UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ________________ to ________________
Commission File No. 1-11778 I.R.S. Employer Identification No. 98-0091805
ACE LIMITED
(Incorporated in the Cayman Islands)
The ACE Building
30 Woodbourne Avenue
Hamilton HM 08
Bermuda
Telephone 441-295-5200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES x NO
---------- --------
The number of registrant's Ordinary Shares ($0.041666667 par value)
outstanding as of May 11, 2000 was 217,018,141
<PAGE>
ACE LIMITED
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION
- ------------------------------
Page No.
-------
Item 1. Financial Statements:
Consolidated Balance Sheets
March 31, 2000 (Unaudited) and December 31, 1999 3
Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 2000 and 1999 4
Consolidated Statements of Shareholders' Equity (Unaudited)
Three Months Ended March 31, 2000 and 1999 5
Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended March 31, 2000 and 1999 6
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2000 and 1999 7
Notes to Interim Consolidated Financial Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 16
Part II. OTHER INFORMATION
- ---------------------------
Item 5. Other Information 28
Item 6. Exhibits and Reports on Form 8-K 28
2
<PAGE>
<TABLE>
<CAPTION>
ACE LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31 December 31
2000 1999
---- ----
(Unaudited)
(in thousands of U.S. Dollars,
except share and per share data)
<S> <C> <C>
Assets
Investments and cash
Fixed maturities available for sale, at fair value
(amortized cost - $10,198,527 and $10,080,402) $ 10,003,071 $ 9,849,803
Equity securities, at fair value (cost - $528,720 and $780,558) 651,572 933,314
Short-term investments, at fair value
(amortized cost - $937,539 and $1,194,956) 937,539 1,192,875
Other investments, at fair value (cost - $415,211 and $303,714) 413,658 300,311
Cash 807,921 599,232
--------------- --------------
Total investments and cash 12,813,761 12,875,535
Accrued investment income 193,433 170,755
Insurance and reinsurance balances receivable 2,321,072 2,018,788
Accounts and notes receivable 537,100 533,863
Reinsurance recoverable 8,551,066 8,840,081
Deferred policy acquisition costs 566,211 514,425
Prepaid reinsurance premiums 584,294 580,244
Goodwill 2,806,044 2,822,718
Deferred tax assets 945,115 916,184
Other assets 927,202 850,295
--------------- --------------
Total assets $ 30,245,298 $ 30,122,888
=============== ==============
Liabilities
Unpaid losses and loss expenses $ 16,857,235 $ 16,460,247
Unearned premiums 2,759,982 2,428,828
Premiums received in advance 67,330 63,759
Insurance and reinsurance balances payable 1,264,569 1,735,956
Contract holder deposit funds 183,931 201,079
Accounts payable, accrued expenses and other liabilities 1,462,703 1,684,725
Dividend payable 23,863 23,921
Short-term debt 758,063 1,074,585
Long-term debt 1,424,228 1,424,228
Trust preferred securities 875,000 575,000
--------------- --------------
Total liabilities 25,676,904 25,672,328
=============== ==============
Commitments and contingencies
Shareholders' Equity
Ordinary Shares ($0.041666667 par value, 300,000,000 shares authorized;
216,901,913 and 217,460,515 shares issued and outstanding) 9,038 9,061
Additional paid-in capital 2,197,331 2,214,989
Unearned stock grant compensation (28,358) (28,908)
Retained earnings 2,472,224 2,321,570
Accumulated other comprehensive (loss) (81,841) (66,152)
----------------- -----------------
Total shareholders' equity 4,568,394 4,450,560
----------------- ----------------
Total liabilities and shareholders' equity $ 30,245,298 $30,122,888
================= ================
See accompanying notes to interim consolidated financial statements
3
<PAGE>
<CAPTION>
ACE LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
Three Months Ended
March 31
2000 1999
----------------- ------------------
(in thousands of U.S. Dollars, except
per share data)
<S> <C> <C>
Revenues
Gross premiums written $ 1,996,960 $ 435,495
Reinsurance premiums ceded (539,938) (94,830)
----------------- ------------------
Net premiums written 1,457,022 340,665
Change in unearned premiums (352,216) (55,398)
----------------- ------------------
Net premiums earned 1,104,806 285,267
Net investment income 182,935 86,484
Net realized gains on investments 56,740 17,254
----------------- ------------------
Total revenues 1,344,481 389,005
----------------- ------------------
Expenses
Losses and loss expenses 715,483 156,881
Policy acquisition costs 150,642 34,353
Administrative expenses 194,008 54,650
Amortization of goodwill 19,646 4,420
Interest expense 57,189 4,530
----------------- ------------------
Total expenses 1,136,968 254,834
----------------- ------------------
Income before income taxes 207,513 134,171
Income tax expense 33,000 5,152
----------------- ------------------
Net income $ 174,513 $ 129,019
================= ==================
Basic earnings per share $0.80 $0.67
================= ==================
Diluted earnings per share $0.80 $0.65
================= ==================
See accompanying notes to interim consolidated financial statements
4
<PAGE>
<CAPTION>
ACE LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
Three Months Ended
March 31
2000 1999
-------------- --------------
(in thousands of U.S. Dollars)
<S> <C> <C>
Ordinary shares
Balance at beginning of period $ 9,061 $ 8,070
Ordinary Shares issued 3 -
Cancellation of Ordinary Shares (28) -
Exercise of stock options 2 8
-------------- --------------
Balance at end of period 9,038 8,078
-------------- --------------
Additional paid-in capital
Balance at beginning of period 2,214,989 1,767,188
Ordinary Shares issued 735 -
Cancellation of Ordinary Shares (18,950) -
Exercise of stock options 557 3,036
-------------- --------------
Balance at end of period 2,197,331 1,770,224
-------------- --------------
Unearned stock grant compensation
Balance at beginning of period (28,908) (15,087)
Stock grants awarded (1,750) (808)
Amortization 2,300 2,279
-------------- --------------
Balance at end of period (28,358) (13,616)
-------------- --------------
Retained earnings
Balance at beginning of period 2,321,570 2,040,664
Net income 174,513 129,019
Dividends declared (23,859) (17,446)
-------------- --------------
Balance at end of period 2,472,224 2,152,237
-------------- --------------
Accumulated other comprehensive income (loss)
Net unrealized appreciation (depreciation) on investments
Balance at beginning of period (83,327) 102,271
Change in period, net of tax (242) (65,359)
-------------- --------------
Balance at end of period (83,569) 36,912
-------------- --------------
Cumulative translation adjustments
Balance at beginning of period 17,175 6,471
Net adjustments during period (15,447) (4,090)
-------------- --------------
Balance at end of period 1,728 2,381
-------------- --------------
Accumulated other comprehensive income (loss) (81,841) 39,293
-------------- --------------
Total shareholders' equity $4,568,394 $3,956,216
============== ==============
See accompanying notes to interim consolidated financial statements
5
<PAGE>
<CAPTION>
ACE LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
Three Months Ended
March 31
2000 1999
---- ----
(in thousands of U.S. Dollars)
<S>
Net income $ 174,513 $ 129,019
Other comprehensive income (loss)
Net unrealized appreciation (depreciation) on investments
Unrealized appreciation (depreciation) on investments 72,229 (41,509)
Less: reclassification adjustment for net realized gains
included in net income (63,059) (27,739)
---------------- ---------------
9,170 (69,248)
Cumulative translation adjustments (22,418) (4,090)
---------------- ---------------
Other comprehensive income (loss), before income taxes (13,248) (73,338)
Income tax benefit (expense) related to other comprehensive income items (2,441) 3,889
---------------- ---------------
Other comprehensive income (loss) (15,689) (69,449)
---------------- ---------------
---------------- ---------------
Comprehensive income $ 158,824 $ 59,570
================ ===============
See accompanying notes to interim consolidated financial statements
6
<PAGE>
<CAPTION>
ACE LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
Three Months Ended
March 31
2000 1999
---- ----
(in thousands of U.S. Dollars)
Cash flows from operating activities
Net income $ 174,513 $ 129,019
Adjustments to reconcile net income to net cash used for operating
activities:
Unearned premiums 344,193 32,449
Unpaid losses and loss expenses, net of reinsurance recoverable 574,116 (143,552)
Prepaid reinsurance premiums (4,050) 16,967
Deferred tax assets (4,094) (852)
Net realized gains on investments (56,740) (17,254)
Amortization of premium/discounts on fixed maturities 393 (5,893)
Amortization of goodwill 19,646 4,420
Deferred policy acquisition costs (54,906) (1,897)
Insurance and reinsurance balances receivable (304,004) (78,043)
Premiums received in advance 3,571 (8,759)
Insurance and reinsurance balances payable (472,242) 36,716
Accounts payable, accrued expenses and other liabilities (270,080) (11,406)
Net change in contract holder deposit funds (8,006) -
Other (26,318) (28,708)
---------------- ---------------
Net cash flows used for operating activities (84,008) (76,793)
---------------- ---------------
Cash flows from investing activities
Purchases of fixed maturities (2,712,024) (4,518,955)
Purchases of equity securities (146,166) (99,084)
Sales of fixed maturities 2,800,521 4,254,178
Sales of equity securities 492,175 102,055
Maturities of fixed maturities 4,094 397,875
Net realized gains on financial futures contracts 8,877 3,535
Other investments (114,900) (15,891)
Acquisition of subsidiaries, net of cash acquired - (9,000)
---------------- ---------------
Net cash flows from investing activities 332,577 114,713
---------------- ---------------
Cash flows from financing activities
Dividends paid (23,917) (17,429)
Repayment of bank debt (605,530) -
Proceeds from short-term debt 289,008 -
Proceeds from issuance of trust preferred securities 300,000 -
Proceeds from exercise of options for Ordinary Shares 559 4,971
---------------- ---------------
Net cash flows used for financing activities (39,880) (12,458)
---------------- ---------------
Net increase in cash 208,689 25,462
Cash at beginning of period 599,232 240,556
---------------- ---------------
Cash at end of period $ 807,921 $ 266,018
================ ===============
See accompanying notes to interim consolidated financial statements
</TABLE>
7
<PAGE>
ACE LIMITED AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
The interim consolidated financial statements, which include the accounts
of the Company and its subsidiaries, have been prepared on the basis of
accounting principles generally accepted in the United States of America
and, in the opinion of management, reflect all adjustments (consisting of
normally recurring accruals) necessary for a fair presentation of results
for such periods. The results of operations and cash flows for any interim
period are not necessarily indicative of results for the full year. These
financial statements should be read in conjunction with the consolidated
financial statements, and related notes thereto, included in the Company's
1999 Annual Report on Form 10-K.
ACE Limited ("ACE" or the "the Company") is a holding company incorporated
with limited liability under the Cayman Islands Companies Law and maintains
its business office in Bermuda. The Company provides property and casualty
insurance and reinsurance for a diverse group of customers worldwide. ACE
International also provides accident and health insurance products that are
designed to meet the insurance needs of individuals and groups outside of
the U.S. insurance markets. In addition, through ACE Global Markets, the
Company provides funds at Lloyd's to support underwriting by Lloyd's
syndicates managed by Lloyd's managing agencies, which are indirect wholly
owned subsidiaries of ACE. ACE operates through six business segments: ACE
Bermuda, ACE Global Markets, ACE Global Reinsurance, ACE USA, ACE
International and ACE Financial Services.
On July 2, 1999, the Company completed the ACE INA acquisition. This
acquisition was recorded using the purchase method of accounting and,
accordingly, the consolidated financial statements of the Company include
the results of ACE INA and its subsidiaries from July 2, 1999, the date of
the acquisition. ACE INA is the holding company for ACE USA and ACE
International operating segments.
On December 30, 1999, the Company acquired ACE Financial Services
(previously Capital Re Corporation). This acquisition has been recorded
using the purchase method of accounting and, accordingly, the consolidated
financial statements of the Company include the results of operations of
ACE Financial Services and its subsidiaries from December 30, 1999, the
date of the acquisition.
For the three months ended March 31, 2000, approximately 57 percent of the
Company's premiums written came from companies headquartered in North
America, 22 percent came from companies headquartered in Europe, 6 percent
came from companies headquartered in Australia and New Zealand, 3 percent
came from companies headquartered in Latin America, 4 percent from
companies headquartered in Asia Pacific and 8 percent came from companies
headquartered in other countries.
<PAGE>
2. Significant Accounting Policies
a) New accounting pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"). SFAS 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded
in other contracts, and hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. SFAS 133
is effective beginning in the first quarter of fiscal 2001. The Company is
currently assessing the effect of adopting this statement on its financial
position and operating results, which as yet, has not been determined.
3. Commitments and Contingencies
The Company has considered asbestos and environmental claims and claims
expenses in establishing the liability for unpaid losses and loss expenses.
The estimation of ultimate losses arising from asbestos and environmental
exposures has presented a challenge because traditional actuarial reserving
methods, which primarily rely on historical experience, are inadequate for
such estimation. The problem of estimating reserves for asbestos and
environmental exposures resulted in the development of reserving methods
which incorporate new sources of data with historical experience. The
Company believes that the reserves carried for these claims are adequate
based on known facts and current law.
4. Restricted Stock Awards
Under the Company's long-term incentive plans, 68,418 restricted Ordinary
Shares were awarded during the three months ended March 31, 2000, to
officers of the Company and its subsidiaries. These shares vest at various
dates through March 2004.
At the time of grant the market value of the shares awarded under these
grants is recorded as unearned stock grant compensation and is presented as
a separate component of shareholders' equity. The unearned compensation is
charged to income over the vesting period.
8
<PAGE>
5. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Three Months Ended
March 31
2000 1999
---- ----
(In thousands of U.S. dollars
except share
and per share data)
<S>
Numerator:
Net Income $ 174,513 $ 129,019
================ ===============
Denominator:
Denominator for basic earnings per share -
Weighted average shares outstanding 216,882,344 193,758,050
Effect of dilutive securities 2,103,927 3,422,737
---------------- ---------------
Denominator for diluted earnings per share -
Adjusted weighted average shares outstanding
and assumed conversions 218,986,271 197,180,787
================ ===============
Basic earnings per share $0.80 $0.67
================ ===============
Diluted earnings per share $0.80 $0.65
================ ===============
- -------------------------------------------------------------------------------------------------
<CAPTION>
6. Debt
- ---------------------------------------------------------------------------------------------------------------------
Coupon March 31 December 31
------ -------- -----------
Rates 2000 1999
----- ---- ----
(in millions of U.S. Dollars)
<S> <C> <C> <C>
Short-term debt
ACE Limited commercial paper Various $ 408 $ 425
ACE INA commercial paper Various 325 625
ACE Financial Services Note Various 25 25
------------------- -----------------
$ 758 $ 1,075
------------------- -----------------
Long-term debt
ACE INA Notes due 2004 8.20% $ 400 $ 400
ACE INA Notes due 2006 8.30% 299 299
ACE US Holdings Senior Notes due 2008 6.47% 250 250
ACE INA Subordinated Notes due 2009 8.41% 300 300
ACE INA Debentures due 2029 8.875% 100 100
ACE Financial Services Debentures due 2002 7.75% 75 75
------------------- -----------------
$ 1,424 $ 1,424
------------------- -----------------
Trust Preferred Securities
ACE INA RHINO Preferred Securities due 2002 Libor + 1.25% $ 400 $ 400
ACE Financial Services Monthly Income
Preferred Securities due 2044 7.65% 75 75
ACE INA Trust Preferred Securities due 2029 8.875% 100 100
ACE INA Capital Securities due 2030 9.70% 300 -
------------------- -----------------
$ 875 $ 575
=================== =================
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
ACE INA Capital Securities
On March 31, 2000, ACE Capital Trust II, a Delaware statutory business
trust ("ACE Capital Trust II") issued and sold in a public offering $300
million of 9.70 percent Capital Securities (the "Capital Securities"). All
of the common securities of ACE Capital Trust II (the "ACE Capital Trust II
Common Securities") are owned by ACE INA.
The Capital Securities mature on April 1, 2030, which may not be extended.
Distributions on the Capital Securities are payable semi-annually at a rate
of 9.70 percent, however, ACE Capital Trust II may defer these payments for
up to 10 consecutive semi-annual periods (but no later than April 1, 2030).
Any deferred payments would accrue interest semi-annually on a compounded
basis if ACE INA defers interest on the Subordinated Debentures due 2030
(as defined below).
The sole assets of ACE Capital Trust II consist of $309,280,000 principal
amount of 9.70 percent Junior Subordinated Deferrable Interest Debentures
(the "Subordinated Debentures due 2030") issued by ACE INA. The
Subordinated Debentures due 2030 mature on April 1, 2030. Interest on the
Subordinated Debentures due 2030 is payable semi-annually at a rate of 9.70
percent, however, ACE INA may defer such interest payments (but no later
than April 1, 2030), with such deferred payments accruing interest
compounded semi-annually. ACE INA may redeem the Subordinated Debentures
due 2030 in the event certain changes in tax or investment company law
occur at a redemption price equal to accrued and unpaid interest to the
redemption date plus the greater of (i) 100 percent of the principal amount
thereof, or (ii) the sum of the present value of scheduled payments of
principal and interest on the debentures from the redemption date to April
1, 2030, discounted to the redemption date on a semi-annual basis at a
discount rate equal to the applicable treasury rate plus 3.1 percent, in
the first year after issuance, and the applicable treasury rate plus
.50 percent thereafter. The Capital Securities and the ACE Capital Trust II
Common Securities will be redeemed upon repayment of the Subordinated
Debentures due 2030.
The Company has guaranteed, on a subordinated basis, ACE INA's obligations
under the Subordinated Debentures due 2030, and distributions and other
payments due on the Capital Securities (the "Guarantees"). The Guarantees,
when taken together with the Company's obligations under expense agreements
entered into with ACE Capital Trust II, provide a full and unconditional
guarantee of amounts due on the Capital Securities.
7. Reinsurance
The Company purchases reinsurance to manage various exposures including
catastrophic risks. Although reinsurance agreements contractually obligate
the Company's reinsurers to reimburse it for the agreed upon portion of its
gross paid losses, they do not discharge the primary liability of the
Company. The amounts for net premiums written and net premiums earned in
the statements of operations are net of reinsurance. Direct, assumed and
ceded amounts for these items for the three months ended March 31, 2000 and
1999 are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Three Months Ended
March 31
2000 1999
---- ----
(in thousands of U.S. dollars)
Premiums
<S> <C> <C>
Premiums written
Direct $ 1,468,667 $ 218,461
Assumed 528,293 217,034
Ceded (539,938) (94,830)
--------------- ----------------
Net premiums written $ 1,457,022 $ 340,665
=============== ================
Premiums earned
Direct $ 1,063,108 $ 252,215
Assumed 401,923 129,560
Ceded (360,225) (96,508)
--------------- ----------------
Net premiums earned $ 1,104,806 $ 285,267
=============== ================
- ------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
The Company's provision for reinsurance recoverable at March 31, 2000 and
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
March 31 December 31
2000 1999
---- ----
(in thousands of U.S. dollars)
<S> <C> <C>
Reinsurance recoverable on paid losses and loss expenses $ 733,252 $ 1,288,651
Reinsurance recoverable on unpaid losses and loss expenses 8,555,561 8,309,014
Provision for uncollectible balances (737,747) (757,584)
----------------- -----------------
Total reinsurance recoverable $ 8,551,066 $ 8,840,081
================= =================
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
8. Taxation
Under current Cayman Islands law, the Company is not required to pay any
taxes in the Cayman Islands on its income or capital gains. The Company has
received an undertaking that, in the event of any taxes being imposed, the
Company will be exempted from taxation in the Cayman Islands until the year
2013. Under current Bermuda law, the Company and its Bermuda subsidiaries
are not required to pay any taxes in Bermuda on its income or capital
gains. The Company has received an undertaking from the Minister of Finance
in Bermuda, that in the event of any taxes being imposed, the Company will
be exempt from taxation in Bermuda until March 2016.
Income from the Company's operations at Lloyd's are subject to United
Kingdom corporation taxes. Lloyd's is required to pay U.S. income tax on
U.S. connected income ("U.S. income") written by Lloyd's syndicates.
Lloyd's has a closing agreement with the IRS whereby the amount of tax due
on this business is calculated by Lloyd's and remitted directly to the IRS.
These amounts are then charged to the personal accounts of the
Names/Corporate Members in proportion to their participation in the
relevant syndicates. The Company's Corporate Members are subject to this
arrangement but, as UK domiciled companies, will receive UK corporation tax
credits for any U.S. income tax incurred up to the value of the equivalent
UK, corporation income tax change on the U.S. income.
ACE INA, ACE US Holdings and ACE Financial Services are subject to income
taxes imposed by U.S. authorities and file U.S. tax returns. Certain
international operations of the Company are also subject to income taxes
imposed by the jurisdictions in which they operate.
The Company is not subject to taxation other than as stated above. There
can be no assurance that there will not be changes in applicable laws,
regulations or treaties which might require the Company to change the way
it operates or become subject to taxation.
The income tax provision for the three months ended March 31, 2000 and 1999
is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Three Months Ended
March 31
2000 1999
---- ----
(in thousands of U.S. dollars)
<S> <C> <C>
Current tax expense $ 8,728 $ 1,220
Deferred tax expense 24,272 3,932
---------------- --------------
Provision for income taxes $ 33,000 $ 5,152
================ ==============
- ------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
The components of the net deferred tax asset as of March 31, 2000 and
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
March 31 December 31
2000 1999
---- ----
(in thousands of U.S. dollars)
<S> <C> <C>
Deferred tax assets
Loss reserve discount $ 659,696 $ 677,459
Unearned premium adjustment (2,843) -
Foreign tax credits 127,171 116,829
Uncollectible reinsurance 24,162 24,413
Net operating loss carry forward 173,151 164,993
Unrealized depreciation on investments 7,084 12,557
Other 293,816 305,647
-------------- ----------------
Total deferred tax assets 1,282,237 1,301,898
-------------- ----------------
Deferred tax liabilities
Deferred policy acquisition costs 85,354 87,691
Unrealized appreciation on investments 4,468 -
Other 120,800 164,699
-------------- ----------------
Total deferred tax liabilities 210,622 252,390
-------------- ----------------
Valuation allowance 126,500 133,324
-------------- ----------------
Net deferred tax asset $ 945,115 $ 916,184
============== ================
- --------------------------------------------------------------------------------------
</TABLE>
9. Summarized financial information
The following is consolidated summarized financial information for ACE INA
and ACE Financial Services, both wholly owned subsidiaries of the Company.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Selected Financial Data: ACE INA Three Months Ended
March 31
2000
----
(in thousands of U.S.
Dollars)
<S> <C>
Selected Statement of Operations Data
Total revenue $ 831,194
Net income $ 53,462
Selected Balance Sheet Data
Total investments and cash $ 7,313,187
Total assets 21,672,412
Unpaid losses and loss expenses 13,623,505
Total shareholders' equity $ 1,346,334
- ----------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Selected Financial Data: ACE Financial Services Three Months Ended
March 31
2000
----
(in thousands of
U.S. Dollars)
<S> <C>
Selected Statement of Operation Data
Total revenue $ 107,722
Net income $ 20,799
Selected Balance Sheet Data
Total investments and cash $ 1,699,305
Total assets 2,080,716
Unpaid losses and loss expenses 515,745
Total shareholders' equity $ 975,253
- ---------------------------------------------------------------------------------------
</TABLE>
Separate financial statements of ACE INA and ACE Financial Services have not
been presented as management has determined that such information is not
material to holders of ACE INA's and ACE Financial Services' debt securities.
10. Segment Information
The following tables summarize the operations by segment for the three
months ended March 31, 2000 and 1999. Net realized gains (losses) have been
presented net of related taxes.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Three months ended March 31, 2000
ACE ACE ACE ACE
ACE Global Global ACE Inter- Financial ACE
Bermuda Markets Reinsurance USA national Services Other (1) Consolidated
------- ------- ----------- --- -------- -------- ----- ------------
(in thousands of U.S. Dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operations Data
Gross premiums written $173,079 $319,918 $104,866 $738,895 $512,600 $147,602 $ - $1,996,960
Net premiums written 138,048 237,191 103,477 459,998 376,160 142,148 - 1,457,022
Net premiums earned 82,485 133,008 32,196 382,814 343,292 131,011 - 1,104,806
Losses and loss expenses 58,904 72,184 9,798 277,205 198,520 98,872 - 715,483
Policy acquisition costs 3,085 36,560 5,950 34,436 56,180 14,431 - 150,642
Administrative expenses 7,460 17,585 1,253 69,192 74,647 7,525 16,346 194,008
------ ------- ------- -------- -------- ------- ------ -------
Underwriting income (loss) 13,036 6,679 15,195 1,981 13,945 10,183 (16,346) 44,673
Net investment income 36,172 8,188 15,000 83,422 21,514 22,360 (3,721) 182,935
Amortization of goodwill (208) 1,040 3,502 135 - 1,052 14,125 19,646
Interest expense 684 1,205 - 8,269 - 3,307 43,724 57,189
Income tax expense
(benefit) 627 2,855 - 23,192 6,503 6,333 (15,775) 23,735
------- ------ --------- ------ ----- ----- ------- ------
Income (loss) excluding net
realized gains (losses) 48,105 9,767 26,693 53,807 28,956 21,851 (62,141) 127,038
Net realized gains (losses)
(net of income tax) 35,219 (774) (2,120) (4,398) 22,327 (1,052) (1,727) 47,475
-------- -------- --------- ------- ------ -------- ------ -------
Net income (loss) $ 83,324 $ 8,993 $ 24,573 $49,409 $ 51,283 $ 20,799 $(63,868) $174,513
======== ======== ========= ======= ======== ======== ======== ========
Total Assets $2,850,072 $2,013,472 $1,367,114 $15,642,160 $3,705,901 $2,080,716 $2,585,863 $30,245,298
========== ========== ========== =========== ========== ========== ========== ===========
(1) Includes ACE Limited, ACE INA Holdings and intercompany eliminations.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Three months ended March 31, 1999
ACE
ACE ACE Global Global ACE (1) ACE
Bermuda Markets Reinsurance USA Other (2) Consolidated
(in thousands of U.S. Dollars)
<S> <C> <C> <C> <C> <C> <C>
Operations Data:
Gross premiums written $130,618 $139,375 $114,574 $50,928 $ - $435,495
Net premiums written 98,581 104,396 114,595 23,093 - 340,665
Net premiums earned 117,620 107,184 36,572 23,891 - 285,267
Losses and loss expenses 65,099 62,029 14,731 15,022 - 156,881
Policy acquisition costs 3,319 27,409 4,743 (1,118) - 34,353
Administrative expenses 14,917 14,177 2,977 9,664 12,915 54,650
------- ------- ------ ----- ------- -------
Underwriting income 34,285 3,569 14,121 323 (12,915) 39,383
Net investment income 49,284 6,586 16,367 12,522 1,725 86,484
Amortization of goodwill (208) 1,057 3,502 69 - 4,420
Interest expense (income) 3,563 1,325 - 6,837 (7,195) 4,530
Income tax expense 430 2,568 - 2,154 - 5,152
-------- ------- -------- ----- --------- -----
Income (loss) excluding net realized
gains (losses) 79,784 5,205 26,986 3,785 (3,995) 111,765
Net realized gains (losses)
(net of income tax) 18,070 (218) (704) 107 (1) 17,254
-------- -------- -------- ------- --------- ----------
Net income (loss) $97,854 $ 4,987 $ 26,282 $3,892 $(3,996) $129,019
======== ======== ========= ======= ========= ==========
Total Assets $3,765,607 $1,146,241 $1,655,090 $1,795,520 $513,931 $8,876,389
========== ========== ========== ========== ========= ==========
(1) Prior to acquisition of ACE INA
(2) Includes ACE Limited and intercompany eliminations.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11. Subsequent Events
The Company issued 6,000,000 FELINE PRIDES on April 12, 2000 and an
additional 221,000 FELINE PRIDES on May 8, 2000, pursuant to a public
offering, for aggregate net proceeds of approximately $300 million. Each
FELINE PRIDES initially consists of a unit referred to as an Income PRIDES.
Each Income PRIDES consists of (i) one 8.25 percent Cumulative Redeemable
Preferred Share, Series A, liquidation preference $50 per share, of the
Company, and (ii) a purchase contract pursuant to which the holder of the
Income PRIDES agrees to purchase from the Company, on May 16, 2003,
ordinary shares at the applicable settlement rate. Each preferred share is
pledged to the Company to secure the holders obligations under the purchase
contract. A holder of an Income PRIDES can obtain the release of the
preferred share by substituting certain zero-coupon treasury securities as
security for performance under the purchase contract. The resulting unit
consisting of the zero-coupon treasury security and the purchase contract
is a Growth PRIDES, and the preferred shares would be a separate security.
A holder of a Growth PRIDES can convert it back into an Income PRIDES by
depositing preferred shares as security for performance under the purchase
contract and thereby obtain the release of the zero-coupon treasury
securities.
The aggregate liquidation preference of the 8.25 percent Cumulative
Redeemable Preferred Shares is $311.1 million. Unless deferred by the
Company, the preferred shares pay dividends quarterly at a rate of 8.25
percent per year to May 16, 2003, and thereafter at the reset rate
established pursuant to a remarketing procedure. If the Company elects to
defer dividend payments on the preferred shares, the dividends will
continue to accrue and the Company will be restricted from paying dividends
on its ordinary shares and taking certain other actions. The preferred
shares are not redeemable prior to June 16, 2003, on which date they must
be redeemed by the Company in whole.
14
<PAGE>
The settlement rate is the number of ordinary shares that the Company is
obligated to sell and the holders of the FELINE PRIDES are obligated to
purchase (for a purchase price of $50 per FELINE PRIDES) on May 16, 2003.
The settlement rate will be equal to $50 divided by the average closing
price of the ordinary shares for the 20 consecutive trading days ending on
the third trading day prior to May 16, 2003, but in no event will it be
less than 1.8991 ordinary shares per FELINE PRIDES (or an aggregate of 11.8
million ordinary shares) nor greater than 2.6376 ordinary shares per FELINE
PRIDES (or an aggregate of 16.4 million ordinary shares). The settlement
rate is subject to anti-dilution adjustments.
12. Reclassification
Certain items in the prior period financial statements have been
reclassified to conform with the current period presentation.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following is a discussion of the Company's results of operations,
financial condition, liquidity and capital resources as of and for the
three months ended March 31, 2000. The results of operations and cash flows
for any interim period are not necessarily indicative of results for the
full year. This discussion should be read in conjunction with the
consolidated financial statements, related notes thereto and the
Management's Discussion and Analysis of Results of Operations and Financial
Condition included in the Company's 1999 Annual Report on Form 10-K.
Safe Harbor Disclosure
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Any written or oral statements made
by or on behalf of the Company may include forward-looking statements which
reflect the Company's current views with respect to future events and
financial performance. These forward-looking statements are subject to
certain uncertainties and other factors that could cause actual results to
differ materially from such statements. These uncertainties and other
factors (which are described in more detail elsewhere herein and in
documents filed by the Company with the Securities and Exchange Commission)
include, but are not limited to, (i) uncertainties relating to government
and regulatory policies (such as subjecting the Company to insurance
regulation or taxation in additional jurisdictions or amending or revoking
or enacting any laws, regulations or treaties affecting the Company's
current operations), (ii) the occurrence of catastrophic events or other
insured or reinsured events with a frequency or severity exceeding the
Company's estimates, (iii) legal, regulatory, and legislative developments,
(iv) the uncertainties of the loss reserving process including the
difficulties associated with assessing environmental and latent injuries,
(v) the actual amount of new and renewal business and market acceptance of
expansion plans, (vi) loss of the services of any of the Company's
executive officers, (vii) changing rates of inflation and other economic
conditions, (viii) losses due to foreign currency exchange rate
fluctuations, (ix) ability to collect reinsurance recoverables, (x) the
competitive environment in which the Company operates, related trends and
associated pricing pressures and developments, (xi) the impact of mergers
and acquisitions, including the ability to successfully integrate acquired
businesses and achieve cost savings, competing demands for ACE's capital
and the risk of undisclosed liabilities, (xii) developments in global
financial markets which could affect the Company's investment portfolio and
financing plans, and (xiii) risks associated with the introduction of new
products and services. The words "believe", "anticipate", "estimate",
"project", "plan", "expect", "intend", "hope", "will likely result" or
"will continue" and variations thereof and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of their
dates. 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.
General
ACE Limited ("ACE" or "the Company"), through its various subsidiaries,
provides a broad range of insurance and reinsurance products to insureds in
the United States and almost 50 other countries. In addition, ACE, through
ACE Global Markets, provides funds at Lloyd's, primarily in the form of
letters of credit, to support underwriting capacity for Lloyd's syndicates
managed by Lloyd's managing agencies which are indirect wholly owned
subsidiaries of ACE. ACE operates through six main business segments: ACE
Bermuda, ACE Global Markets, ACE Global Reinsurance, ACE USA, ACE
International and ACE Financial Services.
On July 2, 1999, the Company completed the ACE INA acquisition. This
acquisition was recorded using the purchase method of accounting and,
accordingly, the consolidated financial statements of the Company include
the results of ACE INA and its subsidiaries from July 2, 1999, the date of
the acquisition. ACE INA is the holding company for ACE USA and ACE
International operating segments.
On December 30, 1999, the Company acquired ACE Financial Services
(previously Capital Re Corporation). This acquisition has been recorded
using the purchase method of accounting and, accordingly, the consolidated
financial statements of the Company include the results of operations of
ACE Financial Services and its subsidiaries from December 30, 1999, the
date of the acquisition.
