be.
Section 10.4. Additional Amounts.
If any Securities of a series provide for the payment of Additional
Amounts, the Company agrees to pay to the Holder of any such Security or any
Coupon appertaining thereto Additional Amounts as provided in or pursuant to
this Indenture or such Securities. Whenever in this Indenture there is
mentioned, in any context, the payment of the principal of or any premium or
interest on, or in respect of, any Security of any series or any Coupon or the
net proceeds received on the sale or exchange of any Security of any series,
such mention shall be deemed to include mention of the payment of Additional
Amounts provided by the terms of such series established hereby or pursuant
hereto to the extent that, in such context, Additional Amounts are, were or
would be payable in respect thereof pursuant to such terms, and express mention
of the payment of Additional Amounts (if applicable) in any provision hereof
shall not be construed as excluding Additional Amounts in those provisions
hereof where such express mention is not made.
Except as otherwise provided in or pursuant to this Indenture or the
Securities of the applicable series, if the Securities of a series provide for
the payment of Additional Amounts, at least 10 days prior to the first Interest
Payment Date with respect to such series of Securities (or if the Securities of
such series shall not bear interest prior to Maturity, the first day on which a
payment of principal is made), and at least 10 days prior to each date of
payment of principal or interest if there has been any change with respect to
the matters set forth in the below-mentioned Officer's Certificate, the Company
shall furnish to the Trustee and the principal Paying Agent or Paying Agents, if
other than the Trustee, an Officer's Certificate instructing the Trustee and
such Paying Agent or Paying Agents whether such payment of principal of and
premium, if any, or interest on the Securities of such series shall be made to
Holders of Securities of such series or the Coupons appertaining thereto who are
United States Aliens without withholding for or on account of any tax,
assessment or other governmental charge described in the Securities of such
series. If any such withholding shall be required, then such Officer's
Certificate shall specify by country the amount, if any, required to be withheld
on such payments to such Holders of Securities or Coupons, and the Company
agrees to pay to the Trustee or such Paying Agent the Additional Amounts
required by the terms of such Securities. The Company covenants to indemnify
the Trustee and any Paying Agent for, and to hold them harmless against, any
loss, liability or expense reasonably incurred without negligence or bad faith
on their part arising out of or in connection with actions taken or omitted by
any of them in reliance on any Officer's Certificate furnished pursuant to this
Section 10.4.
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Section 10.5. Corporate Existence.
Subject to Article 8, the Company and the Guarantor shall do or cause to be
done all things necessary to preserve and keep in full force and effect their
respective corporate existences and that of each of their respective
Subsidiaries and their respective rights (charter and statutory) and franchises;
provided, however, that the foregoing shall not obligate the Company or the
Guarantor or any of their respective Subsidiaries to preserve any such right or
franchise if the Company, the Guarantor or any such Subsidiary shall determine
that the preservation thereof is no longer desirable in the conduct of its
business or the business of such Subsidiary and that the loss thereof is not
disadvantageous in any material respect to any Holder.
Section 10.6. Waiver of Certain Covenants.
The Company or the Guarantor, as the case may be, may omit in any
particular instance to comply with any term, provision or condition set forth in
Section 10.5 with respect to the Securities of any series if before the time for
such compliance the Holders of at least a majority in principal amount of the
Outstanding Securities of such series, by Act of such Holders, either shall
waive such compliance in such instance or generally shall have waived compliance
with such term, provision or condition, but no such waiver shall extend to or
affect such term, provision or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of the
Company and the Guarantor and the duties of the Trustee in respect of any such
term, provision or condition shall remain in full force and effect.
Section 10.7. Company Statement as to Compliance; Notice of Certain
Defaults.
(1) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year, a written statement (which need not be
contained in or accompanied by an Officer's Certificate) signed by the
principal executive officer, the principal financial officer or the
principal accounting officer of the Company, stating that
(a) a review of the activities of the Company during such year
and of its performance under this Indenture has been made under his or
her supervision, and
(b) to the best of his or her knowledge, based on such review,
(a) the Company has complied with all the conditions and covenants
imposed on it under this Indenture throughout such year, or, if there
has been a default in the fulfillment of any such condition or
covenant, specifying each such default known to him or her and the
nature and status thereof, and (b) no event has occurred and is
continuing which is, or after notice or lapse of time or both would
become, an Event of Default, or, if such an event has occurred and is
continuing, specifying each such event known to him and the nature and
status thereof.
(2) The Company shall deliver to the Trustee, within five days after
the occurrence thereof, written notice of any Event of Default or any event
which after notice
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or lapse of time or both would become an Event of Default pursuant to
clause (4) of Section 5.1.
(3) The Trustee shall have no duty to monitor the Company's
compliance with the covenants contained in this Article 10 other than as
specifically set forth in this Section 10.7.
Section 10.8. Guarantor Statement as to Compliance; Notice of Certain
Defaults.
(1) The Guarantor shall deliver to the Trustee, within 120 days after
the end of each fiscal year, a written statement (which need not be
contained in or accompanied by a Guarantor's Officer's Certificate) signed
by the principal executive officer, the principal financial officer or the
principal accounting officer of the Guarantor, stating that
(a) a review of the activities of the Guarantor during such year
and of performance under this Indenture has been made under his or her
supervision, and
(b) to the best of his or her knowledge, based on such review,
(a) the Guarantor has complied with conditions and covenants imposed
on it under this Indenture throughout such year, or, if there has been
a default in the fulfillment of any such condition or covenant,
specifying each such default known to him or her and the nature and
status thereof, and (b) no event has occurred and is continuing which
constitutes, or which after notice or lapse of time or both would
become, an Event of Default, or, if such an event has occurred and is
continuing, specifying each such event known to him and the nature and
status thereof.
(2) The Guarantor shall deliver to the Trustee, within five days
after the occurrence thereof, written notice of any event which after
notice or lapse of time or both would become an Event of Default pursuant
to clause (4) of Section 5.1.
(3) The Trustee shall have no duty to monitor the Guarantor's
compliance with the covenants contained in this Article 10 other than as
specifically set forth in this Section 10.8.
Section 10.9. Additional Sums.
In the case of Securities of a series issued to an ACE Trust, except as
otherwise specified as contemplated by Section 3.1, in the event that (i) such
ACE Trust is the Holder of all of the Outstanding Securities of such series,
(ii) a Tax Event in respect of such ACE Trust shall have occurred and be
continuing and (iii) the Company shall not have (i) redeemed the Securities of
such series pursuant to Section 11.8 or (ii) terminated such ACE Trust pursuant
to Section 9.2(b) of the related Trust Agreement, the Company shall pay to such
ACE Trust (and its permitted successors or assigns under the related Trust
Agreement), for so long as such ACE Trust (or its permitted successor or
assignee) is the registered holder of any Securities of such series, such
additional amounts as may be necessary in order that the amount of Distributions
then due and
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payable by such ACE Trust on the related Preferred Securities and Common
Securities that at any time remain outstanding in accordance with the terms
thereof shall not be reduced as a result of any Additional Taxes (the
"Additional Sums"). Whenever in this Indenture there is mentioned, in any
context, the payment of the principal of or any premium or interest on, or in
respect of, any Security of any series or any Coupon or the net proceeds
received on the sale or exchange of any Security of any series, such mention
shall be deemed to include mention of the payment of Additional Sums provided by
the terms of such series established hereby or pursuant hereto to the extent
that, in such context, Additional Sums are, were or would be payable in respect
thereof pursuant to such terms, and express mention of the payment of Additional
Sums (if applicable) in any provision hereof shall not be construed as excluding
Additional Sums in those provisions hereof where such express mention is not
made, provided, however, that the extension of an interest payment period
pursuant to Section 3.11 or the terms of the applicable Securities shall not
extend the payment of any Additional Sums that may be due and payable during
such interest payment period.
Section 10.10. Prohibition Against Dividends, etc.
Except as otherwise specified as contemplated by Section 3.1, the Company
and the Guarantor each covenant and agree with each Holder of Securities of a
series issued to an ACE Trust that it will not, and will not permit any of its
Subsidiaries to, (a) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the outstanding capital stock of the Company or the Guarantor, as the case may
be, or (b) make any payment of principal of, interest or premium, if any, on or
repay, repurchase or redeem any debt security of the Company or the Guarantor,
as the case may be, that ranks junior in interest to the Securities of such
series or the Guarantee in respect thereof, as the case may be, or make any
guarantee payments with respect to any guarantee by the Company or the
Guarantor, as the case may be, of the debt securities of any Subsidiary of the
Company or the Guarantor, as the case may be, if such guarantee ranks junior in
interest to the Securities of such series or the Guarantee in respect thereof,
as the case may be (other than (i) dividends or distributions on the Capital
Stock of the Company paid or made to the Guarantor and dividends or
distributions in Common Stock of the Company or the Guarantor, as the case may
be, (ii) redemptions or purchases of any rights outstanding under a shareholder
rights plan of the Company or the Guarantor, as the case may be, or the
declaration of a dividend of such rights or the issuance of stock under such
plans in the future, (iii) payments under any Preferred Securities Guarantee,
and (iv) purchases of Common Stock related to the issuance of Common Stock under
any benefit plans of the Company or the Guarantor, as the case may be, for its
respective directors, officers or employees) if at such time (1) there shall
have occurred any event of which the Company or the Guarantor, as the case may
be, has actual knowledge that (A) with the giving of notice or the lapse of time
or both, would constitute an Event of Default hereunder and (B) in respect of
which the Company or the Guarantor, as the case may be, shall not have taken
reasonable steps to cure, (2) the Company shall be in default with respect to
its payment of any obligations under the related Preferred Securities Guarantee
or (3) the Company shall have given notice of its election to begin an Extension
Period as provided herein with respect to the
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Securities of such series and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.
Section 10.11. Payment of Expenses of each ACE Trust.
The Company covenants for the benefit of the Holders of each series of
Securities to pay all of the obligations, costs and expenses of each ACE Trust
(other than payments in respect of Trust Securities) in accordance with the
provisions of its Trust Agreement and to pay the taxes of such ACE Trust in
accordance with the provisions of its Trust Agreement in order to permit such
ACE Trust to make distributions on and redemptions of its Preferred Securities
in accordance with such Trust Agreement.
Section 10.12. Ownership of Common Securities.
The Company covenants, as to each series of Securities issued to an ACE
Trust in connection with the issuance of Preferred Securities and Common
Securities by that ACE Trust, (a) to maintain directly or indirectly 100%
ownership of the Common Securities of such ACE Trust; provided, however, that
any permitted successor of the Company hereunder may succeed to the Company's
ownership of such Common Securities, (b) not to voluntarily dissolve, wind-up or
liquidate such ACE Trust, except in connection with (i) a distribution of the
Securities of such series to the holders of Preferred Securities and Common
Securities in liquidation of such ACE Trust, (ii) the redemption of all of the
Preferred Securities and Common Securities of such ACE Trust or (iii) certain
mergers, consolidations or amalgamations, each as permitted by the Trust
Agreement of such ACE Trust and (c) to use its reasonable efforts, consistent
with the terms and provisions of the related Trust Agreement, to cause such ACE
Trust to remain classified as a grantor trust and not an association taxable as
a corporation for United States federal income tax purposes.
ARTICLE 11
Redemption of Securities
Section 11.1. Applicability of Article.
Redemption of Securities of any series at the option of the Company as
permitted or required by the terms of such Securities shall be made in
accordance with the terms of such Securities and (except as otherwise provided
herein or pursuant hereto) this Article.
Section 11.2. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced by
or pursuant to a Board Resolution. In case of any redemption at the election of
the Company of (a) less than all of the Securities of any series or (b) all of
the Securities of any series, with the same issue date, interest rate or
formula, Stated Maturity and other terms, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be
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satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Securities of such series to be redeemed. If the
Securities of a series are held by an ACE Trust, the Company shall also deliver
a copy of such notice to the Property Trustee of such ACE Trust.
Section 11.3. Selection by Trustee of Securities to be Redeemed.
If less than all of the Securities of any series with the same issue date,
interest rate or formula, Stated Maturity and other terms are to be redeemed,
the particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of portions of the principal amount of Registered Securities of such
series; provided, however, that no such partial redemption shall reduce the
portion of the principal amount of a Registered Security of such series not
redeemed to less than the minimum denomination for a Security of such series
established herein or pursuant hereto.
The Trustee shall promptly notify the Company and the Security Registrar
(if other than itself) in writing of the Securities selected for redemption and,
in the case of any Securities selected for partial redemption, the principal
amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal of such Securities which has been or is to be redeemed.
Unless otherwise specified in or pursuant to this Indenture or the
Securities of any series, if any Security selected for partial redemption is
converted into other securities of the Company or exchanged for securities of
the Guarantor or another issuer in part before termination of the conversion or
exchange right with respect to the portion of the Security so selected, the
converted portion of such Security shall be deemed (so far as may be) to be the
portion selected for redemption. Securities which have been converted or
exchanged during a selection of Securities to be redeemed shall be treated by
the Trustee as Outstanding for the purpose of such selection.
Section 11.4. Notice of Redemption.
Notice of redemption shall be given in the manner provided in Section 1.6,
not less than 30 nor more than 60 days prior to the Redemption Date, unless a
shorter period is specified in the Securities to be redeemed, to the Holders of
Securities to be redeemed. Failure to give notice by mailing in the manner
herein provided to the Holder of any Registered Securities designated for
redemption as a whole or in part, or any defect in the notice to any such
Holder, shall not affect the validity of the proceedings for the redemption of
any other Securities or portion thereof.
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Any notice that is mailed to the Holder of any Registered Securities in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not such Holder receives the notice.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Securities of any series are to be
redeemed, the identification (and, in the case of partial redemption, the
principal amount) of the particular Security or Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the notice
which relates to such Security shall state that on and after the Redemption
Date, upon surrender of such Security, the Holder of such Security will
receive, without charge, a new Security or Securities of authorized
denominations for the principal amount thereof remaining unredeemed,
(5) that, on the Redemption Date, the Redemption Price shall become
due and payable upon each such Security or portion thereof to be redeemed,
and, if applicable, that interest thereon shall cease to accrue on and
after said date,
(6) the place or places where such Securities, together (in the case
of Bearer Securities) with all Coupons appertaining thereto, if any,
maturing after the Redemption Date, are to be surrendered for payment of
the Redemption Price and any accrued interest and Additional Amounts
pertaining thereto,
(7) that the redemption is for a sinking fund, if such is the case,
(8) that, unless otherwise specified in such notice, Bearer
Securities of any series, if any, surrendered for redemption must be
accompanied by all Coupons maturing subsequent to the date fixed for
redemption or the amount of any such missing Coupon or Coupons will be
deducted from the Redemption Price, unless security or indemnity
satisfactory to the Company, the Guarantor, the Trustee and any Paying
Agent is furnished,
(9) if Bearer Securities of any series are to be redeemed and no
Registered Securities of such series are to be redeemed, and if such Bearer
Securities may be exchanged for Registered Securities not subject to
redemption on the Redemption Date pursuant to Section 3.5 or otherwise, the
last date, as determined by the Company, on which such exchanges may be
made,
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(10) in the case of Securities of any series that are convertible into
Common Stock of the Company or exchangeable for other securities, the
conversion or exchange price or rate, the date or dates on which the right
to convert or exchange the principal of the Securities of such series to be
redeemed will commence or terminate and the place or places where such
Securities may be surrendered for conversion or exchange, and
(11) the CUSIP number or the Euroclear or the Cedel reference numbers
of such Securities, if any (or any other numbers used by a Depository to
identify such Securities).
A notice of redemption published as contemplated by Section 1.6 need not
identify particular Registered Securities to be redeemed.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
Section 11.5. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company or the Guarantor shall
deposit, with respect to the Securities of any series called for redemption
pursuant to Section 11.4, with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent or the Guarantor is acting as Paying
Agent, segregate and hold in trust as provided in Section 10.3) an amount of
money in the applicable Currency sufficient to pay the Redemption Price of, and
(except if the Redemption Date shall be an Interest Payment Date, unless
otherwise specified pursuant to Section 3.1 or in the Securities of such series)
any accrued interest (including any Additional Interest) on and Additional
Amounts with respect thereto, all such Securities or portions thereof which are
to be redeemed on that date.
Section 11.6. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company and the Guarantor shall default in the payment of the Redemption Price
and accrued interest) such Securities shall cease to bear interest and the
Coupons for such interest appertaining to any Bearer Securities so to be
redeemed, except to the extent provided below, shall be void. Upon surrender of
any such Security for redemption in accordance with said notice, together with
all Coupons, if any, appertaining thereto maturing after the Redemption Date,
such Security shall be paid by the Company at the Redemption Price, together
with any accrued interest and Additional Amounts to the Redemption Date;
provided, however, that, except as otherwise provided in or pursuant to this
Indenture or the Bearer Securities of such series, installments of interest on
Bearer Securities whose Stated Maturity is on or prior to the Redemption Date
shall be payable only upon presentation and surrender of Coupons for such
interest (at an Office or Agency located outside the United States except as
otherwise provided in Section 10.2), and provided, further, that,
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except as otherwise specified in or pursuant to this Indenture or the Registered
Securities of such series, installments of interest on Registered Securities
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the Regular Record Dates therefor
according to their terms and the provisions of Section 3.7.