16
<PAGE>
Results of Operations - Three Months ended March 31, 2000
The Company expects to continue evaluating potential new product lines and
other opportunities in the insurance and reinsurance markets. In addition,
the Company evaluates potential acquisitions of other companies and
businesses and holds discussions with potential acquisition candidates. As
a general rule, the Company publicly announces such acquisitions only after
a definitive agreement has been reached.
As noted, during 1999, the Company made two substantial acquisitions that
were accounted for under the purchase method of accounting, which requires
that income from the acquired company only be included in the results of
the Company from the date of acquisition. This makes it difficult to
compare the financial results as presented. ACE INA's results are included
from July 2, 1999 and, ACE Financial Services from December 30, 1999.
In addition, the Company has historically recorded its results of
operations of its Lloyd's syndicates one quarter in arrears. With effect
from this quarter ended March 31, 2000, the Company now records the results
from the Lloyd's 2000 underwriting year on a current basis. The impact of
this change is discussed in the relevant sections. Prior year underwriting
results are still reported one quarter in arrears but underwriting results
should run off over the next few quarters. The Company has also increased its
percentage of participation in the Lloyd's syndicates it manages in 2000
versus 1999.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Net Income Three Months Ended
March 31
2000 1999
---- ----
(in millions of U.S. Dollars)
<S> <C> <C>
Income excluding net realized gains on investments $ 127 $ 112
Net realized gains on investments (net of taxes) 48 17
-------------- -----------
Net income 175 129
============== ===========
- ----------------------------------------------------------------------------------
</TABLE>
Income excluding net realized gains on investments was $127 million or
$0.58 per share for the quarter ended March 31, 2000 compared with $112
million or $0.57 per share in 1999. The increase was due to the inclusion
of ACE INA and ACE Financial Services, which together contributed
approximately $57 million to income excluding net realized gains on
investments in the quarter. This was offset by a decrease in income
excluding net realized gains on investments in ACE Bermuda. This decrease
primarily to a decline in net investment income as ACE Bermuda paid
dividends to ACE Limited in 1999 to partially fund the Company's
acquisitions.
Net realized gains on investments (net of taxes) were $48 million for the
March 2000 quarter compared with $17 million for the March 1999 quarter.
The realized gains in 2000 were generated primarily in ACE Bermuda and ACE
International which realigned certain of their equity portfolios during the
quarter.
17
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Premiums Three months ended % Change
March 31 from
2000 1999 Prior Year
---- ---- -------------
(in millions of U.S. Dollars)
<S> <C> <C> <C>
Gross premiums written:
ACE Bermuda $ 173 $ 130 33%
ACE Global Markets 320 139 130%
ACE Global Reinsurance 105 115 (9)%
ACE USA 739 51 N.M.
ACE International 512 - N.M.
ACE Financial Services 148 - N.M.
-------------- ------------------ ---------------
$ 1,997 $ 435 359%
============== ================== ===============
Net premiums written:
ACE Bermuda $ 138 $ 99 40%
ACE Global Markets 237 104 127%
ACE Global Reinsurance 104 115 (10)%
ACE USA 460 23 N.M.
ACE International 376 - N.M.
ACE Financial Services 142 - N.M.
-------------- ------------------ ---------------
$ 1,457 $ 341 328%
============== ================== ===============
Net premiums earned:
ACE Bermuda $ 83 $ 118 (30)%
ACE Global Markets 133 107 24%
ACE Global Reinsurance 32 36 (12)%
ACE USA 383 24 N.M.
ACE International 343 - N.M.
ACE Financial Services 131 - N.M.
-------------- ------------------ ---------------
$ 1,105 $ 285 287%
============== ================== ===============
N.M. - not meaningful
- --------------------------------------------------------------------------------------------------
</TABLE>
Gross premiums written for the quarter ended March 31, 2000 increased by
$1.6 billion to $2.0 billion compared with $435 million for the March 1999
quarter. The inclusion of ACE INA and ACE Financial Services in the current
quarter following their acquisitions resulted in an increase of $1.3 billion.
Net premiums written increased by $1.1 billion or 328 percent compared with
$341 million for the March 1999 quarter and net premiums earned increased
by $820 million or 287 percent compared with $285 million for the March
1999 quarter. As with gross premiums written, these increases were
primarily the result of the inclusion of ACE INA and ACE Financial Services
in the current quarter.
On a comparable basis, including ACE INA and ACE Financial Services in
1999, gross premiums written for all segments combined increased by 33
percent year over year and net premiums written increased by over 30
percent.
The significant competitive pressures experienced in most insurance markets
over the past several years appear to have eased and the Company is now
seeing evidence of a turn in both primary and reinsurance pricing coupled
with an increase in demand for coverage.
ACE Bermuda: Gross premiums written for the quarter increased from $130
million in the March 1999 quarter to $173 million in the March 2000
quarter. This increase is primarily a result of increases in premiums from
tailored risk solutions, satellite and excess property premiums. Net
premiums written for the quarter increased from $99 million in the March
1999 quarter to $138 million in the March 2000 quarter. As with gross
written premiums, this increase is primarily a result of increases in
tailored risk solutions, satellite and excess property premiums. Net
premiums earned decreased from $118 million in the March 1999 quarter to
$83 million in the March 2000 quarter.
18
<PAGE>
In the March 1999 quarter, ACE Bermuda experienced an increase in net
premiums earned due to the commutation of a contract which resulted in the
recognition of $25 million of net premiums earned in that quarter.
ACE Global Markets: Gross premiums written increased 130 percent from $139
million in the March 1999 quarter to $320 million for the March 2000
quarter. The reason for the increase is two-fold. ACE Global Markets
increased its participation in the syndicates under management again in
2000. ACE's participation is now 84 percent of capacity. In addition, as
already noted, the Company now records the results of the Lloyd's 2000
underwriting year on a current basis. As a result, the Company recorded
gross premiums written of $169 million, net premiums written of $116
million and net premiums earned of $16 million which otherwise would have
been recorded in the June 2000 quarter. Prior year underwriting results are
still recorded one quarter in arrears but underwriting results should run off
over the next several quarters.
ACE Global Reinsurance: Gross premiums written for the quarter decreased
from $115 million in the March 1999 quarter to $105 million in the March
2000 quarter. This decrease is due predominantly to a number of program
restructuring and anniversary date changes, which meant not as many
programs came up for renewal in this quarter compared to last year. In the
next several quarters, this segment expects to benefit from new
opportunities in Japan as well as a hardening US hurricane market. Net
premiums written for the quarter decreased from $115 million in the March
1999 quarter to $104 million in the March 2000 quarter for the same reasons
explained above for gross premiums written. Net premiums earned decreased
from $36 million in the March 1999 quarter to $32 million in the March 2000
quarter. This decrease is due to lower premium levels experienced during
1999 and the January 2000 renewals as well as increased usage of
reinsurance since last year.
ACE USA: Gross premiums written increased to $739 million from $51 million
in the March 1999 quarter and net premiums written increased to $460
million from $23 million primarily because of the inclusion of the ACE INA
domestic business in 2000. However, even on a comparable basis, gross
premiums written increased by over 70 percent on a year over year basis.
This significant increase was driven primarily by production gains in our
large account business; the property division, the Westchester Specialty
division, warranty and the USI division (US based multinational accounts).
In addition, ACE USA entered into a loss portfolio contract, generating $85
million in premiums written and $83 million in premiums earned in the
quarter. However, the inflow of business, such as loss portfolio contracts,
is generally more erratic from quarter to quarter than the more traditional
lines of business. Net premiums earned increased from $24 million in March
1999 to $383 million in the March 2000 quarter. The increase in net
premiums earned is due to the inclusion of the ACE INA domestic business.
ACE International: Gross premiums written were $512 million in the March
2000 quarter. On a comparable basis, quarter on quarter, gross premiums
written increased by 12 percent and net premiums written increased by
8 percent. ACE International experienced strong premium growth in Asia
Pacific, Latin America and Europe while Japanese business is still being
impacted by the stagnant Japanese economy.
The growth in property and casualty business in ACE International was
driven by an expanded product offering as ACE continues to gain acceptance
by producers worldwide. Accident and health premiums, while growing in the
quarter, were still impacted by a reduction in overseas travel early in the
quarter due to year 2000 concerns. ACE International believes that rates have
stabilized and are experiencing some rate increases; specifically in
catastrophe exposed property business.
ACE Financial Services: Gross premiums written for ACE Financial Services
were $148 million in the quarter. This is the first quarter in which our
financial results reflect the acquisition of ACE Financial Services, which
was concluded on December 30, 1999. The Company's financial guaranty
reinsurance business has witnessed historically high transactional volume
despite slowing municipal and asset-backed markets due in part to rising
interest rates. The financial risks reinsurance business has seen strong
production in structured excess of loss financial guaranty and residential
mortgage guaranty.
Underwriting Results
The underwriting results of a property and casualty insurer are discussed
frequently by reference to its combined ratio, loss and loss expense ratio
and underwriting and administrative expense ratio. Each ratio is derived by
dividing the relevant expense amounts by net premiums earned. The combined
ratio is the sum of the loss and loss expense ratio and the underwriting
and the administrative expense ratio. A combined ratio under 100 percent
indicates underwriting income and a combined ratio exceeding 100 percent
indicates underwriting losses.
19
<PAGE>
- -------------------------------------------------------------------------------
Three Months Ended
March 31
2000 1999
---- ----
Loss and loss expense ratio
ACE Bermuda 71.5% 55.3%
ACE Global Markets 54.3 57.9
ACE Global Reinsurance 30.4 40.3
ACE USA 72.4 62.9
ACE International 57.8 -
ACE Financial Services 75.5 -
Consolidated 64.8% 55.0%
Underwriting and administrative expense ratio
ACE Bermuda 12.7% 15.5%
ACE Global Markets 40.7 38.8
ACE Global Reinsurance 22.4 21.1
ACE USA 27.1 35.8
ACE International 38.1 -
ACE Financial Services 16.7 -
Consolidated 31.2% 31.2%
Combined Ratio
ACE Bermuda 84.2% 70.8%
ACE Global Markets 95.0 96.7
ACE Global Reinsurance 52.8 61.4
ACE USA 99.5 98.7
ACE International 95.9 -
ACE Financial Services 92.2 -
Consolidated 96.0% 86.2%
- -------------------------------------------------------------------------------
The process of establishing reserves for property and casualty claims
continues to be a complex and uncertain process, requiring the use of
informed estimates and judgments. The Company's estimates and judgments may
be revised as additional experience and other data becomes available and
are reviewed, as new or improved methodologies are developed or as current
laws change. Any such revisions could result in future changes in estimates
of losses or reinsurance recoverables, and would be reflected in the
Company's results of operations in the period in which the estimates are
changed.
In addition, catastrophe losses may have a significant effect on the
insurance and reinsurance industry. ACE Global Reinsurance and other
segments of the group have exposure to windstorm, hail, earthquake and
other catastrophic events, all of which are managed using measures
including underwriting controls, occurrence caps as well as modeling,
monitoring and managing its accumulations. The Company uses its
retrocessional programs to limit its net losses from catastrophes. However,
property catastrophe loss experience is generally characterized as low
frequency but high severity short-tail claims which may result in
volatility in financial results.
Underwriting results for all segments in the March 31, 2000 are consistent
with the Company's operating objective of achieving an underwriting profit.
Following the acquisition of ACE INA, the Company initiated several cost
reduction initiatives at ACE INA with a primary focus on ACE USA. These
included staff reductions at ACE INA, outsourcing of the information
technology operations at ACE USA and consolidating numerous ACE USA field
offices. These initiatives have assisted ACE USA in achieving a combined
ratio under 100 percent for the quarter.
Losses and loss expenses increased substantially in the quarter ended March
31, 2000 to $715 million compared with $157 million in the quarter ended
March 31, 1999. This increase is primarily due to the inclusion of losses
and loss expenses for ACE INA and ACE Financial Services following the
acquisitions. The Company's loss and loss expense ratio also increased from
55.0 percent in 1999 to 64.8 percent in 2000. This increase is primarily
due to the changing mix of business within segments as well as the
inclusion of the domestic business of ACE INA and ACE Financial Services.
20
<PAGE>
ACE Bermuda: The loss ratio for the March 2000 quarter increased to 71.5
percent from 55.3 percent in the March 1999 quarter. A portion of the
increase in loss ratio is due to changes in business mix from 1999 to 2000,
resulting from increased weighting of tailored risk solutions contracts. In
addition, incurred losses in ACE Bermuda in the March 1999 quarter were
impacted by favourable development on prior period loss reserves, primarily
in the tailored risks solutions and professional lines books of business.
ACE Global Markets: The loss ratio has decreased over the past year from
57.9 percent in 1999 to 54.3 percent in 2000.
ACE Global Reinsurance: The loss ratio for this segment is directly
impacted by the level of insured catastrophes. There were no major
catastrophe events during the current quarter but a number of localized
events impacted the regional U.S. book. As a result, Tempest Re's loss
ratio was 30.4 percent compared with 40.3 percent in 1999.
ACE USA: The loss ratio of ACE USA increased to 72.4 percent in 2000
compared with 62.9 percent in 1999. This increase is primarily because the
domestic business of ACE INA has historically had a loss ratio in excess of
ACE US Holdings. The March 1999 ratio relates solely to the ACE US Holdings
group prior to the acquisition of ACE INA.
ACE International: The loss ratio for the March 2000 quarter was 57.8
percent. ACE INA was acquired on July 2, 1999; therefore there are no
comparative figures for this quarter.
ACE Financial Services: The loss ratio of ACE Financial Services was 75.5
percent. ACE Financial Services was acquired on December 30, 1999,
therefore there are no comparative figures for this quarter.
Underwriting and administrative expenses
Underwriting and administrative expenses are comprised of the amortization
of deferred acquisition costs, which include commissions, premium taxes,
underwriting and other costs that vary with and are primarily related to
the production of premium, and administrative expenses which include all
other operating costs. As with losses and loss expenses, total underwriting
and administrative expenses increased significantly from $89 million in
the March 1999 quarter to $345 million in the March 2000 primarily due to
the inclusion of ACE INA and ACE Financial Services following the
acquisitions. The underwriting and administrative expense ratio was flat
quarter on quarter at 31.2 percent.
ACE Bermuda: The underwriting and administrative expense ratio decreased
from 15.5 percent in 1999 to 12.7 percent in 2000. The key factors
influencing the decline are the transfer of responsibility for certain
expenses to ACE Limited following the realignment of certain functions to
the holding company and reductions in other expenses.
ACE Global Markets: The underwriting and administrative expense ratio
increased slightly from 38.8 percent in 1999 to 40.7 percent in 2000 due to
an increase in the policy acquisition costs.
ACE Global Reinsurance: The underwriting and administrative expense ratio
increased slightly from 21.1 percent in 1999 to 22.4 in 2000 due to
increased expenses in connection with the expansion into Europe and the
United States. This increase was partially offset by other non-insurance
income.
ACE USA: The underwriting and administrative expense ratio of ACE USA
declined from 35.8 percent in the March 1999 quarter to 27.1 million in the
March 2000 quarter. The March 1999 ratio relates solely to the ACE US
Holdings group prior to the acquisition of ACE INA. However, the decline in
the expense ratio was primarily driven by the reduction of administrative
expenses at ACE USA resulting from the cost reduction initiatives at ACE
INA following the acquisition.
ACE International: The underwriting and administrative expense ratio of ACE
International was 38.1 percent for the quarter. ACE INA was acquired on
July 2, 1999; therefore there are no comparative figures for this quarter.
ACE Financial Services: The underwriting and administrative expense ratio
of ACE Financial Services was 16.7 percent. ACE Financial Services was
acquired on December 30, 1999, therefore there are no comparative figures
for this quarter.
21
<PAGE>
- -------------------------------------------------------------------------------
Net Investment Income Three Months Ended Percentage
March 31 Change
From Prior
2000 1999 Year
---- ---- ----
(in millions of U.S. Dollars)
ACE Bermuda $ 36 $ 49 (27)%
ACE Global Markets 8 7 24 %
ACE Global Reinsurance 15 16 (8)%
ACE USA 84 12 566%
ACE International 22 - N.M.
ACE Financial Services 22 - N.M.
Other (4) 2 N.M.
----------- ------------ ----------
Total investment income $ 183 $ 86 112%
=========== ============ ===========
N.M.- not meaningful
- -------------------------------------------------------------------------------
Net investment income increased by $97 million in the quarter ended March
31, 2000 compared with the quarter ended March 31, 1999. The primary reason
for this is an increase in the size of investment assets resulting from the
ACE INA and ACE Financial Services acquisitions during 1999. The
significant rise in U.S. interest rates had a positive impact on investment
income during the quarter.
ACE Bermuda: Net investment income decreased by 27 percent to $36 million
in 2000 compared with $49 million in 1999. This decrease is primarily due
to a decline in the investable asset base of ACE Bermuda as ACE Bermuda
paid dividends to ACE Limited during 1999 to partially finance acquisitions
and to cover operating expenses of the holding company.
ACE Global Markets: Net investment income increased by 24 percent to $8
million compared with $7 million in 1999 as a result of the Company's
increased participation in the Lloyd's syndicates it manages.
ACE Global Reinsurance: Net investment income decreased by 8 percent to $15
million during the current quarter compared with $16 million in 1999. The
investable asset base of Tempest Re declined in 1999 as Tempest Re paid
dividends to ACE Limited and paid claims related to 1999 catastrophes.
ACE USA: Net investment income increased by 566 percent to $84 million in
2000 compared with $12 million in 1999. The investment asset base of ACE
USA was higher during the quarter ended March 31, 2000 than during the
quarter ended March 31, 1999 due to the ACE INA acquisition. Net investment
income for the current quarter includes both ACE US Holdings and the US
operations of ACE INA which were acquired on July 2, 1999. Net investment
income for the March 1999 quarter only reflects ACE US Holdings investment
income.
ACE International: Net investment income of $22 million represents the net
investment income of the international operations of ACE INA which were
acquired on July 2, 1999, therefore there is no prior period comparison.
ACE Financial Services: Net investment income of $22 million represents the
net investment income of ACE Financial Services which was acquired on
December 30, 1999, therefore there is no prior period comparison.
22
<PAGE>
- -------------------------------------------------------------------------------
Net Realized Gains (Losses) on Investments Three Months Ended
March 31
2000 1999
---- ----
(in millions of U.S. Dollars)
Fixed maturities and short-term investments $ (38) $ 7
Equity securities 90 7
Financial futures and option contracts 9 4
Currency (4) (1)
--------------- --------------
Net realized gains $ 57 $ 17
=============== ==============
- -------------------------------------------------------------------------------
The Company's investment strategy takes a long-term view and the portfolio
is actively managed to maximize total return within certain specific
guidelines, which minimize risk. The portfolio is reported at fair value.
The effect of market movements on the investment portfolio will directly
impact net realized gains (losses) on investments when securities are sold.
Changes in unrealized gains and losses, which result from the revaluation
of securities held, are reported as a separate component of accumulated
other comprehensive income.
The Company uses foreign currency forward and option contracts to minimize
the effect of fluctuating foreign currencies on the value of non-U.S.
dollar holdings currently held in the portfolio not specifically targeted
to match the currency of liabilities. The contracts used are not designated
as specific hedges and therefore, realized and unrealized gains and losses
recognized on these contracts are recorded as a component of net realized
gains (losses) in the period in which the fluctuations occur, together with
net foreign currency gains (losses) recognized when non-U.S. dollar
securities are sold.
Sales proceeds for fixed maturity securities were generally lower than
their amortized cost during the quarter. This resulted in net realized
losses of $38 million being recognized on fixed maturities and short-term
investments during the quarter ended March 31, 2000 compared to net
realized gains of $7 million for the quarter ended March 31, 1999.
Positive returns in the domestic and international equity markets and the
liquidation of two international equity portfolios contributed to net
realized gains on the sale of equity securities of $90 million in the
current quarter.
Certain of the Company's external managers of fixed income securities use
fixed income futures contracts to manage duration exposure, and losses of
$4 million were recognized on these during the quarter ended March 31,
2000. Net realized gains generated by the Company's equity index futures
contracts amounted to $13 million during the quarter ended March 31, 2000.
Total net realized gains attributable to the financial futures and option
contracts amounted to $9 million during the current quarter, compared to
gains of $4 million for the quarter ended March 31, 1999.
- ------------------------------------------------------------------
Other Expenses Three Months Ended
March 31
2000 1999
---- ----
(in millions of U.S. Dollars)
Goodwill $ 20 $ 4
================ ==============
Interest expense $ 57 $ 5
================ ==============
- ------------------------------------------------------------------
The increase in goodwill amortization in the March 2000 quarter is
primarily the result of the amortization of goodwill with respect to the
ACE INA and ACE Financial Services acquisitions. The ACE INA acquisition
generates goodwill amortization of approximately $14 million per quarter
and the ACE Financial Services acquisition generates approximately $1
million of goodwill amortization per quarter. ACE INA was acquired July 2,
1999 and ACE Financial Services was acquired December 30, 1999, therefore,
goodwill amortization related to these acquisitions are not included in the
comparative amounts.
The increase in interest expense in the March 31, 2000 quarter is a result
of the additional debt incurred by the Company in connection with the
acquisition of ACE INA on July 2, 1999.
23
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CONSOLIDATED FINANCIAL POSITION
At March 31, 2000, total assets were relatively unchanged at $30.2 billion
compared with $30.1 billion at December 31, 1999. However, insurance and
reinsurance balances receivable increased following the January renewal
period. This increase was offset somewhat by a decline in reinsurance
recoverables.
At March 31, 2000, total investments and cash were also relatively unchanged
at $12.8 billion, compared to $12.9 billion at December 31, 1999. The
Company's investment portfolio is structured to provide a high level of
liquidity to meet insurance related or other obligations. The consolidated
investment portfolio is externally managed by independent professional
investment managers and is invested primarily in high quality investment
grade marketable fixed income and equity securities, the majority of which
trade in active, liquid markets.
The Company maintains loss reserves for the estimated unpaid ultimate
liability for losses and loss expenses under the terms of its policies and
agreements. The reserve for unpaid losses and loss expenses of $16.9
billion at March 31, 2000 includes $9.6 billion of case and loss expense
reserves. While the Company believes that its reserve for unpaid losses and
loss expenses at March 31, 2000 is adequate, future developments may result
in ultimate losses and loss expenses significantly greater or less than the
reserve provided.
One of the ways the Company manages its loss exposure is through the use of
reinsurance. While reinsurance arrangements are designed to limit losses
from large exposures and to permit recovery of a portion of direct losses,
reinsurance does not relieve the Company of its liability to its insureds.
Accordingly, the Company's loss reserves represent total gross losses and
reinsurance recoverable represents anticipated recoveries of a portion of
those losses as well as amounts recoverable from reinsurers with respect to
claims which have already been paid by the Company. The Company's
reinsurance recoverable were approximately $8.6 billion and $8.8 billion
at March 31, 2000 and December 31, 1999, net of allowances for
unrecoverable reinsurance of $738 million and $758 million, respectively.
The allowance for unrecoverable reinsurance is required principally due to
the failure of reinsurers to indemnify the Company, primarily because of
disputes under reinsurance contracts and insolvencies. Reinsurance disputes
continue to be significant, particularly on larger and more complex claims,
such as those related to asbestos and environmental pollution (discussed
below) and London reinsurance market exposures. Allowances have been
established for amounts estimated to be uncollectible.
Included in the Company's liabilities for losses and loss expenses are
liabilities for asbestos environmental and latent injury damage claims and
expenses ("A&E claims"). These liabilities include provision for both
reported and IBNR claims. These claims are principally related to claims
arising from remediation costs associated with hazardous waste sites and
bodily injury claims related to asbestos products and environmental
hazards.
LIQUIDITY AND CAPITAL RESOURCES
As a holding company, ACE's assets consist primarily of the stock of its
subsidiaries as well as other investments. In addition to investment
income, its cash flows currently depend primarily on dividends or other
statutorily permissible payments from its Bermuda-based operating
subsidiaries (the "Bermuda subsidiaries"). There are currently no legal
restrictions on the payment of dividends from retained earnings by the
Bermuda subsidiaries as the minimum statutory capital and surplus
requirements are satisfied by the share capital and additional paid-in
24
<PAGE>
capital of each of the Bermuda subsidiaries. However, the payment of
dividends or other statutorily permissible distributions by the Bermuda
subsidiaries is subject to the need to maintain shareholder's equity at a
level adequate to support the level of insurance and reinsurance
operations. No dividends have been received from the Bermuda subsidiaries
during the quarter ended March 31, 2000. During the year ended December 31,
1999, ACE Bermuda and Tempest Re declared dividends of $726 million and
$316 million, respectively.
The payment of any dividends from ACE Global Markets or its subsidiaries
would be subject to applicable United Kingdom insurance law including those
promulgated by the Society of Lloyd's. No dividends were received from ACE
Global Markets during fiscal 1999 or during the current quarter and the
Company does not anticipate receiving dividends from ACE Global Markets
during the remainder of fiscal 2000. ACE INA has issued debt to provide
partial financing for the ACE INA acquisition and for other operating
needs. Cash flow requirements to service this debt are expected to be met
primarily by upstreaming dividend payments from ACE INA's insurance
subsidiaries. Under various U.S. insurance laws to which ACE INA's U.S.
insurance subsidiaries are subject, ACE INA's U.S. insurance subsidiaries
may pay a dividend only from earned surplus subject to the maintenance of a
minimum capital requirement, without prior regulatory approval. ACE INA's
international subsidiaries are also subject to various insurance laws and
are also subject to regulations in the countries in which they operate.
These regulations include restrictions that limit the amount of dividends
that can be paid without prior approval of the insurance regulatory
authorities. No dividends have been received from ACE INA during the
quarter ended March 31, 2000.
The Company's consolidated sources of funds consist primarily of net
premiums written, investment income, and proceeds from sales and maturities
of investments. Funds are used primarily to pay claims, operating expenses
and dividends and for the purchase of investments.
The Company's insurance and reinsurance operations provide liquidity in
that premiums are normally received substantially in advance of the time
claims are paid. The Company's consolidated net cash flow from operating
activities was $(86) million for the quarter ended March 31, 2000, compared
with $(77) million for the quarter ended March 31, 1999. Cash flows are
affected by claim payments, which due to the nature of the Company's
operations, may comprise large loss payments on a limited number of claims
and therefore can fluctuate significantly from year to year. The irregular
timing of these loss payments, for which the source of cash can be from
operations, available net credit facilities or routine sales of
investments, can create significant variations in cash flows from
operations between periods. Loss and loss expense payments amounted to $834
million and $257 million for the three months ended March 31, 2000 and
1999, respectively. The substantial increase in loss and loss expense
payments is a result of the inclusion of paid losses from ACE INA. For the
year ended December 31, 1999 and years ended September 30, 1998 and 1997,
net losses and loss expense payments amounted to $2.4 billion, $584 million
and $422 million respectively.
On July 2, 1999, the Company completed the ACE INA acquisition for $3.45
billion in cash. The Company financed the transaction as follows:
(a) $1.025 billion of available cash;
(b) $400 million from a hybrid trust preferred security issued on June 30,
1999. The interest rate on this security is LIBOR plus 125 basis
points. ACE simultaneously entered into an agreement relating to the
future issuance of $400 million of ACE ordinary shares in a public
offering prior to June 30, 2002;
25
<PAGE>
(c) and the remainder with commercial paper issuance with a current
annualized cost in the range of 5.3 to 6.2 percent. The commercial
paper offerings are backed by line of credit facilities, which were
arranged in connection with the ACE INA Acquisition.
In August 1999, commercial paper outstanding in (c) above was reduced by
$794 million using the net proceeds of a senior debt issuance. In December
1999, the commercial paper outstanding was reduced further, by an
additional $400 million, using the net proceeds from the issuance of $300
million in aggregate principal amount of unsecured subordinated notes
maturing in December 2009, and the net proceeds of a $100 million trust
preferred securities issue. These trust preferred securities mature on
December 31, 2029, but the due date may be extended through December 31,
2048. Distributions on the trust preferred securities are payable quarterly
at a rate of 8.875 percent. The sole assets of the trust consist of
subordinated debentures of ACE INA. The Company has guaranteed the payment
obligations with respect to the trust preferred securities and underlying
subordinated indenture. On March 31, 2000 the commercial paper outstanding
was reduced further, using the net proceeds from the issuance of $300
million in capital securities. These capital securities mature on
April 1, 2030, and the due date may not be extended. Distributions on the
capital securities are payable semi-annually at a rate of 9.70 percent. The
sole assets of the trust consist of subordinated debentures of ACE INA. The
Company has guaranteed the payment obligations with respect to the capital
securities and underlying subordinated indenture. The interest payments on
the senior debt, the unsecured subordinated notes, the trust preferred
securities and the capital securities which were all issued by ACE INA, are
tax deductible.
On April 12, 2000, the Company's commercial paper outstanding was reduced
further using the net proceeds from the issuance of $300 million of FELINE
PRIDES which consist of a share of the Company's 8.25 percent Cumulative
Redeemable Preferred Shares, Series A, liquidation value $50 per share, and
a purchase contract which requires the holder to purchase on May 16, 2003
for $50 a number of the Company's ordinary shares determined as provided in
the purchase contract. On May 8, 2000, exercise of the underwriters'
over-allotment option with respect to the offering of the FELINE PRIDES
resulted in additional net proceeds of $11 million which will be used to
further reduce the Company's commercial paper borrowings. The Preferred
Shares are mandatorily redeemable by the Company on June 16, 2003. Under
the purchase contracts, a minimum of 11.8 million ordinary shares and a
maximum of 16.4 million ordinary shares of the Company will be issued.
The issuance of the FELINE PRIDES represents the last step in securing
permanent financing related to the ACE INA acquisition. Any remaining
commercial paper will either remain outstanding, be repaid from internal
cash flow or be refinanced over time.
On December 30, 1999, the Company completed the acquisition of ACE
Financial Services for aggregate consideration of $110 million in cash and
approximately 20.8 million ACE ordinary shares. The cash used to finance
the acquisition was generated from internal sources.
On January 14, 2000 and April 14, 2000, the Company paid quarterly
dividends of 11 cents per share to shareholders of record on December 31,
1999 and March 31, 2000 respectively. The declaration and payment of future
dividends is at the discretion of the Board of Directors and will be
dependent upon the profits and financial requirements of the Company and
other factors, including legal restrictions on the payment of dividends and
such other factors as the Board of Directors deems relevant.
Fully diluted book value per share was $20.76 at March 31, 2000, compared
with $20.28 at December 31, 1999.
Both internal and external forces influence the Company's financial
condition, results of operations and cash flows. Claim settlements, premium
levels and investment returns may be impacted by changing rates of
inflation and other economic conditions. In many cases, significant periods
of time, ranging up to several years or more, may elapse between the
occurrence of an insured loss, the reporting of the loss to the Company and
the settlement of the Company's liability for that loss. The Company
believes that its cash balances, cash flow from operations, routine sales
of investments and the liquidity provided by its credit facilities
(discussed below) are adequate to meet the Company's expected cash
requirements.
26
<PAGE>
Credit facilities
In May 2000, the Company renewed certain syndicated credit facilities.
Each facility requires that the Company and/or certain of its subsidiaries
maintain specific covenants, including a consolidated tangible net worth
covenant and a maximum leverage covenant. The facilities provide:
o An $800 million, 364-day revolving credit facility with ACE Limited
and various subsidiaries as borrowers and guarantors. This
facility is for general corporate purposes.
o A $250 million, five-year revolving credit facility with ACE
Limited and various subsidiaries as borrowers and guarantors. This
facility is for general corporate purposes and permits both loans
and letters of credit.
Each of the above facilities may be used as commercial paper recourse
facilities.
Tempest Re also maintains an uncollateralized, syndicated revolving credit
facility in the amount of $72.5 million, which is guaranteed by the
Company. At March 31, 2000, no amounts have been drawn down under this
facility.
ACE Financial Services is party to a credit facility with a syndicate of
banks pursuant to which the syndicate provides up to $100 million
specifically designed to provide rating agency qualified capital to further
support ACE Financial Services claims-paying resources. This agreement
expires in January 2006. ACE Financial Services has not borrowed under this
credit facility.
In August 1996, ACE Financial Services entered into a credit agreement for
the provision of a $25 million credit facility, which is available for
general corporate purposes. As of March 31, 2000, $25 million remains
outstanding under this facility.
In November 1998, the Company arranged a syndicated, partially
collateralized, five-year LOC facility in the amount of (pound)270 million
(approximately $437 million) to fulfill the requirements of Lloyd's for the
1999 year of account. This LOC facility requires that the Company and/or
certain of its subsidiaries continue to maintain certain covenants,
including a minimum consolidated tangible net worth covenant and a maximum
leverage covenant. On June 30, 1999, certain terms of this LOC facility
were renegotiated and the facility is now uncollateralized. The facility
was renewed in November 1999 at an increased amount of (pound)290 million
(approximately $470 million) to fulfill the requirements of Lloyd's for the
2000 year of account. ACE Financial Services maintains a (pound)48 million
(approximately $78 million) unsecured letter of credit facility with a bank
to fulfill the requirements of Lloyd's for 1998/99 years of account.
In September 1999, the Company along with ACE Bermuda and Tempest Re as
Account Parties and Guarantors arranged a syndicated, one-year LOC facility
in the amount of $430 million for general business purposes, including the
issuance of (re)insurance letters of credit. This LOC facility requires
that the Company and/or certain of its subsidiaries continue to maintain
certain covenants, including a minimum consolidated tangible net worth
covenant and a maximum leverage covenant.
27
<PAGE>
ACE LIMITED
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
1) On February 25, 2000, the Company declared a quarterly dividend of $0.11
per Ordinary Share payable on April 14, 2000 to shareholders of record on
March 31, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1. EXHIBITS.
3.1 ACE Limited Certificate of the powers, designations, preferences
and rights of the 8.25 percent cumulative redeemable preferred
shares, series A, dated April 12, 2000.
10.1 Underwriting Agreement, dated as of April 6, 2000, among ACE
Limited, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Banc of America Securities LLC and Donaldson,
Lufkin & Jenrette Securities Corporation.
10.2 Purchase Contract Agreement, dated as of April 12, 2000 between
ACE Limited and The Bank of New York, acting as purchase contract
agent for the Holders of Securities.
10.3 Remarketing Agreement, dated as of April 12, 2000 among ACE Limited,
The Bank of New York and Merril Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
10.4 Pledge Agreement, dated as of April 12, 2000, among ACE Limited;
The Bank of New York, as Collateral Agent, Custodial Agent and
Securities Intermediary; and The Bank of New York, as Purchase
Contract Agent.
10.5 ACE USA Officer Deferred Compensation Plan (as amended through
January 1, 2000).
10.6 ACE USA Supplemental Employee Retirement Savings Plan.
10.7 Second Amendement to credit agreements dated as of March 15, 2000
among ACE INA Holdings Inc., ACE Limited, certain subsidiary
guarantors, various lenders, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Morgan Guaranty Trust Company of New York.
10.8 Amendment to letter of credit facility agreement dated as of March
15, 2000 between ACE Limited, ACE Bermuda Insurance Ltd, Citibank,
N.A., as arranger, Barclays Bank plc and ING Barings, as
co-arrangers, and Citibank International plc, as agent and trustee
for the Banks.
10.9 Amendment to reimbursement agreement dated as of March 15, 2000
among ACE Limited, ACE Bermuda Insurance Ltd., Tempest Reinsurance
Company Limited, Deutsche Bank AG, New York and/or Cayman Islands
Branches and Fleet National Bank as Documentation Agents, and
Mellon Bank, as Issuing Bank and Administrative Agent.
27. Financial Data Schedule.
2. REPORTS ON FORM 8-K.
The Company filed a Form 8-K current report (date of earliest event
reported: January 14, 2000) pertaining to the completion of the acquisition
of Capital Re Corporation.
The Company filed a Form 8-K current report (date of earliest event
reported: April 5, 2000) pertaining to ACE Limited's offering of FELINE
PRIDES.
28
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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.
ACE LIMITED
---------------------------------------
May 12, 2000 /s/ Brian Duperreault
---------------------------------------
Brian Duperreault
Chairman and Chief
Executive Officer
May 12, 2000 /s/ Robert Blee
---------------------------------------
Robert A. Blee
Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Numbered Page
- ------- ----------- -------------
3.1 ACE Limited Certificate of the powers, designations, preferences
and rights of the 8.25 percent cumulative redeemable preferred
shares, series A, dated April 12, 2000.
10.1 Underwriting Agreement, dated as of April 6, 2000, among ACE
Limited, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Banc of America Securities LLC and Donaldson,
Lufkin & Jenrette Securities Corporation.
10.2 Purchase Contract Agreement, dated as of April 12, 2000 between
ACE Limited and The Bank of New York, acting as purchase contract
agent for the Holders of Securities.
10.3 Remarketing Agreement, dated as of April 12, 2000 among ACE Limited,
The Bank of New York and Merril Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
10.4 Pledge Agreement, dated as of April 12, 2000, among ACE Limited;
The Bank of New York, as Collateral Agent, Custodial Agent and
Securities Intermediary; and The Bank of New York, as Purchase
Contract Agent.
10.5 ACE USA Officer Deferred Compensation Plan (as amended through
January 1, 2000).
10.6 ACE USA Supplemental Employee Retirement Savings Plan.
10.7 Second Amendement to credit agreements dated as of March 15, 2000
among ACE INA Holdings Inc., ACE Limited, certain subsidiary
guarantors, various lenders, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Morgan Guaranty Trust Company of New York.
10.8 Amendment to letter of credit facility agreement dated as of March
15, 2000 between ACE Limited, ACE Bermuda Insurance Ltd, Citibank,
N.A., as arranger, Barclays Bank plc and ING Barings, as
co-arrangers, and Citibank International plc, as agent and trustee
for the Banks.
10.9 Amendment to reimbursement agreement dated as of March 15, 2000
among ACE Limited, ACE Bermuda Insurance Ltd., Tempest Reinsurance
Company Limited, Deutsche Bank AG, New York and/or Cayman Islands
Branches and Fleet National Bank as Documentation Agents, and
Mellon Bank, as Issuing Bank and Administrative Agent.
27. Financial Data Schedule.
Exhibit 3.1
ACE LIMITED
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
8.25% CUMULATIVE REDEEMABLE PREFERRED SHARES, SERIES A
US $1.00 PAR VALUE PER SHARE
LIQUIDATION VALUE US$50 PER SHARE
The undersigned, Brian Duperreault, the Chairman and Chief
Executive Officer of ACE Limited, a company duly incorporated under the
laws of the Cayman Islands (the "Company"), and sole member of the Public
Offering Committee of the Company's Board of Directors, DOES HEREBY ADOPT
THE FOLLOWING RESOLUTIONS:
RESOLVED, that pursuant to the authority expressly granted to and
vested in this committee by the Board of Directors of the Company and in
accordance with the provisions of the Memorandum of Association and
Articles of Association, this committee hereby authorizes the issuance of a
series of other shares of the Company (the "Preferred Shares") which shall
consist of 6,900,000 shares, and hereby fixes the powers, designations,
preferences and relative, participating, optional or other special rights,
and the qualifications, limitations or restrictions thereof, of the
Preferred Shares (in addition to the powers, designations, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereof, set forth in the
Articles of Association of the Company which are applicable to the
Preferred Shares) as follows:
(i) Designation. The designation of this series shall be the 8.25%
Cumulative Redeemable Preferred Shares, Series A. The number of Preferred
Shares shall be 6,900,000. The liquidation preference of this series shall
be US$50 per share.
(ii) Rank. The Preferred Shares shall, with respect to dividend
rights and distribution rights upon liquidation, winding up and
dissolution, rank (a) senior to the Company's ordinary shares,
US$0.041666667 par value per share (the "Ordinary Shares"), and to all
classes and series of shares of the Company now or hereafter authorized,
issued or outstanding, which by their terms expressly provide that they
rank junior to the Preferred Shares as to dividend distributions and
distributions upon the liquidation, winding up and dissolution of the
Company, or which do not specify their rank (collectively with the Ordinary
Shares, the "Junior Securities"); (b) on a parity with each other class or
series of shares issued by the Company after the date hereof, the terms of
which specifically provide that such class or series will rank on a parity
with the Preferred Shares as to dividend distributions and distributions
upon the liquidation, winding up and dissolution of the Company
<PAGE>
(collectively referred to as the "Parity Securities"); and (c) junior to
each other class or series of shares issued by the Company after the date
hereof, the terms of which specifically provide that such class or series
will rank senior to the Preferred Shares as to dividend distributions and
distributions upon the liquidation, winding up and dissolution of the
Company (collectively referred to as the "Senior Securities").
(iii) Dividends. Dividends are payable on the Preferred Shares
as follows:
(a) The holders of the Preferred Shares shall be entitled to
receive, out of funds legally available for that purpose, and when, as
and if declared by the Board of Directors of the Company, dividends
payable in cash at the annual rate of: (1) from April 12, 2000 to
but excluding May 16, 2003, 8.25% per annum and (2) thereafter, at
the Reset Rate, in each case, of the liquidation preference per
Preferred Share.
(b) The dividend rate will be reset on the third Business Day
immediately preceding May 16, 2003 and dividends shall accumulate on
the Preferred Shares at the Reset Rate from May 16, 2003 to but
excluding June 16, 2003. The Reset Rate shall be determined by the
Reset Agent in the manner provided in the Purchase Contract Agreement.
On the Reset Announcement Date, the Reset Spread and the One-Month
Treasury Bill to be used to determine the Reset Rate will be announced
by the Company. On the Business Day immediately following the Reset
Announcement Date, the Preferred Shares holders will be notified of
such Reset Spread and One-Month Treasury Bill by the Company. Such
notice shall be sufficiently given to holders of the Preferred Shares
if published in an Authorized Newspaper in The City of New York. So
long as the Preferred Shares are held by a Clearing Agency, not less
than 7 calendar days nor more than 15 calendar days prior to the Reset
Announcement Date, the Company will notify the relevant Clearing
Agency or its nominee (or any successor Clearing Agency or its nominee)
by first-class mail, postage prepaid, to notify the beneficial owners
or Clearing Agency Participants holding Preferred Shares or Income
PRIDES of such Reset Announcement Date.
(c) Dividends on the Preferred Shares shall be fully cumulative
and shall accumulate, without interest, from April 12, 2000, and shall
be payable in arrears in cash in equal quarterly payments on
February 16, May 16, August 16 and November 16 of each year,
commencing May 16, 2000 (each, a "Dividend Payment Date"), to holders
of record on the books and records of the Company (1) so long as the
Preferred Shares are held by a Clearing Agency, at the close of
business on the Business Day immediately preceding the relevant
Dividend Payment Date and (2) with respect to the Preferred Shares not
held by a Clearing Agency, as of the relevant record date established
by a resolution of the Board of Directors which shall be more than one
Business Day but less than 60 Business Days immediately preceding the
relevant Dividend Payment Date. If any date on which dividends on the
Preferred Shares are to be made is not a Business Day, payment of the
dividends payable on such date will be made on the next succeeding day
that is a Business Day, without any interest or other payment in
respect of any delay.
(d) Holders of the Preferred Shares of this Series shall be
entitled to receive such dividends in preference to and in priority
over dividends upon the Junior Securities, but subject to the rights
of holders of Senior Securities. The Preferred Shares shall be on a
parity as to dividends with all Parity Securities.
2
<PAGE>
(e) Except as described below, dividends on the Preferred Shares
shall be paid only in cash. The amount of dividends payable shall be
computed on the basis of a 360-day year of twelve 30-day months.
The amount of dividends payable for any period will be computed on
the basis of the actual number of days elapsed in that 90-day
period. All dividends paid with respect to the Preferred Shares
pursuant to this section shall be paid pro rata to the holders
entitled thereto.
(f) In the event the Company does not declare or pay dividends
on the Preferred Shares through May 15, 2003, on May 16, 2003, instead
of a cash payment in respect of such dividends, subject to
shareholder approval, holders of the shares will be entitled to
receive a number of Ordinary Shares of the Company equal to (1)
the aggregate of all accumulated and unpaid dividends on the
Preferred Shares, divided by (2) the average of the closing prices
per Ordinary Share on each of the twenty consecutive Trading Days
ending on the third Trading Day immediately preceding May 16,
2003. If the Company does not receive shareholder approval to make
such payment in Ordinary Shares, such payment shall be made in
cash.
(g) Accumulated but unpaid dividends for any past dividend
period may be declared by the Board of Directors and paid on any date
fixed by the Board of Directors, whether or not a Dividend Payment
Date, to holders of record on the books and records of the Company on
any date fixed by the Board of Directors. Holders of the Preferred
Shares shall not be entitled to any dividends in excess of full
cumulative dividends, as herein provided, on the Preferred Shares.
No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment on the Preferred Shares that
may be in arrears.
(h) Payment Restrictions.
(1) So long as any Preferred Shares are outstanding, if
the Company does not declare or pay dividends on the
Preferred Shares with respect to any Dividend Payment
Date, then, until all accumulated and unpaid dividends
are paid and the full quarterly dividend on the Preferred
Shares for the current and all prior dividend periods is
declared or set apart for payment, the Company may not
declare or pay any dividend or make any distribution of
assets on any Junior Securities or make any guarantee
payments with respect to the foregoing, or redeem,
purchase or otherwise acquire any Junior Securities.
(2) So long as any Preferred Shares are outstanding, if the
Company does not declare or pay dividends on the Preferred
Shares with respect to any Dividend Payment Date, then, until
all accumulated and unpaid dividends are paid and the full
quarterly dividend on the Preferred Shares for the current and
all prior dividend periods is declared or set apart for payment,
the Company may not declare or pay any dividend or make any
distribution of assets on any Parity Securities or make any
guarantee payments with respect to the foregoing, unless such
dividends are declared and paid pro rata so that the amount of
dividends declared and paid per share on the Preferred Shares
and any other Parity Securities in all cases shall bear to each
other the same ratio that the amount of accumulated but unpaid
dividends per share on the Preferred Shares and such other
Parity Securities bear to each other.
3
<PAGE>
(3) So long as any Preferred Shares are outstanding, if
the Company does not declare or pay dividends on the
Preferred Shares with respect to any Dividend Payment
Date, then, until all accumulated and unpaid dividends
are paid and the full quarterly dividend on the Preferred
Shares for the current and all prior dividend periods is
declared or set apart for payment, the Company may not
redeem, purchase or otherwise acquire any Parity Securities.
(4) Notwithstanding anything to the contrary set forth in
Sections (iii)(h)(1), (2) and (3) above, the restrictions
set forth in such Sections shall not apply to (A)
dividends or distributions paid in Junior Securities, (B)
redemptions or purchases of any rights outstanding under
a shareholder rights plan of the Company, or any
successor to such rights plan, or the declaration of a
dividend of such rights or the issuance of shares under
such plans in the future and (C) purchases of Junior
Securities related to the issuance of Junior Securities
under any benefit plans of the Company or its
subsidiaries, as the case may be, for their respective
directors, officers or employees.
(i) Any dividend payment made on the Preferred Shares shall
be credited first against the dividends accumulated with respect
to the earliest dividend period for which dividends have not
been paid.
(iv) Remarketing.
(a) Preferred Shares that comprise components of Income
PRIDES, the holders of which have failed to notify the Purchase
Contract Agent on or prior to the fifth Business Day immediately
preceding May 16, 2003 of their intention to settle the related
Purchase Contract by Cash Settlement on the Business Day
immediately preceding May 16, 2003, will be remarketed in
accordance with the Remarketing Agreement and subject to the
terms of the Remarketing Underwriting Agreement, on the third
Business Day immediately preceding May 16, 2003 in the manner
described in Section 5.2(b) of the Purchase Contract Agreement.
(b) On or prior to the fifth Business Day immediately
preceding May 16, 2003, but no earlier than the Dividend Payment
Date immediately preceding May 16, 2003, holders of Preferred
Shares that are separately traded from the Income PRIDES as the
result of the creation of Growth PRIDES (the "Separate Preferred
Shares") may elect to have their Preferred Shares remarketed in
accordance with the Remarketing Agreement and subject to the
terms of the Remarketing Underwriting Agreement, by delivering
the Preferred Shares to the Collateral Agent together with a
notice of such election to the collateral agent. Holders of
Preferred Shares electing to have their Preferred Shares
remarketed will also have the right to withdraw such election on
or prior to the fifth Business Day immediately preceding May 16,
2003. Such Preferred Shares shall be remarketed in the manner
described in Section 5.2(b) of the Purchase Contract Agreement.
In the event of a Failed Remarketing, the Remarketing Agent shall
promptly return the Separate Preferred Shares to the Collateral
Agent for release to the holders thereof.
4
<PAGE>
(v) Redemption at Option of Holders.
(a) If a Failed Remarketing has occurred, each holder of
Separate Preferred Shares shall have the right to require the
Company to redeem all or a portion of such shares owned by such
holder (the "Put Option") on May 16, 2003 (the "Put Option
Exercise Date"), upon at least three Business Days' prior notice,
at a redemption price of $50 per share plus an amount equal to
the accumulated and unpaid dividends to the date of payment (the
"Put Option Redemption Price").
(b) In order for the Preferred Shares to be repaid on the
Put Option Exercise Date, the Company must receive on or prior to
4:00 p.m. on the third Business Day immediately preceding the Put
Option Exercise Date, at the office of the Transfer Agent
maintained for that purpose in The City of New York, the
Preferred Shares to be repaid with the form entitled "Option to
Elect Redemption" on the reverse thereof or otherwise
accompanying such Preferred Share duly completed. Any such notice
received by the Company shall be irrevocable. All questions as to
the validity, eligibility (including time of receipt) and
acceptance of the Preferred Shares for repayment shall be
determined by the Company, whose determination shall be final
and binding.
(c) Payment of the Put Option Redemption Price to holders
of Preferred Shares shall be made at the office of the Transfer
Agent maintained for that purpose in The City of New York,
provided that the Transfer Agent has received from the Company
a sufficient amount of cash in connection with the related
redemption of the Preferred Shares no later than 1:00 p.m.,
New York City time, on the Put Option Exercise Date by check or
wire transfer in immediately available funds at such place and
to such account as may be designated by such holders. If the
Transfer Agent holds immediately available funds sufficient to
pay the Put Option Redemption Price of such Preferred Shares,
then, immediately prior to the close of business on the Put
Option Exercise Date, such Preferred Shares will cease to be
outstanding and dividends thereon will cease to accumulate,
whether or not Preferred Shares are delivered to the Transfer
Agent, and all other rights of the holder in respect of the
Preferred Shares shall terminate and lapse (other than the right
to receive the Put Option Redemption Price but without interest
on such Put Option Redemption Price). The Company shall not be
required to register or cause to be registered the transfer of
any Preferred Shares for which redemption has been elected. If
payment of the Put Option Redemption Price in respect of
Preferred Shares is improperly withheld or refused and not paid
either by the Transfer Agent or the Company, dividends on such
Preferred Shares will continue to accumulate, from the original
Put Option Exercise Date to the actual date of payment, in which
case the actual payment date will be considered the Put Option
Exercise Date for purposes of calculating the Put Option
Redemption Price.
(d) So long as the Preferred Shares are held by a Clearing
Agency, the Company will request, not less than 10 nor more than
15 calendar days prior to the date on which some or all of the
Preferred Shares could be remarketed in the manner described in
Section 5.2(b) of the Purchase Contract Agreement that the
relevant Clearing Agency notify the holders of the Separate
Preferred Shares as well as the Income PRIDES and Growth PRIDES
holders of such remarketing and of the procedures that must be
followed if a holder of Separate Preferred Shares wishes to
exercise such holder's rights with respect to the Put Option.
5
<PAGE>
(vi) Mandatory Redemption. On June 16, 2003 (the "Mandatory
Redemption Date"), the Preferred Shares shall be mandatorily redeemed by the
Company in whole for cash, out of any source of funds legally available, at a
redemption price equal to 100% of the liquidation preference per Preferred
Share plus all accumulated and unpaid dividends thereon (the "Mandatory
Redemption Price"). The Preferred Shares are not subject to any sinking
fund.
(vii) Procedure for Mandatory Redemption.
(a) Upon redemption of the Preferred Shares pursuant to
Section (vi) hereof, notice of such redemption shall be mailed by
first-class mail, postage prepaid, not less than twenty-five (25)
days nor more than sixty (60) days prior to the Mandatory
Redemption Date to holders of record of the Preferred Shares at
their respective addresses as they shall appear in the books and
records of the Company; provided, however, that the failure to
give such notice or any defect therein or in the mailing thereof
shall not affect the validity of the proceeding for the redemption
of the Preferred Shares except as to the holder to whom the
Company has failed to give such notice or except as to the holder
to whom notice was defective. Each such notice shall state: (1)
the Mandatory Redemption Date; (2) the Mandatory Redemption Price;
(3) the place or places where certificates for such Preferred
Shares are to be surrendered for payment of the Mandatory
Redemption Price; (4) that dividends on the Preferred Shares to be
redeemed will cease to accumulate thereon unless the Company shall
default in payment of the Mandatory Redemption Price; and (5) the
CUSIP number of the Preferred Shares being redeemed.
(b) If a notice of redemption shall have been given as
aforesaid and the Company shall have deposited on or before
the Mandatory Redemption Date a sum sufficient to redeem the
Preferred Shares as to which a notice of redemption has been
given in trust with the Transfer Agent with irrevocable
instructions and authority to pay the Mandatory Redemption Price
to the holders thereof, or if no such deposit is made, then upon
the Mandatory Redemption Date (unless the Company shall default
in making payment of the Mandatory Redemption Price), all rights
of the holders thereof as shareholders of the Company by reason
of the ownership of such Preferred Shares (except their right to
receive the Mandatory Redemption Price thereof without interest)
shall cease and terminate, and such Preferred Shares shall no
longer be deemed outstanding for any purpose. The Company shall
be entitled to receive, from time to time, from the Transfer
Agent the interest, if any, earned on such moneys deposited with
it, and the holders of any Preferred Shares so redeemed shall
have no claim to any such interest. In case the holder of any
Preferred Shares so called for redemption shall not claim the
Mandatory Redemption Price for its Preferred Shares within six
(6) years after the date of redemption, the Transfer Agent shall,
upon demand, pay over to the Company such amount remaining on
deposit, and the Transfer Agent shall thereupon be relieved of
all responsibility to the holder of such Preferred Shares, and
such holder shall look only to the Company for payment thereof.
After such six-year period, the right of any shareholder or other
Person to receive such payment may be forfeited in the manner and
with the effect provided under applicable law.
(c) Not later than 1:00 p.m., New York City Time, on the
Business Day immediately preceding the Mandatory Redemption
Date, the Company shall irrevocably deposit with the Transfer
Agent sufficient funds for the payment of the Mandatory
Redemption Price for the Preferred Shares to be redeemed on
the Mandatory Redemption Date and shall give the Transfer
Agent irrevocable instructions to apply such funds, and, if
applicable and so specified in the instructions, the income
and proceeds therefrom, to the payment of such Mandatory
Redemption Price. The Company may direct the Transfer Agent to
invest any such available funds, provided that the proceeds of
any such investment will be available to the Transfer Agent in
The City of New York at the opening of business on such
Mandatory Redemption Date.
6
<PAGE>
(d) Except as otherwise expressly set forth in this
paragraph and under applicable law, nothing contained in this
certificate shall limit any legal right of the Company to
purchase or otherwise acquire any Preferred Shares at any
price, whether higher or lower than the Mandatory Redemption
Price, in private negotiated transactions, the
over-the-counter market or otherwise; provided that the
Company may not purchase or otherwise acquire Preferred Shares
unless all accumulated and unpaid dividends on all outstanding
Preferred Shares for all dividend period(s) terminating on or
before the date of such purchase or acquisition shall have
been or are being contemporaneously paid or set apart for
payment.
(e) If the Company shall not have funds legally
available for the redemption of all of the Preferred Shares on
the Mandatory Redemption Date, the Company shall redeem on the
Mandatory Redemption Date only the number of Preferred Shares
as it shall have legally available funds to redeem, as
determined in an equitable manner, and the remainder of the
Preferred Shares shall be redeemed, at the option of the
Company, on the earliest practicable date next following the
day on which the Company shall first have funds legally
available for the redemption of such shares.
(f) Prior to calling the Preferred Shares for
redemption in accordance with this Section, the Company, by
resolution of its Board of Directors, shall, to the extent of
the redemption amount, to the extent of any such funds legally
available therefor and to the extent permitted by law, declare
a dividend on the Preferred Shares payable on or prior to the
Mandatory Redemption Date in an amount equal to any
accumulated and unpaid dividends on the Preferred Shares as of
such date.
(viii) Liquidation Preference.
(a) The liquidation preference of Preferred Shares, in
case of the voluntary or involuntary liquidation, dissolution
or winding-up of the Company, shall be US$50 per share, plus
the amount per share of any dividends accumulated thereon and
remaining unpaid at the date of such liquidation, dissolution
or winding-up.
(b) In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the
holders of the Preferred Shares shall be entitled to receive
the liquidation price of such shares held by them in
preference to and in priority over any distributions upon all
Junior Securities, but subject to the rights of holders of
Senior Securities. Upon payment in full of the liquidation
price to which the holders of the Preferred Shares are
entitled, the holders of the Preferred Shares will not be
entitled to any further participation in any distribution of
assets by the Company. If the assets of the Company are not
sufficient to pay in full the liquidation price payable to the
holders of the Preferred Shares and the liquidation price
payable to the holders of all Parity Securities, the holders
of all such shares shall share ratably in such distribution of
assets in accordance with the amounts which would be payable
on such distribution if the amounts to which the holders of
the Preferred Shares and the holders of Parity Securities are
entitled were paid in full.
(c) Neither a consolidation or merger of the Company
with or into any other corporation, nor a merger of any other
corporation with or into the Company, nor a sale or transfer of
all or any part of the Company's assets for cash, securities or
other property shall be considered a liquidation, dissolution or
winding-up of the Company within the meaning of this
Section (viii).
7
<PAGE>
(ix) Reacquired Shares. All shares of this Series which are at
any time redeemed pursuant to Section (v) or (vi) above shall be cancelled
and the authorized but unissued share capital of the Company shall be
increased accordingly, subject to reissuance by the Board of Directors of
the Company as shares of this series or shares of any one or more other
series.
(x) Voting Rights. Except as indicated below or as otherwise
required by applicable law, holders of the Preferred Shares will not have
voting rights.
(a) If at any time dividends payable on the Preferred
Shares are in arrears and unpaid in an aggregate amount equal
to or exceeding the aggregate amount of dividends payable
thereon for six quarterly dividend periods, the holders of the
Preferred Shares, together with the holders of any other
series of Parity Securities as to which dividends are in
arrears and unpaid in an aggregate amount equal to or
exceeding the aggregate amount of dividends payable for six
quarterly dividend periods (but only if the holders of the
shares of such other series would otherwise have a right to
elect Directors as a result of a dividend arrearage), will
have the special and exclusive right (superseding the separate
right of such other series to elect Directors so long as
Preferred Shares remain outstanding, except as otherwise
expressly provided in the certificate of designation
establishing such other series), voting separately as a class
with any such other series, to elect two Directors of the
Company, such Directors to be in addition to the number of
Directors constituting the Board of Directors of the Company
immediately prior to the accrual of such right. Such right of
the holders of Preferred Shares to elect two Directors shall,
when vested, continue until all accumulated dividends on the
Preferred Shares shall have been paid in full and, when so
paid, such right of the holders of Preferred Shares to elect
two Directors separately as a class shall terminate, subject
to revesting in the event of each and every subsequent default
in an aggregate amount equivalent to six full quarterly
dividends.
8
<PAGE>
(b) At any time when such special voting power has
vested in the holders of the Preferred Shares as described in
Section (x)(a) above, a proper officer of the Company will,
upon the written request of the holders of record of at least
10% of the Preferred Shares then outstanding addressed to the
Secretary of the Company, call an extraordinary meeting of the
holders of such series for the purpose of electing Directors.
Such meeting will be held at the earliest practicable date in
such place as may be designated pursuant to the Articles of
Association (or if there be no designation, at the principal
office of the Company in Hamilton, Bermuda). If such meeting
shall not be called by the proper officers of the Company
within 20 days after the Secretary of the Company has been
personally served with such request, or within 30 days after
mailing the same within the United States by registered or
certified mail addressed to the Secretary of the Company at
its principal office, then the holders of record of at least
10% of such class or series then outstanding may designate in
writing one of their number to call such meeting at the
Company's expense, and such meeting may be called by such
Person so designated upon the notice required for annual
meetings of shareholders and will be held in Hamilton,
Bermuda. Any holder of the shares of such class or series so
designated will have access to the register of members of the
Company for the purpose of causing meetings of shareholders to
be called pursuant to these provisions. Notwithstanding the
foregoing, no such extraordinary meeting will be called during
the period within 90 days immediately preceding the date fixed
for the next annual meeting of shareholders.
(c) At any annual or extraordinary meeting at which
the holders of any class or series of Parity Securities have
the special right, voting separately as a class, to elect
Directors as described above, the presence, in person or by
proxy, of the holders representing 33 1/3% of such class or
series will be required to constitute a quorum of such class
or series for the election of any director by the holders of
such class or series, voting as a class. At any such meeting
or adjournment thereof, (1) the absence of a quorum of such
class or series will not prevent the election of Directors
other than those to be elected by such class or series, voting
as a class, and the absence of a quorum for the election of
such other Directors will not prevent the election of the
Directors to be elected by such class or series, voting as a
class, and (2) in the absence of either or both such quorums,
a majority of the holders present in person or by proxy of any
class or series of shares for which a quorum is lacking will
have power to adjourn the meeting for the election of
Directors which they are entitled to elect, from time to time
until a quorum shall be present, without notice other than
announcement at the meeting.
(d) During any period in which the holders of any
class or series of Parity Securities have the right to vote as
a class for Directors as described above, any vacancies in the
Board of Directors will be filled only by vote of a majority
(even if that be only a single director) of the remaining
Directors theretofore elected by the holders of such class or
series which elected the Directors whose office shall have
become vacant. During such period the Directors so elected by
the holders of such class or series will continue in office
(1) until the next succeeding annual meeting or until their
successors, if any, are elected by such holders and qualify or
(2) unless required by applicable law to continue in office
for a longer period, until termination of the right of the
9
<PAGE>
holders of such class or to vote as a class for Directors, if
earlier. If and to the extent permitted by applicable law,
immediately upon any termination of the right of the holders
of any class or series of Parity Securities to vote as a class
for Directors as provided herein, the term of office of the
Directors then in office so elected by the holders of such
class or series will terminate.
(e) Whether or not the Company is being wound up, the
rights attached to any class or series of Parity Securities
may only be varied with the consent in writing of the holders
of three-fourths of the issued shares of that class or series,
or with the sanction of a special resolution approved by at
least 66 2/3% of the votes cast by the holders of the shares
of that class or series at a duly convened meeting where at
least one-third of the issued shares of that class or series
are represented, either in person or by proxy. The rights
attached to any class or series of Parity Securities will not
be deemed to be varied by the creation or issue of any shares
or any securities convertible into or evidencing the right to
purchase shares ranking prior to or equally with such class or
series of the Parity Securities with respect to the payment of
dividends or of assets upon liquidation, dissolution or
winding up.
(f) On any item on which the holders of the Preferred
Shares are entitled to vote, such holders will be entitled to
one vote for each Preferred Share held.
(xi) Miscellaneous. The number of authorized Preferred Shares
may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of
the share capital of the Company entitled to vote.
(xii) No Preemptive Rights. The holders of shares of this Series
shall have no preemptive rights, including preemptive rights with respect
to any share capital or other securities of the Company convertible into or
carrying rights or options to purchase any such shares.
(xiii) Company to Reserve Ordinary Shares. The Company shall at
all times prior to May 16, 2003 reserve and keep available, free from
preemptive rights, out of its authorized but unissued Ordinary Shares the
full number of Ordinary Shares issuable against tender of payment in
respect of all purchase contracts.
(xiv) Certain Definitions. As used in this certificate, the
following terms shall have the following respective meanings:
"Authorized Newspaper" means a daily newspaper, in the
English language, customarily published on each day that is a Business Day
in The City of New York, whether or not published on days that are legal
holidays, and of general circulation in The City of New York. The
Authorized Newspaper for the purposes of the Reset Spread Announcement
Date, is currently anticipated to be The Wall Street Journal (NYC edition).
"Business Day" means any day other than a Saturday, Sunday or
any other day on which banking institutions and trust companies in The City
of New York are permitted or required by any applicable law to close.
"Cash Settlement" has the meaning set forth in Section
5.2(a)(i) of the Purchase Contract Agreement.
10
<PAGE>
"Clearing Agency" means an organization registered as a
"Clearing Agency" pursuant to Section 17A of the Securities and Exchange
Act of 1934, as amended, that is acting as a depositary for the shares of
this Series and in whose name, or in the name of a nominee of that
organization, shall be registered a global certificate and which shall
undertake to effect book-entry transfers and pledges of the shares of this
Series.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time the
Clearing Agency effects book-entry transfers and pledges of securities
deposited with the Clearing Agency.
"Collateral Agent" means The Bank of New York, as Collateral
Agent under the Pledge Agreement until a successor Collateral Agent shall
have become such pursuant to the applicable provisions of the Pledge
Agreement, and thereafter "Collateral Agent" shall mean the Person who is
then the Collateral Agent thereunder.
"Company" means the Person named as the "Company" in the
first paragraph of this instrument.
"Dividend Payment Date" has the meaning set forth in Section
(iii)(c).
"DTC" means The Depository Trust Company, the initial
Clearing Agency.
"Failed Remarketing" has the meaning set forth in Section
5.2(b) of the Purchase Contract Agreement.
"Growth PRIDES" means the collective rights and obligations
of a holder of a Growth PRIDES certificate in respect of a 1/20th undivided
beneficial interest in a treasury security, subject in each case to the
pledge thereof under the Pledge Agreement, and the related Purchase
Contract.
"Income PRIDES" means the collective rights and obligations
of a holder of an Income PRIDES certificate in respect of a Preferred
Share, subject to the pledge thereof under the Pledge Agreement, and the
related Purchase Contract.
"Junior Securities" has the meaning set forth in Section
(ii).
"Mandatory Redemption Date" has the meaning set forth in
Section (vi).
"Mandatory Redemption Price" has the meaning set forth in
Section (vi).