If any Bearer Security surrendered for redemption shall not be accompanied
by all appurtenant Coupons maturing after the Redemption Date, such Security may
be paid after deducting from the Redemption Price an amount equal to the face
amount of all such missing Coupons, or the surrender of such missing Coupon or
Coupons may be waived by the Company and the Trustee if there be furnished to
them such security or indemnity as they may require to save each of them and any
Paying Agent harmless. If thereafter the Holder of such Security shall
surrender to the Trustee or any Paying Agent any such missing Coupon in respect
of which a deduction shall have been made from the Redemption Price, such Holder
shall be entitled to receive the amount so deducted; provided, however, that any
interest or Additional Amounts represented by Coupons shall be payable only upon
presentation and surrender of those Coupons at an Office or Agency for such
Security located outside of the United States except as otherwise provided in
Section 10.2.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and any premium, until paid, shall bear
interest from the Redemption Date at the rate prescribed therefor in the
Security.
Section 11.7. Securities Redeemed in Part.
Any Registered Security which is to be redeemed only in part shall be
surrendered at any Office or Agency for such Security (with, if the Company or
the Trustee so requires, due endorsement by, or a written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing) and the Company shall
execute and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Registered Security or Securities of the
same series, containing identical terms and provisions, of any authorized
denomination as requested by such Holder in aggregate principal amount equal to
and in exchange for the unredeemed portion of the principal of the Security so
surrendered. If a Security in global form is so surrendered, the Company shall
execute, and the Trustee shall authenticate and deliver to the U.S. Depository
or other Depository for such Security in global form as shall be specified in
the Company Order with respect thereto to the Trustee, without service charge, a
new Security in global form in a denomination equal to and in exchange for the
unredeemed portion of the principal of the Security in global form so
surrendered.
Section 11.8. Right of Redemption of Securities Issued to an ACE Trust.
In the case of the Securities of a series issued to an ACE Trust, except as
otherwise specified as contemplated by Section 3.1, if a Special Event in
respect of such ACE Trust shall occur and be continuing, the Company may, at its
option, redeem the Securities of such series
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within 90 days of the occurrence of such Special Event, in whole but not in
part, subject to the provisions of this Section 11.8 and the other provisions of
this Article 11. Unless otherwise specified in or pursuant to this Indenture or
the Securities of such series, the redemption price for any Security so redeemed
pursuant to this Section 11.8 shall be equal to 100% of the principal amount of
such Securities then Outstanding plus accrued and unpaid interest, including any
Additional Interest, to the date fixed for redemption.
ARTICLE 12
Sinking Funds
Section 12.1. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of a series, except as otherwise permitted or
required in or pursuant to this Indenture or any Security of such series issued
pursuant to this Indenture.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such minimum amount provided for by the
terms of Securities of such series is herein referred to as an "optional sinking
fund payment". If provided for by the terms of Securities of any series, the
cash amount of any sinking fund payment may be subject to reduction as provided
in Section 12.2. Each sinking fund payment shall be applied to the redemption
of Securities of any series as provided for by the terms of Securities of such
series and this Indenture.
Section 12.2. Satisfaction of Sinking Fund Payments with Securities.
The Company or the Guarantor may, in satisfaction of all or any part of any
sinking fund payment with respect to the Securities of any series to be made
pursuant to the terms of such Securities (1) deliver Outstanding Securities of
such series (other than any of such Securities previously called for redemption
or any of such Securities in respect of which cash shall have been released to
the Company), together in the case of any Bearer Securities of such series with
all unmatured Coupons appertaining thereto, and (2) apply as a credit Securities
of such series which have been redeemed either at the election of the Company
pursuant to the terms of such series of Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, provided that such series of Securities have not been previously so
credited. Such Securities shall be received and credited for such purpose by
the Trustee at the Redemption Price specified in such Securities for redemption
through operation of the sinking fund and the amount of such sinking fund
payment shall be reduced accordingly. If, as a result of the delivery or credit
of Securities of any series in lieu of cash payments pursuant to this Section
12.2, the principal amount of Securities of such series to be redeemed in order
to satisfy the remaining sinking fund payment shall be less than $100,000, the
Trustee need not call Securities of such series for redemption, except upon
Company Request or Guarantor Request, and such cash payment shall be held by the
Trustee or a Paying Agent and applied to the next
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succeeding sinking fund payment, provided, however, that the Trustee or such
Paying Agent shall at the request of the Company or the Guarantor from time to
time pay over and deliver to the Company or the Guarantor, as the case may be,
any cash payment so being held by the Trustee or such Paying Agent upon delivery
by the Company or the Guarantor to the Trustee of Securities of that series
purchased by the Company or the Guarantor having an unpaid principal amount
equal to the cash payment requested to be released to the Company or the
Guarantor.
Section 12.3. Redemption of Securities for Sinking Fund.
Not less than 75 days prior to each sinking fund payment date for any
series of Securities, the Company shall deliver to the Trustee an Officer's
Certificate specifying the amount of the next ensuing mandatory sinking fund
payment for that series pursuant to the terms of that series, the portion
thereof, if any, which is to be satisfied by payment of cash and the portion
thereof, if any, which is to be satisfied by delivering and crediting of
Securities of that series pursuant to Section 12.2, and the optional amount, if
any, to be added in cash to the next ensuing mandatory sinking fund payment, and
will also deliver to the Trustee any Securities to be so credited and not
theretofore delivered. If such Officer's Certificate shall specify an optional
amount to be added in cash to the next ensuing mandatory sinking fund payment,
the Company shall thereupon be obligated to pay the amount therein specified.
Not less than 60 days before each such sinking fund payment date the Trustee
shall select the Securities to be redeemed upon such sinking fund payment date
in the manner specified in Section 11.3 and cause notice of the redemption
thereof to be given in the name of and at the expense of the Company in the
manner provided in Section 11.4. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Sections 11.6 and 11.7.
ARTICLE 13
Repayment at the Option of Holders
Section 13.1. Applicability of Article.
Securities of any series which are repayable at the option of the Holders
thereof before their Stated Maturity shall be repaid in accordance with the
terms of the Securities of such series. The repayment of any principal amount of
Securities pursuant to such option of the Holder to require repayment of
Securities before their Stated Maturity, for purposes of Section 3.9, shall not
operate as a payment, redemption or satisfaction of the Indebtedness represented
by such Securities unless and until the Company, at its option, shall deliver or
surrender the same to the Trustee with a directive that such Securities be
cancelled. Notwithstanding anything to the contrary contained in this Section
13.1, in connection with any repayment of Securities, the Company may arrange
for the purchase of any Securities by an agreement with one or more investment
bankers or other purchasers to purchase such Securities by paying to the Holders
of such Securities on or before the close of business on the repayment date an
amount not less than the repayment price payable by the Company on repayment of
such Securities, and the obligation of the Company to pay the repayment price of
such Securities shall be satisfied and discharged to the extent such payment is
so paid by such purchasers.
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ARTICLE 14
Securities in Foreign Currencies
Section 14.1. Applicability of Article.
Whenever this Indenture provides for (i) any action by, or the
determination of any of the rights of, Holders of Securities of any series in
which not all of such Securities are denominated in the same Currency, or (ii)
any distribution to Holders of Securities, in the absence of any provision to
the contrary in the form of Security of any particular series or pursuant to
this Indenture or the Securities, any amount in respect of any Security
denominated in a Currency other than Dollars shall be treated for any such
action or distribution as that amount of Dollars that could be obtained for such
amount on such reasonable basis of exchange and as of the record date with
respect to Registered Securities of such series (if any) for such action,
determination of rights or distribution (or, if there shall be no applicable
record date, such other date reasonably proximate to the date of such action,
determination of rights or distribution) as the Company or the Guarantor may
specify in a written notice to the Trustee.
ARTICLE 15
Meetings of Holders of Securities
Section 15.1. Purposes for Which Meetings May Be Called.
A meeting of Holders of Securities of any series may be called at any time
and from time to time pursuant to this Article to make, give or take any
request, demand, authorization, direction, notice, consent, waiver or other Act
provided by this Indenture to be made, given or taken by Holders of Securities
of such series.
Section 15.2. Call, Notice and Place of Meetings.
(1) The Trustee may at any time call a meeting of Holders of
Securities of any series for any purpose specified in Section 15.1, to be
held at such time and at such place in the Borough of Manhattan, The City
of New York, or, if Securities of such series have been issued in whole or
in part as Bearer Securities, in London or in such place outside the United
States as the Trustee shall determine. Notice of every meeting of Holders
of Securities of any series, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such
meeting, shall be given, in the manner provided in Section 1.6, not less
than 21 nor more than 180 days prior to the date fixed for the meeting.
(2) In case at any time the Company (by or pursuant to a Board
Resolution), the Guarantor (by or pursuant to a Guarantor's Board
Resolution) or the Holders of at least 10% in principal amount of the
Outstanding Securities of any series shall have requested the Trustee to
call a meeting of the Holders of Securities of such series for any
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purpose specified in Section 15.1, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed notice of or made the first publication of
the notice of such meeting within 21 days after receipt of such request
(whichever shall be required pursuant to Section 1.6) or shall not
thereafter proceed to cause the meeting to be held as provided herein, then
the Company, the Guarantor or the Holders of Securities of such series in
the amount above specified, as the case may be, may determine the time and
the place in the Borough of Manhattan, The City of New York, or, if
Securities of such series are to be issued as Bearer Securities, in London
for such meeting and may call such meeting for such purposes by giving
notice thereof as provided in clause (1) of this Section.
Section 15.3. Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of Securities of any
series, a Person shall be (1) a Holder of one or more Outstanding Securities of
such series, or (2) a Person appointed by an instrument in writing as proxy for
a Holder or Holders of one or more Outstanding Securities of such series by such
Holder or Holders. The only Persons who shall be entitled to be present or to
speak at any meeting of Holders of Securities of any series shall be the Persons
entitled to vote at such meeting and their counsel, any representatives of the
Trustee and its counsel, any representatives of the Guarantor and its counsel
and any representatives of the Company and its counsel.
Section 15.4. Quorum; Action.
The Persons entitled to vote a majority in principal amount of the
Outstanding Securities of a series shall constitute a quorum for any meeting of
Holders of Securities of such series. In the absence of a quorum within 30
minutes after the time appointed for any such meeting, the meeting shall, if
convened at the request of Holders of Securities of such series, be dissolved.
In any other case the meeting may be adjourned for a period of not less than 10
days as determined by the chairman of the meeting prior to the adjournment of
such meeting. In the absence of a quorum at any reconvened meeting, such
reconvened meeting may be further adjourned for a period of not less than 10
days as determined by the chairman of the meeting prior to the adjournment of
such reconvened meeting. Notice of the reconvening of any adjourned meeting
shall be given as provided in Section 15.2(1), except that such notice need be
given only once not less than five days prior to the date on which the meeting
is scheduled to be reconvened. Notice of the reconvening of an adjourned
meeting shall state expressly the percentage, as provided above, of the
principal amount of the Outstanding Securities of such series which shall
constitute a quorum.
Except as limited by the proviso to Section 9.2, any resolution presented
to a meeting or adjourned meeting duly reconvened at which a quorum is present
as aforesaid may be adopted only by the affirmative vote of the Holders of a
majority in principal amount of the Outstanding Securities of that series;
provided, however, that, except as limited by the proviso to Section 9.2, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other Act which this Indenture expressly provides may
be made, given or taken by the
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Holders of a specified percentage, which is less than a majority, in principal
amount of the Outstanding Securities of a series may be adopted at a meeting or
an adjourned meeting duly reconvened and at which a quorum is present as
aforesaid by the affirmative vote of the Holders of such specified percentage in
principal amount of the Outstanding Securities of such series.
Any resolution passed or decision taken at any meeting of Holders of
Securities of any series duly held in accordance with this Section shall be
binding on all the Holders of Securities of such series and the Coupons
appertaining thereto, whether or not such Holders were present or represented at
the meeting.
Section 15.5. Determination of Voting Rights; Conduct and Adjournment of
Meetings.
(1) Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Holders of Securities of such series in regard to proof of
the holding of Securities of such series and of the appointment of proxies
and in regard to the appointment and duties of inspectors of votes, the
submission and examination of proxies, certificates and other evidence of
the right to vote, and such other matters concerning the conduct of the
meeting as it shall deem appropriate. Except as otherwise permitted or
required by any such regulations, the holding of Securities shall be proved
in the manner specified in Section 1.4 and the appointment of any proxy
shall be proved in the manner specified in Section 1.4 or by having the
signature of the person executing the proxy witnessed or guaranteed by any
trust company, bank or banker authorized by Section 1.4 to certify to the
holding of Bearer Securities. Such regulations may provide that written
instruments appointing proxies, regular on their face, may be presumed
valid and genuine without the proof specified in Section 1.4 or other
proof.
(2) The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been
called by the Company or by Holders of Securities as provided in Section
15.2(2), in which case the Company, the Guarantor or the Holders of
Securities of the series calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the Persons
entitled to vote a majority in principal amount of the Outstanding
Securities of such series represented at the meeting.
(3) At any meeting, each Holder of a Security of such series or proxy
shall be entitled to one vote for each $1,000 principal amount of
Securities of such series held or represented by him; provided, however,
that no vote shall be cast or counted at any meeting in respect of any
Security challenged as not Outstanding and ruled by the chairman of the
meeting to be not Outstanding. The chairman of the meeting shall have no
right to vote, except as a Holder of a Security of such series or proxy.
(4) Any meeting of Holders of Securities of any series duly called
pursuant to Section 15.2 at which a quorum is present may be adjourned from
time to time by
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Persons entitled to vote a majority in principal amount of the Outstanding
Securities of such series represented at the meeting; and the meeting may
be held as so adjourned without further notice.
Section 15.6. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of
Securities of any series shall be by written ballots on which shall be
subscribed the signatures of the Holders of Securities of such series or of
their representatives by proxy and the principal amounts and serial numbers of
the Outstanding Securities of such series held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in triplicate of all votes cast at the meeting. A record, at least in
triplicate, of the proceedings of each meeting of Holders of Securities of any
series shall be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 15.2 and, if
applicable, Section 15.4. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company and the Guarantor, and another to the
Trustee to be preserved by the Trustee, the latter to have attached thereto the
ballots voted at the meeting. Any record so signed and verified shall be
conclusive evidence of the matters therein stated.
ARTICLE 16
Subordination Of Securities
Section 16.1. Agreement to Subordinate.
The Company covenants and agrees, and each Holder of Securities issued
hereunder and under any indenture supplemental hereto or pursuant to a Board
Resolution, Officer's Certificate and Guarantor's Officer's Certificate
("Additional Provisions") by such Holder's acceptance thereof likewise covenants
and agrees, that all Securities shall be issued subject to the provisions of
this Article 16; and each Holder of a Security, whether upon original issue or
upon transfer or assignment thereof, accepts and agrees to be bound by such
provisions.
The payment by the Company of the principal of, any premium and interest
(including any Additional Interest) on and any Additional Amounts with respect
to all Securities of each series issued hereunder and under any Additional
Provisions shall, to the extent and in the manner hereinafter set forth, be
subordinate in right of payment to the prior payment in full of all Company
Senior Indebtedness with respect to such series, whether outstanding at the date
of this Indenture or thereafter incurred.
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No provision of this Article 16 shall prevent the occurrence of any default
or Event of Default hereunder.
Section 16.2. Default on Company Senior Indebtedness.
In the event and during the continuation of any default by the Company in
the payment of principal, premium, interest or any other amount due on any
Company Senior Indebtedness with respect to the Securities of any series, or in
the event that the maturity of any Company Senior Indebtedness with respect to
the Securities of any series has been accelerated because of a default, then, in
either case, no payment shall be made by the Company with respect to the
principal (including redemption and sinking fund payments) of, any premium or
interest (including any Additional Interest) on, or any Additional Amounts with
respect to, the Securities of such series.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 16.2, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of such Company
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Company Senior
Indebtedness may have been issued, as their respective interests may appear, but
only to the extent that the holders of such Company Senior Indebtedness (or
their representative or representatives or a trustee) notify the Trustee in
writing within 90 days of such payment of the amounts then due and owing on such
Company Senior Indebtedness and only the amounts specified in such notice to the
Trustee shall be paid to the holders of such Company Senior Indebtedness.