"One-Month Treasury Bill" means direct obligations of the
United States (which may be obligations traded on a when-issued basis only)
having a maturity comparable to the remaining term to the Mandatory
Redemption Date of the Preferred Shares, as agreed upon by the Company and
the Reset Agent. The rate for the One-Month Treasury Bill will be the bid
side rate displayed at 10:00 A.M., New York City time, on the third
Business Day immediately preceding the May 16, 2003 in the Telerate system
(or if the Telerate system is (a) no longer available on the third Business
Day immediately preceding May 16, 2003 or (b) in the opinion of the Reset
Agent (after consultation with the Company) no longer an appropriate system
from which to obtain such rate, such other nationally recognized quotation
11
<PAGE>
system as, in the opinion of the Reset Agent (after consultation with the
Company) is appropriate. If such rate is not so displayed, the rate for the
One-Month Treasury Bill shall be, as calculated by the Reset Agent, the
yield to maturity for the One-Month Treasury Bill, expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis, and computed by taking the arithmetic mean of the
secondary market bid rates, as of 10:30 A.M., New York City time, on the
third Business Day immediately preceding May 16, 2003, of three leading
United States government securities dealers selected by the Reset Agent
(after consultation with the Company) (which may include the Reset Agent or
an affiliate thereof).
"Ordinary Shares" has the meaning set forth in Section (ii).
"Parity Securities " has the meaning set forth in Section (ii).
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Pledge Agreement" means the Pledge Agreement, dated as of
the date hereof, by and among the Company, the Collateral Agent and the
Agent, on its own behalf and as attorney-in-fact for the Holders from time
to time of the Securities.
"Preferred Shares" has the meaning set forth in the preamble.
"Pricing Committee" has the meaning set forth in the
preamble.
"Purchase Contract," when used with respect to any Income
PRIDES or Growth PRIDES, means the contract forming a part of such security
and obligating the Company to sell and the holder of such Security to
purchase Ordinary Shares under the terms and subject to the conditions set
forth in Article Five of the Purchase Contract Agreement.
"Purchase Contract Agent" means The Bank of New York.
"Purchase Contract Agreement" means the agreement between the
Company and the Purchase Contract Agent, dated April 12, 2000.
"Put Option" has the meaning set forth in Section (v).
"Put Option Exercise Price" has the meaning set forth in
Section (v).
"Put Option Redemption Price" has the meaning set forth in
Section (v).
"Remarketing Agent" means a nationally recognized investment
banking firm chosen by the Company to remarket the Preferred Shares. It is
currently anticipated that Merrill Lynch, Pierce, Fenner & Smith
Incorporated will act in such capacity.
"Remarketing Agreement" means the Remarketing Agreement dated
April 12, 2000 by and among the Company, the Remarketing Agent and the
Purchase Contract Agent.
12
<PAGE>
"Remarketing Underwriting Agreement" has the meaning
specified in the Remarketing Agreement.
"Reset Agent" means a nationally recognized investment
banking firm chosen by the Company to determine the Reset Rate. It is
currently anticipated that Merrill Lynch, Pierce, Fenner & Smith
Incorporated will act in such capacity.
"Reset Announcement Date" means the tenth (10th) Business Day
immediately preceding May 16, 2003.
"Reset Rate" means the dividend rate per annum (to be
determined by the Reset Agent), equal to the sum of (X) the Reset Spread
and (Y) the rate of interest on the One-Month Treasury Bill in effect on
the third Business Day immediately preceding May 16, 2003, that the
Preferred Shares should bear in order for the Preferred Shares to have an
approximate market value of 100.5% of their aggregate liquidation amount on
the third Business Day immediately preceding May 16, 2003; provided, that
the Company may limit such Reset Spread to be no higher than 200 basis
points (2%); and provided, further, that in the event of a Failed
Remarketing, the Reset Rate shall be the dividend rate per annum in effect
on the Business Day immediately preceding May 16, 2003.
"Reset Spread" means a spread amount to be determined by the
Reset Agent on the tenth (10th) Business Day immediately preceding May 16,
2003.
"Senior Securities" has the meaning set forth in Section
(ii).
"Separate Preferred Shares" has the meaning set forth in
Section (iv)(b).
"Trading Day" has the meaning specified in Section 5.1 of the
Purchase Contract Agreement.
"Transfer Agent" means The Bank of New York.
13
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate
to be duly executed on its behalf by the undersigned and attested to this
12th day of April, 2000.
_____________________________________________
Name: Brian Duperreault
Title: Chairman and Chief Executive Officer
ATTEST:
_______________________________
Name:
Title:
14
===============================================================================
Exhibit 10.1
ACE LIMITED
(a Cayman Islands company)
6,000,000 FELINE PRIDES
initially consisting of
6,000,000 Income PRIDES
UNDERWRITING AGREEMENT
Dated: April 6, 2000
===============================================================================
<PAGE>
Page
-----
TABLE OF CONTENTS
Section 1. Representations and Warranties................................3
(a) Representations and Warranties by the Company..................3
(1) Compliance with Registration Requirements...............3
(2) Incorporated Documents..................................4
(3) Independent Accountants.................................5
(4) Financial Statements....................................5
(5) No Material Adverse Change in Business..................5
(6) Good Standing of the Company............................6
(7) Good Standing of Corporate Subsidiaries.................6
(8) Good Standing of Partnership Subsidiaries...............7
(9) Capitalization..........................................7
(10) Authorization of the Purchase Contract Agreement........7
(11) Authorization of the Pledge Agreement...................8
(12) Authorization of FELINE PRIDES..........................8
(13) Authorization of Preferred Shares.......................8
(14) Authorization of the Ordinary Shares....................8
(15) Authorization of this Agreement, the Pricing
Agreement and the Remarketing Agreement...............8
(16) Descriptions of the Securities and the Operative
Agreements............................................9
(17) Non-Taxation of Current Payments........................9
(18) Reserves...............................................10
(19) Absence of Defaults and Conflicts......................10
(20) Absence of Proceedings.................................11
(21) Accuracy of Exhibits...................................11
(22) Absence of Further Requirements........................11
(23) Possession of Licenses and Permits.....................11
(24) Insurance Laws.........................................12
(25) Governmental Authorization.............................12
(26) Commodity Exchange Act.................................12
(27) Investment Company Act.................................12
(b) Officers' Certificates..........................................13
Section 2. Sale and Delivery to Underwriters; Closing....................13
(a) Initial Securities.............................................13
(b) Option Securities..............................................13
(c) Pledge of Securities...........................................13
(d) Payment........................................................13
(e) Compensation...................................................14
(e) Denominations; Registration....................................14
Section 3. Covenants of the Company......................................14
(a) Compliance with Securities Regulations and Commission
Requests......................................................14
(b) Filing of Amendments..........................................15
(c) Delivery of Registration Statements...........................15
(d) Delivery of Prospectuses......................................15
(e) Continued Compliance with Securities Laws.....................15
(f) Blue Sky Qualifications.......................................16
(g) Earnings Statement............................................16
(h) Use of Proceeds...............................................16
(i) Restriction on Sale of Securities.............................16
(j) Reporting Requirements........................................17
(k) Documentary, Stamp or Similar Issue Taxes.....................17
(l) Reserve of Ordinary Shares....................................17
Section 4. Payment of Expenses..........................................17
(a) Expenses......................................................17
(b) Termination of Agreement......................................18
iv
<PAGE>
Section 5 Conditions of Underwriters' Obligations......................18
(a) Effectiveness of Registration Statement.......................18
(b) Opinions of Counsel for the Company...........................18
(c) Opinion of Counsel for Purchase Contract Agent................19
(d) Opinion of Counsel for Underwriters...........................19
(e) Officers' Certificate.........................................19
(f) Accountant's Comfort Letters..................................20
(g) Bring-down Comfort Letters....................................20
(h) Ratings.......................................................21
(i) Conditions to Purchase of Option Securities...................21
(j) Additional Documents..........................................22
(k) Termination of Agreement......................................22
Section 6. Indemnification..............................................23
(a) Indemnification of Underwriters..............................23
(b) Indemnification of the Company, Directors and Officers........23
(c) Actions against Parties; Notification.........................24
(d) Settlement without Consent if Failure to Reimburse............24
Section 7. Contribution.................................................24
Section 8. Representations, Warranties and Agreements to Survive
Delivery....................................................26
Section 9. Termination...................................................26
(a) Underwriting Agreement........................................26
(b) Liabilities...................................................27
Section 10. Default by One or More of the Underwriters....................27
Section 11. Notices.......................................................27
Section 12. Parties.......................................................28
Section 13. Consent to Jurisdiction; Miscellaneous........................28
Section 14. Waiver of Immunities..........................................28
Section 15. Judgment Currency.............................................29
Section 16. GOVERNING LAW AND TIME........................................29
Section 17. Effect of Headings............................................29
v
<PAGE>
SCHEDULE A
SCHEDULE B
EXHIBIT A Form of Opinion of Maples and Calder, the Company's Cayman
Islands Counsel, to be Delivered Pursuant to Section 5(b)
EXHIBIT B Form of Opinion of Conyers, Dill & Pearman, the Company's
Bermuda Counsel, to be Delivered Pursuant to Section 5(b)
EXHIBIT C Form of Opinion of Peter N. Mear, Esq., General Counsel of
the Company, to be Delivered Pursuant to Section 5(b)
EXHIBIT D Form of Opinion of Mayer, Brown & Platt, United States
Counsel for the Company, to be Delivered Pursuant to
Section 5(b)
vi
<PAGE>
ACE LIMITED
(a Cayman Islands Company)
6,000,000 FELINE PRIDES
consisting of
6,000,000 Income PRIDES
UNDERWRITING AGREEMENT
April 6, 2000
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BANC OF AMERICA SECURITIES LLC
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
c/o Merrill Lynch & Co.,
Merrill Lynch Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower
New York, New York 10281-1209
Ladies and Gentlemen:
ACE Limited, a Cayman Islands company (the "Company"), confirms
its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), Banc of America Securities LLC and
Donaldson, Lufkin & Jenrette Securities Corporation (collectively, the
"Underwriters," which term shall also include any underwriter substituted
as provided in Section 10 hereof), with respect to the issue and sale by
the Company and the purchase by the Underwriters, acting severally and not
jointly, of 6,000,000 FELINE PRIDESSM or the "Initial Securities" which
will initially consist of units (referred to as "Income PRIDESSM") with a
Stated Amount of $50 comprised of (a) a stock purchase contract (the
"Purchase Contract") under which the holder will purchase from the Company
on May 16, 2003 a number of ordinary shares, $0.041666667 par value per
share, of the Company (the "Ordinary Shares") equal to the Settlement Rate
as set forth in the Purchase Contract Agreement (as defined below), and (b)
beneficial ownership of one 8.25% Cumulative Redeemable Preferred Share,
Series A, of the Company, having a liquidation preference of $50 (the
"Preferred Shares") and with respect to the grant by the Company to the
Underwriters, acting severally and not jointly, of an option to purchase up
to an additional 900,000 FELINE PRIDES (the "Option Securities" and,
together with the Initial Securities, being referred to herein as the
"Securities"). In accordance with the terms of the Purchase Contract
Agreement, to be dated as of April 12, 2000, between the Company and The
Bank of New York, as purchase contract agent (the "Purchase Contract
Agent"), the Preferred Shares will be pledged by the Purchase Contract
Agent, on behalf of the holders of the Securities, to The Bank of New York,
as collateral agent (the "Collateral Agent"), pursuant to the Pledge
Agreement, to be dated as of April 12, 2000 (the "Pledge Agreement"), among
the Company, the Purchase Contract Agent and the Collateral Agent, to
secure such holders' obligation to purchase Ordinary Shares under the
Purchase Contracts. Under the terms of the Purchase Contract Agreement and
Pledge Agreement, holders of Income PRIDES are permitted to substitute
certain treasury securities ("Treasury Securities") for the Preferred
Shares as collateral in order to create "Growth PRIDESSM" ("Growth
PRIDES"). Growth PRIDES will consist of a unit with a Stated Amount of $50
comprised of (a) a Purchase Contract and (b) a 1/20th undivided beneficial
interest in a zero-coupon U.S. Treasury Security maturing on May 16, 2003.
The rights and obligations of (i) a holder of Income PRIDES in respect of
Preferred Shares, subject to the pledge thereof, and Purchase Contracts,
(ii) a holder of Growth PRIDES in respect of a beneficial interest in the
Treasury Securities, subject to the pledge thereof, and Purchase Contracts
and (iii) a holder of separately trading Preferred Shares resulting from
the creation of Growth PRIDES ("Separate Preferred Shares") will, in each
case, be evidenced by Security Certificates (the "Security Certificates").
Pursuant to a remarketing agreement (the "Remarketing Agreement")
to be dated as of April 12, 2000, among the Company, the Purchase Contract
Agent and a nationally recognized investment banking firm chosen by the
Company, certain Preferred Shares may be remarketed, subject to certain
terms and conditions.
<PAGE>
The Company and certain other entities affiliated therewith have
filed with the Securities and Exchange Commission (the "Commission") a
joint registration statement on Form S-3 (No. 333-78841) and pre-effective
amendments nos. 1 and 2 thereto, for the registration of the Securities and
certain other securities described therein under the Securities Act of
1933, as amended (the "1933 Act"), and the offering thereof from time to
time in accordance with Rule 415 of the rules and regulations of the
Commission under the 1933 Act (the "1933 Act Regulations"). Such
registration statement has been declared effective by the Commission. Such
registration statement, in the form in which it became effective, is
referred to herein as the "Registration Statement"; and the final
prospectus and the final prospectus supplement relating to the offering of
the Securities, in the form first furnished to the Underwriters by the
Company for use in connection with the offering of the Securities, are
collectively referred to herein as the "Prospectus"; provided, however,
that all references to the "Registration Statement" and the "Prospectus"
shall also be deemed to include all documents incorporated therein by
reference pursuant to the Securities Exchange Act of 1934, as amended (the
"1934 Act"), prior to the time the applicable final prospectus and the
final prospectus supplement were first furnished to the Underwriters by the
Company; provided, further, that if the Company files a registration
statement with the Commission pursuant to Rule 462(b) of the 1933 Act
Regulations (the "Rule 462(b) Registration Statement"), then, after such
filing, all references to "Registration Statement" shall also be deemed to
include the Rule 462 Registration Statement. A "preliminary prospectus"
shall be deemed to refer to any prospectus relating to the offering of the
Securities that omitted information to be included upon pricing in a form
of prospectus filed with the Commission pursuant to Rule 424(b) of the 1933
Act Regulations and was used after the Registration Statement became
effective and prior to the execution and delivery of this Underwriting
Agreement. For purposes of this Underwriting Agreement, all references to
the Registration Statement, Prospectus or preliminary prospectus or to any
amendment or supplement to any of the foregoing shall be deemed to include
any copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR").
All references in this Underwriting Agreement to financial
statements and schedules and other information which is "contained,"
"included" or "stated" (or other references of like import) in the
Registration Statement, Prospectus or preliminary prospectus shall be
deemed to mean and include all such financial statements and schedules and
other information which is incorporated by reference in the Registration
Statement, Prospectus or preliminary prospectus, as the case may be, prior
to the execution of this Underwriting Agreement; and all references in this
Underwriting Agreement to amendments or supplements to the Registration
Statement, Prospectus or preliminary prospectus shall be deemed to mean and
include the filing of any document under the 1934 Act which is incorporated
by reference in the Registration Statement, Prospectus or preliminary
prospectus, as the case may be, after the execution of this Underwriting
Agreement.
The Remarketing Agreement, the Purchase Contract Agreement, the
Pledge Agreement and this Agreement are referred to collectively as the
"Operative Agreements."
The Company understands that the Underwriters propose to make a
public offering of the Securities as soon as the Underwriters deem
advisable after this Agreement has been executed and delivered.
Section 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company represents
and warrants to the Underwriters as of the date hereof, as of the Closing
Time and, if applicable, as of each Date of Delivery (as defined below) (in
each case, a "Representation Date"), as follows:
(1) Compliance with Registration Requirements. The Company meets
the requirements for use of Form S-3 under the 1933 Act. The
Registration Statement (including any Rule 462(b) Registration
Statement) has become effective under the 1933 Act and no stop order
suspending the effectiveness of the Registration Statement (or such
Rule 462(b) Registration Statement) has been issued under the 1933 Act
and no proceedings for that purpose have been instituted or are
pending or, to the knowledge of the Company, are contemplated by the
Commission, and any request on the part of the Commission for
additional information with respect to the Registration Statement (or
any document incorporated therein by reference pursuant to the 1934
Act) has been complied with.
2
<PAGE>
At the respective times the Registration Statement (including any
Rule 462(b) Registration Statement) and any post-effective amendments
thereto (including the filing of the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 with the Commission (the "Annual
Report on Form 10-K")) became effective and at each Representation Date,
the Registration Statement (including any Rule 462(b) Registration
Statement) and any amendments thereto complied and will comply in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations and did not and will not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading. At the date of the Prospectus, at the Closing Time and
at each Date of Delivery, if any, neither the Prospectus nor any
amendments and supplements thereto included or will include an
untrue statement of a material fact or omitted or will 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. Notwithstanding the foregoing, the
representations and warranties in this subsection shall not apply
to statements in or omissions from the Registration Statement (or
any amendment thereto) or the Prospectus made in reliance upon and
in conformity with information furnished to the Company in writing
by any Underwriter expressly for use in the Registration Statement
(or any amendment thereto) or the Prospectus (or any amendment or
supplement thereto).
Each preliminary prospectus and prospectus filed as part
of the Registration Statement as originally filed or as part of
any amendment thereto, or filed pursuant to Rule 424 under the
1933 Act, complied when so filed in all material respects with the
1933 Act Regulations and each preliminary prospectus and the
Prospectus delivered to the Underwriters for use in connection
with the offering of the Securities will, at the time of such
delivery, be identical to any electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(2) Incorporated Documents. The documents incorporated or deemed
to be incorporated by reference in the Registration Statement and the
Prospectus, at the time they were or hereafter are filed with the
Commission, complied and will comply in all material respects with
the requirements of the 1934 Act and the rules and regulations of
the Commission thereunder (the "1934 Act Regulations") and, when
read together with the other information in the Prospectus, at the
date of the Prospectus, at the Closing Time and at each Date of
Delivery, if any, did not and will not include an untrue statement
of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(3) Independent Accountants. The accountants who certified or shall
certify the financial statements and any supporting schedules thereto of
the Company included in the Registration Statement and the Prospectus are
independent public accountants with respect to the Company and its
subsidiaries as required by the 1933 Act and the 1933 Act Regulations.
(4) Financial Statements. The financial statements of the Company
included in the Registration Statement and the Prospectus,
together with the related schedules and notes, as well as those
financial statements, schedules and notes of any other entity
included therein, present fairly the financial position of the
Company and its consolidated subsidiaries, or such other entity,
as the case may be, at the dates indicated and the statement of
operations, stockholders' equity and cash flows of the Company and
its consolidated subsidiaries, or such other entity, as the case
may be, for the periods specified. Such financial statements have
been prepared in conformity with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved, except as indicated therein or in
the notes thereto. The supporting schedules, if any, included in
the Registration Statement and the Prospectus present fairly in
accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial
information, if any, included in the Prospectus present fairly the
information shown therein and have been compiled on a basis
consistent with that of the related audited financial statements
included in the Registration Statement and the Prospectus. The pro
3
<PAGE>
forma financial statements of the Company and its subsidiaries and
the related notes thereto included in the Registration Statement
and the Prospectus present fairly the information shown therein,
have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and have
been properly compiled on the basis described therein, and the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein.
(5) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein (i) neither the
Company nor any of its subsidiaries has sustained any material
loss or material interference with its business from any action,
notice, order or decree from an insurance regulatory authority and
(ii) there has been (A) no material adverse change in case
reserves or losses or loss expense of the Company and its
consolidated subsidiaries and (B) no material adverse change, nor
any development or event involving a prospective material adverse
change, in the financial condition, business, or results of
operations of the Company and its subsidiaries considered as one
enterprise, in either case whether or not arising in the ordinary
course of business (a "Material Adverse Change").
(6) Good Standing of the Company. The Company has been duly
organized and is subsisting and in good standing under the laws of the
Cayman Islands, with corporate power and authority to own, lease
and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its
obligations under, or as contemplated under, the Operative
Agreements to which it is a party. The Company is duly qualified
to transact business as a foreign corporation and is in good
standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification, except where the failure to so qualify or be in
good standing would not reasonably be expected to result in a
Material Adverse Change.
(7) Good Standing of Corporate Subsidiaries. Each subsidiary of the
Company, other than such subsidiaries as would not, individually
or in the aggregate, constitute a "significant subsidiary" as such
term is defined in Rule 1-02 of Regulation S-X promulgated under
the 1933 Act (each, a "Significant Subsidiary") which is a
corporation has been duly incorporated or organized and is an
existing corporation in good standing (with respect to
jurisdictions which recognize such concept) under the laws of the
jurisdiction of its incorporation, with corporate power and
authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus; and each such
Significant Subsidiary of the Company is duly qualified to
transact business as a foreign corporation and is in good standing
(with respect to jurisdictions which recognize such concept) in
all other jurisdictions in which its ownership or lease of
property or the conduct of its business requires such
qualification, except where the failure to so qualify or be in
good standing would not reasonably be expected to result in a
Material Adverse Change; all of the issued and outstanding capital
stock of each such Significant Subsidiary of the Company has been
duly authorized and validly issued and is fully paid and
nonassessable; and all of the issued and outstanding capital stock
of each such Significant Subsidiary is owned by the Company,
directly or through subsidiaries, except for de minimis
shareholdings as required to comply with applicable law, and such
capital stock is owned free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity (except for
restrictions on transferability of the shares of insurance
subsidiaries under applicable law).
4
<PAGE>
(8) Good Standing of Partnership Subsidiaries. Each Significant
Subsidiary of the Company which is a partnership has been duly
formed and is an existing partnership in good standing (with
respect to jurisdictions which recognize such concept) under the
laws of the jurisdiction of its formation, with power and
authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus; and each such
Significant Subsidiary of the Company is duly qualified to
transact business and is in good standing (with respect to
jurisdictions which recognize such concept) in all other
jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where
the failure to so qualify or be in good standing would not
reasonably be expected to result in a Material Adverse Change; all
of the outstanding equity interests of each such Significant
Subsidiary of the Company have been duly authorized and validly
issued; and all of the equity interests of each such Significant
Subsidiary are owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity (other than immaterial
amounts necessary to comply with applicable law).
(9) Capitalization. The authorized, issued and outstanding shares of
capital stock of the Company set forth in the Prospectus in the
column entitled "Actual" under the caption "Capitalization"
(except for subsequent issuances thereof, if any, pursuant to
reservations, agreements or employee benefit plans or pursuant to
the exercise of convertible securities or options). Such shares of
capital stock have been duly authorized and validly issued by the
Company and are fully paid and non-assessable, and none of such
shares of capital stock was issued in violation of preemptive or
other similar rights of any securityholder of the Company.
(10) Authorization of the Purchase Contract Agreement. The Purchase
Contract Agreement has been duly authorized by the Company and,
when validly executed and delivered by the Company and assuming
due authorization, execution and delivery of the Purchase Contract
Agreement by the Purchase Contract Agent, the Purchase Contract
Agreement will constitute a valid and binding agreement of the
Company, enforceable against the Company in accordance with its
terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally or by general equitable principles (regardless of
whether enforcement is considered in a proceeding at law or in
equity).
(11) Authorization of the Pledge Agreement. The Pledge Agreement
has been duly authorized by the Company and, when validly executed and
delivered by the Company and assuming due authorization, execution
and delivery of the Pledge Agreement by the Collateral Agent and
the Purchase Contract Agent, the Pledge Agreement will constitute
a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally or by
general equitable principles (regardless of whether enforcement is
considered in a proceeding at law or in equity).
(12) Authorization of the FELINE PRIDES. The FELINE PRIDES have
been duly authorized for issuance and sale to the Underwriters and,
when issued and delivered against payment therefor as provided
herein, will be validly issued and fully paid and non-assessable.
The issuance of the FELINE PRIDES is not subject to preemptive or
other similar rights. All corporate action required to be taken
for the authorization, issuance and delivery of the FELINE PRIDES
have been validly taken.
5
<PAGE>
(13) Authorization of Preferred Shares. The Preferred Shares have
been duly authorized for issuance by the company and, when issued and
delivered against payment therefor as provided herein, will be
validly issued and fully paid and non-assessable. The issuance of
the Preferred Shares will not be subject to preemptive or other
similar rights. All corporate action required to be taken for the
authorization, issuance and delivery of the Preferred Shares has
been validly taken.
(14) Authorization of the Ordinary Shares. The Ordinary Shares have
been duly authorized and validly reserved for issuance by the Company
and, when issued and delivered in accordance with the provisions of
the Purchase Contract Agreement and the Pledge Agreement, will be
validly issued and fully paid and non-assessable. The issuance of the
Ordinary Shares will not be subject to preemptive or other similar
rights. All corporate action required to be taken for the
authorization, issuance and delivery of the Ordinary Shares has been
validly taken.
(15) Authorization of this Agreement and the Remarketing Agreement.
This Agreement and Remarketing Agreement have been duly authorized,
executed and delivered by the Company.
(16) Descriptions of the Securities and the Operative Agreements.
The Securities and the Operative Agreements, as of each Representation
Date, will conform in all material respects to the statements
relating thereto contained in the Prospectus and will be in
substantially the form filed or incorporated by reference, as the
case may be, as an exhibit to the Registration Statement.
(17) Non-Taxation of Current Payments. Except as disclosed in the
Prospectus, under current laws and regulations of the Cayman Islands and
Bermuda and any political subdivision thereof, all current payments in
respect of Income PRIDES or Growth PRIDES may be paid by the Company to
the holders thereof in United States dollars and freely transferred out of
the Cayman Islands or Bermuda and all such payments made to holders
thereof or therein who are non-residents of the Cayman Islands or Bermuda
will not be subject to income, withholding or other taxes under laws and
regulations of the Cayman Islands or Bermuda or any political
subdivision or taxing authority thereof or therein and will
otherwise be free and clear of any other tax, duty, withholding or
deduction in the Cayman Islands or Bermuda or any political
subdivision or taxing authority thereof or therein and without the
necessity of obtaining any governmental authorization in the
Cayman Islands or Bermuda or any political subdivision or taxing
authority thereof or therein.
(18) Reserves. The description of the Company's reserves and
reserving methodology and assumptions described in the Prospectus is
accurate and fairly presents the information set forth therein in
all material respects and, since the date of the latest financial
statements included in the Prospectus, no loss experience has
developed which would require or make it appropriate for the
Company to alter or modify such methodology.
6
<PAGE>
(19) Absence of Defaults and Conflicts. None of the Company or any
subsidiary thereof is in violation of its charter or by-laws,
partnership agreement or other constitutive documents or in default in
the performance or observance of any obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or any subsidiary thereof is a party
or by which it or any of them may be bound, or to which any of the
assets, properties or operations of the Company or any subsidiary
thereof is subject (collectively, "Agreements and Instruments"),
except for such defaults that would not reasonably be expected to
result in a Material Adverse Change. The entry by the Company into the
Purchase Contacts underlying the Income PRIDES, the offer of the
Securities as contemplated herein and in the Prospectus, the issuance
of the Ordinary Shares and the sale of the Ordinary Shares pursuant to
the Purchase Contracts, the execution, delivery and performance by the
Company of each of the Operative Agreements and any other agreement or
instrument entered into or issued or to be entered into or issued by
the Company in connection with the transactions contemplated hereby or
thereby or in the Registration Statement and the Prospectus, and the
consummation of the transactions contemplated herein and in the
Registration Statement and the Prospectus (including, without
limitation, the issuance and sale of the Securities, and the use of
the proceeds from the sale of the Securities as described under the
caption "Use of Proceeds") and compliance by the Company with its
obligations hereunder and thereunder do not and will not, whether with
or without the giving of notice or passage of time or both, conflict
with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any assets, properties or operations
of the Company or any subsidiary thereof pursuant to, any Agreements
and Instruments (except for such conflicts, breaches, defaults or
Repayment Events or liens, charges or encumbrances that would not
reasonably be expected to result in a Material Adverse Change), nor
will such action result in any violation of the provisions of the
charter or by-laws, partnership agreement or other constitutive
documents of the Company or any subsidiary thereof or, to the best
knowledge of the Company, any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any subsidiary thereof or over any of
their assets, properties or operations, except for such violations
under any applicable law, statute, rule, regulation, judgement, order,
writ or decree as would not reasonably be expected to result in a
Material Adverse Change. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment
of all or a portion of such indebtedness by the Company or any
subsidiary thereof.
(20) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending or, to the knowledge of
the Company, threatened, against or affecting the Company or any
subsidiary thereof which is required to be disclosed in the Registration
Statement and the Prospectus (other than as disclosed therein), or which
would reasonably be expected to result in a Material Adverse Change, or
which would reasonably be expected to materially and adversely affect the
ability of the Company to perform its obligations any of the Operative
Agreements to which it is a party.
7
<PAGE>
(21) Accuracy of Exhibits. There are no contracts or documents which
are required to be described in the Registration Statement, the
Prospectus or the documents incorporated by reference therein or
to be filed as exhibits thereto which have not been so described
and filed as required.
(22) Absence of Further Requirements. No consent, approval,
authorization, or order of, or filing with, any governmental
agency or body or any court, domestic or foreign, is required for
the entry into the Purchase Contracts underlying the Income PRIDES
or in connection with the issuance, offering and sale of the
Securities and the issuance and sale of the Ordinary Shares by the
Company pursuant to such Purchase Contracts, for the due
authorization, execution or delivery by the Company of the
Operative Agreements or for the performance by the Company of its
obligations under any of the Operative Agreements, except such as
have been obtained or made prior to the Closing Date, such as have
been obtained and made under the 1933 Act, such filing of the
Prospectus as has been made with the Bermuda Registrar of
Companies under the Companies Act 1981 of Bermuda and such as may
be required under state securities laws.
(23) Possession of Licenses and Permits. The Company and its
subsidiaries possess such permits, licenses, approvals, consents
and other authorizations (collectively, "Governmental Licenses")
issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary to conduct the business
now operated by them, except where the failure to so possess any
such Governmental Licenses would not, singly or in aggregate,
reasonably be expected to result in a Material Adverse Change. The
Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the
failure so to comply would not, singly or in the aggregate,
reasonably be expected to result in a Material Adverse Change.
Neither the Company nor any of its subsidiaries has received any
notice of proceedings relating to the revocation or modification
of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would reasonably be expected to result in a Material
Adverse Change.
(24) Insurance Laws. Each of the Company and its insurance
subsidiaries (including insurance holding companies) is duly registered,
licensed or admitted as an insurer or an insurance holding company
(as applicable) in each jurisdiction where it is required to be so
licensed or admitted to conduct its business as presently
conducted, except where the failure to be so registered, licensed
or admitted would not reasonably be expected to result in a
Material Adverse Change; each of the Company and its insurance
subsidiaries (including insurance holding companies) is in
compliance with all applicable insurance statutes and regulations
and has filed all reports, documents or other information required
to be filed under such statutes and regulations, except where the
failure to comply or file would not reasonably be expected to
result in a Material Adverse Change.
(25) Governmental Authorization. Except as set forth in the
Registration Statement and the Prospectus, no authorization,
approval or consent of any governmental authority or agency is
required (other than any license as an insurer or insurance
holding company and other than those which have already been
obtained) under the laws of any jurisdiction in which the Company
or any of its subsidiaries conduct their respective businesses in
connection with the ownership, directly or indirectly, by the
Company of equity interests in any subsidiary or the repatriation
of any amount from or to the Company or any of its subsidiaries,
except to the extent that the failure to obtain such
authorization, approval or consent would not reasonably be
expected to result in a Material Adverse Change.
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(26) Commodity Exchange Act. The Securities, upon issuance, will be
excluded or exempted under, or beyond the purview of, the Commodity
Exchange Act, as amended (the "Commodity Exchange Act"), and the rules
and regulations of the Commodity Futures Trading Commission under the
Commodity Exchange Act (the "Commodity Exchange Act Regulations").
(27) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the "1940
Act").
(b) Officers' Certificates. Any certificate signed by any officer of the
Company or any of its subsidiaries and delivered to the Underwriters or to
counsel for the Underwriters in connection with the offering of the
Securities shall be deemed a representation and warranty by the Company or
such subsidiary, as the case may be, to each Underwriter as to the matters
covered thereby on the date of such certificate and, unless subsequently
amended or supplemented, at each Representation Date subsequent thereto.
Section 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations, warranties
and agreements herein contained and subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, severally and
not jointly, and each Underwriter, severally and not jointly, agrees to
purchase from the Company, at the price per security set forth in Schedule
B, the number of Initial Securities set forth in Schedule A hereto opposite
the name of such Underwriter, plus any additional number of Initial
Securities that such Underwriter may become obligated to purchase pursuant
to the provisions of Section 10 hereof.
(b) Option Securities. On the basis of the representations, warranties
and agreements herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriters,
severally and not jointly, to purchase at their election up to an
additional 900,000 FELINE PRIDES, consisting solely of Income PRIDES, at
the price per Security set forth in Schedule B. The option will expire
automatically at the close of business on the 30th calendar day after the
date hereof and may be exercised in whole or in part from time to time only
for the purpose of covering over-allotments which may be made in connection
with the offering and distribution of the Initial Securities upon notice by
the Underwriters to the Company setting forth the aggregate number of
additional Option Securities as to which the several Underwriters are then
exercising the option and the time, date and place of payment and delivery
for such Option Securities. Any such time and date of payment and delivery
(a "Date of Delivery") shall be determined by the Underwriters and the
Company, but shall not be later than seven full business days after the
exercise of said options, nor in any event prior to the Closing Time,
unless otherwise agreed upon by the Underwriters and the Company. If the
option is exercised as to all or any portion of the Option Securities, each
of the Underwriters, severally and not jointly, will purchase that
proportion of the total number of Option Securities then being purchased
which the number of Initial Securities each such Underwriter has severally
agreed to purchase bears to the total number of Initial Securities, subject
to such adjustments as the Underwriters in their discretion shall make to
eliminate any sales or purchases of a fractional number of Option
Securities.
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(c) Pledge of Securities. The Preferred Shares will be pledged with the
Collateral Agent to secure the obligations of holders of the Income PRIDES
to purchase Ordinary Shares under the Purchase Contracts. Such pledge shall
be effected by the transfer to the Collateral Agent of the Preferred
Securities at the Closing Time and appropriate Date of Delivery, if any, in
accordance with the Pledge Agreement.
(d) Payment. Payment of the purchase price for, and delivery of, the
Initial Securities shall be made at the offices of Brown & Wood LLP, One
World Trade Center, New York, New York, or at such other place as shall be
agreed upon by the Underwriters and the Trust, at 9:00 A.M. (Eastern time)
on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time)
on any given day) business day after the date of this Underwriting
Agreement (unless postponed in accordance with the provisions of Section 10
hereof), or such other time not later than ten business days after such
date as shall be agreed upon by the Underwriters and the Company (such time
and date of payment and delivery being herein called "Closing Time"). In
addition, in the event that the Underwriters have exercised their option to
purchase any or all of the Option Securities, payment of the purchase price
for, and delivery of such Option Securities, shall be made at the
above-mentioned offices of Brown & Wood LLP, or at such other place as
shall be agreed upon by the Underwriters and the Company, on the relevant
Date of Delivery as specified in the notice from the Underwriters to the
Company.
Payment shall be made to the Company by wire transfer of
immediately available funds to a bank account designated by the Company,
against delivery to the Underwriters for the respective accounts of the
Underwriters of the Securities to be purchased by them. It is understood
that each Underwriter has authorized Merrill Lynch, for its account, to
accept delivery of, receipt for, and make payment of the purchase price
for, the Securities which it has severally agreed to purchase. Merrill
Lynch, individually and not as representative of the Underwriters, may (but
shall not be obligated to) make payment of the purchase price for the
Initial Securities or the Option Securities, if any, to be purchased by any
Underwriter whose funds have not been received by the Closing Time or the
relevant Date of Delivery, as the case may be, but such payment shall not
relieve such Underwriter from its obligations hereunder.
(e) Denominations; Registration. The Securities and certificates for the
Securities shall be in such denominations and registered in such names as
the Underwriters may request in writing at least one full business day
prior to the Closing Time or the relevant Date of Delivery, as the case may
be. The Securities and certificates for the Securities will be made
available for examination and packaging by the Underwriters in The City of
New York not later than 10:00 A.M. (Eastern time) on the business day prior
to the Closing Time or the relevant Date of Delivery, as the case may be.
Section 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will notify the Underwriters immediately,
and confirm the notice in writing, of (i) the effectiveness of any
post-effective amendment to the Registration Statement or the filing of any
supplement or amendment to the Prospectus, (ii) the receipt of any comments
from the Commission, (iii) any request by the Commission for any amendment
to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information, and (iv) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus, or of the suspension of the qualification of
the Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424 and
will take such steps as they deem necessary to ascertain promptly whether
the Prospectus transmitted for filing under Rule 424 was received for
filing by the Commission and, in the event that it was not, they will
promptly file the Prospectus. The Company will make every reasonable effort
to prevent the issuance of any stop order and, if any stop order is issued,
to obtain the lifting thereof at the earliest possible moment.
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(b) Filing of Amendments. The Company will give the Underwriters notice
of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b) of the 1933 Act
Regulations) or any amendment, supplement or revision to either the
prospectus included in the Registration Statement at the time it became
effective or to the Prospectus, whether pursuant to the 1933 Act, the 1934
Act or otherwise, will furnish the Underwriters with copies of any such
documents a reasonable amount of time prior to such proposed filing or use,
as the case may be, and will give the Underwriters a reasonable opportunity
to comment on any such document prior to such proposed filing or use, as
the case may be.
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Underwriters and counsel for the Underwriters, without
charge, signed copies of the Registration Statement as originally filed and
of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein and documents incorporated or deemed to
be incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the Underwriters, without
charge, a conformed copy of the Registration Statement as originally filed
and of each amendment thereto (without exhibits) for each of the
Underwriters. The Registration Statement and each amendment thereto
furnished to the Underwriters will be identical to any electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company will deliver to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter may reasonably request, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
such number of copies of the Prospectus as such Underwriter may reasonably
request. The Prospectus and any amendments or supplements thereto furnished
to the Underwriters will be identical to any electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act
Regulations so as to permit the completion of the distribution of the
Securities as contemplated in this Underwriting Agreement and in the
Registration Statement and the Prospectus. If at any time when the
Prospectus is required by the 1933 Act or the 1934 Act to be delivered in
connection with sales of the Securities, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of counsel
for the Underwriters or for the Company, to amend the Registration
Statement in order that the Registration Statement will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading or to amend or supplement the Prospectus in order that the
Prospectus will not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein
not misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of
such counsel, at any such time to amend the Registration Statement or amend
or supplement the Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare
and file with the Commission, subject to Section 3(b), such amendment or
supplement as may be necessary to correct such statement or omission or to
make the Registration Statement or the Prospectus comply with such
requirements, and the Company will furnish to the Underwriters, without
charge, such number of copies of such amendment or supplement as the
Underwriters may reasonably request.
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(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering
and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Underwriters may designate and
to maintain such qualifications in effect for a period of not less than one
year from the date of this Underwriting Agreement; provided, however, that
the Company shall not be obligated to file any general consent to service
of process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which they are not so qualified or to
subject themselves to taxation in respect of doing business in any
jurisdiction in which they are not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company
will file such statements and reports as may be required by the laws of
such jurisdiction to continue such qualification in effect for a period of
not less than one year from the date of this Underwriting Agreement.
(g) Earnings Statement. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally available
to its securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Prospectus
under "Use of Proceeds".
(i) Restriction on Sale of Securities. During a period of 90 days from
the date of the Prospectus, the Company will not, without the prior written
consent of Merrill Lynch, (A) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option for the sale of, or otherwise
transfer or dispose of any Securities, Purchase Contracts, preferred
shares, ordinary shares or any security of the Company similar to the
Securities, Preferred Shares, Purchase Contracts or Ordinary Shares or any
security convertible into or exercisable or exchangeable for or repayable
with Securities, Purchase Contracts, Preferred Shares or Ordinary Shares or
any equity securities substantially similar to the Securities, Purchase
Contracts, Preferred Shares or Ordinary Shares; or (B) directly or
indirectly, enter into any swap or any other agreement or any transaction
that transfers, in whole or in part, the economic equivalent of ownership
of the Securities, Purchase Contracts, Preferred Shares or Ordinary Shares,
any security convertible into or exercisable or exchangeable for or
repayable with the Securities, Purchase Contracts, Preferred Shares or
Ordinary Shares or equity securities substantially similar to the
Securities, Purchase Contracts, Preferred Shares or Ordinary Shares whether
any such swap or transaction is to be settled by delivery of Securities,
Purchase Contracts, Preferred Shares or Ordinary Shares or other
securities, in cash or otherwise. The foregoing sentence shall not affect
the ability of the Company to take any such action (i) in connection with
any employee benefit, dividend reinvestment and stock option or stock
purchase plans of the Company or its subsidiaries; (ii) in connection with
the offering of the Securities issued pursuant to this Agreement; (iii) in
connection with any securities issued pursuant to or sold in connection
with any securities of the Company or its subsidiaries, outstanding as of
the date hereof, that are convertible into or exercisable or exchangeable
for or repayable with any securities of the Company and its subsidiaries;
(iv) in connection with Growth PRIDES or Income PRIDES to be created or
recreated upon substitution of Pledged Securities, or Ordinary Shares
issuable upon early settlement of the Income PRIDES or Growth PRIDES; (v)
in connection with any merger, acquisition or acquisition of assets by the
Company, the consideration for which are securities of the Company; or (vi)
upon exercise of stock options.
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(j) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant
to the 1934 Act within the time periods required by the 1934 Act and the
1934 Act Regulations.
(k) Documentary, Stamp or Similar Issue Taxes. The Company will jointly
and severally indemnify and hold harmless the Underwriters against any
documentary, stamp or similar issue tax, including any interest and
penalties, on the creation, issue and sale of the Securities and on the
execution and delivery of this Underwriting Agreement. All payments to be
made by the Company hereunder shall be made without withholding or
deduction for or on account of any present or future taxes, duties or
governmental charges whatsoever unless the Company is compelled by law to
deduct or withhold such taxes, duties or charges. In that event, the
Company shall pay such additional amounts as may be necessary in order that
the net amounts received after such withholding or deduction shall equal
the amounts that would have been received if no withholding or deduction
had been made.
(l) Reserve of Ordinary Shares. The Company will reserve and keep
available at all times, free of preemptive or other similar rights and liens
and adverse claims, sufficient Ordinary Shares to satisfy any obligations to
issue Ordinary Shares upon settlement of the Purchase Contracts and shall
take all actions necessary to keep effective the Registration Statement
with respect to the Ordinary Shares.
Section 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Underwriting Agreement, the Purchase
contracts, the Purchase Contract Agreement and the Pledge Agreement
including (i) the preparation, printing and filing of the Registration
Statement (including financial statements and exhibits) as originally filed
and of each amendment thereto, (ii) the preparation, printing and delivery
to the Underwriters of this Underwriting Agreement, any Agreement among
Underwriters, the other Operative Agreements, and such other documents as
may be required in connection with the offering, purchase, sale, issuance
or delivery of the Securities, (iii) the preparation, issuance and delivery
of the Securities and any certificates for the Securities, to the
Underwriters, including any transfer taxes and any stamp or other duties
payable upon the sale, issuance or delivery of the Securities to the
Underwriters, (iv) the fees and disbursements of the Company's counsel,
accountants and other advisors or agents (including transfer agents and
registrars), as well as the fees and disbursements of the Purchase Contract
Agent, the Collateral Agent, any depositary and their respective counsel,
(v) the qualification of the Securities under state securities laws in
accordance with the provisions of Section 3(f) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection therewith and in connection with the
preparation, printing and delivery of the Blue Sky Survey, and any
amendment thereto, (vi) the printing and delivery to the Underwriters of
copies of each preliminary prospectus and the Prospectus and any amendments
or supplements thereto, (vii) the fees charged by nationally recognized
statistical rating organizations for the rating of the Securities, if
applicable, and (viii) the filing fees incident to, and the reasonable fees
and disbursements of counsel to the Underwriters in connection with, the
review, if any, by the National Association of Securities Dealers, Inc.
(the "NASD") of the terms of the sale of the Securities.
(b) Termination of Agreement. If this Underwriting Agreement is
terminated by the Underwriters in accordance with the provisions of Section 5
or Section 9(a)(i) or 9(a)(ii) hereof, the Company shall reimburse the
Underwriters for all of their out-of-pocket expenses, including the
reasonable fees and disbursements of counsel for the Underwriters.
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Section 5. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase and pay for the Securities pursuant to this
Underwriting Agreement are subject to the accuracy of the representations
and warranties of the Company contained in Section 1 hereof or in
certificates of any officer of the Company or any of its respective
subsidiaries delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations
hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective
under the 1933 Act and no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act and no
proceedings for that purpose shall have been instituted or be pending or
threatened by the Commission, and any request on the part of the Commission
for additional information shall have been complied with to the reasonable
satisfaction of counsel to the Underwriters. A prospectus containing
information relating to the description of the Securities, the specific
method of distribution of the Securities and similar matters shall have
been filed with the Commission in accordance with Rule 424(b)(1), (2), (3),
(4) or (5), as applicable.
(b) Opinions of Counsel for the Company. At Closing Time, the
Underwriters shall have received the favorable opinions, each dated as of
Closing Time, of Maples and Calder, Cayman Islands counsel for the Company,
Conyers Dill & Pearman, Bermuda counsel for the Company, Peter N. Mear,
Esq., General Counsel of the Company, and Mayer, Brown & Platt, United States
counsel for the Company, each in form and substance satisfactory to counsel for
the Underwriters, together with signed or reproduced copies of such letters for
each of the other Underwriters, to the effect set forth in: Exhibit A
hereto with respect to the opinion of Maples and Calder; Exhibit B hereto
with respect to the opinion of Conyers Dill & Pearman; Exhibit C hereto
with respect to the opinion of Peter N. Mear, Esq., and Exhibit D hereto
with respect to the opinion of Mayer, Brown & Platt, and, as to each
opinion, to such further effect as counsel to the Underwriters may
reasonably request.
(c) Opinion of Counsel for Purchase Contract Agent. At Closing Time, the
Underwriters shall have received the favorable opinion, dated as of Closing
Time, of Emmet, Marvin & Martin, LLP, counsel to the Purchase Contract
Agent, in form and substance satisfactory to counsel for the Underwriters,
to the effect that:
(i) The Bank of New York is duly incorporated and is validly
existing as a national banking association with trust powers under
the laws of the United States with all necessary power and authority to
execute, deliver and perform its obligations under the Purchase
Contract Agreement, the Pledge Agreement and the Remarketing
Agreement;
(ii) The execution, delivery and performance by the Purchase
Contract Agent of the Purchase Contract Agreement, the Pledge Agreement
and the Remarketing Agreement, and the authentication and delivery of the
Securities have been duly authorized by all necessary action on the part
of the Purchase Contract Agent. The Purchase Contract Agreement, the
Pledge Agreement and the Remarketing Agreement have been duly executed
and delivered by the Purchase Contract Agent, and constitute the legal,
valid and binding obligations of the Purchase Contract Agent, enforceable
against the Purchase Contract Agent in accordance with their respective
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally or by general
equitable principles (regardless of whether enforcement is considered in
a proceeding at law or in equity);
(iii) The execution, delivery and performance of the Purchase
Contract Agreement, the Pledge Agreement and the Remarketing Agreement by
the Purchase Contract Agent does not conflict with or constitute a
breach of the charter or by-laws of the Purchase Contract Agent;
and
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(iv) No consent, approval or authorization of, or registration
with or notice to, any Illinois or federal governmental authority or
agency is required for the execution, delivery or performance by
the Purchase Contract Agent of the Purchase Contract Agreement,
the Pledge Agreement and the Remarketing Agreement.
(d) Opinion of Counsel for Underwriters. At Closing Time, the
Underwriters shall have received the favorable opinion, dated as of Closing
Time, of Brown & Wood LLP, counsel for the Underwriters, in form and substance
reasonably satisfactory to the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters. In
giving such opinion, such counsel may rely, as to all matters governed by
the laws of jurisdictions other than the law of the State of New York, the
federal law of the United States and the General Corporation Law of the
State of Delaware, upon the opinions of counsel satisfactory to the
Underwriters. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper,
upon certificates of officers of the Company and its subsidiaries and
certificates of public officials.
(e) Officers' Certificate. At Closing Time, the Underwriters shall have
received a certificate of the Chairman, President and Chief Executive
Officer or the General Counsel and Secretary of the Company and of the
chief financial officer, chief accounting officer or chief investment
officer of the Company, dated as of Closing Time, to the effect that (i)
there has not been, since the date of this Underwriting Agreement or since
the respective dates as of which information is given in the Prospectus,
any material adverse change, or any development or event involving a
prospective material adverse change, in the financial condition, business
or results of operations of the Company and its subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of business,
(ii) the representations and warranties of the Company in Section 1(a) are
true and correct with the same force and effect as though expressly made at
and as of the Closing Time, (iii) the Company has complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Time, and (iv) no stop order
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted, are pending or,
to the best of such officers' knowledge, are threatened by the Commission.
(f) Accountant's Comfort Letters. At the time of the execution of this
Underwriting Agreement, the Underwriters shall have received from
PricewaterhouseCoopers LLP a letter, dated such date, in form and substance
satisfactory to the Underwriters, together with signed or reproduced copies
of such letters for each of the other Underwriters, containing statements
and information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and
the Prospectus.
(g) Bring-down Comfort Letters. At Closing Time, the Underwriters shall
have received from PricewaterhouseCoopers LLP a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (j) of this Section 5, except that the
specified date referred to shall be a date not more than three business
days prior to the Closing Time.
(h) Ratings. At Closing Time and at any relevant Date of Delivery, the
Securities shall be rated no lower than "BBB" by Standard & Poor's Rating
Service and "a2" by Moody's Investors Service, Inc., and the Company shall
have delivered to the Underwriters a letter, dated as of such date, from
each such rating organization, or other evidence satisfactory to the
Underwriters, confirming that the Securities have such ratings. Since the
time of execution of this Underwriting Agreement, there shall not have
occurred a downgrading in, or withdrawal of, the rating assigned to the
Securities or any of the Company's securities or the Company's financial
strength or claims paying ability by any such rating organization or any
other "nationally recognized statistical rating organization," as defined
for purposes of Rule 436(g)(2) under the 1933 Act Regulations, and no such
rating organization shall have publicly announced that it has under
surveillance or review with negative implications its rating of the
Securities or any of the Company's securities or the Company's financial
strength or claims paying ability.
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(i) Conditions to Purchase of Option Securities. In the event that the
Underwriters exercise their option to purchase all or any portion of the
Option Securities, the representations and warranties of the Company
contained herein and the statements in any certificates furnished by the
Company or any of its subsidiaries hereunder shall be true and correct as
of each Date of Delivery, and, at the relevant Date of Delivery the
Underwriters shall have received:
(1) The favorable opinions of (i) Maples and Calder, Cayman Islands
counsel for the Company, (ii) Conyers Dill & Pearman, Bermuda
counsel for the Company, (iii) Peter N. Mear, Esq., General
Counsel of the Company, and (iv) Mayer, Brown & Platt, United
States counsel for the Company, each in form and substance
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities and otherwise to the
same effect as the opinions required by Section 5(b) hereof.
(2) The favorable opinion of Emmet, Marvin & Martin, LLP, counsel to
the Purchase Contract Agent, in form and substance satisfactory to
counsel for the Underwriters, dated such Date of Delivery,
relating to the Option Securities and otherwise to the same effect
as the opinion required by Section 5(c) hereof.
(3) The favorable opinion of Brown & Wood LLP, counsel for the
Underwriters, in form and substance reasonably satisfactory to the
Underwriters, dated such Date of Delivery, relating to the Option
Securities and otherwise to the same effect as the opinion
required by Section 5(d) hereof.
(4) A certificate, dated such Date of Delivery, of the Chairman,
President and Chief Executive Officer or the General Counsel and
Secretary of the Company and of the chief financial officer, chief
accounting officer or chief investment officer of the Company,
confirming that the certificate delivered at the Closing Time
pursuant to Section 5(e) hereof remains true and correct as of
such Date of Delivery.
(5) A letter from PricewaterhouseCoopers LLP, in form and
substance satisfactory to the Underwriters and dated such Date of
Delivery, substantially the same in form and substance as the letter
furnished to the Underwriters pursuant to Section 5(f) hereof,
except that the "specified date" on the letter furnished pursuant
to this paragraph shall be a date not more than three business
days prior to such Date of Delivery.
(j) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such documents
and opinions as they may require for the purpose of enabling them to pass
upon the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or warranties,
or the fulfillment of any of the conditions, herein contained; and all
proceedings taken by Company in connection with the issuance and sale of
the Securities as herein contemplated shall be satisfactory in form and
substance to the Underwriters and counsel for the Underwriters.
(k) Termination of Agreement. If any condition specified in this
Section 5 shall not have been fulfilled when and as required to be fulfilled,
this Underwriting Agreement (or, with respect to the Underwriters' exercise of
the over-allotment option for the purchase of Option Securities on a Date
of Delivery after the Closing Time, the obligations of the Underwriters to
purchase the Option Securities on such Date of Delivery) may be terminated
by the Underwriters by notice to the Company at any time at or prior to the
Closing Time (or such Date of Delivery, as applicable), and such
termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 1, 6, 7 and 8
shall survive any such termination and remain in full force and effect.
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Section 6. Indemnification.
(a) Indemnification of Underwriters. The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act as follows:
(1) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained
in the Registration Statement (or any amendment thereto), or the
omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein
not misleading or arising out of any untrue statement or alleged
untrue statement of a material fact included in any preliminary
prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading;
(2) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue
statement or omission; provided that (subject to Section 6(d)
below) any such settlement is effected with the written consent of
the Company; and
(3) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
(1) or (2) above;
provided, however, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made
in reliance upon and in conformity with written information furnished to
the Company by any Underwriter through the Underwriters expressly for use
in the Registration Statement (or any amendment thereto), or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(b) Indemnification of the Company, Directors and Officers. Each
Underwriter severally agrees to indemnify and hold harmless the Company,
its directors, each of its officers who signed the Registration Statement
and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and
all loss, liability, claim, damage and expense described in the indemnity
contained in subsection (a) of this Section, as incurred, but only with
respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto),
or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through the
Underwriters expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
17
<PAGE>
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may
be sought hereunder, but failure to so notify an indemnifying party shall
not relieve such indemnifying party from any liability hereunder to the
extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. In the case of parties indemnified
pursuant to Section 6(a) above, counsel to the indemnified parties shall be
selected by the Underwriters, and, in the case of parties indemnified
pursuant to Section 6(b) above, counsel to the indemnified parties shall be
selected by the Company. An indemnifying party may participate at its own
expense in the defense of any such action; provided, however, that counsel
to the indemnifying party shall not (except with the consent of the
indemnified party) also be counsel to the indemnified party. In no event
shall the indemnifying parties be liable for fees and expenses of more than
one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances. No indemnifying party
shall, without the prior written consent of the indemnified parties, settle
or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever in respect of
which indemnification or contribution could be sought under this Section 6
or Section 7 hereof (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or
claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel, such indemnifying
party agrees that it shall be liable for any settlement of the nature
contemplated by Section 6(a)(2) effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party
shall have received notice of the terms of such settlement at least 30 days
prior to such settlement being entered into and (iii) such indemnifying
party shall not have reimbursed such indemnified party in accordance with
such request prior to the date of such settlement.
Section 7. Contribution. If the indemnification provided for in Section 6
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute
to the aggregate amount of such losses, liabilities, claims, damages and
expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by
the Company, on the one hand, and the Underwriters, on the other hand, from
the offering of the Securities pursuant to this Underwriting Agreement or
(ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative
fault of the Company, on the one hand, and the Underwriters, on the other
hand, in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
18
<PAGE>
The relative benefits received by the Company, on the one hand,
and the Underwriters, on the other hand, in connection with the offering of
the Securities pursuant to this Underwriting Agreement shall be deemed to
be in the same respective proportions as the total net proceeds from the
offering of such Securities (before deducting expenses) received by the
Company and the total underwriting commission received by the Underwriters,
in each case as set forth on the cover of the Prospectus, bear to the
aggregate initial public offering price of such Securities as set forth on
such cover.
The relative fault of the Company, on the one hand, and the
Underwriters, on the other hand, shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this
Section 7 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which
the total price at which the Securities underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages
which such Underwriter has otherwise been required to pay by reason of any
such untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls
an Underwriter within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as such
Underwriter, and each director of the Company, each officer of the Company
who signed the Registration Statement and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as the Company.
The Underwriters' respective obligations to contribute pursuant to this
Section 7 are several in proportion to the principal amount of Initial
Securities set forth opposite their respective names in Schedule A hereto,
and not joint.
Section 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this
Underwriting Agreement or in certificates of officers of the Company or any
of its subsidiaries submitted pursuant hereto shall remain operative and in
full force and effect, regardless of any investigation made by or on behalf
of any Underwriter or controlling person, or by or on behalf of the
Company, and shall survive delivery of and payment for the Securities.
19
<PAGE>
Section 9. Termination.
(a) Underwriting Agreement. The Underwriters may terminate this
Underwriting Agreement by notice to the Company, at any time at or prior to
the Closing Time, if (i) there has been, since the time of execution of
this Underwriting Agreement or since the respective dates as of which
information is given in the Prospectus, any material adverse change, or any
development or event involving a prospective material adverse change, in
the financial condition, business or results of operations of the Company
and its subsidiaries considered as one enterprise, whether or not arising
in the ordinary course of business, or (ii) there has occurred any material
adverse change in the financial markets in the United States or any
outbreak of hostilities or escalation thereof or other calamity or crisis
or any change or development involving a prospective change in national or
international political, financial or economic conditions, in each case
referred to in this clause (ii), the effect of which is such as to make it,
in the judgment of the Underwriters, impracticable to market the Securities
or to enforce contracts for the sale of the Securities, or (iii) trading in
any securities of the Company has been suspended or materially limited by
the Commission or the New York Stock Exchange, or if trading generally on
the New York Stock Exchange or the American Stock Exchange or in the Nasdaq
National Market has been suspended or materially limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices
have been required, by either of said exchanges or by such system or by
order of the Commission, the NASD or any other governmental authority, or
(iv) a banking moratorium has been declared by either U.S. Federal, New
York or Bermuda authorities.
(b) Liabilities. If this Underwriting Agreement is terminated pursuant to
this Section 9, such termination shall be without liability of any party to
any other party except as provided in Section 4 hereof, and provided
further that Sections 1, 6, 7 and 8 shall survive such termination and
remain in full force and effect.
Section 10. Default by One or More of the Underwriters. If one or more of
the Underwriters shall fail at the Closing Time or the relevant Date of
Delivery, as the case may be, to purchase the Securities which it or they
are obligated to purchase under this Underwriting Agreement (the "Defaulted
Securities"), then the Underwriters shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than
all, of the Defaulted Securities in such amounts as may be agreed upon and
upon the terms herein set forth; if, however, the Underwriters shall not
have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed
10% of the number of Securities to be purchased on such date
pursuant to this Underwriting Agreement, the non-defaulting
Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their
respective underwriting obligations under this Underwriting
Agreement bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of
the number of Securities to be purchased on such date pursuant to
this Underwriting Agreement, this Underwriting Agreement (or, with
respect to the Underwriters' exercise of the over-allotment option
for the purchase of Option Securities on a Date of Delivery after
the Closing Time, the obligations of the Underwriters to purchase
such Option Securities on such Date of Delivery) shall terminate
without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section 10 shall relieve any
defaulting Underwriter from liability in respect of its default.
20
<PAGE>
In the event of any such default which does not result in (i) a
termination of this Underwriting Agreement or (ii) in the case of a Date of
Delivery after the Closing Time, a termination of the obligations of the
Underwriters and the Company with respect to the related Option Securities,
as the case may be, either the Underwriters or the Company shall have the
right to postpone the Closing Time or the relevant Date of Delivery, as the
case may be, for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or the Prospectus or in any
other documents or arrangements.
Section 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Underwriters c/o Merrill Lynch,
Pierce, Fenner & Smith Incorporated, World Financial Center, North Tower,
New York, New York 10281-1201, attention of Joseph Consolino, Director,
Financial Institutions Group; and notices to the Company shall be directed
to it at The ACE Building, 30 Woodbourne Avenue, Hamilton HM 08 Bermuda,
attention of the General Counsel and Secretary.
Section 12. Parties. This Underwriting Agreement shall inure to the
benefit of and be binding upon the Underwriters, the Company, and their
respective successors. Nothing expressed or mentioned in this Underwriting
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company, and their respective
successors and the controlling persons and officers, directors and trustees
referred to in Sections 6 and 7 and their heirs and legal representatives,
any legal or equitable right, remedy or claim under or in respect of this
Underwriting Agreement or any provision herein contained. This Underwriting
Agreement and all conditions and provisions hereof are intended to be for
the sole and exclusive benefit of the parties hereto and their respective
successors, and said controlling persons and officers, directors and
trustees and their heirs and legal representatives, and for the benefit of
no other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such
purchase.
Section 13. Consent to Jurisdiction; Miscellaneous. Each of the parties
hereto hereby expressly and irrevocably submits to the non-exclusive
jurisdiction of any competent court in the place of its domicile and any
United States Federal or New York State court sitting in the Borough of
Manhattan in The City of New York in any action, suit or proceeding arising
out of or relating to this Underwriting Agreement or the transactions
contemplated hereby to the extent that such court has subject matter
jurisdiction over the controversy, and expressly and irrevocably waives, to
the extent permitted under applicable law, any immunity from the
jurisdiction thereof and any claim or defense in such action, suit or
proceeding based on a claim of improper venue, forum non conveniens or any
similar basis to which it might otherwise be entitled in any such action,
suit or proceeding. The Company irrevocably appoints ACE USA, Inc., 1133
Avenue of the Americas, 32nd Floor, New York, New York 10036 as its
authorized agent in the Borough of Manhattan in The City of New York upon
which process may be served in any such action, suit or proceeding, and
agrees that service of process upon such agent, and written notice of said
service to the Company by the person serving the same to the address
provided in Section 11, shall be deemed in every respect effective service
of process upon the the Company, in any such action, suit or proceeding.
The Company further agrees to take any and all action as may be necessary
to maintain such designation and appointment of such agent in full force
and effect for a period of seven years from the date of this Underwriting
Agreement.
21
<PAGE>
Section 14. Waiver of Immunities. To the extent that the Company or any
of its properties, assets or revenues may have or may hereafter become
entitled to, or have attributed to them, any right of immunity, on the
grounds of sovereignty, from any legal action, suit or proceeding, from
set-off or counterclaim, from the jurisdiction of any court, from service
of process, from attachment upon or prior to judgment, or from attachment
in aid of execution of judgment, or from execution of judgment, other legal
process or proceeding for the giving of any relief or for the enforcement
of any judgment, in any jurisdiction in which proceedings may at any time
be commenced, with respect to their obligations, liabilities or any other
matter under or arising out of or in connection with this Underwriting
Agreement or any additional agreement, the Company hereby irrevocably and
unconditionally, to the extent permitted by applicable law, waives and
agrees not to plead or claim any such immunity and consents to such relief
and enforcement.
Section 15. Judgement Currency. The Company agrees to indemnify each
Underwriter against any loss incurred by such Underwriter as a result of
any judgment or order being given or made for any amount due hereunder and
such judgment or order being expressed and paid in a currency (the
"Judgment Currency") other than United States dollars and as a result of
any variation as between (i) the rate of exchange at which the United
States dollar amount is converted into the Judgment Currency for the
purpose of such judgment or order, and (ii) the rate of exchange at which
such Underwriter is able to purchase United States dollars with the amount
of the Judgment Currency actually received by such Underwriter. The
foregoing indemnity shall constitute a separate and independent obligation
of the Company and shall continue in full force and effect notwithstanding
any such judgment or order as aforesaid. The term "rate of exchange" shall
include any premiums and costs of exchange payable in connection with the
purchase of, or conversion into, the relevant currency.
Section 16. GOVERNING LAW AND TIME. THIS UNDERWRITING AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
Section 17. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this Underwriting Agreement, along with all counterparts, will
become a binding agreement between the Underwriters and the Company in
accordance with its terms.
Very truly yours,
ACE LIMITED
By: -------------------------------------
Name: Christopher Z. Marshall
Title: Chief Financial Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BANC OF AMERICA SECURITIES LLC
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: -----------------------------------------
Authorized Signatory
22
<PAGE>
Sch-A-1
Schedule A
Number of
Initial
Underwriter Securities
---------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..............................
Banc of America Securities LLC.........................
Donaldson, Lufkin & Jenrette Securities Corporation....
Total.......................................... ==========
Sch-A-1
<PAGE>
Schedule B
ACE LIMITED
(a Cayman Islands company)
6,000,000 FELINE PRIDES (Stated Amount of $50 per FELINE PRIDES),
consisting of
6,000,000 Income PRIDES
each consisting of
a Purchase Contract of ACE Limited requiring the purchase on
May 16, 2003 (or earlier)
of Ordinary Shares of
ACE Limited
and
an 8.25% Cumulative Redeemable Preferred Share, Series A
of ACE Limited ($50 Liquidation Preference per Share)
1. The initial public offering price per Security, determined as
provided in said Section 2, shall be $50 per Security.
2. The price per Security to be paid by the several Underwriters
shall be equal to the initial public offering price set forth in
paragraph 1 above. The Company shall pay a commission to the
Underwriters equal to nine million dollars ($9,000,000) and, with
respect to the Option Securities, $1.50 per Option Security.
Sch-B-1
<PAGE>
Exhibit A
FORM OF OPINION OF MAPLES AND CALDER, THE COMPANY'S
CAYMAN ISLANDS COUNSEL, TO BE DELIVERED
PURSUANT TO SECTION 5(b)
(1) The Company has been duly incorporated and is validly existing
and in good standing as an exempted company, under the laws of the Cayman
Islands, and has the corporate power and corporate authority to own, lease
and operate its property, and to conduct its business, as described in the
Registration Statement and the Prospectus, and to enter into and perform
its obligations under, or as contemplated under, the Operative Agreements.
(2) The authorized share capital of the Company, as set out in its
Memorandum and Articles of Association, conforms as to legal
matters to the description thereof contained in the Registration
Statement and the Prospectus.
(3) The Operative Agreements have been duly authorized, executed and
delivered by the Company.
(4) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, the Operative Agreements
do not and will not (A) violate any provision of the Memorandum
and Articles of Association of the Company; (B) contravene any
provision of any law, public rule or regulation of the Cayman
Islands applicable to the Company; (C) to the best of such
counsel's knowledge, contravene any existing published order or
decree of the courts of the Cayman Islands by which the Company is
bound or by which its properties or assets may be affected; or (D)
require any consent, approval or authorization or order of, or
qualification with, any Cayman Islands governmental agency in
connection with the offer and sale of the Securities.
(5) To the best of such counsel's knowledge, but based only upon a
search of the cause list at the offices of the Grand Courts of the
Cayman Islands, there was no action, suit or proceeding to which
the Company is a party or to which the assets, properties or
operations of the Company is subject, before the courts of the
Cayman Islands at the close of business on [specify a recent
date].