Section 16.3. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Company or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to creditors
upon any dissolution, winding-up, liquidation or reorganization of the Company,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or
other proceedings, all amounts due upon all Company Senior Indebtedness with
respect to the Securities of any series shall first be paid in full, or payment
thereof provided for in money in accordance with its terms, before any payment
is made by the Company on account of the principal of, premium or interest
(including any Additional Interest) on, or Additional Amounts with respect to,
the Securities of such series; and upon any such dissolution, winding-up,
liquidation or reorganization, any payment by the Company, or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, to which the Holders or the Trustee would be entitled to receive
from the Company, except for the provisions of this Article 16, shall be paid by
the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the Holders or
by the Trustee under this Indenture if received by them or it, directly to the
holders of such Company Senior Indebtedness (pro rata to such holders on the
basis of the respective amounts of such Company Senior Indebtedness held by such
holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees
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under any indenture pursuant to which any instruments evidencing such Company
Senior Indebtedness may have been issued, as their respective interests may
appear, to the extent necessary to pay such Company Senior Indebtedness in full,
in money or money's worth, after giving effect to any concurrent payment or
distribution to or for the holders of such Company Senior Indebtedness, before
any payment or distribution is made to the Holders of the Securities of such
series or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing shall be received by the
Trustee before all such Company Senior Indebtedness is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of such Company Senior Indebtedness or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Company Senior
Indebtedness may have been issued, as their respective interests may appear, as
calculated by the Company, for application to the payment of all such Company
Senior Indebtedness remaining unpaid to the extent necessary to pay such Company
Senior Indebtedness in full in money in accordance with its terms, after giving
effect to any concurrent payment or distribution to or for the benefit of the
holders of such Company Senior Indebtedness.
For purposes of this Article 16, the words "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article 16 with respect to
the Securities of the relevant series to the payment of all Company Senior
Indebtedness with respect to the Securities of such series that may at the time
be outstanding, provided that (i) such Company Senior Indebtedness is assumed by
the new corporation, if any, resulting from any such reorganization or
readjustment, and (ii) the rights of the holders of such Company Senior
Indebtedness are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the Company with, or the
merger of the Company into, another Person or the liquidation or dissolution of
the Company following the conveyance, transfer or lease of its property as an
entirety, or substantially as an entirety, to another Person upon the terms and
conditions provided for in Sections 8.1 and 8.2 of this Indenture shall not be
deemed a dissolution, winding-up, liquidation or reorganization for the purposes
of this Section 16.3 if such other Person shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions stated
in Sections 8.1 and 8.2 of this Indenture. Nothing in Section 16.2 or in this
Section 16.3 shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 6.6 of this Indenture.
Section 16.4. Subrogation.
Subject to the payment in full of all Company Senior Indebtedness with
respect to the Securities of any series, the rights of the Holders of the
Securities of such series shall be
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subrogated to the rights of the holders of such Company Senior Indebtedness to
receive payments or distributions of cash, property or securities of the Company
applicable to such Company Senior Indebtedness until the principal of, any
premium and interest (including any Additional Interest) on, and any Additional
Amounts with respect to, the Securities of such series shall be paid in full;
and, for the purposes of such subrogation, no payments or distributions to the
holders of such Company Senior Indebtedness of any cash, property or securities
to which the Holders or the Trustee would be entitled except for the provisions
of this Article 16, and no payment over pursuant to the provisions of this
Article 16 to or for the benefit of the holders of such Company Senior
Indebtedness by Holders of the Securities of such series or the Trustee, shall,
as between the Company, its creditors other than holders of such Company Senior
Indebtedness, and the Holders of the Securities of such series, be deemed to be
a payment by the Company to or on account of such Company Senior Indebtedness.
It is understood that the provisions of this Article 16 are and are intended
solely for the purposes of defining the relative rights of the Holders of the
Securities of each series, on the one hand, and the holders of the Company
Senior Indebtedness with respect to the Securities of such series on the other
hand.
Nothing contained in this Article 16 or elsewhere in this Indenture, any
Additional Provisions or in the Securities of any series is intended to or shall
impair, as between the Company, its creditors other than the holders of Company
Senior Indebtedness with respect to the Securities of such series, and the
Holders of the Securities of such series, the obligation of the Company, which
is absolute and unconditional, to pay to the Holders of the Securities of such
series the principal of, any premium and interest (including any Additional
Interest) on, and any Additional Amounts with respect to, the Securities of such
series as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders of the Securities of such series and creditors of the Company, other
than the holders of such Company Senior Indebtedness, nor shall anything herein
or therein prevent the Trustee or the Holder of any Security of such series from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article 16 of the
holders of such Company Senior Indebtedness in respect of cash, property or
securities of the Company, as the case may be, received upon the exercise of any
such remedy.
Upon any payment or distribution of assets of the Company referred to in
this Article 16, the Trustee, subject to the provisions of Article 6 of this
Indenture, and the Holders shall be entitled to conclusively rely upon any order
or decree made by any court of competent jurisdiction in which such dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent
or other Person making such payment or distribution, delivered to the Trustee or
to the Holders of the Securities of any series, for the purposes of ascertaining
the Persons entitled to participate in such distribution, the holders of Company
Senior Indebtedness with respect to the Securities of such series and other
indebtedness of the Company, as the case may be, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article 16.
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Section 16.5. Trustee to Effectuate Subordination.
Each Holder of Securities by such Holder's acceptance thereof authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article 16 and appoints the Trustee such Holder's attorney-in-fact for any and
all such purposes.
Section 16.6. Notice by the Company.
The Company shall give prompt written notice to a Responsible Officer of
the Trustee of any fact known to the Company that would prohibit the making of
any payment of monies to or by the Trustee in respect of the Securities of any
series pursuant to the provisions of this Article 16. Notwithstanding the
provisions of this Article 16 or any other provision of this Indenture or any
Additional Provisions, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment of monies
to or by the Trustee in respect of the Securities of any series pursuant to the
provisions of this Article 16, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof from the Company or a holder
or holders of Company Senior Indebtedness with respect to the Securities of such
series or from any trustee therefor; and before the receipt of any such written
notice, the Trustee, subject to the provisions of Article 6 of this Indenture,
shall be entitled in all respects to assume that no such facts exist; provided,
however, that if the Trustee shall not have received the notice provided for in
this Section 16.6 at least two Business Days prior to the date upon which by the
terms hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of, any premium or interest (including
any Additional Interest) on, or any Additional Amounts with respect to, any
Security of such series), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive such
money and to apply the same to the purposes for which they were received, and
shall not be affected by any notice to the contrary that may be received by it
within two Business Days prior to such date.
The Trustee, subject to the provisions of Article 6 of this Indenture,
shall be entitled to conclusively rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Company Senior Indebtedness
with respect to the Securities of any series (or a trustee on behalf of such
holder), to establish that such notice has been given by a holder of such
Company Senior Indebtedness or a trustee on behalf of any such holder or
holders. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of such
Company Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 16, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Company Senior Indebtedness held by such Person, the extent to which such Person
is entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article 16, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
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Upon any payment or distribution of assets of the Company referred to in
this Article 16, the Trustee and the Holders shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding-up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, liquidating trustee, custodian, receiver, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders of the Securities of
any series, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of Company Senior Indebtedness with
respect to the Securities of such series and other indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 16.
Section 16.7. Rights of the Trustee; Holders of Company Senior
Indebtedness.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article 16 in respect of any Company Senior Indebtedness with
respect to the Securities of any series at any time held by it, to the same
extent as any other holder of such Company Senior Indebtedness, and nothing in
this Indenture or any Additional Provisions shall deprive the Trustee of any of
its rights as such holder.
With respect to the holders of Company Senior Indebtedness with respect to
the Securities of any series, the Trustee undertakes to perform or to observe
only such of its covenants and obligations as are specifically set forth in this
Article 16, and no implied covenants or obligations with respect to the holders
of such Company Senior Indebtedness shall be read into this Indenture or any
Additional Provisions against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of such Company Senior Indebtedness and,
subject to the provisions of Article 6 of this Indenture, the Trustee shall not
be liable to any holder of such Company Senior Indebtedness if it shall pay over
or deliver to Holders of the Securities of such series, the Company or any other
Person money or assets to which any holder of such Company Senior Indebtedness
shall be entitled by virtue of this Article 16 or otherwise.
Nothing in this Article 16 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.6.
Section 16.8. Subordination May Not Be Impaired
No right of any present or future holder of any Company Senior Indebtedness
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company,
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Company Senior Indebtedness with respect to the Securities of any
series may, at any time and
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from time to time, without the consent of or notice to the Trustee or the
Holders of Securities of such series, without incurring responsibility to such
Holders and without impairing or releasing the subordination provided in this
Article 16 or the obligations hereunder of the Holders of the Securities of such
series to the holders of such Company Senior Indebtedness, do any one or more of
the following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, such Company Senior Indebtedness, or
otherwise amend or supplement in any manner such Company Senior Indebtedness or
any instrument evidencing the same or any agreement under which such Company
Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing such Company
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection of such Company Senior Indebtedness; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
ARTICLE 17
Guarantee And Indemnity
Section 17.1. The Guarantee.
The Guarantor hereby unconditionally guarantees to each Holder of a
Security authenticated and delivered by the Trustee the due and punctual payment
of the principal of, any premium and interest (including any Additional
Interest) on, any Additional Amounts, and, if applicable, any Additional Sums
with respect to such Security and the due and punctual payment of the sinking
fund payments (if any) provided for pursuant to the terms of such Security, when
and as the same shall become due and payable, whether at maturity, by
acceleration, redemption, repayment or otherwise, in accordance with the terms
of such Security and of this Indenture. In case of the failure of the Company
punctually to pay any such principal, premium, interest (including any
Additional Interest), Additional Amounts, Additional Sums or sinking fund
payment, the Guarantor hereby agrees to cause any such payment to be made
punctually when and as the same shall become due and payable, whether at
maturity, upon acceleration, redemption, repayment or otherwise, and as if such
payment were made by the Company.
Section 17.2. Net Payments.
All payments of principal of and premium, if any, interest (including any
Additional Interest) and any other amounts on, or in respect of, the Securities
of any series or any Coupon appertaining thereto shall be made by the Guarantor
without withholding or deduction at source for, or on account of, any present or
future taxes, fees, duties, assessments or governmental charges of whatever
nature imposed or levied by or on behalf of the Cayman Islands or Bermuda (each,
a "taxing jurisdiction") or any political subdivision or taxing authority
thereof or therein, unless such taxes, fees, duties, assessments or governmental
charges are required to be withheld or deducted by (i) the laws (or any
regulations or ruling promulgated thereunder) of a taxing jurisdiction or any
political subdivision or taxing authority thereof or therein or (ii) an official
position regarding the application, administration, interpretation or
enforcement of any such laws, regulations or rulings (including, without
limitation, a holding by a court of competent
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jurisdiction or by a taxing authority in a taxing jurisdiction or any political
subdivision thereof). If a withholding or deduction at source is required, the
Guarantor shall, subject to certain limitations and exceptions set forth below,
pay to the Holder of any such Security or any Coupon appertaining thereto such
Additional Amounts as may be necessary so that every net payment of principal,
premium, if any, interest or any other amount made to such Holder, after such
withholding or deduction, shall not be less than the amount provided for in such
Security, any Coupons appertaining thereto and this Indenture to be then due and
payable; provided, however, that the Guarantor shall not be required to make
-------- -------
payment of such Additional Amounts for or on account of:
(1) any tax, fee, duty, assessment or governmental charge of whatever
nature which would not have been imposed but for the fact that such Holder:
(A) was a resident, domiciliary or national of, or engaged in business or
maintained a permanent establishment or was physically present in, the
relevant taxing jurisdiction or any political subdivision thereof or
otherwise had some connection with the relevant taxing jurisdiction other
than by reason of the mere ownership of, or receipt of payment under, such
Security; (B) presented such Security for payment in the relevant taxing
jurisdiction or any political subdivision thereof, unless such Security
could not have been presented for payment elsewhere; or (C) presented such
Security more than thirty (30) days after the date on which the payment in
respect of such Security first became due and payable or provided for,
whichever is later, except to the extent that the Holder would have been
entitled to such Additional Amounts if it had presented such Security for
payment on any day within such period of thirty (30) days;
(2) any estate, inheritance, gift, sale, transfer, personal property
or similar tax, assessment or other governmental charge;
(3) any tax, assessment or other governmental charge that is imposed
or withheld by reason of the failure by the Holder or the beneficial owner
of such Security to comply with any reasonable request by the Guarantor
addressed to the Holder within 90 days of such request (A) to provide
information concerning the nationality, residence or identity of the Holder
or such beneficial owner or (B) to make any declaration or other similar
claim or satisfy any information or reporting requirement, which, in the
case of (A) or (B), is required or imposed by statute, treaty, regulation
or administrative practice of the relevant taxing jurisdiction or any
political subdivision thereof as a precondition to exemption from all or
part of such tax, assessment or other governmental charge; or
(4) any combination of items (1), (2) and (3);
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or premium, if any, interest or any other amounts on, any such
Security to any Holder who is a fiduciary or partnership or other than the sole
beneficial owner of such Security to the extent such payment would be required
by the laws of the relevant taxing jurisdiction (or any political subdivision or
relevant taxing authority thereof or therein) to be included in the income for
tax purposes of a beneficiary or partner or settlor with respect to such
fiduciary or a member of such
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partnership or a beneficial owner who would not have been entitled to such
Additional Amounts had it been the Holder of the Security.
Whenever in this Indenture there is mentioned, in any context, the payment
of the principal of or any premium, interest or any other amounts on, or in
respect of, any Security of any series or any Coupon or the net proceeds
received on the sale or exchange of any Security of any series, such mention
shall be deemed to include mention of the payment of Additional Amounts provided
by the terms of such series established hereby or pursuant hereto to the extent
that, in such context, Additional Amounts are, were or would be payable in
respect thereof pursuant to such terms, and express mention of the payment of
Additional Amounts (if applicable) in any provision hereof shall not be
construed as excluding the payment of Additional Amounts in those provisions
hereof where such express mention is not made.
Except as otherwise provided in or pursuant to this Indenture or the
Securities of the applicable series, at least 10 days prior to the first
Interest Payment Date with respect to a series of Securities (or if the
Securities of such series shall not bear interest prior to Maturity, the first
day on which a payment of principal is made), and at least 10 days prior to each
date of payment of principal or interest if there has been any change with
respect to the matters set forth in the below-mentioned Guarantor's Officer's
Certificate, the Guarantor shall furnish to the Trustee and the principal Paying
Agent or Paying Agents, if other than the Trustee, a Guarantor's Officer's
Certificate instructing the Trustee and such Paying Agent or Paying Agents
whether such payment of principal of and premium, if any, interest or any other
amounts on the Securities of such series shall be made to Holders of Securities
of such series or the Coupons appertaining thereto without withholding for or on
account of any tax, fee, duty, assessment or other governmental charge described
in this Section 17.2. If any such withholding shall be required, then such
Guarantor's Officer's Certificate shall specify by taxing jurisdiction the
amount, if any, required to be withheld on such payments to such Holders of
Securities or Coupons, and the Guarantor agrees to pay to the Trustee or such
Paying Agent the Additional Amounts required by this Section 17.2. The
Guarantor covenants to indemnify the Trustee and any Paying Agent for, and to
hold them harmless against, any loss, liability or expense reasonably incurred
without negligence or bad faith on their part arising out of or in connection
with actions taken or omitted by any of them in reliance on any Guarantor's
Officer's Certificate furnished pursuant to this Section 17.2.
Section 17.3. Guarantee Unconditional, etc.
The Guarantor hereby agrees that its obligations hereunder shall be as
principal and not merely as surety, and shall be absolute, irrevocable and
unconditional, irrespective of, and shall be unaffected by, any invalidity,
irregularity or unenforceability of any Security or this Indenture, any failure
to enforce the provisions of any Security or this Indenture, or any waiver,
modification, consent or indulgence granted with respect thereto by the Holder
of such Security or the Trustee, the recovery of any judgment against the
Company or any action to enforce the same, or any other circumstances which may
otherwise constitute a legal or equitable discharge of a surety or guarantor.
The Guarantor hereby waives diligence, presentment, demand of
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payment, filing of claims with a court in the event of merger, insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest or notice with respect to any such Security or the Indebtedness
evidenced thereby and all demands whatsoever, and covenants that this Guarantee
will not be discharged except by payment in full of the principal of, any
premium and interest (including any Additional Interest) on, and any Additional
Amounts, and, if applicable, any Additional Sums and sinking fund payments
required with respect to, the Securities and the complete performance of all
other obligations contained in the Securities. The Guarantor further agrees, to
the fullest extent that it lawfully may do so, that, as between the Guarantor,
on the one hand, and the Holders and the Trustee, on the other hand, the
Maturity of the obligations guaranteed hereby may be accelerated as provided in
Section 5.2 hereof for the purposes of this Guarantee, notwithstanding any stay,
injunction or prohibition extant under any bankruptcy, insolvency,
reorganization or other similar law of any jurisdiction preventing such
acceleration in respect of the obligations guaranteed hereby.
Section 17.4. Reinstatement.
This Guarantee shall continue to be effective or be reinstated, as the case
may be, if at any time payment on any Security, in whole or in part, is
rescinded or must otherwise be restored to the Company or the Guarantor upon the
bankruptcy, liquidation or reorganization of the Company or otherwise.
Section 17.5. Subrogation.
The Guarantor shall be subrogated to all rights of the Holder of any
Security against the Company in respect of any amounts paid to such Holder by
the Guarantor pursuant to the provisions of this Guarantee; provided, however,
that the Guarantor shall not be entitled to enforce, or to receive any payments
arising out of or based upon, such right of subrogation until the principal of,
any premium and interest (including any Additional Interest) on, and any
Additional Amounts and, if applicable, any Additional Sums and sinking fund
payments required with respect to, all Securities shall have been paid in full.
Section 17.6. Indemnity.