(6) All statements made in the Prospectus with regard to statutes,
regulations, rules, treaties and other laws of the Cayman Islands
(including, but not limited to, insurance, regulatory and tax
matters and the Companies Law (1998 Revision) of the Cayman
Islands) and enforcement of judgments in the Cayman Islands are
accurate.
(7) Pursuant to the Underwriting Agreement, and to the extent that
the laws of the Cayman Islands are relevant, the Company has legally,
validly, effectively and irrevocably submitted to the jurisdiction
of the United States Federal and New York State courts sitting in
the Borough of Manhattan in The City of New York, State of New
York, and has legally, validly and effectively appointed ACE USA,
Inc. as the authorized agent of the Company for the purposes
described in Section 13 of the Underwriting Agreement assuming
this to be the case as a matter of the applicable United States
Federal and New York State laws.
A-1
<PAGE>
(8) The choice of the laws of the State of New York, United States
of America as the governing law of the Underwriting Agreement is a
valid and effective choice of law and in an action brought before
a court of competent jurisdiction in the Cayman Islands, the laws
of the State of New York would, to the extent specifically pleaded
and proved as a fact by expert evidence, be recognized and applied
by such court to all issues concerning the formal and essential
validity of the Underwriting Agreement and the interpretation
thereof, except that in any such action such court will apply
those laws of the Cayman Islands as such court characterizes as
procedural, and will not apply those laws of the State of New York
as such court characterizes as procedural.
(9) Although there is no statutory enforcement in the Cayman Islands
of a judgment obtained in New York, the courts of the Cayman
Islands will recognize and enforce a foreign judgment of a court
of competent jurisdiction, based on the principle that a judgment
of a competent foreign court imposes upon the judgment debtor an
obligation to pay the sum for which judgment has been given
provided such judgment is final, for a liquidated sum, not in
respect of taxes or a fine or penalty, and was not obtained in a
manner and is not of a kind the enforcement of which is contrary
to the public policy of the Cayman Islands. A Cayman Islands court
may stay proceedings if concurrent proceedings are being brought
elsewhere. For the purposes of enforcement of a judgment granted
against the Company in respect of the Underwriting Agreement, a
court in the Cayman Islands would recognize the jurisdiction of
the applicable federal or state court to the jurisdiction of which
the Company has submitted rendering such judgment if service of
process on the Company is effected pursuant to and in accordance
with the provisions of the Underwriting Agreement.
(10) On the basis that the Company carries on its business as set
forth in the Prospectus, there is no requirement that it be licensed
under the Insurance Law, 1979, as amended of the Cayman Islands.
(11) The Securities to be purchased by the Underwriters from the
Company have been authorized for issuance and sale to the
Underwriters and, when issued and delivered by the Company
pursuant to the Underwriting Agreement against payment of the
consideration set forth therein, will be validly issued and fully
paid and non-assessable; the issuance of such Securities will not
be subject the preemptive or other similar rights arising by law
or otherwise.
(12) The Ordinary Shares subject to the Purchase Contract Agreement
have been validly authorized and reserved for issuance and, when
issued and delivered by the Company in accordance with the
provisions of the Purchase Contract Agreement, the Purchase
Contracts and the Pledge Agreement, will be fully paid and
non-assessable; the issuance of such Ordinary Shares will not be
subject to preemptive or other similar rights arising by law or
otherwise.
A-2
<PAGE>
(13) The Preferred Shares have been duly authorized for issuance by
the company and, when issued and delivered against payment therefor as
provided in the Prospectus, will be validly issued and fully paid
and non-assessable. The issuance of the Preferred Shares will not
be subject to preemptive or other similar rights. All corporate
action required to be taken for the authorization, issuance and
delivery of the Preferred Shares has been validly taken.
[In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the Cayman
Islands, to the extent such counsel deems proper and specified in such
opinion, upon the opinion of other counsel whom such counsel believes to be
reliable (which opinion shall be dated and furnished to the Underwriters at
the Closing Time, shall be satisfactory in form and substance to counsel
for the Underwriters and shall expressly state that the Underwriters may
rely on such opinion as if it were addressed to them), provided that such
counsel shall state in their opinion that they believe that they and the
Underwriters are justified in relying upon such opinion, and (B) as to
matters of fact (but not as to legal conclusions), to the extent such
counsel deems proper, on certificates of responsible officers of the
Company, its subsidiaries and public officials.]
A-3
<PAGE>
Exhibit B
FORM OF OPINION OF CONYERS DILL & PEARMAN, THE COMPANY'S
BERMUDA COUNSEL, TO BE DELIVERED
PURSUANT TO SECTION 5(b)
(1) Each of ACE Bermuda Insurance Ltd. and Tempest Reinsurance
Company Limited (collectively, the "Bermuda Insurance Subsidiaries") (A)
is validly existing under the laws of Bermuda as a company with
limited liability and is in good standing under the laws of
Bermuda (meaning that such company has not failed to make any
filing with any Bermuda government authority or to pay any Bermuda
government fee or tax, the failure of which would make such
company immediately liable to be struck off the Register of
Companies and thereby cease to exist under the laws of Bermuda)
and (B) the corporate objects and powers contained in the
Memorandum of Association of each of the Bermuda Insurance
Subsidiaries are sufficient to allow them to carry on their
business and to own, lease and operate its properties as both are
described in the Prospectus.
(2) The Company is validly registered under the Companies Act 1981
as a Permit Company and is in good standing under the laws of Bermuda
(meaning that such company has not failed to make any filing with
any Bermuda government authority or to pay any Bermuda government
fee or tax which is required to be paid in respect of Permit
Companies in Bermuda).
(3) Based solely upon a certified copy of the Register of Members
for each of the Bermuda Insurance Subsidiaries, and without further
inquiry, (A) all of the issued shares in the share capital of each
of the Bermuda Insurance Subsidiaries have been duly and validly
authorized and issued and are fully paid and nonassessable
(meaning that no further sums are required to be paid by the
holders thereof in connection with the issue of such shares); and
(B) the Company is the registered holder of all the issued shares
of each of the Bermuda Insurance Subsidiaries.
(4) Each of the Bermuda Insurance Subsidiaries is duly registered
as an insurer under the Insurance Act of 1978 (Bermuda) and the
regulations promulgated thereunder (together, the "Insurance Act")
and as so registered, each Bermuda Insurance Subsidiary may
conduct the insurance business as described in the Prospectus; and
based solely on the Certificates of Compliance and without
independent inquiry, each of the Bermuda Insurance Subsidiaries
has filed with the appropriate Bermuda governmental authority all
reports, documents or other information required to be filed under
the Insurance Act.
(5) The Company is not registered as an insurer under the Insurance
Act and is therefore not required to comply with the requirements
of the Insurance Act applicable to registered insurers.
(6) The execution and delivery by the Company of, and the
performance by the Company of its obligations under the Operative
Agreements do not and will not (A) violate any provision of the Memorandum
of Association or By-laws of either of the Bermuda Insurance
Subsidiaries or any applicable law, regulation, order or decree in
Bermuda; (B) based solely upon the Cause Book, contravene any
judgment, order or decree by the Bermuda Supreme Court against the
Company or the Bermuda Insurance Subsidiaries; or (C) require any
consent, approval or authorization or order of, or qualification
with, any Bermuda governmental agency.
(7) Based solely upon the Cause Book and without further inquiry,
there is no action, suit or proceeding now pending before the
Bermuda Supreme Court against the Company or the Bermuda Insurance
Subsidiaries or any of their respective properties.
B-1
<PAGE>
(8) All statements made in the Registration Statement and Prospectus
with respect to statutes, regulations, rules, treaties and other
laws of Bermuda (including, but not limited to, statements made
with respect to the Insurance Act and Bermuda tax matters) fairly
and accurately present the information set forth therein and such
counsel's opinion as to such matters.
[In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of Bermuda,
to the extent such counsel deems proper and specified in such opinion, upon
the opinion of other counsel whom such counsel believes to be reliable
(which opinion shall be dated and furnished to the Underwriters at the
Closing Time, shall be satisfactory in form and substance to counsel for
the Underwriters and shall expressly state that the Underwriters may rely
on such opinion as if it were addressed to them), provided that such
counsel shall state in their opinion that they believe that they and the
Underwriters are justified in relying upon such opinion, and (B) as to
matters of fact (but not as to legal conclusions), to the extent such
counsel deems proper, on certificates of responsible officers of the
Company, its subsidiaries and public officials.]
B-2
<PAGE>
Exhibit C
FORM OF OPINION OF PETER N. MEAR, ESQ.,
GENERAL COUNSEL OF THE COMPANY,
TO BE DELIVERED PURSUANT TO SECTION 5(b)
(1) The Company is qualified to do business, and is in good
standing, as a foreign corporation, under the laws of each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that
the failure to be so qualified or to be in good standing would not
singly or in the aggregate result in a Material Adverse Change;
(2) Each of ACE Bermuda Insurance Ltd., Tempest Reinsurance
Company Limited, ACE USA, Inc. and ACE INA Holdings Inc. is qualified to
transact business and is in good standing (with respect to jurisdictions
which recognize such concept) in each jurisdiction in which it owns or
leases real property or in which the conduct of its business requires
such qualification, except where the failure to be so qualified or to be
in good standing (with respect to jurisdictions which recognize such
concept) would not singly or in the aggregate result in a Material Adverse
Change;
(3) Except as set forth in the Registration Statement and the
Prospectus, such counsel does not know of any outstanding (A)
securities or obligations of the Company convertible into or
exchangeable for any shares of capital stock of the Company or any
of its subsidiaries; (B) rights, warrants or options to acquire or
purchase from the Company any shares of capital stock of the
Company or any such convertible or exchangeable securities or
obligations; or (C) obligations or understandings of the Company
to issue or sell any shares of capital stock of the Company or any
of its subsidiaries, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or
obligations; and
(4) To the best of such counsel's knowledge, and other than as
disclosed in the Prospectus, there are no threatened legal
proceedings against the Company or any of its subsidiaries which,
if determined adversely to the Company or such subsidiary, would
result in a Material Adverse Change.
[In rendering such opinion, such counsel may rely as to matters of
fact (but not as to legal conclusions), to the extent such counsel deems
proper, on certificates of responsible officers of the Company, its
subsidiaries and public officials.]
C-1
<PAGE>
Exhibit D
FORM OF OPINION OF MAYER, BROWN & PLATT,
UNITED STATES COUNSEL FOR THE COMPANY,
TO BE DELIVERED PURSUANT TO SECTION 5(b)
(1) Each of ACE INA Holdings Inc. and ACE USA, Inc. is duly
incorporated and is validly existing as a corporation in good standing
under the laws of the State of Delaware.
(2) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, each of the Operative
Agreements to which it is a party and any other agreement or
instrument entered into or issued or to be entered into or issued
by the Company in connection with the transactions contemplated by
the Registration Statement and the Prospectus and the consummation
by the Company of the transactions contemplated by the Operative
Agreements do not and will not (A) contravene any provision of any
United States federal or New York State law, rule or regulation,
in each case which, in such counsel's opinion, based on such
counsel's experience, are normally applicable to transactions of
the type contemplated by the Operative Agreements ("United States
Applicable Laws"), except that such counsel need not express any
opinion in this paragraph with respect to state securities laws;
(B) contravene any judgment, order or decree known to such counsel
without independent inquiry of any United States federal or New
York State court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or by
which the Company or any of its subsidiaries is bound or by which
their properties or assets may be affected; (C) conflict with,
result in any breach of or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a
default) under, or give rise to any right to accelerate the
maturity or require the prepayment of any indebtedness or the
purchase of any capital stock under, or result in the creation or
imposition of any lien, charge or encumbrance upon any properties
or assets of ACE INA Holdings Inc. or any of its subsidiaries,
pursuant to the terms of, any agreement or instrument filed as an
exhibit to the Company's Annual Report on Form 10-K for the fiscal
year ended December 30, 1999 or any agreement or instrument
otherwise known to such counsel to which the Company or any of its
subsidiaries is a party or by which it or any of them may be
bound, or to which any of the assets, properties or operations of
the Company or any of its subsidiaries is subject, or the
certificate of incorporation or bylaws of ACE INA Holdings Inc. or
ACE USA, except for such conflicts, breaches, violations,
defaults, accelerations, repayments, repurchases, liens, charges
or encumbrances that would not singly or in the aggregate result
in a Material Adverse Change; or (D) based upon such counsel's
review of the United States Applicable Laws, require any consent,
approval or authorization or order of, or qualification with, any
United States federal or state governmental agency or authority or
court, except such as have been obtained under the 1933 Act, the
1933 Act Regulations and such as may be required under state
securities or blue sky laws or state insurance laws in connection
with the offer and sale of the Securities.
(3) The Operative Agreements have been duly authorized, executed
and delivered by the Company.
(4) Assuming due authorization, execution and delivery of the
Purchase Contract Agreement by the Purchase Contract Agent, the Purchase
Contract Agreement constitutes a valid and binding agreement of
the Company, enforceable against the Company in accordance with
its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally or by general equitable principles (regardless of
whether enforcement is considered in a proceeding at law or in
equity).
D-1
<PAGE>
(5) Assuming due authorization, execution and delivery of the Pledge
Agreement by the Collateral Agent and the Purchase Contract Agent,
the Pledge Agreement constitutes a valid and binding agreement of
the Company, enforceable against the Company in accordance with
its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally or by general equitable principles (regardless of
whether enforcement is considered in a proceeding at law or in
equity).
(6) The Securities and the Operative Agreements conform in all
material respects to the statements relating thereto contained in
the Prospectus and are in substantially the form filed or
incorporated by reference, as the case may be, as an exhibit to
the Registration Statement.
(7) Such counsel does not know, after inquiry of officers of the
Company and based solely on such inquiry, of any action, suit or
proceeding before or by any United States federal or state
government, governmental instrumentality or court now pending or
threatened against or affecting the Company or any of its
subsidiaries or any of their respective assets or properties that
is required to be described in the Registration Statement or the
Prospectus and is not so described or of any contract or other
document that is required to be described in the Registration
Statement or the Prospectus, or to be filed as an exhibit to the
Registration Statement, that is not described or filed, as
required.
(8) The statements in the Registration Statement and the Prospectus
insofar as they are descriptions of contracts, agreements,
instruments or proceedings, or constitute statements or summaries
of United States federal or New York State laws or legal
conclusions with respect thereto, are accurate and present fairly
the information required to be shown.
(9) The Registration Statement (including any Rule 462(b)
Registration Statement) and the Prospectus, excluding the documents
incorporated by reference therein, and each amendment or
supplement to the Registration Statement (including any Rule
462(b) Registration Statement) and Prospectus, excluding the
documents incorporated by reference therein, as of their
respective effective or issue dates (other than the financial
statements and supporting schedules and other financial data
included therein or omitted therefrom, as to which such counsel
need express no opinion) complied as to form in all material
respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
(10) The documents incorporated by reference in the Prospectus
(other than the financial statements and supporting schedules and other
financial data included therein or omitted therefrom, as to which
such counsel need express no opinion), when they became effective
or were filed with the Commission, as the case may be, complied as
to form in all material respects with the requirements of the 1933
Act or the 1934 Act, as applicable, and the rules and regulations
of the Commission thereunder.
(11) The Securities, upon issuance, will be excluded or exempted
under, or beyond the purview of, the Commodity Exchange Act, as amended
(the "Commodity Exchange Act"), and the rules and regulations of
the Commodity Futures Trading Commission under the Commodity
Exchange Act (the "Commodity Exchange Act Regulations").
(12) The Company is not, and upon the issuance and sale of the
Securities as contemplated in the Underwriting Agreement and the
application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the "1940
Act").
D-2
<PAGE>
(13) When issued in accordance with the terms of the Purchase
Contract Agreement and delivered against payment therefor as provided in
the Underwriting Agreement, the holders of the Securities will be
entitled to the right and subject to the obligations specified in
the Purchase Contract Agreement.
(14) The provisions of the Pledge Agreement are effective to create
in favor of the Collateral Agent for the benefit of the Company a
valid security interest under the UCC in all "securities
entitlements" (as defined in Section 8-102(a)(17) of the UCC and
the Federal Book-Entry Regulations) now or hereafter credited to
the Collateral Account and relating to the Preferred Shares or the
Treasury Securities (the "Pledged Securities Entitlements"); and
the provisions of the Pledge Agreement are effective under the UCC
and the Federal Book-Entry Regulations to perfect the security
interest of the Collateral Agent for the benefit of the Company in
the Pledged Securities Entitlements.
(15) The Security Certificates are in the form contemplated by the
Purchase Contract Agreement.
Such counsel shall also state that it has been advised by the
Commission that the Registration Statement (including any Rule 462(b)
Registration Statement) became effective under the 1933 Act; that any
required filings of the Prospectus pursuant to Rule 424(b) have been made
in the manner and within the time period required by Rule 424(b); and that,
based solely on conversations with the Commission, no stop order suspending
the effectiveness of the Registration Statement (or such Rule 462(b)
Registration Statement) has been issued and no proceedings for the purpose
have been instituted, are pending or, to such counsel's knowledge, are
contemplated under the 1933 Act.
Such counsel shall also state that they have examined various
documents and participated in conferences with representatives of the
Company and their accountants and with representatives of the Underwriters
and their counsel at which times the contents of the Registration Statement
and the Prospectus and related matters were discussed, and that, although
they are not passing upon and assume no responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus or making any representation that they have
independently verified or checked the accuracy, completeness or fairness of
such statements, except as set forth above, no facts have come to such
counsel's attention that cause such counsel to believe that the
Registration Statement (including any Rule 462(b) Registration Statement)
or any post-effective amendment thereto, at the time the Registration
Statement (including any Rule 462(b) Registration Statement) or any
post-effective amendment thereto (including the filing of the Company's
Annual Report on Form 10-K with the Commission) became effective or as of
the date of the Underwriting Agreement, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; or that
the Prospectus or any amendment or supplement thereto, at the date of the
Prospectus, at the date of any such amendment or supplement or at the
Closing Time, included or includes any untrue statement of a material fact
or omitted or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (such counsel need
not express a belief with respect to the financial statements and
supporting schedules and other financial data included in or omitted from
the Registration Statement (including any Rule 462(b) Registration
Statement) or any post-effective amendment thereto or the Prospectus or any
amendment or supplement thereto).
[In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the State
of New York, the corporate laws of the State of Delaware or the federal
laws of the United States of America, to the extent such counsel deems
proper and specified in such opinion, upon the opinion of other counsel
whom such counsel believes to be reliable (which opinion shall be dated and
furnished to the Underwriters at the Closing Time, shall be satisfactory in
form and substance to counsel for the Underwriters and shall expressly
state that the Underwriters may rely on such opinion as if it were
addressed to them), provided that such counsel shall state in their opinion
that they believe that they and the Underwriters are justified in relying
upon such opinion, and (B) as to matters of fact (but not as to legal
conclusions), to the extent such counsel deems proper, on certificates of
responsible officers of the Company, its subsidiaries and public
officials.]
D-3
Exhibit 10.2
ACE LIMITED
AND
THE BANK OF NEW YORK,
AS PURCHASE CONTRACT AGENT
------------------
PURCHASE CONTRACT AGREEMENT
------------------
Dated as of April 12, 2000
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. DEFINITIONS...................................................1
SECTION 1.2. COMPLIANCE CERTIFICATES AND OPINIONS..........................9
SECTION 1.3. FORM OF DOCUMENTS DELIVERED TO AGENT..........................9
SECTION 1.4. ACTS OF HOLDERS; RECORD DATES................................10
SECTION 1.5. NOTICES......................................................11
SECTION 1.6. NOTICE TO HOLDERS; WAIVER....................................12
SECTION 1.7. EFFECT OF HEADINGS AND TABLE OF CONTENTS.....................12
SECTION 1.8. SUCCESSORS AND ASSIGNS.......................................12
SECTION 1.9. SEPARABILITY CLAUSE..........................................12
SECTION 1.10. BENEFITS OF AGREEMENT........................................12
SECTION 1.11. GOVERNING LAW................................................12
SECTION 1.12. LEGAL HOLIDAYS...............................................13
SECTION 1.13. COUNTERPARTS.................................................13
SECTION 1.14. INSPECTION OF AGREEMENT......................................13
ARTICLE II
CERTIFICATE FORMS
SECTION 2.1. FORMS OF CERTIFICATES GENERALLY..............................13
SECTION 2.2. FORM OF AGENT'S CERTIFICATE OF AUTHENTICATION................14
ARTICLE III
THE SECURITIES
SECTION 3.1. TITLE AND TERMS; DENOMINATIONS...............................14
SECTION 3.2. RIGHTS AND OBLIGATIONS EVIDENCED BY THE CERTIFICATES.........14
SECTION 3.3. EXECUTION, AUTHENTICATION, DELIVERY AND DATING...............15
SECTION 3.4. TEMPORARY CERTIFICATES.......................................16
SECTION 3.5. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE..........16
SECTION 3.6. BOOK-ENTRY INTERESTS.........................................18
SECTION 3.7. NOTICES TO HOLDERS...........................................18
SECTION 3.8. APPOINTMENT OF SUCCESSOR CLEARING AGENCY.....................18
SECTION 3.9. DEFINITIVE CERTIFICATES......................................18
SECTION 3.10. MUTILATED, DESTROYED, LOST AND STOLEN CERTIFICATES...........19
SECTION 3.11. PERSONS DEEMED OWNERS........................................20
SECTION 3.12. CANCELLATION.................................................20
SECTION 3.13. ESTABLISHMENT OR REESTABLISHMENT OF GROWTH PRIDES............21
SECTION 3.14. ESTABLISHMENT OR REESTABLISHMENT OF INCOME PRIDES............22
SECTION 3.15. TRANSFER OF COLLATERAL UPON OCCURRENCE OF TERMINATION EVENT..23
SECTION 3.16. CUSIP NUMBERS................................................23
ARTICLE IV
THE PREFERRED SHARES
SECTION 4.1. PAYMENT OF DIVIDEND; RIGHTS TO DIVIDENDS PRESERVED;
DIVIDEND RATE RESET; NOTICE..................................23
SECTION 4.2. NOTICE AND VOTING............................................24
i
<PAGE>
ARTICLE V
THE PURCHASE CONTRACTS
SECTION 5.1. PURCHASE OF ORDINARY SHARES..................................25
SECTION 5.2. PAYMENT OF PURCHASE PRICE....................................26
SECTION 5.3. ISSUANCE OF ORDINARY SHARES..................................30
SECTION 5.4. ADJUSTMENT OF SETTLEMENT RATE................................30
SECTION 5.5. NOTICE OF ADJUSTMENTS AND CERTAIN OTHER EVENTS...............35
SECTION 5.6. TERMINATION EVENT; NOTICE....................................35
SECTION 5.7. EARLY SETTLEMENT.............................................36
SECTION 5.8. NO FRACTIONAL SHARES.........................................37
SECTION 5.9. CHARGES AND TAXES............................................37
ARTICLE VI
REMEDIES
SECTION 6.1. UNCONDITIONAL RIGHT OF HOLDERS TO PURCHASE ORDINARY SHARES...38
SECTION 6.2. RESTORATION OF RIGHTS AND REMEDIES...........................38
SECTION 6.3. RIGHTS AND REMEDIES CUMULATIVE...............................38
SECTION 6.4. DELAY OR OMISSION NOT WAIVER.................................38
SECTION 6.5. UNDERTAKING FOR COSTS........................................38
SECTION 6.6. WAIVER OF STAY OR EXTENSION LAWS.............................39
ARTICLE VII
THE AGENT
SECTION 7.1. CERTAIN DUTIES AND RESPONSIBILITIES..........................39
SECTION 7.2. NOTICE OF DEFAULT............................................40
SECTION 7.3. CERTAIN RIGHTS OF AGENT......................................40
SECTION 7.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.......41
SECTION 7.5. MAY HOLD SECURITIES..........................................41
SECTION 7.6. MONEY HELD IN CUSTODY........................................41
SECTION 7.7. COMPENSATION AND REIMBURSEMENT...............................42
SECTION 7.8. CORPORATE AGENT REQUIRED; ELIGIBILITY........................42
SECTION 7.9. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR............42
SECTION 7.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.......................44
SECTION 7.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS..44
SECTION 7.12. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.......44
SECTION 7.13. NO OBLIGATIONS OF AGENT......................................45
SECTION 7.14. TAX COMPLIANCE...............................................45
ARTICLE VIII
SUPPLEMENTAL AGREEMENTS
SECTION 8.1. SUPPLEMENTAL AGREEMENTS WITHOUT CONSENT OF HOLDERS...........45
SECTION 8.2. SUPPLEMENTAL AGREEMENTS WITH CONSENT OF HOLDERS..............46
SECTION 8.3. EXECUTION OF SUPPLEMENTAL AGREEMENTS.........................47
SECTION 8.4. EFFECT OF SUPPLEMENTAL AGREEMENTS............................47
SECTION 8.5. REFERENCE TO SUPPLEMENTAL AGREEMENTS.........................47
ARTICLE IX
NSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 9.1. COVENANT NOT TO MERGE, CONSOLIDATE, SELL OR CONVEY
PROPERTY EXCEPT UNDER CERTAIN CONDITIONS.....................47
SECTION 9.2. RIGHTS AND DUTIES OF SUCCESSOR CORPORATION...................48
SECTION 9.3. OPINION OF COUNSEL GIVEN TO AGENT............................48
ii
<PAGE>
ARTICLE X
COVENANTS
SECTION 10.1. PERFORMANCE UNDER PURCHASE CONTRACTS.........................48
SECTION 10.2. MAINTENANCE OF OFFICE OR AGENCY..............................48
SECTION 10.3. COMPANY TO RESERVE ORDINARY SHARES...........................49
SECTION 10.4. COVENANTS AS TO ORDINARY SHARES..............................49
EXHIBIT A Form of Income PRIDES Certificate
EXHIBIT B Form of Growth PRIDES Certificate
EXHIBIT C Instruction to Collateral Agent
EXHIBIT D Instruction to Purchase Contract Agent
EXHIBIT E Notice to Settle with Separate Cash
iii
<PAGE>
PURCHASE CONTRACT AGREEMENT, dated as of April 12, 2000, between
ACE Limited, a company duly organized and existing under the laws of the
Cayman Islands (the "Company"), and The Bank of New York, a New York
banking corporation, acting as purchase contract agent for the Holders of
Securities from time to time (the "Agent").
RECITALS
The Company has duly authorized the execution and delivery of this
Agreement and the Certificates evidencing the Securities.
All things necessary to make the Purchase Contracts, when the
Certificates are executed by the Company and authenticated, executed on
behalf of the Holders and delivered by the Agent, as provided in this
Agreement, the valid obligations of the Company, and to constitute these
presents a valid agreement of the Company, in accordance with its terms,
have been done.
WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1. Definitions.
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular; and
nouns and pronouns of the masculine gender include the feminine and neuter
genders;
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United States;
(c) 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 or other subdivision; and
(d) the following terms have the meanings given to them in this
Section 1.1(d).
"Act" when used with respect to any Holder, has the meaning
specified in Section 1.4.
"Affiliate" has the same meaning as given to that term in Rule 405
of the Securities Act or any successor rule thereunder.
"Agent" means the Person named as the "Agent" in the first
paragraph of this instrument until a successor Agent shall have become such
pursuant to the applicable provisions of this Agreement, and thereafter
"Agent" shall mean such Person.
<PAGE>
"Agreement" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more agreements
supplemental hereto entered into pursuant to the applicable provisions
hereof.
"Applicable Market Value" has the meaning specified in Section
5.1.
"Authorized Newspaper" means a daily newspaper, in the English
language, customarily published on each day that is a Business Day in The
City of New York, whether or not published on days that are Legal Holidays,
and of general circulation in The City of New York. The Authorized
Newspaper for the purposes of the Reset Spread Announcement Date, is
currently anticipated to be The Wall Street Journal (NYC edition).
"Beneficial Owner" means, with respect to a Book-Entry Interest, a
Person who is the beneficial owner of such Book-Entry Interest as reflected
on the books of the Clearing Agency or on the books of a Person maintaining
an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with
the rules of such Clearing Agency).
"Board of Directors" means the board of directors of the Company
or a duly authorized committee of that board.
"Board Resolution" means one or more resolutions of the Board of
Directors, a copy of which has been certified by the Secretary or an
Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification and delivered to the Agent.
"Book-Entry Interest" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 3.6.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which banking institutions and trust companies in The City of
New York are permitted or required by any applicable law to close.
"Cash Settlement" has the meaning set forth in Section 5.2(a)(i).
"Certificate" means an Income PRIDES Certificate or a Growth
PRIDES Certificate.
"Clearing Agency" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as a
depositary for the Securities and in whose name, or in the name of a
nominee of that organization, shall be registered a Global Certificate and
which shall undertake to effect book-entry transfers and pledges of the
Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the
Clearing Agency effects book-entry transfers and pledges of securities
deposited with the Clearing Agency.
"Closing Price" has the meaning specified in Section 5.1.
2
<PAGE>
"Collateral" has the meaning specified in Section 2.1 of the
Pledge Agreement.
"Collateral Agent" means The Bank of New York, a New York banking
corporation, as Collateral Agent under the Pledge Agreement until a
successor Collateral Agent shall have become such pursuant to the
applicable provisions of the Pledge Agreement, and thereafter "Collateral
Agent" shall mean the Person who is then the Collateral Agent thereunder.
"Collateral Substitution" has the meaning specified in Section
3.13.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor shall have become such
pursuant to the applicable provision of this Agreement, and thereafter
"Company" shall mean such successor.
"Corporate Trust Office" means the principal corporate trust
office of the Agent at which, at any particular time, its corporate trust
business shall be administered, which office at the date hereof is located
at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention:
Corporate Trust Administration.
"Current Market Price" has the meaning specified in Section
5.4(a)(8).
"Depositary" means, initially, DTC until another Clearing Agency
becomes its successor.
"Dividend Rate" means the percentage rate per annum of the Stated
Amount of the Preferred Shares at which dividends thereon are payable, if
declared.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"Early Settlement" has the meaning specified in Section 5.7(a).
"Early Settlement Amount" has the meaning specified in Section
5.7(a).
"Early Settlement Date" has the meaning specified in Section
5.7(a).
"Early Settlement Rate" has the meaning specified in Section
5.7(b).
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time, and
the rules and regulations promulgated thereunder.
"Expiration Date" has the meaning specified in Section 1.4.
"Expiration Time" has the meaning specified in Section 5.4(a)(6).
"Failed Remarketing" has the meaning specified in Section 5.2(b).
3
<PAGE>
"Global Certificate" means a Certificate that evidences all or
part of the Securities and is registered in the name of a Depositary or a
nominee thereof.
"Growth PRIDES" means the collective rights and obligations of a
holder of a Growth PRIDES Certificate in respect of a 1/20th undivided
beneficial interest in a Treasury Security, subject in each case to the
Pledge thereof, and the related Purchase Contract.
"Growth PRIDES Certificate" means a certificate evidencing the
rights and obligations of a Holder in respect of the number of Growth
PRIDES specified on such certificate.
"Growth PRIDES Register" and "Growth PRIDES Registrar" have the
respective meanings specified in Section 3.5.
"Holder," when used with respect to a Security, means the Person
in whose name the Security evidenced by an Income PRIDES Certificate and/or
a Growth PRIDES Certificate is registered in the related Income PRIDES
Register and/or the Growth PRIDES Register, as the case may be.
"Income PRIDES" means the collective rights and obligations of a
Holder of an Income PRIDES Certificate in respect of a Preferred Share,
subject to the Pledge thereof, and the related Purchase Contract.
"Income PRIDES Certificate" means a certificate evidencing the
rights and obligations of a Holder in respect of the number of Income
PRIDES specified on such certificate.
"Income PRIDES Register" and "Income PRIDES Registrar" have the
respective meanings specified in Section 3.5.
"Issuer Order" or "Issuer Request" means a written order or
request signed in the name of the Company by the Chairman of the Board, the
Vice Chairman, the President, the Chief Financial Officer, the Chief
Administrative Officer, General Counsel, Secretary or any Vice President
(or other officer performing similar functions) of the Company and
delivered to the Agent.
"NYSE" has the meaning specified in Section 5.1.
"Officer's Certificate" means a certificate signed by the Chairman
of the Board, the Vice Chairman, the President, the Chief Financial
Officer, the Chief Administrative Officer, General Counsel, Secretary or
any Vice President (or other officer performing similar functions) of the
Company and delivered to the Agent.
"One-Month Treasury Bill" means direct obligations of the United
States (which may be obligations traded on a when-issued basis only) having
a maturity comparable to the remaining term to the mandatory redemption
date of the Preferred Shares, as agreed upon by the Company and the Reset
Agent. The rate for the One-Month Treasury Bill will be the bid side rate
displayed at 10:00 A.M., New York City time, on the third Business Day
immediately preceding the Purchase Contract Settlement Date in the Telerate
system (or if the Telerate system is (a) no longer available on the third
Business Day immediately preceding the Purchase Contract Settlement Date or
(b) in the opinion of the Reset Agent (after consultation with the Company)
no longer an appropriate system from which to obtain such rate, such other
nationally recognized quotation system as, in the opinion of the Reset
Agent (after consultation with the Company) is appropriate). If such rate
is not so displayed, the rate for the One-Month Treasury Bill shall be, as
calculated by the Reset Agent, the yield to maturity for the One-Month
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Treasury Bill, expressed as a bond equivalent on the basis of a year of 365
or 366 days, as applicable, and applied on a daily basis, and computed by
taking the arithmetic mean of the secondary market bid rates, as of 10:30
A.M., New York City time, on the third Business Day immediately preceding
the Purchase Contract Settlement Date, of three leading United States
government securities dealers selected by the Reset Agent (after
consultation with the Company) (which may include the Reset Agent or an
Affiliate thereof).
"Ordinary Shares" means the ordinary shares, par value
US$0.041666667, of the Company.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company or an
Affiliate.
"Outstanding Securities," with respect to any Income PRIDES or
Growth PRIDES, means, as of the date of determination, all Income PRIDES or
Growth PRIDES evidenced by Certificates theretofore authenticated, executed
and delivered under this Agreement, except:
(i) If a Termination Event has occurred, (A) Growth
PRIDES and (B) Income PRIDES for which the Stated Amount of the
related Preferred Share has been theretofore deposited with the
Agent in trust for the Holders of such Income PRIDES;
(ii) Income PRIDES and Growth PRIDES evidenced by
Certificates theretofore cancelled by the Agent or delivered to
the Agent for cancellation or deemed cancelled pursuant to the
provisions of this Agreement; and
(iii) Income PRIDES and Growth PRIDES evidenced by
Certificates in exchange for or in lieu of which other
Certificates have been authenticated, executed on behalf of the
Holder and delivered pursuant to this Agreement, other than any
such Certificate in respect of which there shall have been
presented to the Agent proof satisfactory to it that such
Certificate is held by a bona fide purchaser in whose hands the
Income PRIDES or Growth PRIDES evidenced by such Certificate are
valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
number of the Income PRIDES or Growth PRIDES have given any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Income PRIDES or Growth PRIDES owned by the Company or any Affiliate of the
Company shall be disregarded and deemed not to be outstanding, except that,
in determining whether the Agent shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver,
only Income PRIDES or Growth PRIDES which a Responsible Officer of the
Agent actually knows to be so owned shall be so disregarded. Income PRIDES
or Growth PRIDES so owned which have been pledged in good faith may be
regarded as Outstanding Securities if the pledgee establishes to the
satisfaction of the Agent the pledgee's right so to act with respect to
such Income PRIDES or Growth PRIDES and that the pledgee is not the Company
or any Affiliate of the Company.
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"Payment Date" means each February 16, May 16, August 16 and
November 16, commencing May 16, 2000.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Permitted Investments" has the meaning set forth in Section 1.1
of the Pledge Agreement.
"Pledge" means the pledge under the Pledge Agreement of the
Preferred Shares or the Treasury Securities, in each case constituting a
part of the Securities.
"Pledge Agreement" means the Pledge Agreement, dated as of the
date hereof, by and among the Company, the Collateral Agent and the Agent,
on its own behalf and as attorney-in-fact for the Holders from time to time
of the Securities.
"Predecessor Certificate" means a Predecessor Income PRIDES
Certificate or a Predecessor Growth PRIDES Certificate.
"Predecessor Growth PRIDES Certificate" of any particular Growth
PRIDES Certificate means every previous Growth PRIDES Certificate
evidencing all or a portion of the rights and obligations of the Company
and the Holder under the Growth PRIDES evidenced thereby; and, for the
purposes of this definition, any Growth PRIDES Certificate authenticated
and delivered under Section 3.10 in exchange for or in lieu of a mutilated,
destroyed, lost or stolen Growth PRIDES Certificate shall be deemed to
evidence the same rights and obligations of the Company and the Holder as
the mutilated, destroyed, lost or stolen Growth PRIDES Certificate.
"Predecessor Income PRIDES Certificate" of any particular Income
PRIDES Certificate means every previous Income PRIDES Certificate
evidencing all or a portion of the rights and obligations of the Company
and the Holder under the Income PRIDES evidenced thereby; and, for the
purposes of this definition, any Income PRIDES Certificate authenticated
and delivered under Section 3.10 in exchange for or in lieu of a mutilated,
destroyed, lost or stolen Income PRIDES Certificate shall be deemed to
evidence the same rights and obligations of the Company and the Holder as
the mutilated, destroyed, lost or stolen Income PRIDES Certificate.
"Preferred Shares" means the 8.25% Cumulative Redeemable Preferred
Shares, Series A, $1.00 par value per share, of the Company, having a
stated liquidation amount of $50 per share.
"Proceeds" has the meaning set forth in Section 1.1 of the Pledge
Agreement.
"Purchase Contract," when used with respect to any Security, means
the contract forming a part of such Security and obligating the Company to
sell and the Holder of such Security to purchase Ordinary Shares on the
terms and subject to the conditions set forth in Article Five hereof.
"Purchase Contract Settlement Date" means May 16, 2003.
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"Purchase Contract Settlement Fund" has the meaning specified in
Section 5.3.
"Purchase Price" has the meaning specified in Section 5.1.
"Purchased Shares" has the meaning specified in Section 5.4(a)(6).
"Record Date" for the distribution payable on any Payment Date
means, as to any Global Certificate, the Business Day next preceding such
Payment Date, and as to any other Certificate, a day selected by the
Company which shall be more than one Business Day but less than 60 Business
Days prior to such Payment Date.
"Register" means the Income PRIDES Register and the Growth PRIDES
Register.
"Registrar" means the Income PRIDES Registrar and the Growth
PRIDES Registrar.
"Remarketing Agent" has the meaning specified in Section 5.2.
"Remarketing Agreement" means the Remarketing Agreement, dated
April 12, 2000, by and among the Company, the Remarketing Agent and the
Agent.
"Remarketing Fee" has the meaning specified in Section 5.2.
"Remarketing Underwriting Agreement" has the meaning specified in
the Remarketing Agreement.
"Reorganization Event" has the meaning specified in Section
5.4(b).
"Reset Agent" means a nationally recognized investment banking
firm chosen by the Company to determine the Reset Rate. It is currently
anticipated that Merrill Lynch, Pierce, Fenner & Smith Incorporated will
act in such capacity.
"Reset Announcement Date" means the tenth (10th) Business Day
immediately preceding the Purchase Contract Settlement Date.
"Reset Rate" means the dividend rate per annum (to be determined
by the Reset Agent), equal to the sum of (X) the Reset Spread and (Y) the
rate of interest on the One-Month Treasury Bill in effect on the third
Business Day immediately preceding the Purchase Contract Settlement Date,
that the Preferred Shares should bear in order for the Preferred Shares to
have an approximate market value of 100.5% of their aggregate liquidation
amount on the third Business Day immediately preceding the Purchase
Contract Settlement Date; provided, that the Company may limit such Reset
Spread to be no higher than 200 basis points (2%); and provided, further,
that in the event of a Failed Remarketing, the Reset Rate shall be the
dividend rate per annum in effect on the Business Day immediately preceding
the Purchase Contract Settlement Date.
"Reset Spread" means a spread amount to be determined by the Reset
Agent on the tenth (10th) Business Day immediately preceding the Purchase
Contract Settlement Date.
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"Responsible Officer," when used with respect to the Agent, means
any officer of the Agent assigned by the Agent to administer its corporate
trust matters.
"Security" means an Income PRIDES or a Growth PRIDES.
"Settlement Rate" has the meaning specified in Section 5.1.
"Stated Amount" means $50.
"Termination Date" means the date, if any, on which a Termination
Event occurs.
"Termination Event" means the occurrence of any of the following
events: (i) at any time on or prior to the Purchase Contract Settlement
Date, a judgment, decree or court order shall have been entered granting
relief under any applicable system of bankruptcy laws, adjudicating the
Company to be insolvent, or approving as properly filed a petition seeking
reorganization or liquidation of the Company or any other similar
applicable law, and, unless such judgment, decree or order shall have been
entered within 60 days prior to the Purchase Contract Settlement Date, such
decree or order shall have continued undischarged and unstayed for a period
of 60 days; or (ii) a judgment, decree or court order for the appointment
of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of the Company or of its property, or for the winding up or
liquidation of its affairs, shall have been entered, and, unless such
judgment, decree or order shall have been entered within 60 days prior to
the Purchase Contract Settlement Date, such judgment, decree or order shall
have continued undischarged and unstayed for a period of 60 days, or (iii)
at any time on or prior to the Purchase Contract Settlement Date, the
Company shall file a petition for relief under any applicable system of
bankruptcy laws, or shall consent to the filing of a bankruptcy proceeding
against it, or shall file a petition or answer or consent seeking
reorganization or liquidation under such laws or any other similar
applicable law, or shall consent to the filing of any such petition, or
shall consent to the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of it or of its property, or shall
make an assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts generally as they become due.
"Threshold Appreciation Price" has the meaning specified in
Section 5.1.
"Threshold Depreciation Price" has the meaning specified in
Section 5.1.
"TIA" means the Trust Indenture Act of 1939, as amended, or any
successor statute.
"Trading Day" has the meaning specified in Section 5.1.
"Treasury Security" means a zero coupon U.S. Treasury security
(CUSIP Number 912833 FS4) with a principal amount at maturity equal to
$1,000 and maturing on May 15, 2003.
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"Underwriting Agreement" means the Underwriting Agreement, dated
April 6, 2000, between the Company and Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC and
Donaldson, Lufkin & Jenrette Securities Corporation.
"Vice President" 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 by this Agreement, upon any
application or request by the Company to the Agent to take any action under
any provision of this Agreement, the Company shall furnish to the Agent an
Officer's Certificate stating that all conditions precedent, if any,
provided for in this Agreement relating to the proposed action have been
complied with and, if requested by the Agent, 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 is
specifically required by any provision of this Agreement 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 Agreement shall include:
(1) a statement that the individual signing such
certificate or opinion has read such covenant or condition and the
definitions herein relating thereto;
(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 or she has made such examination or investigation as is
necessary to enable such individual to express an informed opinion
as to whether or not such covenant or condition has been complied
with; and
(4) a statement as to whether, in the opinion of such
individual, such condition or covenant has been complied with.
Section 1.3. Form of Documents Delivered to Agent.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one
such Person, or that they be so certified or covered by only one document,
but one such Person may certify or give an opinion with respect to some
matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or
in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or
Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company unless such counsel
knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
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Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or
other instruments under this Agreement, they may, but need not, be
consolidated and form one instrument.
Section 1.4. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement to be given or
taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person
or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument
or instruments are delivered to the Agent and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as
the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Agreement and (subject to
Section 7.1) conclusive in favor of the Agent and the Company, if made in
the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Agent deems
sufficient.
(c) The ownership of Securities shall be proved by the Income
PRIDES Register or the Growth PRIDES Register, as the case may be.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Certificate shall bind
every future Holder of the same Certificate and the Holder of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Agent or the Company in reliance thereon,
whether or not notation of such action is made upon such Certificate.
(e) The Company may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities entitled to give, make
or take any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Agreement to be given,
made or taken by Holders of Securities. If any record date is set pursuant
to this paragraph, the Holders of the Outstanding Income PRIDES and the
Outstanding Growth PRIDES, as the case may be, on such record date, and no
other Holders, shall be entitled to take the relevant action with respect
to the Income PRIDES or the Growth PRIDES, as the case may be, whether or
not such Holders remain Holders after such record date; provided that no
such action shall be effective hereunder unless taken on or prior to the
applicable Expiration Date by Holders of the requisite number of
Outstanding Securities on such record date. Nothing in this paragraph shall
be construed to prevent the Company from setting a new record date for any
action for which a record date has previously been set pursuant to this
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paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be cancelled and of no effect), and nothing in
this paragraph shall be construed to render ineffective any action taken by
Holders of the requisite number of Outstanding Securities on the date such
action is taken. Promptly after any record date is set pursuant to this
paragraph, the Company, at its own expense, shall cause notice of such
record date, the proposed action by Holders and the applicable Expiration
Date to be given to the Agent in writing and to each Holder of Securities
in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section, the
Company may designate any date as the "Expiration Date" and from time to
time may change the Expiration Date to any earlier or later day; provided
that no such change shall be effective unless notice of the proposed new
Expiration Date is given to the Agent in writing, and to each Holder of
Securities in the manner set forth in Section 1.6, on or prior to the
existing Expiration Date. If an Expiration Date is not designated with
respect to any record date set pursuant to this Section, the Company shall
be deemed to have initially designated the 180th day after such record date
as the Expiration Date with respect thereto, subject to its right to change
the Expiration Date as provided in this paragraph. Notwithstanding the
foregoing, no Expiration Date shall be later than the 180th day after the
applicable record date.
Section 1.5. Notices.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Agreement to be made upon, given or furnished to, or filed with:
(1) the Agent by any Holder or by the Company shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing
and personally delivered or mailed, first-class postage prepaid,
to the Agent at The Bank of New York, 101 Barclay Street, Floor 21
West, New York, New York 10286, Attention: Corporate Trust
Administration, or at any other address previously furnished in
writing by the Agent to the Holders and the Company; or
(2) the Company by the Agent or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing
and personally delivered or mailed, first-class postage prepaid,
to the Company at ACE Limited, The ACE Building, 30 Woodbourne
Avenue, Hamilton HM 08, Bermuda, or at any other address
previously furnished in writing to the Agent by the Company; or
(3) the Collateral Agent by the Agent, the Company or any
Holder shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if made, given, furnished or
filed in writing and personally delivered or mailed, first-class
postage prepaid, addressed to the Collateral Agent at The Bank of
New York, 101 Barclay Street, Floor 21 West, New York, New York
10286, Attention: Corporate Trust Administration, or at any other
address previously furnished in writing by the Collateral Agent to
the Agent, the Company and the Holders.
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Section 1.6. Notice to Holders; Waiver.
Where this Agreement provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at its address as it appears in the
applicable Register, not later than the latest date, and not earlier than
the earliest date, prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed to any particular Holder
shall affect the sufficiency of such notice with respect to other Holders.
Where this Agreement provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Agent, but
such filing shall not be a condition precedent to the validity of any
action taken in reliance upon such waiver.
In 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
Agent shall constitute a sufficient notification for every purpose
hereunder.
Section 1.7. 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 1.8. Successors and Assigns.
All covenants and agreements in this Agreement by the Company
shall bind its successors and assigns, whether so expressed or not.
Section 1.9. Separability Clause.
In case any provision in this Agreement or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof and thereof shall not in
any way be affected or impaired thereby.
Section 1.10. Benefits of Agreement.
Nothing in this Agreement or in the Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder and, to the extent provided hereby, the Holders, any
benefits or any legal or equitable right, remedy or claim under this
Agreement. The Holders from time to time shall be beneficiaries of this
Agreement and shall be bound by all of the terms and conditions hereof and
of the Securities evidenced by their Certificates by their acceptance of
delivery of such Certificates.
Section 1.11. Governing Law.
This Agreement and the Securities shall be governed by and
construed in accordance with the laws of the State of New York, without
regard to conflicts of laws principles thereof.
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Section 1.12. Legal Holidays.
In any case where any Purchase Contract Settlement Date shall not
be a Business Day, then (notwithstanding any other provision of this
Agreement, the Income PRIDES Certificates or the Growth PRIDES
Certificates), the Purchase Contracts shall not be performed on such date,
but the Purchase Contracts shall be performed on the immediately following
Business Day with the same force and effect as if performed on the Purchase
Contract Settlement Date.
Section 1.13. Counterparts.
This Agreement may be executed in any number of counterparts by
the parties hereto on separate counterparts, each of which, when so
executed and delivered, shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
Section 1.14. Inspection of Agreement.
A copy of this Agreement shall be available at all reasonable
times during normal business hours at the Corporate Trust Office for
inspection by any Holder.
ARTICLE II
CERTIFICATE FORMS
Section 2.1. Forms of Certificates Generally.
The Income PRIDES Certificates (including the form of Purchase
Contract forming part of the Income PRIDES evidenced thereby) shall be in
substantially the form set forth in Exhibit A hereto, with such letters,
numbers or other marks of identification or designation and such legends or
endorsements printed, lithographed or engraved thereon as may be required
by the rules of any securities exchange on which the Income PRIDES are
listed or any depositary therefor, or as may, consistently herewith, be
determined by the officers of the Company executing such Income PRIDES
Certificates, as evidenced by their execution of the Income PRIDES
Certificates.
The definitive Income PRIDES Certificates shall be printed,
lithographed or engraved on steel engraved borders or may be produced in
any other manner, all as determined by the officers of the Company
executing such Income PRIDES Certificates, consistent with the provisions
of this Agreement, as evidenced by their execution thereof.
The Growth PRIDES Certificates (including the form of Purchase
Contracts forming part of the Growth PRIDES evidenced thereby) shall be in
substantially the form set forth in Exhibit B hereto, with such letters,
numbers or other marks of identification or designation and such legends or
endorsements printed, lithographed or engraved thereon as may be required
by the rules of any securities exchange on which the Growth PRIDES may be
listed or any depositary therefor, or as may, consistently herewith, be
determined by the officers of the Company executing such Growth PRIDES
Certificates, as evidenced by their execution of the Growth PRIDES
Certificates.
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The definitive Growth PRIDES Certificates shall be printed,
lithographed or engraved on steel engraved borders or may be produced in
any other manner, all as determined by the officers of the Company
executing such Growth PRIDES Certificates, consistent with the provisions
of this Agreement, as evidenced by their execution thereof.
Every Global Certificate authenticated, executed on behalf of the
Holders and delivered hereunder shall bear a legend in substantially the
following form:
THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
PURCHASE CONTRACT AGREEMENT (AS HEREINAFTER DEFINED) AND IS
REGISTERED IN THE NAME OF THE CLEARING AGENCY OR A NOMINEE
THEREOF. THIS CERTIFICATE MAY NOT BE EXCHANGED IN WHOLE OR IN PART
FOR A CERTIFICATE REGISTERED, AND NO TRANSFER OF THIS CERTIFICATE
IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON
OTHER THAN SUCH CLEARING AGENCY OR A NOMINEE THEREOF, EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT
AGREEMENT.
Section 2.2. Form of Agent's Certificate of Authentication.
The form of the Agent's certificate of authentication of the
Income PRIDES shall be in substantially the form set forth on the form of
the Income PRIDES Certificates.
The form of the Agent's certificate of authentication of the
Growth PRIDES shall be in substantially the form set forth on the form of
the Growth PRIDES Certificates.
ARTICLE III
THE SECURITIES
Section 3.1. Title and Terms; Denominations.
The aggregate number of Income PRIDES evidenced by Certificates
authenticated, executed on behalf of the Holders and delivered hereunder is
limited to 6,000,000 (6,900,000 if the Underwriters' over-allotment option
pursuant to the Underwriting Agreement is exercised in full), except for
Certificates authenticated, executed and delivered upon registration of
transfer of, in exchange for, or in lieu of, other Certificates pursuant to
Section 3.4, 3.5, 3.10, 3.13, 3.14, 5.7 or 8.5. Growth PRIDES will be
issued only in the manner described in Section 3.13 hereof.
The Certificates shall be issuable only in registered form and
only in denominations of a single Income PRIDES or Growth PRIDES and any
integral multiple thereof.
Section 3.2. Rights and Obligations Evidenced by the Certificates.
Each Income PRIDES Certificate shall evidence the number of Income
PRIDES specified therein, with each such Income PRIDES representing the
ownership by the Holder thereof of a beneficial interest in a Preferred
Share, subject to the Pledge of such Preferred Share by such Holder
pursuant to the Pledge Agreement, and the rights and obligations of the
Holder thereof and the Company under one Purchase Contract. The Agent as
attorney-in-fact for, and on behalf of, the Holder of each Income PRIDES
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shall pledge, pursuant to the Pledge Agreement, the Preferred Share forming
a part of such Income PRIDES, to the Collateral Agent and grant to the
Collateral Agent a security interest in the right, title, and interest of
such Holder in such Preferred Share for the benefit of the Company, to
secure the obligation of the Holder under each Purchase Contract to
purchase the Ordinary Shares of the Company. Prior to the purchase of
Ordinary Shares under each Purchase Contract, the Purchase Contracts shall
not entitle the Holders of Income PRIDES Certificates to any of the rights
of a holder of Ordinary Shares, including, without limitation, the right to
vote or receive any dividends or other payments or to consent or to receive
notice as stockholders in respect of the meetings of stockholders or for
the election of directors of the Company or for any other matter, or any
other rights whatsoever as stockholders of the Company.
Each Growth PRIDES Certificate shall evidence the number of Growth
PRIDES specified therein, with each such Growth PRIDES representing the
ownership by the Holder thereof of a 1/20th undivided beneficial interest
in a Treasury Security, subject to the Pledge of such interest in such
Treasury Security by such Holder pursuant to the Pledge Agreement, and the
rights and obligations of the Holder thereof and the Company under one
Purchase Contract. Prior to the purchase of Ordinary Shares under each
Purchase Contract, the Purchase Contracts shall not entitle the Holders of
Growth PRIDES Certificates to any of the rights of a holder of Ordinary
Shares, including, without limitation, the right to vote or receive any
dividends or other payments or to consent or to receive notice as
stockholders in respect of the meetings of stockholders or for the election
of directors of the Company or for any other matter, or any other rights
whatsoever as stockholders of the Company.
Section 3.3. Execution, Authentication, Delivery and Dating.
Subject to the provisions of Sections 3.13 and 3.14 hereof, upon
the execution and delivery of this Agreement, and at any time and from time
to time thereafter, the Company may deliver Certificates executed by the
Company to the Agent for authentication, execution on behalf of the Holders
and delivery, together with its Issuer Order for authentication of such
Certificates, and the Agent in accordance with such Issuer Order shall
authenticate, execute on behalf of the Holders and deliver such
Certificates.
The Certificates shall be executed on behalf of the Company by the
Chairman of the Board, the Vice Chairman, the President, the Chief
Financial Officer, the Chief Administrative Officer, General Counsel,
Secretary or any Vice President (or other officer performing similar
functions) of the Company and delivered to the Agent. The signature of any
of these officers on the Certificates may be manual or facsimile.
Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication and delivery of
such Certificates or did not hold such offices at the date of such
Certificates.
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No Purchase Contract evidenced by a Certificate shall be valid
until such Certificate has been executed on behalf of the Holder by the
manual signature of an authorized signatory of the Agent, as such Holder's
attorney-in-fact. Such signature by an authorized signatory of the Agent
shall be conclusive evidence that the Holder of such Certificate has
entered into the Purchase Contracts evidenced by such Certificate.
Each Certificate shall be dated the date of its authentication.
No Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose unless there appears on
such Certificate a certificate of authentication substantially in the form
provided for herein executed by an authorized signatory of the Agent by
manual signature, and such certificate upon any Certificate shall be
conclusive evidence, and the only evidence, that such Certificate has been
duly authenticated and delivered hereunder.
Section 3.4. Temporary Certificates.
Pending the preparation of definitive Certificates, the Company
shall execute and deliver to the Agent, and the Agent shall authenticate,
execute on behalf of the Holders, and deliver, in lieu of such definitive
Certificates, temporary Certificates which are in substantially the form
set forth in Exhibit A or Exhibit B hereto, as the case may be, with such
letters, numbers or other marks of identification or designation and such
legends or endorsements printed, lithographed or engraved thereon as may be
required by the rules of any securities exchange on which the Income PRIDES
or Growth PRIDES are listed, or as may, consistently herewith, be
determined by the officers of the Company executing such Certificates, as
evidenced by their execution of the Certificates.
If temporary Certificates are issued, the Company will cause
definitive Certificates to be prepared without unreasonable delay. After
the preparation of definitive Certificates, the temporary Certificates
shall be exchangeable for definitive Certificates upon surrender of the
temporary Certificates at the Corporate Trust Office, at the expense of the
Company and without charge to the Holder. Upon surrender for cancellation
of any one or more temporary Certificates, the Company shall execute and
deliver to the Agent, and the Agent shall authenticate, execute on behalf
of the Holder, and deliver in exchange therefor, one or more definitive
Certificates of like tenor and denominations and evidencing a like number
of Income PRIDES or Growth PRIDES, as the case may be, as the temporary
Certificate or Certificates so surrendered. Until so exchanged, the
temporary Certificates shall in all respects evidence the same benefits and
the same obligations with respect to the Income PRIDES or Growth PRIDES, as
the case may be, evidenced thereby as definitive Certificates.
Section 3.5. Registration; Registration of Transfer and Exchange.
The Agent shall keep at the Corporate Trust Office a register (the
"Income PRIDES Register") in which, subject to such reasonable regulations
as it may prescribe, the Agent shall provide for the registration of Income
PRIDES Certificates and of transfers of Income PRIDES Certificates (the
Agent, in such capacity, the "Income PRIDES Registrar") and a register (the
"Growth PRIDES Register") in which, subject to such reasonable regulations
as it may prescribe, the Agent shall provide for the registration of the
Growth PRIDES Certificates and transfers of Growth PRIDES Certificates (the
Agent, in such capacity, the "Growth PRIDES Registrar").
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Upon surrender for registration of transfer of any Certificate at
the Corporate Trust Office, the Company shall execute and deliver to the
Agent, and the Agent shall authenticate, execute on behalf of the
designated transferee or transferees, and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of any
authorized denominations, like tenor, and evidencing a like number of
Income PRIDES or Growth PRIDES, as the case may be.
At the option of the Holder, Certificates may be exchanged for
other Certificates, of any authorized denominations and evidencing a like
number of Income PRIDES or Growth PRIDES, as the case may be, upon
surrender of the Certificates to be exchanged at the Corporate Trust
Office. Whenever any Certificates are so surrendered for exchange, the
Company shall execute and deliver to the Agent, and the Agent shall
authenticate, execute on behalf of the Holder, and deliver the Certificates
which the Holder making the exchange is entitled to receive.
All Certificates issued upon any registration of transfer or
exchange of a Certificate shall evidence the ownership of the same number
of Income PRIDES or Growth PRIDES, as the case may be, and be entitled to
the same benefits and subject to the same obligations, under this Agreement
as the Income PRIDES or Growth PRIDES, as the case may be, evidenced by the
Certificate surrendered upon such registration of transfer or exchange.
Every Certificate presented or surrendered for registration of
transfer or for exchange shall (if so required by the Agent) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Agent duly executed, by the Holder
thereof or its attorney duly authorized in writing.
No service charge shall be made for any registration of transfer
or exchange of a Certificate, but the Company and the Agent may require
payment from the Holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration
of transfer or exchange of Certificates, other than any exchanges pursuant
to Sections 3.6 and 8.5 not involving any transfer.
Notwithstanding the foregoing, the Company shall not be obligated
to execute and deliver to the Agent, and the Agent shall not be obligated
to authenticate, execute on behalf of the Holder and deliver any
Certificate presented or surrendered for registration of transfer or for
exchange on or after the Business Day immediately preceding the earlier of
the Purchase Contract Settlement Date or the Termination Date. In lieu of
delivery of a new Certificate, upon satisfaction of the applicable
conditions specified above in this Section and receipt of appropriate
registration or transfer instructions from such Holder, the Agent shall (i)
if the Purchase Contract Settlement Date has occurred, deliver the number
of Ordinary Shares issuable in respect of the Purchase Contracts forming a
part of the Securities evidenced by such Certificate, (ii) in the case of
Income PRIDES, if a Termination Event shall have occurred prior to the
Purchase Contract Settlement Date, transfer the aggregate Stated Amount of
the Preferred Shares evidenced thereby, or (iii) in the case of Growth
PRIDES, if a Termination Event shall have occurred prior to the Purchase
Contract Settlement Date, transfer the Treasury Securities evidenced
thereby, in each case subject to the applicable conditions and in
accordance with the applicable provisions of Article Five hereof.
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Section 3.6. Book-Entry Interests.
The Certificates, on original issuance, will be issued in the form
of one or more, fully registered Global Certificates, to be delivered to
the Depositary by, or on behalf of, the Company. Such Global Certificate
shall initially be registered on the books and records of the Company in
the name of Cede & Co., the nominee of the Depositary, and no Beneficial
Owner will receive a definitive Certificate representing such Beneficial
Owner's interest in such Global Certificate, except as provided in Section
3.9. The Agent shall enter into an agreement with the Depositary if so
requested by the Company. Unless and until definitive, fully registered
Certificates have been issued to Beneficial Owners pursuant to Section 3.9:
(a) the provisions of this Section 3.6 shall be in full force and
effect;
(b) the Company shall be entitled to deal with the Clearing Agency
for all purposes of this Agreement (including receiving approvals, votes or
consents hereunder) as the Holder of the Securities and the sole holder of
the Global Certificate(s) and shall have no obligation to the Beneficial
Owners;
(c) to the extent that the provisions of this Section 3.6 conflict
with any other provisions of this Agreement, the provisions of this Section
3.6 shall control; and
(d) the rights of the Beneficial Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by
law and agreements between such Beneficial Owners and the Clearing Agency
and/or the Clearing Agency Participants. The Clearing Agency will make
book-entry transfers among Clearing Agency Participants and receive and
transmit dividends on the Preferred Shares to such Clearing Agency
Participants.
Section 3.7. Notices to Holders.
Whenever a notice or other communication to the Holders is
required to be given under this Agreement, the Company or the Company's
agent shall give such notices and communications to the Holders and, with
respect to any Securities registered in the name of a Clearing Agency or
the nominee of a Clearing Agency, the Company or the Company's agent shall,
except as set forth herein, have no obligations to the Beneficial Owners.
Section 3.8. Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its services as
securities depositary with respect to the Securities, the Company may, in
its sole discretion, appoint a successor Clearing Agency with respect to
the Securities.
Section 3.9. Definitive Certificates.
If (i) a Clearing Agency elects to discontinue its services as
securities depositary with respect to the Securities and a successor
Clearing Agency is not appointed within 90 days after such discontinuance
pursuant to Section 3.8, (ii) the Company elects to terminate the
book-entry system through the Clearing Agency with respect to the
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Securities, or (iii) there shall have occurred and be continuing a default
by the Company in respect of its obligations under one or more Purchase
Contracts, then upon surrender of the Global Certificates representing the
Book-Entry Interests with respect to the Securities by the Clearing Agency,
accompanied by registration instructions, the Company shall cause
definitive Certificates to be delivered to Beneficial Owners in accordance
with the instructions of the Clearing Agency. The Company shall not be
liable for any delay in delivery of such instructions and may conclusively
rely on and shall be protected in relying on, such instructions.
Section 3.10. Mutilated, Destroyed, Lost and Stolen Certificates.
If any mutilated Certificate is surrendered to the Agent, the
Company shall execute and deliver to the Agent, and the Agent shall
authenticate, execute on behalf of the Holder, and deliver in exchange
therefor, a new Certificate at the cost of the Holder, evidencing the same
number of Income PRIDES or Growth PRIDES, as the case may be, and bearing a
Certificate number not contemporaneously outstanding.
If there shall be delivered to the Company and the Agent (i)
evidence to their satisfaction of the destruction, loss or theft of any
Certificate, and (ii) such security or indemnity at the cost of the Holder
as may be required by them to hold each of them and any agent of any of
them harmless, then, in the absence of notice to the Company or the Agent
that such Certificate has been acquired by a bona fide purchaser, the
Company shall execute and deliver to the Agent, and the Agent shall
authenticate, execute on behalf of the Holder, and deliver to the Holder,
in lieu of any such destroyed, lost or stolen Certificate, a new
Certificate, evidencing the same number of Income PRIDES or Growth PRIDES,
as the case may be, and bearing a Certificate number not contemporaneously
outstanding.
Notwithstanding the foregoing, the Company shall not be obligated
to execute and deliver to the Agent, and the Agent shall not be obligated
to authenticate, execute on behalf of the Holder, and deliver to the
Holder, a Certificate on or after the Business Day immediately preceding
the earlier of the Purchase Contract Settlement Date or the Termination
Date. In lieu of delivery of a new Certificate, upon satisfaction of the
applicable conditions specified above in this Section and receipt of
appropriate registration or transfer instructions from such Holder, the
Agent shall (i) if the Purchase Contract Settlement Date has occurred,
deliver the number of Ordinary Shares issuable in respect of the Purchase
Contracts forming a part of the Securities evidenced by such Certificate,
or (ii) if a Termination Event shall have occurred prior to the Purchase
Contract Settlement Date, transfer the Preferred Shares or the Treasury
Securities, as the case may be, evidenced thereby, in each case subject to
the applicable conditions and in accordance with the applicable provisions
of Article Five hereof.
Upon the issuance of any new Certificate under this Section, the
Company and the Agent may require the payment by the Holder of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Agent) connected therewith.
Every new Certificate issued pursuant to this Section in lieu of
any destroyed, lost or stolen Certificate shall constitute an original
additional contractual obligation of the Company and of the Holder in
respect of the Security evidenced thereby, whether or not the destroyed,
lost or stolen Certificate (and the Securities evidenced thereby) shall be
at any time enforceable by anyone, and shall be entitled to all the
benefits and be subject to all the obligations of this Agreement equally
and proportionately with any and all other Certificates delivered
hereunder.
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The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen
Certificates.
Section 3.11. Persons Deemed Owners.
Prior to due presentment of a Certificate for registration of
transfer, the Company and the Agent, and any agent of the Company or the
Agent, may treat the Person in whose name such Certificate is registered as
the owner of the Income PRIDES or Growth PRIDES evidenced thereby, for the
purpose of receiving dividends on the Preferred Shares, if declared,
performance of the Purchase Contracts and for all other purposes
whatsoever, whether or not any dividends on the Preferred Shares shall be
overdue and notwithstanding any notice to the contrary, and neither the
Company nor the Agent, nor any agent of the Company or the Agent, shall be
affected by notice to the contrary.