As a separate and alternative stipulation, the Guarantor unconditionally
and irrevocably agrees that any sum expressed to be payable by the Company under
this Indenture, the Securities or the Coupons but which is for any reason
(whether or not now known or becoming known to the Company, the Guarantor, the
Trustee or any Holder of any Security or Coupon) not recoverable from the
Guarantor on the basis of a guarantee will nevertheless be recoverable from it
as if it were the sole principal debtor and will be paid by it to the Trustee on
demand. This indemnity constitutes a separate and independent obligation from
the other obligations in this Indenture, gives rise to a separate and
independent cause of action and will apply irrespective of any indulgence
granted by the Trustee or any Holder of any Security or Coupon.
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ARTICLE 18
Subordination Of Guarantee
Section 18.1. Agreement to Subordinate Guarantee.
The Guarantor covenants and agrees, and each Holder of Securities issued
hereunder and under any Additional Provisions, by such Holder's acceptance
thereof likewise covenants and agrees, that all Securities shall be issued
subject to the provisions of this Article 18; and each Holder of a Security,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions.
The payment by the Guarantor pursuant to the Guarantee of the principal of,
any premium and interest (including any Additional Interest) on, any Additional
Amounts and, if applicable, any Additional Sums with respect to all Securities
of each series issued hereunder and under any Additional Provisions shall, to
the extent and in the manner hereinafter set forth, be subordinate in right of
payment to the prior payment in full of all Guarantor Senior Indebtedness with
respect to such series, whether outstanding at the date of this Indenture or
thereafter incurred.
No provision of this Article 18 shall prevent the occurrence of any default
or Event of Default hereunder.
Section 18.2. Default on Guarantor Senior Indebtedness.
In the event and during the continuation of any default by the Guarantor in
the payment of principal, premium, interest (including any Additional Interest)
or any other amount due on any Guarantor Senior Indebtedness with respect to the
Securities of any series, or in the event that the maturity of any Guarantor
Senior Indebtedness with respect to the Securities of any series has been
accelerated because of a default, then, in either case, no payment shall be made
by the Guarantor pursuant to the Guarantee with respect to the principal
(including redemption and sinking fund payments) of, any premium or interest
(including any Additional Interest) on, or any Additional Amounts or, if
applicable, Additional Sums with respect to, the Securities of such series.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 18.2, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of such
Guarantor Senior Indebtedness or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Guarantor
Senior Indebtedness may have been issued, as their respective interests may
appear, but only to the extent that the holders of such Guarantor Senior
Indebtedness (or their representative or representatives or a trustee) notify
the Trustee in writing within 90 days of such payment of the amounts then due
and owing on such Guarantor Senior Indebtedness and only the amounts
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specified in such notice to the Trustee shall be paid to the holders of such
Guarantor Senior Indebtedness.
Section 18.3. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Guarantor or distribution of assets of the
Guarantor of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution, winding-up, liquidation or reorganization of the
Guarantor, whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due upon all Guarantor Senior
Indebtedness with respect to the Securities of any series shall first be paid in
full, or payment thereof provided for in money in accordance with its terms,
before any payment is made by the Guarantor pursuant to the Guarantee on account
of the principal of, premium or interest (including any Additional Interest) on,
or Additional Amounts or, if applicable, Additional Sums with respect to, the
Securities of such series; and upon any such dissolution, winding-up,
liquidation or reorganization, any payment by the Guarantor, or distribution of
assets of the Guarantor of any kind or character, whether in cash, property or
securities, to which the Holders or the Trustee would be entitled to receive
from the Guarantor, except for the provisions of this Article 18, shall be paid
by the Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the Holders or
by the Trustee under this Indenture if received by them or it, directly to the
holders of such Guarantor Senior Indebtedness (pro rata to such holders on the
basis of the respective amounts of such Guarantor Senior Indebtedness held by
such holders, as calculated by the Guarantor) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Guarantor Senior Indebtedness may have
been issued, as their respective interests may appear, to the extent necessary
to pay such Guarantor Senior Indebtedness in full, in money or money's worth,
after giving effect to any concurrent payment or distribution to or for the
holders of such Guarantor Senior Indebtedness, before any payment or
distribution is made pursuant to the Guarantee to the Holders of the Securities
of such series or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Guarantor pursuant to the Guarantee of any kind or
character, whether in cash, property or securities, prohibited by the foregoing
shall be received by the Trustee before all such Guarantor Senior Indebtedness
is paid in full, or provision is made for such payment in money in accordance
with its terms, such payment or distribution shall be held in trust for the
benefit of and shall be paid over or delivered to the holders of such Guarantor
Senior Indebtedness or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing such Guarantor Senior Indebtedness may have been issued, as their
respective interests may appear, as calculated by the Guarantor, for application
to the payment of all such Guarantor Senior Indebtedness remaining unpaid to the
extent necessary to pay such Guarantor Senior Indebtedness in full in money in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the benefit of the holders of such Guarantor Senior
Indebtedness.
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For purposes of this Article 18, the words "cash, property or securities"
shall not be deemed to include shares of stock of the Guarantor as reorganized
or readjusted, or securities of the Guarantor or any other corporation provided
for by a plan of reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article 18 with respect to
the Guarantee in respect of any series of Securities to the payment of all
Guarantor Senior Indebtedness with respect to the Securities of such series that
may at the time be outstanding, provided that (i) such Guarantor Senior
Indebtedness is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (ii) the rights of the holders of such
Guarantor Senior Indebtedness are not, without the consent of such holders,
altered by such reorganization or readjustment. The consolidation of the
Guarantor with, or the merger of the Guarantor into, another Person or the
liquidation or dissolution of the Guarantor following the conveyance, transfer
or lease of its property as an entirety, or substantially as an entirety, to
another Person upon the terms and conditions provided for in Sections 8.3 and
8.4 of this Indenture shall not be deemed a dissolution, winding-up, liquidation
or reorganization for the purposes of this Section 18.3 if such other Person
shall, as a part of such consolidation, merger, conveyance or transfer, comply
with the conditions stated in Sections 8.3 and 8.4 of this Indenture. Nothing
in Section 18.2 or in this Section 18.3 shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 6.6 of this Indenture.
Section 18.4. Subrogation.
Subject to the payment in full of all Guarantor Senior Indebtedness with
respect to the Securities of any series, the rights of the Holders of the
Securities of such series shall be subrogated to the rights of the holders of
such Guarantor Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Guarantor applicable to such Guarantor Senior
Indebtedness until the principal of, any premium and interest (including any
Additional Interest) on, and any Additional Amounts or, if applicable,
Additional Sums with respect to, the Securities of such series shall be paid in
full; and, for the purposes of such subrogation, no payments or distributions to
the holders of such Guarantor Senior Indebtedness of any cash, property or
securities to which the Holders or the Trustee would be entitled except for the
provisions of this Article 18, and no payment over pursuant to the provisions of
this Article 18 to or for the benefit of the holders of such Guarantor Senior
Indebtedness by Holders of the Securities of such series or the Trustee, shall,
as between the Guarantor, its creditors other than holders of such Guarantor
Senior Indebtedness, and the Holders of the Securities of such series, be deemed
to be a payment by the Guarantor to or on account of such Guarantor Senior
Indebtedness. It is understood that the provisions of this Article 18 are and
are intended solely for the purposes of defining the relative rights of the
Holders of the Securities of each series, on the one hand, and the holders of
such Guarantor Senior Indebtedness with respect to the Securities of such series
on the other hand.
Nothing contained in this Article 18 or elsewhere in this Indenture, any
Additional Provisions or in the Securities of any series is intended to or shall
impair, as between the Guarantor, its creditors other than the holders of
Guarantor Senior Indebtedness with respect to the Securities of such series, and
the Holders of the Securities of such series, the obligation of the
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Guarantor, which is absolute and unconditional, to pay to the Holders of the
Securities of such series pursuant to the Guarantee the principal of, any
premium and interest (including any Additional Interest) on, and any Additional
Amounts or, if applicable, Additional Sums with respect to, the Securities of
such series as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders of the Securities of such series and creditors of the Guarantor, other
than the holders of such Guarantor Senior Indebtedness, nor shall anything
herein or therein prevent the Trustee or the Holder of any Security of such
series from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
18 of the holders of such Guarantor Senior Indebtedness in respect of cash,
property or securities of the Guarantor, as the case may be, received upon the
exercise of any such remedy.
Upon any payment or distribution of assets of the Guarantor referred to in
this Article 18, the Trustee, subject to the provisions of Article 6 of this
Indenture, and the Holders shall be entitled to conclusively rely upon any order
or decree made by any court of competent jurisdiction in which such dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent
or other Person making such payment or distribution, delivered to the Trustee or
to the Holders of the Securities of any series, for the purposes of ascertaining
the Persons entitled to participate in such distribution, the holders of
Guarantor Senior Indebtedness with respect to the Securities of such series and
other indebtedness of the Guarantor, as the case may be, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 18.
Section 18.5. Trustee to Effectuate Subordination.
Each Holder of Securities by such Holder's acceptance thereof authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article 18 and appoints the Trustee such Holder's attorney-in-fact for any and
all such purposes.
Section 18.6. Notice by the Guarantor.
The Guarantor shall give prompt written notice to a Responsible Officer of
the Trustee of any fact known to the Guarantor that would prohibit the making of
any payment of monies to or by the Trustee in respect of the Securities of any
series pursuant to the provisions of this Article 18. Notwithstanding the
provisions of this Article 18 or any other provision of this Indenture or any
Additional Provisions, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment of monies
to or by the Trustee in respect of the Securities of any series pursuant to the
provisions of this Article 18, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof from the Guarantor or a
holder or holders of Guarantor Senior Indebtedness with respect to the
Securities of such series or from any trustee therefor; and before the receipt
of any such written notice, the Trustee, subject to the provisions of Article 6
of this Indenture, shall be entitled in all respects to assume that no such
facts exist; provided, however, that if the Trustee shall not have received the
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notice provided for in this Section 18.6 at least two Business Days prior to the
date upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment pursuant to the Guarantee of the
principal of, any premium or interest (including any Additional Interest) on, or
any Additional Amounts or, if applicable, Additional Sums with respect to, any
Security of such series), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive such
money and to apply the same to the purposes for which they were received, and
shall not be affected by any notice to the contrary that may be received by it
within two Business Days prior to such date.
The Trustee, subject to the provisions of Article 6 of this Indenture,
shall be entitled to conclusively rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Guarantor Senior Indebtedness
with respect to the Securities of any series (or a trustee on behalf of such
holder), to establish that such notice has been given by a holder of such
Guarantor Senior Indebtedness or a trustee on behalf of any such holder or
holders. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of such
Guarantor Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 18, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Guarantor Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article 18, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Upon any payment or distribution of assets of the Guarantor referred to in
this Article 18, the Trustee and the Holders shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding-up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, liquidating trustee, custodian, receiver, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders of the Securities of
any series, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of Guarantor Senior Indebtedness
with respect to the Securities of such series and other indebtedness of the
Guarantor, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 18.
Section 18.7. Rights of the Trustee; Holders of Guarantor Senior
Indebtedness.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article 18 in respect of any Guarantor Senior Indebtedness
with respect to the Securities of any series at any time held by it, to the same
extent as any other holder of such Guarantor Senior Indebtedness, and nothing in
this Indenture or any Additional Provisions shall deprive the Trustee of any of
its rights as such holder.
With respect to the holders of Guarantor Senior Indebtedness with respect
to the Securities of any series, the Trustee undertakes to perform or to observe
only such of its
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covenants and obligations as are specifically set forth in this Article 18, and
no implied covenants or obligations with respect to the holders of such
Guarantor Senior Indebtedness shall be read into this Indenture or any
Additional Provisions against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of such Guarantor Senior Indebtedness and,
subject to the provisions of Article 6 of this Indenture, the Trustee shall not
be liable to any holder of such Guarantor Senior Indebtedness if it shall pay
over or deliver to Holders of the Securities of such series, the Guarantor or
any other Person money or assets to which any holder of such Guarantor Senior
Indebtedness shall be entitled by virtue of this Article 18 or otherwise.
Nothing in this Article 18 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.6.
Section 18.8. Subordination May Not Be Impaired.
No right of any present or future holder of any Guarantor Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Guarantor, or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Guarantor with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof that any such
holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Guarantor Senior Indebtedness with respect to the Securities of any
series may, at any time and from time to time, without the consent of or notice
to the Trustee or the Holders of Securities of such series, without incurring
responsibility to such Holders and without impairing or releasing the
subordination provided in this Article 18 or the obligations hereunder of the
Holders of the Securities of such series to the holders of such Guarantor Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Guarantor Senior Indebtedness, or otherwise amend or supplement in any manner
such Guarantor Senior Indebtedness or any instrument evidencing the same or any
agreement under which such Guarantor Senior Indebtedness is outstanding; (ii)
sell, exchange, release or otherwise deal with any property pledged, mortgaged
or otherwise securing such Guarantor Senior Indebtedness; (iii) release any
Person liable in any manner for the collection of such Guarantor Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Guarantor and any other Person.
* * *
109
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed, all
as of the day and year first above written.
[SEAL] ACE INA HOLDINGS INC.
Attest:
By_______________________________
Name:
Title:
[SEAL] ACE LIMITED,
as Guarantor
Attest:
By_______________________________
Name:
Title:
[SEAL] THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
Attest:
By_______________________________
Name:
Title:
110
<PAGE>
EXECUTION COPY
____________________________________________________
FIRST SUPPLEMENTAL INDENTURE
among
ACE INA HOLDINGS INC.
as Issuer,
ACE LIMITED,
as Guarantor
and
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
Dated as of June 30, 1999
____________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 Definitions
Section 1.1. Definition of Terms................................... 2
ARTICLE 2 General Terms and Conditions of the Subordinated Notes
Section 2.1. Designation and Principal Amount...................... 7
Section 2.2. Maturity.............................................. 7
Section 2.3. Form and Payment; Minimum Transfer Restriction........ 7
Section 2.4. Exchange and Registration of Transfer of Securities;
Restrictions on Transfers; Depository................. 8
Section 2.5. Interest.............................................. 12
Section 2.6. Right to Proceed...................................... 15
Section 2.7. No Issuance Upon the Exercise of Warrants............. 15
ARTICLE 3 Redemption of the Subordinated Notes
Section 3.1. Redemption............................................ 15
Section 3.2. Optional Redemption by Company........................ 15
Section 3.3. No Sinking Fund....................................... 15
Section 3.4. Mandatory Redemption upon a Qualifying Equity Offering 15
ARTICLE 4Extension of Interest Payment Period
Section 4.1. Extension of Interest Payment Period.................. 16
ARTICLE 5 Expenses
Section 5.1. Payment of Expenses................................... 17
Section 5.2. Payment upon Resignation or Removal................... 17
</TABLE>
ARTICLE 6 Subordination
i
<PAGE>
Section 6.1. Agreement to Subordinate............................... 18
ARTICLE 7 Conversion and Exchange of Subordinated Notes
Section 7.1. Conversion/Exchange Rights............................. 18
ARTICLE 8 Form of Subordinated Notes
Section 8.1. Form of Subordinated Note.............................. 18
ARTICLE 9 Original Issue of Subordinated Notes
Section 9.1. Original Issue of Subordinated Notes................... 19
ARTICLE 10 Remarketing; Reset Rate
Section 10.1. Effectiveness of this Article; Incorporation of
Remarketing Agreement................................. 19
Section 10.2. Determination of Reset Date; Remarketing Procedures.... 19
Section 10.3. Reset of Interest Rate and Maturity Date............... 22
Section 10.4. Renewed Remarketing.................................... 22
Section 10.5. Failed Remarketing..................................... 23
ARTICLE 11 Miscellaneous
Section 11.1. Ratification of Base Indenture; First Supplemental
Indenture Controls..................................... 23
Section 11.2. Trustee Not Responsible for Recitals................... 23
Section 11.3. Governing Law.......................................... 23
Section 11.4. Severability........................................... 23
Section 11.5. Counterparts........................................... 24
ii
<PAGE>
Page
Exhibit A-1 - Form of Subordinated Note
Exhibit A-2 - Form of Replacement Note
Exhibit B - Form of Remarketing Agreement
Exhibit C - Form of Trust Agreement
Exhibit D - Form of Amended and Restated Trust Agreement
iii
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of June 30, 1999 (the "FIRST
Supplemental Indenture"), among ACE INA Holdings Inc., a Delaware corporation
(the "Company"), ACE Limited, as guarantor (the "Guarantor") and The First
National Bank of Chicago, a national banking association, as trustee (the
"Trustee") under the Indenture dated as of June 15, 1999 between the Company,
the Guarantor and the Trustee (the "Base Indenture" and together with this First
Supplemental Indenture, the "Indenture").
WHEREAS, the Company and the Guarantor executed and delivered the Base
Indenture to the Trustee to provide for the future issuance of the Company's
Securities to be issued from time to time in one or more series as might be
determined by the Company under the Indenture, in an unlimited aggregate
principal amount which may be authenticated and delivered as provided in the
Base Indenture;
WHEREAS, Section 3.1 of the Base Indenture permits the terms of any series
of Securities to be established in an indenture supplemental to the Base
Indenture;
WHEREAS, pursuant to the terms of the Base Indenture, the Company desires
to provide for the establishment of a new series of its Securities to be known
as its Auction Rate Reset Subordinated Notes Series A (the "Subordinated
Notes"), the form and substance of such Subordinated Notes and the terms,
provisions and conditions thereof to be set forth as provided in the Base
Indenture and this First Supplemental Indenture;
WHEREAS, ACE RHINOS Trust, a Delaware statutory business trust (the
"Trust"), has offered to Banc of America Securities LLC $400,000,000 aggregate
liquidation amount of its Auction Rate Reset Preferred Securities (the
"Preferred Securities"), representing undivided beneficial interests in the
assets of the Trust, and proposes to invest the proceeds from such offering,
together with the proceeds of the issuance and sale by the Trust to the
Guarantor of $12,372,000 aggregate liquidation amount of its Common Securities,
in $412,372,000 aggregate principal amount of the Subordinated Notes;
WHEREAS, pursuant to the terms of the Remarketing and Contingent Purchase
Agreement dated as of June 30, 1999 (the "Remarketing Agreement") by and among
the Guarantor, the Company, the Trust, and Banc of America Securities LLC, as
remarketing agent (the "Remarketing Agent"), the Preferred Securities or,
following any distribution of Subordinated Notes to the holders of Preferred
Securities, such Subordinated Notes, as the case may be, shall, on the
<PAGE>
occurrence of a Trigger Event, be remarketed in accordance with the terms hereof
by the Remarketing Agent on the Reset Date; and
WHEREAS, the Company and the Guarantor requested that the Trustee execute
and deliver this First Supplemental Indenture, and all requirements necessary to
make this First Supplemental Indenture a valid instrument in accordance with its
terms, and to make the Subordinated Notes, when executed by the Company and
authenticated and delivered by the Trustee, the legal, valid and binding
obligations of the Company, have been performed, and the execution and delivery
of this First Supplemental Indenture has been duly authorized in all respects.
NOW THEREFORE, in consideration of the purchase and acceptance of the
Subordinated Notes by the Holder thereof, and for the purpose of setting forth,
as provided in the Indenture, the form and substance of the Subordinated Notes
and the terms, provisions and conditions thereof, the Company and the Guarantor
covenant and agree with the Trustee as follows:
ARTICLE 1
Definitions
Section 1.1. Definition of Terms. Unless the context otherwise requires:
(1) a term defined in the Base Indenture has the same meaning when used in
this First Supplemental Indenture;
(2) the singular includes the plural as well as vice versa;
(3) a reference to a Section or Article is to a Section or Article of this
First Supplemental Indenture;
(4) headings are for convenience of reference only and do not affect
interpretation; and
(5) the following terms have the meanings given to them in the Trust
Agreement:
Administrative Trustee
Affiliate
Associated Person
Closing Date
2
<PAGE>
Closing Price
Common Securities
Delaware Trustee
Direct Action
Like Amount
Liquidation Amount
Majority in Liquidation Amount
Mandatory Redemption Date
Mandatory Redemption Price
Ordinary Shares
Person
PORTAL Market
Preferred Securities
Pro Rata
Property Trustee
Purchase Agreement
Qualifying Equity Offering
Reference Corporate Dealer
Remarketing Fee
Replacement Securities
Rule 144A
Secondary Purchase Agreement
Securities Act
Special Event
Trading Day
Trigger Price
(6) the following terms have the meanings given to them in this Section
1.1(f):
"90 Day Period" has the meaning set forth in Section 3.1.
"Additional Interest" means the interest, if any, that shall accrue on any
interest on the Subordinated Notes that is in arrears for more than one interest
payment period or not paid during any Extension Period, which in either case
shall accrue at the stated rate per annum specified or determined as specified
in such Subordinated Note and compounded quarterly.
"Additional Sums" has the meaning set forth in Section 2.5(f).
3
<PAGE>
"Additional Taxes" means the sum of any additional taxes, duties and other
governmental changes to which the Trust has become subject from time to time as
a result of a Tax Event.
"Affiliated Bidder" has the meaning set forth in Section 10.2(b).
"Bid" means an irrevocable offer to purchase the aggregate outstanding
principal amount of Subordinated Notes at the Remarketing Price with an Interest
Rate equal to the Bid Rate specified in such Bid and with a Maturity Date on the
Remarketed Maturity Date.
"Bid Rate" means the proposed Interest Rate on the Subordinated Notes
specified in a Bid.
"Business Day" means a day on which banking institutions in New York, New
York and Delaware are not authorized to close and, until the Remarketing
Settlement Date, that is also a London Banking Day.
"Calculation Agent" means Banc of America Securities LLC.
"Date of Determination" has the meaning set forth in Section 2.5(b).
"Dissolution Event" means that pursuant to Section 8.01 of the Trust
Agreement the Trust is to be dissolved in accordance with the Trust Agreement,
and the Subordinated Notes held by the Property Trustee are to be distributed to
the holders of the Trust Securities issued by the Trust Pro Rata in accordance
with the Trust Agreement.
"Expected Reset Date" has the meaning set forth in Section 10.2(a)(i).
"Extension Period" has the meaning set forth in Section 4.1.
"Failed Remarketing" means any event specified as such, at the time so
specified in Article 10 hereof or in Article 6 of the Trust Agreement.
"Final Reset Date" has the meaning set forth in Section 10.2(a)(iii).
"Former Holders" has the meaning set forth in Section 10.2(i)
"Global Subordinated Note" has the meaning set forth in Section 2.4(a)(i).
"Guarantee Trustee" means the Preferred Securities Guarantee Trustee as
defined in the Preferred Securities Guarantee Agreement dated as of June 30,
4
<PAGE>
1999 between ACE INA Holdings Inc., as Guarantor, and The First National Bank of
Chicago, as Preferred Securities Guarantee Trustee.
"Interest Payment Date" has the meaning set forth in Section 2.5(d).
"Interest Rate" has the meaning set forth in Section 2.5(a).
"LIBOR" means the rate determined by the Calculation Agent as the interest
rate expressed in decimal figures for deposits in the London interbank market
for a period of three months in U.S. Dollars which appears on the Telerate Page
3750 as of 11:00 a.m., London time, on the Date of Determination. If such rate
does not appear on the Telerate Page 3750, the rate on the Date of Determination
will be determined as if the parties had specified the LIBOR-Reference Banks
Rate as the applicable rate.
"LIBOR-Reference Banks Rate" means that the rate will be determined on the
basis of the rates at which deposits in U.S. Dollars are offered by the
Reference Banks at approximately 11:00 a.m., London time, on the Date of
Determination to prime banks in the London interbank market for a period of
three months commencing two London Banking Days following such Date of
Determination and in the Representative Amount. The Calculation Agent will
request the principal London office of each of the Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided, the rate
will be the arithmetic mean of the quotations. If fewer than two quotations are
provided as requested, the rate will be the arithmetic mean of the rates quoted
by major banks in New York City, selected by the Calculation Agent, at
approximately 11:00 a.m., New York City time, on the Date of Determination for
loans in U.S. Dollars to leading banks for a period of three months commencing
two London Banking Days following such Date of Determination and in the
Representative Amount.
"London Banking Day" means any day on which dealings in deposits in U.S.
Dollars are transacted in the London interbank market.
"Maturity Date" means September 30, 2002 provided that in the event of a
successful Remarketing of the Subordinated Notes or the Preferred Securities, as
the case may be, the Maturity Date shall be the Remarketed Maturity Date.
"Remarketed Maturity Date" means the later of (i) the first anniversary of
the Remarketing Settlement Date on which Replacement Notes are issued, and (ii)
September 30, 2001.
5
<PAGE>
"Pre-Remarketing Interest Payment Date" has the meaning set forth in
Section 2.5(b).
"Pre-Remarketing Regular Record Date" has the meaning set forth in Section
2.5(d).
"Redemption Date" shall mean, when used with respect to any Subordinated
Notes to be redeemed, the date fixed for such redemption by or pursuant to this
First Supplemental Indenture.
"Redemption Price" has the meaning set forth in Section 3.1.
"Reference Banks" means, for the purposes of any LIBOR rate, four major
banks in the London interbank market selected by the Calculation Agent.
"Regular Record Date" has the meaning set forth in Section 2.5(e).
"Remarketing" means a remarketing of Subordinated Notes pursuant to Article
10 hereof or Article 6 of the Trust Agreement.
"Remarketing Price" means 100.25% of the aggregate principal amount of the
Subordinated Notes plus accrued and unpaid interest (including Additional
Interest, if any).
"Remarketing Settlement Date" means the third Business Day immediately
following the Reset Date.
"Renewed Remarketing" has the meaning set forth in Section 10.4.
"Replacement Notes" has the meaning set forth in Section 10.2(j).
"Replacement Securities" has the meaning set forth in Section 5(j) of the
Remarketing Agreement.
"Representative Amount" means, for the purposes of any LIBOR rate for which
a Representative Amount is relevant, an amount that is equal to the aggregate
principal amount of all of the Subordinated Notes.
"Reset Date" means any date established as a Reset Date pursuant to Article
10 hereof or Article 6 of the Trust Agreement.
"Reset Rate" has the meaning set forth in Section 1 of the Remarketing
Agreement.
6
<PAGE>
"Restricted Security" has the meaning set forth in Section 2.4(c).
"Secondary Purchaser" has the meaning set forth in Section 10.2(c).
"Transfer Restriction Termination Date" means the first date on which the
Subordinated Notes (other than Subordinated Notes acquired by the Company or any
Affiliate thereof) may be sold pursuant to Rule 144(k).
"Trigger Event" has the meaning set forth in Section 10.2(a).
"Trust Agreement" means the Amended and Restated Trust Agreement of ACE
RHINOS Trust, a Delaware statutory business trust, dated as of June 30, 1999.
"Trust Securities" means the Preferred Securities and Common Securities of
the Trust.
"U.S. Dollar" means the lawful currency of the United States of America.
"Winning Bid Rate" has the meaning set forth in Section 10.2(b) hereof or
in Section 6.02(b) of the Trust Agreement.
ARTICLE 2
General Terms and Conditions of the Subordinated Notes
Section 2.1. Designation and Principal Amount. There is hereby authorized
a series of Securities designated the "Auction Rate Reset Subordinated Notes
Series A", limited in aggregate principal amount to $412,372,000 (except as
contemplated in Section 3.1(2) of the Base Indenture).
Section 2.2. Maturity. The principal of the Subordinated Notes shall be
due and payable on the Maturity Date.
Section 2.3. Form and Payment; Minimum Transfer Restriction.
(7) Except as provided in Section 2.4, the Subordinated Notes shall be
issued in fully registered certificated form without coupons in denominations of
$100,000 in principal amount and integral multiples of $1,000 thereof.
Principal and interest on the Subordinated Notes issued in certificated form
will be payable by check or wire transfer, the transfer of such Subordinated
Notes will be registrable and such Subordinated Notes will be exchangeable for
Subordinated
7
<PAGE>
Notes bearing identical terms and provisions at the office or agency of the
Trustee in the Borough of Manhattan, the City of New York; provided, however,
that payment of interest may be made at the option of the Company by check
mailed to the Holder at such address as shall appear in the Securities Register.
Notwithstanding the foregoing, so long as the Holder of any Subordinated Notes
is the Property Trustee, the payment of the principal of and interest (including
any Additional Interest, if any) on such Subordinated Notes held by the Property
Trustee will be made at such place and to such account as may be designated by
the Property Trustee.
(8) A holder of Subordinated Notes may transfer or exchange Subordinated
Notes held by it only in minimum denominations of $100,000 and integral
multiples of $1,000 in excess thereof, and only if such transfer or exchange
does not result in such holder's holding Subordinated Notes in a denomination of
less than $100,000. Any attempted transfer, sale or other disposition of
Subordinated Notes in a denomination of less than $100,000 shall be deemed to be
void and of no legal effect whatsoever.
Section 2.4. Exchange and Registration of Transfer of Securities;
Restrictions on Transfers; Depository. (a) If distributed to holders of
Preferred Securities in connection with a Dissolution Event, the Subordinated
Notes will be issued in the same form as the Preferred Securities that such
Subordinated Notes replace in accordance with the following procedures.
(1) If the Preferred Securities are held in global form, the
Subordinated Notes shall be presented to the Trustee by the Property
Trustee in exchange for a Security in permanent global form in an aggregate
principal amount equal to the aggregate principal amount of all outstanding
Subordinated Notes (a "Global Subordinated Note"), to be registered in the
name of the Depository, or its nominee, and delivered by the Property
Trustee to the Depository for crediting to the accounts of its participants
pursuant to the instructions of the Administrative Trustees. The Company
upon any such presentation shall execute a Global Subordinated Note in such
aggregate principal amount and deliver the same to the Trustee for
authentication and delivery in accordance with the Indenture. Payments on
the Subordinated Notes issued as a Global Subordinated Note will be made to
the Depository. The Company initially appoints The Depository Trust Company
to act as Depository with respect to the Global Subordinated Note.
(2) If the Preferred Securities are held in certificated form, the
Subordinated Notes shall be presented to the Trustee by the Property
8
<PAGE>
Trustee and each outstanding Preferred Security certificate will be deemed
to represent a beneficial interest in such Subordinated Note in an
aggregate principal amount equal to the aggregate Liquidation Amount of the
Preferred Securities represented by such Preferred Security certificate.
When the holder of a Preferred Security certificate presents such
certificate for transfer or reissuance, such certificate will be canceled
and a Subordinated Note, registered in the name of such holder or such
holder's transferee, as the case may be, in an aggregate principal amount
equal to the aggregate Liquidation Amount of the canceled certificate, will
be executed by the Company and delivered to the Trustee for authentication
and delivery in accordance with the Indenture. On issue of such
Subordinated Notes, Subordinated Notes with an equivalent aggregate
principal amount that were presented by the Property Trustee to the Trustee
will be deemed to have been canceled.
(9) Any Global Subordinated Note may be endorsed with or have
incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Indenture as may be required by the
Depository, by a national securities exchange or by the National Association of
Securities Dealers, Inc. in order for the Subordinated Notes to be tradeable on
the PORTAL Market or as may be required for the Subordinated Notes to be
tradeable on any other market developed for trading of securities pursuant to
Rule 144A or required to comply with any applicable law or any regulation
thereunder or with the rules and regulations of any securities exchange upon
which the Subordinated Notes may be listed or traded or to conform with any
usage with respect thereto, or to indicate any special limitations or
restrictions to which any particular Subordinated Notes are subject.
(10) Each Subordinated Note that bears or is required to bear the legend
set forth in this Section 2.4(c) (a "Restricted Security") shall be subject to
the restrictions on transfer provided in the legend set forth in this Section
2.4(c), unless such restrictions on transfer shall be waived by the written
consent of the Company, and the Holder of each Restricted Security, by such
Holder's acceptance thereof, agrees to be bound by such restrictions on
transfer. As used in this Section 2.4(c) and in Section 2.4(d), the term
"transfer" encompasses any sale, pledge, transfer or other disposition of any
Restricted Security.
Prior to the Remarketing Settlement Date and after the occurrence of a
Dissolution Event, any certificate evidencing a Subordinated Note shall bear a
legend in substantially the following form, unless otherwise agreed by the
Company (with written notice thereof to the Trustee):
9
<PAGE>
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES THAT IT
WILL NOT RESELL OR OTHERWISE TRANSFER THE SECURITIES EVIDENCED HEREBY
EXCEPT (1) TO ACE LIMITED OR ANY AFFILIATE THEREOF, (2) TO NATIONSBANK,
N.A., OR ANY OF ITS AFFILIATES, (3) TO ANY ENTITY SPONSORED OR ORGANIZED
BY, ON BEHALF OF, OR FOR THE PRIMARY USE OF, NATIONSBANK, N.A. OR ANY OF
ITS AFFILIATES OR (4) TO A SECONDARY PURCHASER (AS DEFINED IN THE AMENDED
AND RESTATED TRUST AGREEMENT OF ACE RHINOS TRUST DATED AS OF JUNE 30, 1999
(AS AMENDED FROM TIME TO TIME, THE "TRUST AGREEMENT")) THAT AS OF THE RESET
DATE HAS ENTERED INTO A SECONDARY PURCHASE AGREEMENT (AS DEFINED IN THE
TRUST AGREEMENT) WITH THE TRUST.
On and after the Remarketing Settlement Date and after the occurrence of a
Dissolution Event and prior to the Transfer Restriction Termination Date, any
certificate evidencing a Replacement Note shall bear a legend in substantially
the following form, unless otherwise agreed by the Company (with written notice
thereof to the Trustee):
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF
THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITIES EVIDENCED HEREBY
UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION)
RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY EXCEPT (A) TO
ACE LIMITED OR ANY SUBSIDIARY THEREOF, OR (B) TO A QUALIFIED
10
<PAGE>
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AT THE REQUEST
OF THE HOLDER, THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION
OF THE HOLDING PERIOD APPLICABLE TO THE SALE OF THE SECURITY
EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE SECURITIES ACT.
Following the Transfer Restriction Termination Date, any Subordinated Note
or security issued in exchange or substitution therefor (other than Subordinated
Notes acquired by the Company or any Affiliate), may upon surrender of such
Subordinated Note or security for exchange to the Trustee in accordance with the
provisions of this Section 2.4, be exchanged for a new Subordinated Note or
Subordinated Notes, of like tenor and aggregate principal amount, which shall
not bear the restrictive legend required by this Section 2.4(c).
(11) Any Subordinated Note that, prior to the Transfer Restriction
Termination Date, is purchased or owned by the Company or any Affiliate thereof
may not be resold by the Company or such Affiliate unless registered under the
Securities Act or resold pursuant to an exemption from the registration
requirements thereof that results in such Subordinated Note no longer being a
"restricted security" as defined under Rule 144 under the Securities Act.
(12) Except as provided in (f) below, a Global Subordinated Note may be
transferred, in whole but not in part, only to another nominee of the
Depository, or a successor Depository selected or approved by the Company or to
a nominee of such successor Depository.
(13) If (i) the Depository notifies the Company that it is unwilling or
unable to continue as a depositary for such Global Subordinated Note and no
successor depositary shall have been appointed within 90 days by the Company,
(ii) the Depository, at any time, ceases to be a clearing agency registered
under the Exchange Act at which time the Depository is required to be so
registered to act as such depositary and no successor depositary shall have been
appointed within 90 days by the Company, (iii) the Company, in its sole
discretion, determines that such Global Subordinated Note shall be so
exchangeable or (iv) there shall have occurred an Event of Default with respect
to such Subordinated Notes, the Company will execute and the Trustee, upon
written notice from the Company and receipt of a Company Order, will
authenticate and deliver the Subordinated
11
<PAGE>
Notes in definitive registered form without coupons, in authorized
denominations, and in an aggregate principal amount equal to the principal
amount of the Global Subordinated Notes in exchange for such Global Subordinated
Notes. In addition, upon an Event of Default or if the Company may at any time
determine that the Subordinated Notes shall no longer be represented by a Global
Subordinated Note, in such event the Company will execute and the Trustee, upon
receipt of an Officers' Certificate evidencing such determination by the Company
and an Company Order, will authenticate and make available for delivery the
Subordinated Notes in definitive registered form without coupons, in authorized
denominations, and in an aggregate principal amount equal to the principal
amount of the Global Subordinated Note for such Subordinated Notes in definitive
registered form without coupons, in authorized denominations, the Global
Subordinated Note shall be canceled by the Trustee. Such Subordinated Notes
shall be registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall deliver such
Subordinated Notes to the Depository for delivery to the Persons in whose names
such Subordinated Notes are so registered.
Section 2.5. Interest. (a) Interest on the principal amount of each
Subordinated Note will accrue and be payable at a rate (the "Interest Rate") per
annum equal to
(1) from and including the Closing Date to but excluding the earlier
of (A) the Remarketing Settlement Date on which Replacement Notes are
issued and (B) the date such principal amount is paid, LIBOR plus 125 basis
points;
(2) from and including the Remarketing Settlement Date on which
Replacement Notes are issued to but excluding the date such principal
amount is paid, the Winning Bid Rate; and
(3) notwithstanding clauses (i) and (ii) above, if the Company fails
to pay the principal amount on the date such amount becomes due, then from
and including such due date to but excluding the date such principal amount
is paid, the applicable periodic Interest Rate, compounded quarterly, but
only to the extent permitted by applicable law.
Interest that is not paid when due will bear additional interest thereon
compounded quarterly at the applicable periodic Interest Rate specified above
(to the extent permitted by applicable law) in accordance with Section 4.1. The
term
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<PAGE>
"interest", as used herein, includes any such Additional Interest unless
otherwise stated.
(14) Until the Remarketing Settlement Date on which Replacement Notes are
issued, interest on the Subordinated Notes will be payable quarterly in arrears
on July 1, October 1, January 1 and April 1 of each year, commencing October 1,
1999, and on such Remarketing Settlement Date (each, a "Pre-Remarketing Interest
Payment Date"), will accrue from and including the most recent date to which
interest has been paid or, if no interest has been paid, from June 30, 1999, to
but excluding the related Pre-Remarketing Interest Payment Date, except as
otherwise described below.
The Interest Rate in effect for the period from and including the Closing
Date to but excluding October 1, 1999 shall be the rate determined by the
Calculation Agent two London Banking Days prior to Closing Date and shall equal
LIBOR plus 125 basis points. The Interest Rate in effect thereafter, for each
quarterly period from and including the immediately preceding Pre-Remarketing
Interest Payment Date to but excluding the applicable Pre-Remarketing Interest
Payment Date, shall be determined by the Calculation Agent two London Banking
Days prior to such immediately preceding Pre-Remarketing Interest Payment Date
(a "Date of Determination") and shall equal LIBOR plus 125 basis points. Prior
to the Remarketing Settlement Date, the amount of interest payable for any
period shall be computed on the basis of a 360-day year and the actual number of
days elapsed in such period. If a Pre-Remarketing Interest Payment Date is not a
Business Day, then such Pre-Remarketing Interest Payment Date will be the next
succeeding Business Day, except if such Business Day is in the next succeeding
calendar month, such Pre-Remarketing Distribution Date will be the immediately
preceding Business Day.
(15) Interest shall be paid to the Person in whose name such Subordinated
Note or any predecessor Subordinated Note is registered on the books and records
of the Company at the close of business on the Regular Record Date for such
interest installment, which shall be fifteen (15) days prior to a Pre-
Remarketing Interest Payment Date (the "Pre-Remarketing Regular Record Date").
(16) From and including the Remarketing Settlement Date on which
Replacement Notes are issued, interest on the Replacement Notes will be
cumulative and payable quarterly in arrears on July 1, October 1, January 1 and
April 1 of each year, commencing on the Remarketing Settlement Date, and on the
Maturity Date (each, an "Interest Payment Date"), will accumulate from the most
recent date to which interest has been paid or, if no interest has been paid,
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from and including the Remarketing Settlement Date, to but excluding the related
Interest Payment Date, except as otherwise described below. From and including
the Remarketing Settlement Date, the amount of interest payable for any
quarterly period shall be computed on the basis of a 360-day year of twelve 30-
day months. Except as provided in the last sentence of this paragraph, from and
including the Remarketing Settlement Date the amount of interest payable for any
period shorter than a full quarterly period for which interest is computed will
be computed on the basis of the actual number of days elapsed per 30-day month.
If an Interest Payment Date is not a Business Day, then such Interest Payment
Date will be postponed to the next succeeding Business Day (and without any
interest or other payment in respect of any such delay).
(17) Interest shall be paid to the Person in whose name the Subordinated
Note or any predecessor Subordinated Note is registered on the books and records
of the Company, at the close of business on the Regular Record Date for such
interest installment, which, in respect of Subordinated Notes of which the
Property Trustee is the Holder and the related Preferred Securities are in book-
entry only form or a Global Subordinated Note, shall be the close of business on
the Business Day next preceding that Interest Payment Date (the "Regular Record
Date"). If the Subordinated Notes are not represented by a Global Subordinated
Note, the Regular Record Date for such interest installment shall be fifteen
(15) days prior to that Interest Payment Date.
(18) In the event that (i) the Property Trustee is the Holder of all of the
outstanding Subordinated Notes, (ii) a Tax Event in respect of the Trust shall
have occurred and be continuing and (iii) the Company shall not have (A)
redeemed the Subordinated Notes pursuant to Section 3.1 or (B) terminated the
Trust pursuant to Section 8.01(iii) of the Trust Agreement, the Company shall
pay to the Trust (or its permitted successors or assigns under the Trust
Agreement) for so long as the Trust (or its permitted successor or assignee) is
the registered holder of the Subordinated Notes, such additional amounts as may
be necessary in order that the amount of distributions (including any Additional
Amounts as defined in the Trust Agreement) then due and payable by the Trust on
the Preferred Securities and Common Securities that at any time remain
outstanding in accord with the terms thereof shall not be reduced as a result of
any Additional Taxes (the "Additional Sums"). Whenever in this Indenture or the
Subordinated Notes there is a reference in any context to the payment of
principal of or interest on the Subordinated Notes, such mention shall be deemed
to include mention of the payments of the Additional Sums provided for in this
paragraph to the extent that, in such context, Additional Sums are, were or
would be payable in respect thereof pursuant to the provisions of this paragraph
and express mention of the payment of Additional Sums (if applicable) in any
provisions hereof shall not be construed
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as excluding Additional Sums in those provisions hereof where such express
mention is not made; provided that the extension of an interest payment period
pursuant to Section 4.1 on the Subordinated Notes shall not extend the payment
of any Additional Sums that may be due and payable during such interest payment
period.
Section 2.6. Right to Proceed. The Company acknowledges the rights of the
Holders of Preferred Securities under the Trust Agreement to take Direct Action
referred to in Section 3.08(e) thereof and Annex I thereto.
Section 2.7. No Issuance Upon the Exercise of Warrants. The Subordinated
Notes shall not be issuable upon the exercise of warrants.
ARTICLE 3
REDEMPTION OF THE SUBORDINATED NOTES
Section 3.1. Redemption. If at any time a Special Event occurs, the Company
shall have the right (subject to the conditions set forth in the Indenture) at
any time, upon not less than 30 nor more than 60 days notice, to redeem the
Subordinated Notes in whole or in part within the 90 days following the
occurrence of such Special Event (the "90 Day Period") at a redemption price
equal to 100% of the principal amount of the Subordinated Notes plus any accrued
and unpaid interest thereon (including any Additional Interest) to the date of
such redemption (the "Redemption Price"), and, simultaneous with such
redemption, to cause a Like Amount of the Trust Securities to be redeemed by the
Trust at the Mandatory Redemption Price on a Pro Rata basis. The Redemption
Price shall be paid prior to 12:00 noon, New York City time, on the date of such
redemption or such earlier time as the Company determines, provided that the
Company shall deposit with the Trustee an amount sufficient to pay the
Redemption Price prior to the Redemption Date.
Section 3.2. Optional Redemption by Company. Except as provided in Section
3.1, the Subordinated Notes are not entitled to any optional redemption by the
Company.
Section 3.3. No Sinking Fund. The Subordinated Notes are not entitled to
the benefit of any sinking fund.
Section 3.4. Mandatory Redemption upon a Qualifying Equity Offering. If at
any time a Qualifying Equity Offering occurs, the Company shall, upon not
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less than 30 nor more than 60 days' notice, redeem Subordinated Notes having an
aggregate principal amount equal to the gross proceeds of such Qualifying Equity
Offering (without deduction of any applicable underwriting discounts and
commissions), on the 90th day following the closing of such Qualifying Equity
Offering, and, simultaneous with such redemption, cause a Like Amount of the
Trust Securities to be redeemed by the Trust on a Pro Rata basis at a redemption
price equal to the Redemption Price.
ARTICLE 4
EXTENSION OF INTEREST PAYMENT PERIOD
Section 4.1. Extension of Interest Payment Period. The Company shall have
the right, at any time during the term of the Subordinated Notes, so long as no
Event of Default has occurred and is continuing, from time to time to extend the
interest payment period for the Subordinated Notes (each such deferral period,
an "Extension Period"), during which period the Company shall have the right to
not make payments of interest on any interest payment date, and at the end of
such Extension Period the Company shall pay all interest then accrued and unpaid
thereon (together with Additional Interest thereon, if any, to the extent
permitted by applicable law) to the Person in whose name the Subordinated Note
or any predecessor Subordinated Note is registered on the books and records of
the Company at the close of business on the Regular Record Date for the Interest
Payment Date at the end of such Extension Period; provided that no such
Extension Period shall extend beyond the Mandatory Redemption Date, if the Trust
Securities are at the time outstanding, or the Maturity Date. Upon termination
of any Extension Period and upon the payment of all accrued and unpaid interest
and any Additional Interest then due, the Company may select a new Extension
Period, subject to the above requirements. No interest including Additional
Interest, if any, shall be due and payable during an Extension Period, except at
the end thereof. The Company shall give the Trustee, the Property Trustee and
the Administrative Trustees notice of its selection of such Extension Period at
least one Business Day prior to the record date for the date the distributions
on the Preferred Securities of the Trust (or if no Preferred Securities are
outstanding, for the date interest on the Subordinated Notes) would have been
payable except for the election to begin such Extension Period. Such notice
shall specify the period selected.
The Trustee shall promptly give notice of the Company's selection of such
Extension Period to the Holders of the outstanding Subordinated Notes.
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The limitations set forth in the first paragraph of Section 3.11 of the
Base Indenture shall apply during any Extension Period.
ARTICLE 5
EXPENSES
Section 5.1. Payment of Expenses. In connection with the offering, sale and
issuance of the Subordinated Notes to the Trust and in connection with the sale
of the Trust Securities by the Trust, the Company, in its capacity as borrower
with respect to the Subordinated Notes, shall:
(19) pay all costs and expenses relating to the offering, sale and issuance
of the Subordinated Notes and the Trust Securities payable by the Trust pursuant
to the Purchase Agreement and compensation of the Trustee under the Indenture in
accordance with the provisions of Section 6.6 of the Base Indenture;
(20) pay all costs and expenses of the Trust (other than payment in respect
of Trust Securities) (including, but not limited to, costs and expenses relating
to the organization of the Trust; the fees and expenses and indemnities of the
Property Trustee and the Delaware Trustee; the costs and expenses relating to
the operation of the Trust, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing, engraving, computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating and travel; telephone and other
telecommunications expenses; and costs and expenses incurred in connection with
the acquisition, financing, and disposition of Trust assets);
(21) pay all costs and expenses of the Trust or Property Trustee related to
the enforcement by the Property Trustee of the rights of the holders of the
Preferred Securities;
(22) be primarily liable for any indemnification obligations arising with
respect to the Trust Agreement; and
(23) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and expenses
with respect to such taxes of the Trust.
Section 5.2. Payment upon Resignation or Removal. Upon termination of this
First Supplemental Indenture or the Base Indenture or the removal or resignation
of the Trustee pursuant to Section 6.8 of the Base Indenture, the
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Company shall pay to the Trustee all amounts accrued to the date of such
termination, removal or resignation. Upon termination of the Trust Agreement or
the removal or resignation of the Delaware Trustee, the Guarantee Trustee or the
Property Trustee, as the case may be, the Company shall pay to the Delaware
Trustee, the Guarantee Trustee or the Property Trustee and their respective
counsel, as the case may be, all amounts accrued to the date of such
termination, removal or resignation.
ARTICLE 6
SUBORDINATION
Section 6.1. Agreement to Subordinate. The Company covenants and agrees,
and each Holder of Subordinated Notes issued hereunder, by such Holder's
acceptance thereof likewise covenants and agrees, that (i) all Subordinated
Notes shall rank pari passu in right of payment with respect to any Securities
now or hereafter issued, other than any Securities expressly made senior
pursuant to the terms of such Securities; provided that, notwithstanding the
foregoing, all Subordinated Notes shall rank pari passu in right of payment with
respect to any Securities now or hereafter issued that pursuant to their terms
permit deferral of scheduled payments of principal or interest and (ii) all
Subordinated Notes shall be issued as Securities subject to the provisions of
Article 16 of the Base Indenture and this Article 6.
ARTICLE 7
CONVERSION AND EXCHANGE OF SUBORDINATED NOTES
Section 7.1. Conversion/Exchange Rights. The Subordinated Notes are not
exchangeable for Ordinary Shares at any time, and are not convertible into
shares of common stock of the Company at any time.
ARTICLE 8
FORM OF SUBORDINATED NOTES
Section 8.1. Form of Subordinated Note. The Subordinated Notes and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A-1. Following the Remarketing, the Replacement Notes shall be
substantially in the form of Exhibit A-2. Each of Exhibit A-1 and Exhibit A-2 is
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hereby incorporated in and expressly made a part of this First Supplemental
Indenture.
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ARTICLE 9
ORIGINAL ISSUE OF SUBORDINATED NOTES
Section 9.1. Original Issue of Subordinated Notes. Subordinated Notes in
the aggregate principal amount of $412,372,000 may, upon execution of this First
Supplemental Indenture, be executed by the Company and delivered to the Trustee
for authentication, and the Trustee shall thereupon authenticate and deliver
said Subordinated Notes to or upon the written order of the Company, in
accordance with Section 3.3 of the Base Indenture.
ARTICLE 10
REMARKETING; RESET RATE
Section 10.1. Effectiveness of this Article; Incorporation of Remarketing
Agreement. (a) Sections 10.2 and 10.4 shall become effective if and only if the
Subordinated Notes have been distributed to the Holders of the Trust Securities
prior to Remarketing. Notwithstanding the foregoing, on the Remarketing
Settlement Date (except in the case of a Failed Remarketing), the certificates
representing the Subordinated Notes held by the Property Trustee shall be
exchanged for certificates representing Replacement Notes.
(24) Every Person, by virtue of having become a Holder in accordance with
the terms of this Agreement, shall be deemed to have expressly assented and
agreed to the terms of, and shall be bound by, this First Supplemental
Indenture, including the terms of Exhibit B. Exhibit B is hereby incorporated in
and expressly made a part of this First Supplemental Indenture.
Section 10.2. Determination of Reset Date; Remarketing Procedures.
(25) (i) Subject to Section 10.4, if the Closing Price of the Ordinary
Shares on any Trading Day is less than the Trigger Price and the Subordinated
Notes have been distributed to the holders of the Trust Securities (a "Trigger
Event"), the holders of a majority in principal amount of the Subordinated Notes
(the "Requesting Holders") will have the option to require remarketing of the
Subordinated Notes. The Requesting Holders may exercise this option by giving
notice in writing to the Remarketing Agent who shall immediately give notice in
writing to the Company on their behalf (a "Remarketing Notice") at any time
prior to the sixth Business Day following the date such Trigger Event occurs. If
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the Requesting Holders exercise their option to require the remarketing of the
Subordinated Notes, the Reset Date shall be the sixth Business Day after the
date on which the Remarketing Notice is given by the Remarketing Agent (the
"Expected Reset Date").
(ii) If the Requesting Holders do not exercise their option to
require the remarketing the Subordinated Notes, pursuant to Section
10.2(a)(i) above with respect to any Trigger Event, the Requesting Holders
shall continue to have the option to require the remarketing of the
Subordinated Notes, in accordance with Section 10.2(a)(i) with respect to
any subsequent Trigger Event.
(iii) Notwithstanding Section 10.2(a)(i):
(A) the Guarantor may, by notice to the Remarketing Agent,
direct that the Reset Date be delayed if the Company believes it will
be unable to meet the conditions to Remarketing in the absence of such
a delay; and
(B) the Remarketing Agent may, by notice to the Company,
direct that the Reset Date be delayed if the Remarketing Agent
believes that a Remarketing will not be successful in the absence of
such a delay,
provided that the Guarantor and the Remarketing Agent, in either such
event, will use their reasonable best efforts to establish a delayed Reset
Date that is within five Business Days after the Expected Reset Date, but
in no event later than the 15th Business Day following the date on which
the related Remarketing Notice was delivered, or the 20th Business Day in
the case of a Renewed Remarketing to which the provisions of Section 10.4
apply (as applicable, the "Final Reset Date").
(iv) If the Guarantor and the Remarketing Agent have not agreed, on
or prior to the sixth Business Day preceding the Final Reset Date, to a
Reset Date that is not later than the Final Reset Date, a Failed
Remarketing shall be deemed to have occurred.
(26) The Guarantor shall, by notice to the Remarketing Agent no later than
five Business Days prior to the Reset Date, select and specify five Reference
Corporate Dealers. By 3:00 p.m., New York City time, on the Reset Date, the
Remarketing Agent shall request Bids from such Reference Corporate Dealers. The
Remarketing Agent or an Affiliate or Associated Person thereof (any such
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person, an "Affiliated Bidder") may, at its option, enter a Bid. The Remarketing
Agent shall disclose to the Guarantor the Bids obtained and determine the lowest
Bid Rate from among the Bids obtained on the Reset Date (the "Winning Bid
Rate"). By approximately 4:30 p.m., New York City time, on the Reset Date, the
Remarketing Agent shall notify the Trustee and the Property Trustee of the
Winning Bid Rate. If on a Reset Date, Bids are not submitted by at least two
Reference Corporate Dealers, or if the lowest Bid submitted would result in a
Winning Bid Rate in excess of the rate permitted by applicable law, such
Remarketing shall be deemed to be a Failed Remarketing on the corresponding
Remarketing Settlement Date. The Winning Bid Rate determined by the Remarketing
Agent, absent manifest error, shall be binding and conclusive upon the holders
of the Subordinated Notes, the Company, the Guarantor and the Trust.
(27) On the Reset Date, the Remarketing Agent shall designate as the
Secondary Purchaser (the "Secondary Purchaser") the Reference Corporate Dealer
providing the Bid containing the Winning Bid Rate. If the Winning Bid Rate is
specified in the Bids submitted by two or more bidders, the Remarketing Agent
shall, in consultation with the Company, designate one of such bidders as the
Secondary Purchaser.
(28) On the Reset Date, the Secondary Purchaser shall enter into a
Secondary Purchase Agreement for the purchase by such Secondary Purchaser at the
Remarketing Price of the aggregate principal amount of Subordinated Notes, with
an Interest Rate equal to the Winning Bid Rate and with a Mandatory Redemption
Date (or, in the case of Subordinated Notes, a Maturity Date) on the Remarketed
Maturity Date.
(29) If a Remarketing has occurred pursuant to this Section 10.2 but
settlement of the purchase and sale of the Subordinated Notes, does not occur on
the corresponding Remarketing Settlement Date, then, unless the provisions of
Section 10.4 with respect to a Renewed Remarketing shall apply, a Failed
Remarketing shall be deemed to occur on such Remarketing Settlement Date.
(30) At the time and in the manner specified in the Secondary Purchase
Agreement, the Secondary Purchaser shall pay to the Remarketing Agent on behalf
of the Holders of the Subordinated Notes, on the Remarketing Settlement Date, an
amount of cash equal to the Remarketing Price.
(31) Unless otherwise agreed among the Remarketing Agent, the Paying Agent
and any Former Holder, the Remarketing Agent shall promptly pay the Remarketing
Price, less the Remarketing Fee, to the Paying Agent, acting solely as agent for
the Former Holders, and the Paying Agent shall pay such
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amount to the Former Holders in the same manner as is specified in Section 2.7
of the Base Indenture for payments of interest and otherwise herein, except that
the record date therefor shall be the Business Day immediately preceding the
Remarketing Settlement Date.
(32) The obligation of the Remarketing Agent to make payment to the Former
Holders in connection with the Remarketing shall be limited to the extent that
the Secondary Purchaser has delivered the Remarketing Price therefor to the
Remarketing Agent.
(33) Any outstanding Preferred Securities (or, if applicable, the
Subordinated Notes) purchased on the Remarketing Settlement Date shall be deemed
to be transferred to the Secondary Purchaser and shall be replaced in the manner
provided in Section 10.2(j). On and after the Remarketing Settlement Date
(except in the event of a Failed Remarketing), the Company shall make no further
payments to, and the Company shall have no further obligations under First
Supplemental Indenture (or the Indenture) in respect of, the Holders of such
replaced Subordinated Notes (the "Former Holders"), the Company shall only be
obligated to make payments to the Holders of Replacement Notes and the of the
Former Holders shall no longer represent an obligation of the Company, but shall
only represent a right to receive the proceeds of the Remarketing from the
Paying Agent.
(34) The Company shall cause replacement certificates evidencing the
remarketed Subordinated Notes (or, if the Preferred Securities have been
remarketed, reset Subordinated Notes) to be executed by the Company and
authenticated by the Trustee in accordance with the provisions of Section 3.3 of
the Base Indenture (the "Replacement Notes"). The Replacement Notes shall be
delivered to the purchaser or purchasers of the remarketed Subordinated Notes in
accordance with the terms of the Secondary Purchase Agreement.
Section 10.3. Reset of Interest Rate and Maturity Date. From and including
the Remarketing Settlement Date on which Replacement Securities are issued, if
the Subordinated Notes are remarketed pursuant to Article 10 hereof or the
Preferred Securities are remarketed pursuant to Article 6 of the Trust
Agreement, the Interest Rate on the Subordinated Notes shall be the Winning Bid
Rate and the Maturity Date shall be the Remarketed Maturity Date.
Section 10.4. Renewed Remarketing. If a Remarketing has occurred pursuant
to Section 10.2 that would be a Failed Remarketing pursuant to Section 10.2(e),
because the purchase and sale of the Subordinated Notes do not take place on the
corresponding Remarketing Settlement Date, and the reason for such
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failure shall, in the good faith determination of the Remarketing Agent (made
after consultation with the Guarantor), result from facts or circumstances that
are not due to the action or inaction of the Guarantor, then the provisions of
Section 10.2 shall apply to a second remarketing (a "Renewed Remarketing") of
the Preferred Securities (or, if applicable, the Subordinated Notes), except
that the Expected Reset Date shall be the sixth Business Day following such
corresponding Remarketing Settlement Date; provided however that upon the
occurrence of a Failed Remarketing pursuant to Section 10.2, only one Renewed
Remarketing can occur pursuant to this Section 10.4, and no Renewed Remarketing
shall occur after the Final Reset Date.
Section 10.5. Failed Remarketing. The Remarketing Agent shall give notice
of any Failed Remarketing on the date such Failed Remarketing occurs, or is
deemed to occur, by 4:00 p.m., New York City time, on the date of such Failed
Remarketing, to the Guarantor, the Trustee and the Paying Agent under the
Indenture.
ARTICLE 11
Miscellaneous
Section 11.1. Ratification of Base Indenture; First Supplemental Indenture
Controls. The Base Indenture, as supplemented by this First Supplemental
Indenture, is in all respects ratified and confirmed, and this First
Supplemental Indenture shall be deemed part of the Base Indenture in the manner
and to the extent herein and therein provided. The provisions of this First
Supplemental Indenture shall supersede the provisions of the Base Indenture to
the extent the Base Indenture is inconsistent herewith.
Section 11.2. Trustee Not Responsible for Recitals. The recitals herein
contained are made by the Company and not by the Trustee, and the Trustee
assumes no responsibility for the correctness thereof. The Trustee makes no
representation as to the validity or sufficiency of this First Supplemental
Indenture.
Section 11.3. Governing Law. This First Supplemental Indenture and each
Subordinated Note shall be governed by and construed in accordance with the laws
of the State of New York, as applied to contracts made and performed within the
State of New York, without regard to its principles of conflicts of laws.
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Section 11.4. Severability. If any provision in the Base Indenture, this
First Supplemental Indenture or in the Subordinated Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 11.5. Counterparts. The parties may sign any number of copies of
this First Supplemental Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. Any signed copy shall be
sufficient proof of this First Supplemental Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed as of the day and year first above written.
ACE INA HOLDINGS INC.
By:____________________________
Name: Peter N. Mear
Title: Secretary
ACE LIMITED, as Guarantor
By:____________________________
Name: Peter N. Mear
Title: Secretary
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
By:____________________________
Name: Michael D. Pinzon
Title: Authorized Officer
<PAGE>
EXHIBIT A-1
[FORM OF SUBORDINATED NOTE]
IF A DISSOLUTION EVENT HAS OCCURRED, INSERT THE FOLLOWING -THE SECURITY
EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE SECURITIES
EVIDENCED HEREBY EXCEPT (1) TO ACE LIMITED OR ANY AFFILIATE THEREOF, (2) TO
NATIONSBANK, N.A., OR ANY OF ITS AFFILIATES, (3) TO ANY ENTITY SPONSORED OR
ORGANIZED BY, ON BEHALF OF, OR FOR THE PRIMARY USE OF, NATIONSBANK, N.A. OR ANY
OF ITS AFFILIATES (4) TO A SECONDARY PURCHASER (AS DEFINED IN THE AMENDED AND
RESTATED TRUST AGREEMENT OF ACE RHINOS TRUST DATED AS OF JUNE 30, 1999 (AS
AMENDED FROM TIME TO TIME, THE "TRUST AGREEMENT")) THAT AS OF THE RESET DATE HAS
ENTERED INTO A SECONDARY PURCHASE AGREEMENT (AS DEFINED IN THE TRUST AGREEMENT)
WITH THE TRUST.
FROM AND AFTER THE REMARKETING SETTLEMENT DATE ON WHICH REPLACEMENT NOTES ARE
ISSUED TO ANY PERSON OTHER THAN THE PROPERTY TRUSTEE, THIS INSTRUMENT SHALL
REPRESENT ONLY THE RIGHT TO RECEIVE THE REMARKETING PRICE, AS PROVIDED IN THE
TRUST AGREEMENT, AND SHALL NO LONGER REPRESENT AN OBLIGATION OF THE COMPANY.
A1-0
<PAGE>
No. ________
ACE INA HOLDINGS INC.
AUCTION RATE RESET SUBORDINATED NOTE SERIES A
ACE INA Holdings Inc., a Delaware corporation (the "Company", which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay the principal sum of ___________
dollars ($___________) on the Maturity Date.
(35) Interest on the principal amount of this Subordinated Note will accrue
and be payable at a rate (the "Interest Rate") per annum equal to
(1) from and including the Closing Date to but excluding the date on
which the principal amount of this Subordinated Note becomes due upon the
maturity, acceleration or redemption thereof, LIBOR plus 125 basis points;
(2) except as provided in clause (iii) below, from and including the
Remarketing Settlement Date on which Replacement Notes are issued to but
excluding the date on which the principal amount of the Subordinated Notes
becomes due upon the maturity, acceleration or redemption thereof, the
Winning Bid Rate; and
(3) if the Company fails to pay the principal amount due upon the
maturity, acceleration or redemption of this Subordinated Notes on the date
such amount becomes due, from and including such due date to but excluding
the date of actual payment by the Company, the applicable periodic Interest
Rate compounded quarterly.
Interest that is not paid when due will bear additional interest thereon
compounded quarterly at the applicable periodic Interest Rate (to the extent
permitted by applicable law).
The term "interest", as used herein, includes any Additional Interest
unless otherwise stated.
(36) Until the Remarketing Settlement Date on which Replacement Notes are
issued, interest on this Subordinated Note will be payable quarterly (subject to
deferral as set forth herein) in arrears on July 1, October 1, January 1 and
April 1 of each year, commencing October 1, 1999, and on such Remarketing
A1-1
<PAGE>
Settlement Date (each, a "Pre-Remarketing Interest Payment Date"), will
accumulate from and including the most recent date to which interest has been
paid or, if no interest has been paid, from June 30, 1999, to but excluding the
related Pre-Remarketing Interest Payment Date, except as otherwise described
below.
The Interest Rate in effect for the period from and including the Closing
Date to but excluding October 1, 1999 shall be the rate determined by the
Calculation Agent two London Banking Days prior to the Closing Date and shall
equal LIBOR plus 125 basis points. The Interest Rate in effect thereafter, for
each quarterly period from and including the immediately preceding Pre-
Remarketing Interest Payment Date to but excluding the applicable Pre-
Remarketing Interest Payment Date, shall be determined by the Calculation Agent
two London Banking Days prior to such immediately preceding Pre-Remarketing
Interest Payment Date (a "Date of Determination") and shall equal LIBOR plus 125
basis points. Prior to the Remarketing Settlement Date, the amount of interest
payable for any period shall be computed on the basis of a 360-day and the
actual number of days elapsed in such period. If a Pre-Remarketing Interest
Payment Date is not a Business Day, then such Pre-Remarketing Interest Payment
Date will be the next succeeding Business Day, except if such Business Day is in
the next succeeding calendar month, such Pre-Remarketing Distribution Date will
be the immediately preceding Business Day.
As used herein, "London Banking Day" means any day on which dealings in
deposits in U.S. Dollars are transacted in the London interbank market.
All percentages resulting from any calculations on the Subordinated Notes
will be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point, with five one-millionths of a percentage point rounded upward
(e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)), and
all dollar amounts used in or resulting from such calculations will be rounded
to the nearest cent (with one-half cent being rounded upward).
(37) From and including the Remarketing Settlement Date on which
Replacement Notes are issued, interest on the Replacement Notes will be payable
quarterly in arrears on July 1, October 1, January 1 and April 1 of each year,
commencing on the Remarketing Settlement Date, and on the Maturity Date (each,
an "Interest Payment Date"), will accumulate from the most recent date to which
interest has been paid or, if no interest has been paid, from and including the
Remarketing Settlement Date, to but excluding the related Interest Payment Date,
except as otherwise described below. From and including the Remarketing
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Settlement Date, the amount of interest payable for any period shall be computed
on the basis of a 360-day year of twelve 30-day months. Except as provided in
the last sentence of this paragraph, from and including the Remarketing
Settlement Date the amount of interest payable for any period shorter than a
full quarterly period for which interest is computed will be computed on the
basis of the actual number of days elapsed per 30-day month. If an Interest
Payment Date is not a Business Day, then such Interest Payment Date will be
postponed to the next succeeding Business Day (and without interest or other
payment in respect of any such delay).
(d) Interest shall be paid to the Person in whose name this Subordinated
Note or any predecessor Subordinated Note is registered on the books and records
of the Company at the close of business on the Regular Record Date for such
interest installment, which shall be fifteen (15) days prior to a Pre-
Remarketing Interest Payment Date (the "Pre-Remarketing Regular Record Date").
Notwithstanding the foregoing, so long as the Holder of this Subordinated Note
is the Property Trustee, the payment of the principal of (and premium, if any)
and interest on this Subordinated Note will be made at such place and to such
account as may be designated by the Property Trustee.
The indebtedness evidenced by this Subordinated Note is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all existing and future Senior Indebtedness and the
prior payment of other Securities to the extent provided for in the First
Supplemental Indenture, and this Subordinated Note is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this
Subordinated Note, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee on his or her behalf to
take such action as may be necessary or appropriate to acknowledge or effectuate
the subordination so provided and (c) appoints the Trustee his or her attorney-
in-fact for any and all such purposes. Each Holder hereof, by his or her
acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Subordinated Note shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by or on
behalf of the Trustee.
A1-3
<PAGE>
The provisions of this Subordinated Note are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
A1-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
ACE INA HOLDINGS INC.
By:____________________________
Name:
Title:
Attest:
By: _____________________________
Name:
Title:
A1-5
<PAGE>
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designed herein referred to in the
within-mentioned Indenture.
Dated:
[THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
By:_________________________
Authorized Officer ]
[THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
By: _________________________
as Authentication Agent
By:_________________________
Authorized Officer ]
A1-6
<PAGE>
[FORM OF REVERSE OF NOTE]
This Subordinated Note is one of a duly authorized series of Securities of
the Company (herein sometimes referred to as the "Subordinated Notes"),
specified in the Base Indenture, all issued or to be issued in one or more
series under and pursuant to an Indenture dated as of June 15, 1999, duly
executed and delivered between the Company, ACE Limited (the "Guarantor") and
The First National Bank of Chicago, as Trustee (the "Trustee"), as supplemented
by the First Supplemental Indenture dated as of June 30, 1999, between the
Company, the Guarantor and the Trustee (the Base Indenture as so supplemented,
the "Indenture"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company, the
Guarantor and the Holders of the Subordinated Notes. By the terms of the
Indenture, the Subordinated Notes are issuable thereunder in series that may
vary as to amount, date of maturity, rate of interest and in other respects as
provided in the Indenture. This series of Subordinated Notes is limited in
aggregate principal amount as specified in said First Supplemental Indenture and
herein sometimes referred to as the "Subordinated Notes."
Because of the occurrence and continuation of a Special Event, a Qualifying
Equity Offering, in certain circumstances, this Subordinated Note may become due
and payable at the principal amount together with any interest accrued thereon
(including Additional Interest) (the "Redemption Price"). The Redemption Price
shall be paid prior to 12:00 noon, New York City time, on the date of such
redemption or at such earlier time as the Company determines. If the Maturity
Date or any other date fixed for redemption of the Subordinated Notes is not a
Business Day, then payment of the Redemption Price or principal payable on such
date will be made on the next succeeding day that is a Business Day with
interest thereon to the date of payment; provided that the Company may elect to
make such payment on the immediately preceding day that is a Business Day.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Subordinated Notes may
be declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company, the Guarantor and
the Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Subordinated Notes and each other series of
Securities Outstanding and affected, to execute supplemental indentures for the
purpose of adding any provisions to or changing in any manner or eliminating any
A1-7
<PAGE>
of the provisions of the Indenture or of modifying in any manner the rights of
the Holders of such Series of Securities; provided that the Company, the
Guarantor and the Trustee may not, without the consent of the Holder of each
Subordinated Note then Outstanding and affected thereby: (a) change the time of
payment of the principal (or any installment) of any Subordinated Note, or
reduce the principal amount thereof, or reduce the rate or change the time of
payment of interest thereon, or impair the right to institute suit for the
enforcement of any payment on any Subordinated Note when due or (b) reduce the
percentage in principal amount of the Subordinated Notes. The Indenture also
contains provisions providing that prior to the acceleration of the maturity of
any Subordinated Note, the Holders of a majority in aggregate principal amount
of Subordinated Notes may, on behalf of the Holders of all Subordinated Notes,
waive any past default with respect to the Subordinated Notes and its
consequences, except a default (i) in respect of a covenant or provision of the
Indenture or of any Subordinated Note which cannot be modified or amended
without the consent of the Holder of each Outstanding Subordinated Note or (ii)
in the payment of the principal of, any premium or interest (including any
Additional Interest) on, or any Additional Amounts with respect to the
Subordinated Notes.
No reference herein to the Indenture and no provision of this Subordinated
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and premium, if
any, and interest on this Subordinated Note at the time and place and at the
rate and in the money herein prescribed.
The Company shall have the right at any time during the term of this
Subordinated Note, from time to time, to extend the interest payment period of
such Subordinated Note (each such deferral period an "Extension Period"), during
which periods the Company shall have the right not to make payments of interest
on any interest payment date, and at the end of which the Company shall pay all
interest then accrued and unpaid (together with Additional Interest, if any,
thereon to the extent permitted by applicable law) to the Person in whose name
such Subordinated Note or any predecessor Subordinated Note is registered on the
books and records of the Company at the close of business on the Regular Record
Date. Prior to the termination of any such Extension Period, the Company may
further extend the interest payment period, provided that no Extension Period
shall extend beyond the Mandatory Redemption Date, if the Trust Securities are
at the time outstanding, or the Maturity Date of this Subordinated Note. Upon
the termination of any such Extension Period and upon the payment of all accrued
and unpaid interest and any Additional Interest then due, the Company may elect
to being a new Extension Period.
A1-8
<PAGE>
As provided in the Indenture and subject to certain limitations herein and
therein set forth, this Subordinated Note is transferable by the registered
Holder hereof on the Securities Register of the Company, upon surrender of this
Subordinated Note for registration of transfer at the office or agency of the
Trustee in the City and State of New York accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company or the Trustee duly
executed by the registered Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Subordinated Notes of authorized
denominations and for the same aggregate principal amount and series will be
issued to the designated transferee or transferees. No service charge will be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this Subordinated
Note, the Company, the Guarantor, the Trustee, any paying agent and the
Securities Registrar may deem and treat the registered holder hereof as the
absolute owner hereof (whether or not this Subordinated Note shall be overdue
and notwithstanding any notice of ownership or writing hereon made by anyone
other than the Securities Registrar) for the purpose of receiving payment of or
on account of the principal hereof and premium, if any, and interest due hereon
and for all other purposes, and neither the Company nor the Guarantor nor the
Trustee nor any paying agent nor any Securities Registrar shall be affected by
any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Subordinated Note, or for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
The Subordinated Notes of this series are issuable only in registered form
without coupons in denominations of $100,000 and any integral multiple of $1,000
thereof. A holder of Subordinated Notes may transfer or exchange Subordinated
Notes held by it only in minimum denominations of $100,000 and integral
multiples of $1,000 in excess thereof, and only if such transfer or exchange
does not result in such holder's holding Subordinated Notes in a denomination of
less than $100,000. Any attempted transfer, sale or other
A1-9
<PAGE>
disposition of Subordinated Notes in a denomination of less than $100,000 shall
be deemed to be void and of no legal effect whatsoever.
All terms used in this Subordinated Note that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SUBORDINATED NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS.
A1-10
<PAGE>
EXHIBIT A-2
[FORM OF REPLACEMENT NOTE]
IF THE NOTE IS TO BE A GLOBAL SUBORDINATED NOTE, INSERT THE FOLLOWING--This
Note is a Global Security within the meaning of the Indenture hereinafter
referred to and is registered in the name of a Depository or a nominee of a
Depository. This Note is exchangeable for Subordinated Notes registered in the
name of a person other than the Depository or its nominee only in the limited
circumstances described in the Indenture, and no transfer of this Note (other
than a transfer of this Note as a whole by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository) may be registered except in limited circumstances.
Unless this Note is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer or
its agent for registration of transfer, exchange or payment, and any Note issued
is registered in the name of Cede & Co. or such other name as requested by an
authorized representative of The Depository Trust Company and any payment hereon
is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co.,
has an interest herein.
IF A DISSOLUTION EVENT HAS OCCURRED, INSERT THE FOLLOWING - THE SECURITY
EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT PRIOR TO THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED
HEREBY UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION)
RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY EXCEPT (A) TO ACE
LIMITED OR ANY AFFILIATE THEREOF OR (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AT THE REQUEST OF THE HOLDER,
THIS LEGEND WILL BE
A2-1
<PAGE>
REMOVED AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO THE SALE OF THE
SECURITY EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE SECURITIES ACT.
A2-2
<PAGE>
No.__________ CUSIP NO.________
ACE INA HOLDINGS INC.
AUCTION RATE RESET SUBORDINATED NOTE SERIES A
REPLACEMENT NOTE
ACE INA Holdings Inc., a Delaware corporation (the "Company", which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay the principal sum of ____________
dollars ($__________) on the Maturity Date.
Interest on the principal amount of this Subordinated Note will accrue and
be payable at a rate (the "Interest Rate") per annum equal to from and including
the date of issuance to but excluding the date such principal amount is paid,
the Winning Bid Rate, compounded quarterly; and if the Company fails to pay the
principal amount on the date such amount becomes due, then from and including
such due date to but excluding the date such principal amount is paid, the
applicable periodic Interest Rate, compounded quarterly, but only to the extent
permitted by applicable law.
Interest that is not paid when due will bear additional interest thereon
compounded quarterly at the applicable periodic Interest Rate (to the extent
permitted by applicable law).
The term "interest", as used herein, includes any Additional Interest
unless otherwise stated.
From and including the date of issuance, interest on this Replacement Note,
will be payable quarterly in arrears on July 1, October 1, January 1 and April 1
of each year, commencing on the Remarketing Settlement Date, and on the Maturity
Date (each, an "Interest Payment Date"), will accumulate from the most recent
date to which interest has been paid or, if no interest has been paid, from and
including the date of issuance, to but excluding the related Interest Payment
Date, except as otherwise described below. The amount of interest payable for
any period shall be computed on the basis of a 360-day year of twelve 30-day
months. Except as provided in the last sentence of this paragraph, the amount of
interest payable for any period shorter than a full quarterly period for which
interest is computed will be computed on the basis of the actual number of days
elapsed per 30-day month. If an Interest Payment Date is not a Business Day,
A2-3
<PAGE>
then such Interest Payment Date will be the next succeeding Business Day (and
without any interest or other payment in respect of any such delay).
Interest shall be paid to the Person in whose name the Subordinated Note or
any predecessor Subordinated Note is registered on the books and records of the
Company at the close of business on the Regular Record Date for such interest
installment, which, in respect of Subordinated Notes of which the Property
Trustee is the Holder and the related Preferred Securities are in book-entry
only form or a Global Subordinated Note, shall be the close of business on the
Business Day next preceding that Interest Payment Date (the "Regular Record
Date"). If the Subordinated Notes are not represented by a Global Subordinated
Note, the Regular Record Date for such interest installment shall be fifteen
(15) days prior to an Interest Payment Date. Notwithstanding the foregoing, so
long as the Holder of this Subordinated Note is the Property Trustee, the
payment of the principal of (and premium, if any) and interest on this
Subordinated Note will be made at such place and to such account as may be
designated by the Property Trustee.
The indebtedness evidenced by this Subordinated Note is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all existing and future Senior Indebtedness and the
prior payment of other Securities to the extent provided for in the First
Supplemental Indenture, and this Subordinated Note is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this
Subordinated Note, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee on his or her behalf to
take such action as may be necessary or appropriate to acknowledge or effectuate
the subordination so provided and (c) appoints the Trustee his or her attorney-
in-fact for any and all such purposes. Each Holder hereof, by his or her
acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Subordinated Note shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by or on
behalf of the Trustee.
The provisions of this Subordinated Note are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
A2-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
ACE INA HOLDINGS INC.
By:___________________________
Name:
Title:
Attest:
By:__________________________
Name:
Title:
A2-5
<PAGE>
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in the
within-mentioned Indenture.
Dated:
[THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
By: _________________________
Authorized Officer ]
[THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
By: _________________________
as Authentication Agent
By: _________________________
Authorized Officer ]
A2-6
<PAGE>
[FORM OF REVERSE OF NOTE]
This Subordinated Note is one of a duly authorized series of Securities of
the Company (herein sometimes referred to as the "Subordinated Notes"),
specified in the Base Indenture (as defined below), all issued or to be issued
in one or more series under and pursuant to an Indenture (the "Base Indenture")
dated as of June 15, 1999, duly executed and delivered between the Company, ACE
Limited (the "Guarantor") and The First National Bank of Chicago, as Trustee
(the "Trustee"), as supplemented by the First Supplemental Indenture dated as of
June 30, 1999, among the Company, the Guarantor and the Trustee (the Base
Indenture as so supplemented, the "Indenture"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company, the Guarantor and the Holders of the Subordinated
Notes. By the terms of the Indenture, the Subordinated Notes are issuable
thereunder in series that may vary as to amount, date of maturity, rate of
interest and in other respects as provided in the Indenture. This series of
Subordinated Notes is limited in aggregate principal amount as specified in said
First Supplemental Indenture and herein sometimes referred to as the
"Subordinated Notes."
Because of the occurrence and continuation of a Special Event or a
Qualifying Equity Offering in certain circumstances, this Subordinated Note may
become due and payable at the principal amount together with any interest
accrued thereon (including Additional Interest) (the "Redemption Price"). The
Redemption Price shall be paid prior to 12:00 noon, New York City time, on the
date of such redemption or at such earlier time as the Company determines. If
the Maturity Date or any other date fixed for redemption of the Subordinated
Notes is not a Business Day, then payment of the Redemption Price or principal
payable on such date will be made on the next succeeding day that is a Business
Day with interest thereon to the date of payment; provided that the Company may
elect to make such payment on the immediately preceding day that is a Business
Day.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Subordinated Notes may
be declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company, the Guarantor and
the Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Subordinated Notes and each other series of
Securities Outstanding and affected, to execute supplemental indentures for the
A2-7
<PAGE>
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Indenture or of modifying in any manner the rights of
the Holders of such Series of Securities; provided that the Company, the
Guarantor and the Trustee may not, without the consent of the Holder of each
Subordinated Notes then Outstanding and affected thereby: (a) change the time
of payment of the principal (or any installment) of any Subordinated Note, or
reduce the principal amount thereof, or reduce the rate or change the time of
payment of interest thereon, or impair the right to institute suit for the
enforcement of any payment on any Subordinated Note when due or (b) reduce the
percentage in principal amount of the Subordinated Notes. The Indenture also
contains provisions providing that prior to the acceleration of the maturity of
any Subordinated Note, the Holders of a majority in aggregate principal amount
of Subordinated Notes may, on behalf of the Holders of all Subordinated Notes
waive any past default with respect to the Subordinated Notes and its
consequences, except a default (i) in respect of a covenant or provision of the
Indenture or of any Subordinated Note which cannot be modified or amended
without the consent of the Holder of each Outstanding Subordinated Note or (ii)
in the payment of the principal of, any premium or interest (including any
Additional Interest) on, or any Additional Amounts with respect to the
Subordinated Notes.
No reference herein to the Indenture and no provision of this Subordinated
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and premium, if
any, and interest on this Subordinated Note at the time and place and at the
rate and in the money herein prescribed.
The Company shall have the right at any time during the term of this
Subordinated Note, from time to time, to extend the interest payment period of
such Subordinated Note (each such deferral period an "Extension Period"), during
which periods the Company shall have the right not to make payments of interest
on any interest payment date, and at the end of which the Company shall pay all
interest then accrued and unpaid (together with Additional Interest, if any,
thereon to the extent permitted by applicable law) to the Person in whose name
such Subordinated Note or any predecessor Subordinated Note is registered on the
books and records of the Company at the close of business on the Regular Record
Date. Prior to the termination of any such Extension Period, the Company may
further extend the interest payment period, provided that no Extension Period
shall extend beyond the Mandatory Redemption Date, if the Trust Securities are
at the time outstanding, or the Maturity Date of this Subordinated Note. Upon
the termination of any such Extension Period and upon the payment of all accrued
A2-8
<PAGE>
and unpaid interest and any Additional Interest then due, the Company may elect
to being a new Extension Period.
As provided in the Indenture and subject to certain limitations herein and
therein set forth, this Subordinated Note is transferable by the registered
Holder hereof on the Securities Register of the Company, upon surrender of this
Subordinated Note for registration of transfer at the office or agency of the
Trustee in the City and State of New York accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company or the Trustee duly
executed by the registered Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Subordinated Notes of authorized
denominations and for the same aggregate principal amount and series will be
issued to the designated transferee or transferees. No service charge will be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this Subordinated
Note, the Company, the Guarantor, the Trustee, any paying agent and the
Securities Registrar may deem and treat the registered holder hereof as the
absolute owner hereof (whether or not this Subordinated Note shall be overdue
and notwithstanding any notice of ownership or writing hereon made by anyone
other than the Securities Registrar) for the purpose of receiving payment of or
on account of the principal hereof and premium, if any, and interest due hereon
and for all other purposes, and neither the Company nor the Guarantor nor the
Trustee nor any paying agent nor any Securities Registrar shall be affected by
any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Subordinated Note, or for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
The Subordinated Notes of this series are issuable only in registered form
without coupons in denominations of $100,000 and any integral multiple of $1,000
thereof. A holder of Subordinated Notes may transfer or exchange Subordinated
Notes held by it only in minimum denominations of $100,000 and integral
multiples of $1,000 in excess thereof, and only if such transfer or exchange
does not result in such holder's holding Subordinated Notes in a
A2-9
<PAGE>
denomination of less than $100,000. Any attempted transfer, sale or other
disposition of Subordinated Notes in a denomination of less than $100,000 shall
be deemed to be void and of no legal effect whatsoever.
All terms used in this Subordinated Note that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SUBORDINATED NOTES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS.
A2-10
<PAGE>
EXHIBIT B
FORM OF REMARKETING AGREEMENT
<PAGE>
EXHIBIT C
FORM OF TRUST AGREEMENT
<PAGE>
EXHIBIT D
FORM OF AMENDED AND RESTATED TRUST AGREEMENT