Notwithstanding the foregoing, with respect to any Global
Certificate, nothing herein shall prevent the Company, the Agent or any
agent of the Company or the Agent, from giving effect to any written
certification, proxy or other authorization furnished by any Clearing
Agency (or its nominee), as a Holder, with respect to such Global
Certificate or impair, as between such Clearing Agency and owners of
beneficial interests in such Global Certificate, the operation of customary
practices governing the exercise of rights of such Clearing Agency (or its
nominee) as Holder of such Global Certificate.
Section 3.12. Cancellation.
All Certificates surrendered for delivery of Ordinary Shares on or
after the Purchase Contract Settlement Date, upon the transfer of Preferred
Shares or Treasury Securities, as the case may be, after the occurrence of
a Termination Event or pursuant to an Early Settlement, or upon the
registration of a transfer or exchange of a Security, or a Collateral
Substitution or the re-establishment of an Income PRIDES shall, if
surrendered to any Person other than the Agent, be delivered to the Agent
and, if not already cancelled, shall be promptly cancelled by it. The
Company may at any time deliver to the Agent for cancellation any
Certificates previously authenticated, executed and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all
Certificates so delivered shall, upon Issuer Order, be promptly cancelled
by the Agent. No Certificates shall be authenticated, executed on behalf of
the Holder and delivered in lieu of or in exchange for any Certificates
cancelled as provided in this Section, except as expressly permitted by
this Agreement. All cancelled Certificates held by the Agent shall be
disposed of by the Agent in accordance with its customary practices.
If the Company or any Affiliate of the Company shall acquire any
Certificate, such acquisition shall not operate as a cancellation of such
Certificate unless and until such Certificate is delivered to the Agent
cancelled or for cancellation.
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Section 3.13. Establishment or Reestablishment of Growth PRIDES.
A Holder may separate the Preferred Shares from the related
Purchase Contracts in respect of an Income PRIDES by substituting for such
Preferred Shares, Treasury Securities in an aggregate principal amount at
maturity equal to the aggregate Stated Amount of such Preferred Shares (a
"Collateral Substitution"), at any time from and after the date of this
Agreement and on or prior to the fifth Business Day immediately preceding
the Purchase Contract Settlement Date by (a) depositing with the Collateral
Agent Treasury Securities having an aggregate principal amount at maturity
equal to the aggregate Stated Amount of the Preferred Shares comprising
part of such Income PRIDES and (b) transferring the related Income PRIDES
to the Agent accompanied by a notice to the Agent, substantially in the
form of Exhibit D hereto, stating that the Holder has transferred the
relevant amount of Treasury Securities to the Collateral Agent and
requesting that the Agent instruct the Collateral Agent to release the
Preferred Shares underlying such Income PRIDES, whereupon the Agent shall
promptly give such instruction to the Collateral Agent, substantially in
the form of Exhibit C hereto. Upon receipt of the Treasury Securities
described in clause (a) above and the instruction described in clause (b)
above, in accordance with the terms of the Pledge Agreement, the Collateral
Agent will release to the Agent, on behalf of the Holder, Preferred Shares
having a corresponding aggregate Stated Amount of such Preferred Shares
from the Pledge, free and clear of the Company's security interest therein,
and upon receipt thereof the Agent shall promptly:
(i) cancel the related Income PRIDES;
(ii) transfer the related Preferred Shares to the
Holder; and
(iii) authenticate, execute on behalf of such Holder and
deliver a Growth PRIDES Certificate executed by the Company in
accordance with Section 3.3 evidencing the same number of Purchase
Contracts as were evidenced by the cancelled Income PRIDES.
Holders who elect to separate the Preferred Shares from the
related Purchase Contract and to substitute Treasury Securities for such
Preferred Shares, shall be responsible for any fees or expenses payable to
the Collateral Agent for its services as Collateral Agent in respect of the
substitution, and the Company shall not be responsible for any such fees or
expenses.
Holders may make Collateral Substitutions only in integral
multiples of 20 Income PRIDES.
In the event a Holder making a Collateral Substitution pursuant to
this Section 3.13 fails to effect a book-entry transfer of the Income
PRIDES or fails to deliver an Income PRIDES Certificate to the Agent after
depositing Treasury Securities with the Collateral Agent, the Preferred
Shares constituting a part of such Income PRIDES, and any distributions on
such Preferred Share, shall be held in the name of the Agent or its nominee
in trust for the benefit of such Holder, until such Income PRIDES are so
transferred or the Income PRIDES Certificate is so delivered, as the case
may be, or, with respect to an Income PRIDES Certificate, such Holder
provides evidence satisfactory to the Company and the Agent that such
Income PRIDES Certificate has been destroyed, lost or stolen, together with
any indemnity that may be required by the Agent and the Company.
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Except as described in this Section 3.13, for so long as the
Purchase Contract underlying an Income PRIDES remains in effect, such
Income PRIDES shall not be separable into its constituent parts, and the
rights and obligations of the Holder in respect of the Preferred Shares,
and Purchase Contract comprising such Income PRIDES may be acquired, and
may be transferred and exchanged, only as an Income PRIDES.
Section 3.14. Establishment or Reestablishment of Income PRIDES.
A Holder of a Growth PRIDES may create or recreate Income PRIDES
at any time on or prior to the fifth Business Day immediately preceding the
Purchase Contract Settlement Date by (a) depositing with the Collateral
Agent Preferred Shares having an aggregate Stated Amount equal to the
aggregate principal amount at maturity of the Pledged Treasury Securities
comprising part of the Growth PRIDES and (b) transferring the related
Growth PRIDES to the Agent accompanied by a notice to the Agent,
substantially in the form of Exhibit D hereto, stating that the Holder has
transferred the relevant amount of Preferred Shares, to the Collateral
Agent and requesting that the Agent instruct the Collateral Agent to
release the Treasury Securities underlying such Growth PRIDES, whereupon
the Agent shall promptly give such instruction to the Collateral Agent,
substantially in the form of Exhibit C hereto. Upon receipt of the
Preferred Shares described in clause (a) above and the instruction
described in clause (b) above, in accordance with the terms of the Pledge
Agreement, the Collateral Agent will effect the release of the Treasury
Securities having a corresponding aggregate principal amount at maturity
from the Pledge to the Agent free and clear of the Company's security
interest therein, and upon receipt thereof the Agent shall promptly:
(i) cancel the related Growth PRIDES;
(ii) transfer the Treasury Securities to the Holder; and
(iii) authenticate, execute on behalf of such Holder and
deliver an Income PRIDES Certificate executed by the Company in
accordance with Section 3.3 evidencing the same number of Purchase
Contracts as were evidenced by the cancelled Growth PRIDES.
Holders of Growth PRIDES may establish or reestablish Income
PRIDES in integral multiples of 20 Growth PRIDES for 20 Preferred Shares
only.
Except as provided in this Section 3.14, for so long as the
Purchase Contract underlying a Growth PRIDES remains in effect, such Growth
PRIDES shall not be separable into its constituent parts and the rights and
obligations of the Holder of such Growth PRIDES in respect of the Treasury
Security and Purchase Contract comprising such Growth PRIDES may be
acquired, and may be transferred and exchanged only as a Growth PRIDES.
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Section 3.15. Transfer of Collateral upon Occurrence of Termination Event.
Upon the occurrence of a Termination Event and the transfer to the
Agent of the Preferred Shares or the Treasury Securities, as the case may
be, underlying the Income PRIDES and the Growth PRIDES pursuant to the
terms of the Pledge Agreement, the Agent shall request transfer
instructions with respect to such Preferred Shares or Treasury Securities,
as the case may be, from each Holder by written request mailed to such
Holder at its address as it appears in the Income PRIDES Register or the
Growth PRIDES Register, as the case may be. Upon book-entry transfer of the
Income PRIDES or Growth PRIDES or delivery of an Income PRIDES Certificate
or Growth PRIDES Certificate to the Agent with such transfer instructions,
the Agent shall transfer the Preferred Shares or Treasury Securities, as
the case may be, underlying such Income PRIDES or Growth PRIDES, as the
case may be, to such Holder by book-entry transfer, or other appropriate
procedures, in accordance with such instructions. In the event a Holder of
Income PRIDES or Growth PRIDES fails to effect such transfer or delivery,
the Preferred Shares or Treasury Securities, as the case may be, underlying
such Income PRIDES or Growth PRIDES, as the case may be, and any
distributions thereon, shall be held in the name of the Agent or its
nominee in trust for the benefit of such Holder, until such Income PRIDES
or Growth PRIDES are transferred or the Income PRIDES Certificate or Growth
PRIDES Certificate is surrendered or such Holder provides satisfactory
evidence that such Income PRIDES Certificate or Growth PRIDES Certificate
has been destroyed, lost or stolen, together with any indemnity that may be
required by the Agent and the Company.
Section 3.16. CUSIP Numbers.
The Company in issuing the Securities may use CUSIP numbers (if
then generally in use), and, if so, the Agent shall use CUSIP numbers in
notices as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers. The Company will
promptly notify the Agent of any change in the CUSIP numbers.
ARTICLE IV
THE PREFERRED SHARES
Section 4.1. Payment of Dividend; Rights to Dividends Preserved;
Dividend Rate Reset; Notice.
A distribution on any Preferred Share which is paid on any Payment
Date shall, subject to receipt thereof by the Agent from the Collateral
Agent as provided by the terms of the Pledge Agreement, be paid to the
Person in whose name the Income PRIDES Certificate (or one or more
Predecessor Income PRIDES Certificates) of which such Preferred Share is a
part is registered at the close of business on the Record Date for such
Payment Date.
Each Income PRIDES Certificate evidencing Preferred Shares
delivered under this Agreement upon registration of transfer of or in
exchange for or in lieu of any other Income PRIDES Certificate shall carry
the rights to accumulated and unpaid dividends, and to accumulate
dividends, which were carried by the Preferred Shares underlying such other
Income PRIDES Certificate.
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In the case of any Income PRIDES with respect to which Cash
Settlement of the underlying Purchase Contract is effected on the Business
Day immediately preceding the Purchase Contract Settlement Date pursuant to
prior notice, or with respect to which Early Settlement of the underlying
Purchase Contract is effected on an Early Settlement Date, or with respect
to which a Collateral Substitution is effected, in each case on a date that
is after any Record Date and on or prior to the next succeeding Payment
Date, dividends on the Preferred Shares underlying such Income PRIDES
otherwise payable on such Payment Date shall be payable on such Payment
Date notwithstanding such Cash Settlement or Early Settlement or Collateral
Substitution, and such dividends shall, subject to receipt thereof by the
Agent, be payable to the Person in whose name the Income PRIDES Certificate
(or one or more Predecessor Income PRIDES Certificates) was registered at
the close of business on the Record Date. Except as otherwise expressly
provided in the immediately preceding sentence, in the case of any Income
PRIDES with respect to which Cash Settlement or Early Settlement of the
underlying Purchase Contract is effected on the Business Day immediately
preceding the Purchase Contract Settlement Date or an Early Settlement
Date, as the case may be, or with respect to which a Collateral
Substitution has been effected, dividends on the related Preferred Shares
that would otherwise be payable after the Purchase Contract Settlement Date
or Early Settlement Date shall not be payable hereunder to the Holder of
such Income PRIDES; provided, however, that to the extent that such Holder
continues to hold the separated Preferred Shares that formerly comprised a
part of such Holder's Income PRIDES, such Holder shall be entitled to
receive the dividends on such separated Preferred Shares.
The applicable Dividend Rate on the Preferred Shares on and after
the Purchase Contract Settlement Date will be reset on the third Business
Day immediately preceding the Purchase Contract Settlement Date to the
Reset Rate (such Reset Rate to be in effect on and after the Purchase
Contract Settlement Date). On the Reset Announcement Date, the Reset Spread
and the One-Month Treasury Bill to be used to determine the Reset Rate will
be announced by the Company. On the Business Day immediately following the
Reset Announcement Date, the Preferred Shares Holders will be notified of
such Reset Spread and the One-Month Treasury Bill by the Company. Such
notice shall be sufficiently given to Holders of Preferred Shares if
published in an Authorized Newspaper in The City of New York.
Not less than 7 calendar days nor more than 15 calendar days prior
to the Reset Announcement Date, the Company will notify DTC or its nominee
(or any successor Clearing Agency or its nominee) by first-class mail,
postage prepaid, to notify the Beneficial Owners or Clearing Agency
Participants holding Income PRIDES or Growth PRIDES, of such Reset
Announcement Date and the procedures to be followed by such Holders of
Income PRIDES who intend to settle their obligation under the Purchase
Contract with separate cash on the Purchase Contract Settlement Date.
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Section 4.2. Notice and Voting.
Under the terms of the Pledge Agreement, the Agent will be
entitled to exercise the voting and any other consensual rights pertaining
to the Preferred Shares pledged with the Collateral Agent but only to the
extent instructed by the Holders as described below. Upon receipt of notice
of any meeting at which holders of Preferred Shares are entitled to vote or
upon any solicitation of consents, waivers or proxies of holders of
Preferred Shares, the Agent shall, as soon as practicable thereafter, mail
to the Holders of Income PRIDES a notice (a) containing such information as
is contained in the notice or solicitation, (b) stating that each Holder on
the record date set by the Agent therefor (which, to the extent possible,
shall be the same date as the record date for determining the holders of
Preferred Shares entitled to vote) shall be entitled to instruct the Agent
as to the exercise of the voting rights pertaining to the Preferred Shares
underlying their Income PRIDES and (c) stating the manner in which such
instructions may be given. Upon the written request of the Holders of
Income PRIDES on such record date, the Agent shall endeavor insofar as
practicable to vote or cause to be voted, in accordance with the
instructions set forth in such requests, the maximum number of Preferred
Shares as to which any particular voting instructions are received. In the
absence of specific instructions from the Holder of an Income PRIDES, the
Agent shall abstain from voting the Preferred Share underlying such Income
PRIDES. The Company hereby agrees, if applicable, to solicit Holders of
Income PRIDES to timely instruct the Agent in order to enable the Agent to
vote such Preferred Shares.
ARTICLE V
THE PURCHASE CONTRACTS
Section 5.1. Purchase of Ordinary Shares.
Each Purchase Contract shall, unless an Early Settlement has
occurred in accordance with Section 5.7 hereof, obligate the Holder of the
related Security to purchase, and the Company to sell, on the Purchase
Contract Settlement Date at a price equal to the Stated Amount (the
"Purchase Price"), a number of newly issued Ordinary Shares equal to the
Settlement Rate unless, on or prior to the Purchase Contract Settlement
Date, there shall have occurred a Termination Event with respect to the
Security of which such Purchase Contract is a part. The "Settlement Rate"
is equal to (a) if the Applicable Market Value (as defined below) is equal
to or greater than $26.3281 (the "Threshold Appreciation Price"), 1.8991
Ordinary Shares per Purchase Contract, (b) if the Applicable Market Value
is less than the Threshold Appreciation Price, but is greater than $18.9563
(the "Threshold Depreciation Price"), the number of Ordinary Shares equal
to the Stated Amount divided by the Applicable Market Value and (c) if the
Applicable Market Value is less than or equal to Threshold Depreciation
Price, 2.6376 Ordinary Shares per Purchase Contract, in each case subject
to adjustment as provided in Section 5.4 (and in each case rounded upward
or downward to the nearest 1/10,000th of a share). As provided in Section
5.8, no fractional Ordinary Shares will be issued upon settlement of
Purchase Contracts.
The "Applicable Market Value" means the average of the Closing
Prices per Ordinary Share on each of the 20 consecutive Trading Days ending
on the third Trading Day immediately preceding the Purchase Contract
Settlement Date.
The "Closing Price" of the Ordinary Shares on any date of
determination means the closing sale price (or, if no closing price is
reported, the last reported sale price) of the Ordinary Shares on the New
York Stock Exchange (the "NYSE") on such date or, if the Ordinary Shares
are not listed for trading on the NYSE on any such date, as reported in the
composite transactions for the principal United States securities exchange
on which the Ordinary Shares are so listed, or if the Ordinary Shares are
not so listed on a United States national or regional securities exchange,
as reported by The Nasdaq Stock Market, or, if the Ordinary Shares are not
so reported, the last quoted bid price for the Ordinary Shares in the
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over-the-counter market as reported by the National Quotation Bureau or
similar organization, or, if such bid price is not available, the market
value of the Ordinary Shares on such date as of 4:00 p.m., New York City
time, as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Company.
A "Trading Day" means a day on which the Ordinary Shares (A) are
not suspended from trading on any national or regional securities exchange
or association or over-the-counter market at the close of business and (B)
have traded at least once on the national or regional securities exchange
or association or over-the-counter market that is the primary market for
the trading of the Ordinary Shares.
Each Holder of an Income PRIDES or a Growth PRIDES, by its
acceptance thereof, irrevocably authorizes the Agent to enter into and
perform the related Purchase Contract on its behalf as its attorney-in-fact
(including the execution of Certificates on behalf of such Holder), agrees
to be bound by the terms and provisions thereof, covenants and agrees to
perform its obligations under such Purchase Contracts, and consents to the
provisions hereof, irrevocably authorizes the Agent as its attorney-in-fact
to enter into and perform the Pledge Agreement on its behalf as its
attorney-in-fact, and consents to and agrees to be bound by the Pledge of
the Preferred Shares or the Treasury Securities pursuant to the Pledge
Agreement; provided that upon a Termination Event, the rights of the Holder
of such Security under the Purchase Contract may be enforced without regard
to any other rights or obligations. Each Holder of an Income PRIDES or a
Growth PRIDES, by its acceptance thereof, further covenants and agrees,
that, to the extent and in the manner provided in Section 5.2 and the
Pledge Agreement, but subject to the terms thereof, payments in respect of
the Stated Amount of the Preferred Shares or the Proceeds of the Treasury
Securities on the Purchase Contract Settlement Date shall be paid by the
Collateral Agent to the Company in satisfaction of such Holder's
obligations under such Purchase Contract and such Holder shall acquire no
right, title or interest in such payments.
Upon registration of transfer of a Certificate, the transferee
shall be bound (without the necessity of any other action on the part of
such transferee), under the terms of this Agreement, the Purchase Contracts
underlying such Certificate and the Pledge Agreement and the transferor
shall be released from the obligations under this Agreement, the Purchase
Contracts underlying the Certificates so transferred and the Pledge
Agreement. The Company covenants and agrees, and each Holder of a
Certificate, by its acceptance thereof, likewise covenants and agrees, to
be bound by the provisions of this paragraph.
Section 5.2. Payment of Purchase Price.
(a) (i) Unless a Holder settles the underlying Purchase Contract
through the early delivery of cash to the Agent in the manner described in
Section 5.7, each Holder of an Income PRIDES must notify the Agent by use
of a notice in substantially the form of Exhibit E hereto of its intention
to pay in cash ("Cash Settlement") the Purchase Price for the Ordinary
Shares to be purchased pursuant to a Purchase Contract. Such notice shall
be made on or prior to 5:00 p.m., New York City time, on the fifth Business
Day immediately preceding the Purchase Contract Settlement Date. The Agent
shall promptly notify the Collateral Agent of the receipt of such a notice
from a Holder intending to make a Cash Settlement.
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(ii) A Holder of an Income PRIDES who has so notified the Agent of
its intention to make a Cash Settlement is required to pay the Purchase
Price to the Collateral Agent prior to 11:00 a.m., New York City time, on
the Business Day immediately preceding the Purchase Contract Settlement
Date in lawful money of the United States by certified or cashiers' check
or wire transfer, in each case in immediately available funds payable to or
upon the order of the Company. Any cash received by the Collateral Agent
will be invested promptly by the Collateral Agent in Permitted Investments
and paid to the Company on the Purchase Contract Settlement Date in
settlement of the Purchase Contract in accordance with the terms of this
Agreement and the Pledge Agreement. Any funds received by the Collateral
Agent in respect of the investment earnings from the investment in such
Permitted Investments will be distributed to the Agent when received for
payment to the Holder.
(iii) If a Holder of an Income PRIDES fails to notify the Agent of
its intention to make a Cash Settlement in accordance with paragraph (a)(i)
above, such failure shall constitute an event of default and the Holder
shall be deemed to have consented to the disposition of the pledged
Preferred Shares pursuant to the remarketing as described in paragraph (b)
below. If a Holder of an Income PRIDES does notify the Agent as provided in
paragraph (a)(i) above of its intention to pay the Purchase Price in cash,
but fails to make such payment as required by paragraph (a)(ii) above, such
failure shall also constitute a default; however, the Preferred Shares of
such a Holder will not be remarketed but instead the Collateral Agent, for
the benefit of the Company, will exercise its rights as a secured party
with respect to such Preferred Shares, including those rights specified in
paragraph (c) below.
(b) In order to dispose of the Preferred Shares of Income PRIDES
Holders who have not notified the Agent of their intention to effect a Cash
Settlement as provided in paragraph (a)(i) above, the Company shall engage
a nationally recognized investment bank (the "Remarketing Agent") pursuant
to the Remarketing Agreement to sell such Preferred Shares. In order to
facilitate the remarketing, the Agent shall notify, by 10:00 a.m., New York
City time, on the fourth Business Day immediately preceding the Purchase
Contract Settlement Date, the Remarketing Agent of the aggregate number of
Preferred Shares to be remarketed. Concurrently, the Collateral Agent,
pursuant to the terms of the Pledge Agreement, will present for remarketing
such Preferred Shares to the Remarketing Agent. Upon receipt of such notice
from the Agent and such Preferred Shares from the Collateral Agent, the
Remarketing Agent will, on the third Business Day immediately preceding the
Purchase Contract Settlement Date, use its reasonable efforts to remarket
such Preferred Shares on such date at a price of approximately 100.5% (but
not less than 100%) of the aggregate stated liquidation amount of such
Preferred Shares, plus accumulated and unpaid distributions, if any,
thereon. After deducting as the remarketing fee ("Remarketing Fee") an
amount not exceeding 25 basis points (.25%) of the aggregate stated
liquidation amount of the remarketed Preferred Shares from any amount of
such proceeds in excess of the aggregate stated liquidation amount of the
remarketed Preferred Shares plus accumulated and unpaid dividends, if any,
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then the Remarketing Agent will remit the entire amount of the proceeds
from such remarketing to the Collateral Agent. Such portion of the
proceeds, equal to the aggregate stated liquidation amount of such
Preferred Shares, will automatically be applied by the Collateral Agent, in
accordance with the Pledge Agreement to satisfy in full such Income PRIDES
holders' obligations to pay the Purchase Price for the Ordinary Shares
under the related Purchase Contracts on the Purchase Contract Settlement
Date. Any proceeds in excess of those required to pay the Purchase Price
and the Remarketing Fee will be remitted to the Agent for payment to the
Holders of the related Income PRIDES. Income PRIDES Holders whose Preferred
Shares are so remarketed will not otherwise be responsible for the payment
of any Remarketing Fee in connection therewith. If, in spite of using its
reasonable efforts, the Remarketing Agent cannot remarket the related
Preferred Shares of such Holders of Income PRIDES at a price not less then
100% of the aggregate stated liquidation amount of such Preferred Shares
plus accumulated and unpaid dividends, if any, the remarketing will be
deemed to have failed (a "Failed Remarketing") and in accordance with the
terms of the Pledge Agreement, the Collateral Agent for the benefit of the
Company will exercise its rights as a secured party with respect to such
Preferred Shares, including those actions specified in paragraph (c) below;
provided, that if upon a Failed Remarketing the Collateral Agent exercises
such rights for the benefit of the Company with respect to such Preferred
Shares, any accumulated and unpaid dividends on such Preferred Shares will
become payable by the Company to the Agent for payment to the Beneficial
Owner of the Income PRIDES to which such Preferred Shares relates. Such
payment will be made by the Company on or prior to 11 a.m., New York City
time, on the Purchase Contract Settlement Date in lawful money of the
United States by certified or cashiers' check or wire transfer in
immediately available funds payable to or upon the order of the Agent. The
Company will cause a notice of such Failed Remarketing to be published on
the second Business Day immediately preceding the Purchase Contract
Settlement Date in an Authorized Newspaper in The City of New York.
(c) With respect to any Preferred Shares beneficially owned by
Holders who have elected Cash Settlement but failed to deliver cash as
required in (a)(ii) above, or with respect to Preferred Shares which are
subject to a Failed Remarketing, the Collateral Agent for the benefit of
the Company reserves all of its rights as a secured party with respect
thereto and, subject to applicable law and paragraph (g) below, may, among
other things, (i) retain the Preferred Shares in full satisfaction of the
Holders obligations under the Purchase Contracts or (ii) sell the Preferred
Shares in one or more public or private sales.
(d) (i) Unless a Holder of Growth PRIDES settles the underlying
Purchase Contract through the early delivery of cash to the Agent in the
manner described in Section 5.7, each Holder of a Growth PRIDES must notify
the Agent by use of a notice in substantially the form of Exhibit E hereto
of its intention to pay in cash the Purchase Price for the Ordinary Shares
to be purchased pursuant to a Purchase Contract on or prior to 5:00 p.m.,
New York City time, on the second Business Day immediately preceding the
Purchase Contract Settlement Date.
(ii) A Holder of a Growth PRIDES who has so notified the Agent of
its intention to make a Cash Settlement in accordance with paragraph (d)(i)
above is required to pay the Purchase Price to the Collateral Agent prior
to 11:00 a.m., New York City time, on the Business Day immediately
preceding the Purchase Contract Settlement Date in lawful money of the
United States by certified or cashiers' check or wire transfer, in each
case in immediately available funds payable to or upon the order of the
Company. Any cash received by the Collateral Agent will be invested
promptly by the Collateral Agent in specific Permitted Investments as
directed in writing by the Company and paid to the Company on the Purchase
Contract Settlement Date in settlement of the Purchase Contract in
accordance with the terms of this Agreement and the Pledge Agreement. Any
funds received by the Collateral Agent in respect of the investment
earnings from the investment in such Permitted Investments will be
distributed to the Agent when received for payment to the Holder.
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(iii) If a Holder of a Growth PRIDES notifies the Agent of its
intention to make a Cash Settlement in accordance with paragraph (d)(i)
above, but fails to make such payment as required by paragraph (d)(ii)
above, then upon the maturity of the Pledged Treasury Securities held by
the Collateral Agent on the Business Day immediately prior to the Purchase
Contract Settlement Date, the principal amount at maturity of the Treasury
Securities received by the Collateral Agent will be invested promptly in
specific overnight Permitted Investments as directed in writing by the
Company. On the Purchase Contract Settlement Date, an amount equal to the
Purchase Price will be remitted to the Company as payment thereof without
receiving any instructions from the Holder. In the event the sum of the
proceeds from the related Pledged Treasury Securities and the investment
earnings earned from such investments is in excess of the aggregate
Purchase Price of the Purchase Contracts being settled thereby, the
Collateral Agent will distribute such excess to the Agent for the benefit
of the Holder of the related Growth PRIDES when received.
(e) Any distribution to Holders of excess funds and interest
described above shall be payable at the office of the Agent in The City of
New York maintained for that purpose or, at the option of the Holder, by
check mailed to the address of the Person entitled thereto at such address
as it appears on the Register.
(f) Unless a Holder settles the underlying Purchase Contract
through the early delivery of cash to the Collateral Agent in the manner
described herein, the Company shall not be obligated to issue any Ordinary
Shares in respect of a Purchase Contract or deliver any certificate
therefor to the Holder unless it shall have received payment in full of the
Purchase Price for the Ordinary Shares to be purchased thereunder in the
manner herein set forth.
Upon Cash Settlement of any Purchase Contract, (i) the Collateral
Agent will in accordance with the terms of the Pledge Agreement cause the
Pledged Preferred Shares or the Pledged Treasury Securities underlying the
relevant Security to be released from the Pledge by the Collateral Agent
free and clear of any security interest of the Company and transferred to
the Agent for delivery to the Holder thereof or its designee as soon as
practicable and (ii) subject to the receipt thereof from the Collateral
Agent, the Agent shall, by book-entry transfer, or other appropriate
procedures, in accordance with instructions provided by the Holder thereof,
transfer such Preferred Shares or such Treasury Securities (or, if no such
instructions are given to the Agent by the Holder, the Agent shall hold
such Preferred Shares or such Treasury Securities, and any dividends or
distributions thereon, in the name of the Agent or its nominee in trust for
the benefit of such Holder).
(g) The obligations of the Holders to pay the Purchase Price are
non-recourse obligations and are payable solely out of any Cash Settlement
or the proceeds of any Collateral Pledged to secure the obligations of the
Holders and in no event will Holders be liable for any deficiency between
the proceeds of Collateral disposition and the Purchase Price.
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Section 5.3. Issuance of Ordinary Shares.
Unless a Termination Event shall have occurred on or prior to the
Purchase Contract Settlement Date or an Early Settlement shall have
occurred, on the Purchase Contract Settlement Date, upon its receipt of
payment in full of the Purchase Price for the Ordinary Shares purchased by
the Holders pursuant to the foregoing provisions of this Article and
subject to Section 5.4(b), the Company shall issue and deposit with the
Agent, for the benefit of the Holders of the Outstanding Securities, one or
more certificates representing the newly issued Ordinary Shares registered
in the name of the Agent (or its nominee) as custodian for the Holders
(such certificates for Ordinary Shares, together with any dividends or
distributions for which a record date and payment date for such dividend or
distribution has occurred after the Purchase Contract Settlement Date,
being hereinafter referred to as the "Purchase Contract Settlement Fund")
to which the Holders are entitled hereunder. Subject to the foregoing, upon
surrender of a Certificate to the Agent on or after the Purchase Contract
Settlement Date, together with settlement instructions thereon duly
completed and executed, the Holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of
whole Ordinary Shares which such Holder is entitled to receive pursuant to
the provisions of this Article Five (after taking into account all
Securities then held by such Holder) together with cash in lieu of
fractional shares as provided in Section 5.8 and any dividends or
distributions with respect to such shares constituting part of the Purchase
Contract Settlement Fund, but without any interest thereon, and the
Certificate so surrendered shall forthwith be cancelled. Such shares shall
be registered in the name of the Holder or the Holder's designee as
specified in the settlement instructions provided by the Holder to the
Agent. If any Ordinary Shares issued in respect of a Purchase Contract are
to be registered to a Person other than the Person in whose name the
Certificate evidencing such Purchase Contract is registered, no such
registration shall be made unless the Person requesting such registration
has paid any transfer and other taxes required by reason of such
registration in a name other than that of the registered Holder of the
Certificate evidencing such Purchase Contract or has established to the
satisfaction of the Company that such tax either has been paid or is not
payable.
Section 5.4. Adjustment of Settlement Rate.
(a) Adjustments for Dividends, Distributions, Stock Splits, Etc.
(1) In case the Company shall pay or make a dividend or
other distribution on the Ordinary Shares in Ordinary Shares, the
Settlement Rate, as in effect at the opening of business on the day
following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be increased by dividing
such Settlement Rate by a fraction of which the numerator shall be the
number of Ordinary Shares outstanding at the close of business on the date
fixed for such determination and the denominator shall be the sum of such
number of shares and the total number of shares constituting such dividend
or other distribution, such increase to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (1), the number of
Ordinary Shares at the time outstanding shall not include shares held in
the treasury of the Company but shall include any shares issuable in
respect of any scrip certificates issued in lieu of fractions of Ordinary
Shares. The Company will not pay any dividend or make any distribution on
Ordinary Shares held in the treasury of the Company.
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(2) In case the Company shall issue rights, options or
warrants to all holders of its Ordinary Shares (not being available on an
equivalent basis to Holders of the Securities upon settlement of the
Purchase Contracts underlying such Securities) entitling them, for a period
expiring within 45 days after the record date for the determination of
shareholders entitled to receive such rights, options or warrants, to
subscribe for or purchase Ordinary Shares at a price per share less than
the Current Market Price per Ordinary Share on the date fixed for the
determination of shareholders entitled to receive such rights, options or
warrants (other than pursuant to a dividend reinvestment plan), the
Settlement Rate in effect at the opening of business on the day following
the date fixed for such determination shall be increased by dividing such
Settlement Rate by a fraction, the numerator of which shall be the number
of Ordinary Shares outstanding at the close of business on the date fixed
for such determination plus the number of Ordinary Shares which the
aggregate of the offering price of the total number of Ordinary Shares so
offered for subscription or purchase would purchase at such Current Market
Price and the denominator of which shall be the number of Ordinary Shares
outstanding at the close of business on the date fixed for such
determination plus the number of Ordinary Shares so offered for
subscription or purchase, such increase to become effective immediately
after the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (2), the number of
Ordinary Shares at any time outstanding shall not include shares held in
the treasury of the Company but shall include any shares issuable in
respect of any scrip certificates issued in lieu of fractions of Ordinary
Shares. The Company shall not issue any such rights, options or warrants in
respect of Ordinary Shares held in the treasury of the Company.
(3) In case outstanding Ordinary Shares shall be
subdivided or split into a greater number of Ordinary Shares, the
Settlement Rate in effect at the opening of business on the day following
the day upon which such subdivision or split becomes effective shall be
proportionately increased, and, conversely, in case outstanding Ordinary
Shares shall each be combined into a smaller number of Ordinary Shares, the
Settlement Rate in effect at the opening of business on the day following
the day upon which such combination becomes effective shall be
proportionately reduced, such increase or reduction, as the case may be, to
become effective immediately after the opening of business on the day
following the day upon which such subdivision, split or combination becomes
effective.
(4) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Ordinary Shares evidences of its
indebtedness or assets (including securities, but excluding any rights or
warrants referred to in paragraph (2) of this Section, any dividend or
distribution paid exclusively in cash and any dividend or distribution
referred to in paragraph (1) of this Section), the Settlement Rate shall be
adjusted so that the same shall equal the rate determined by dividing the
Settlement Rate in effect immediately prior to the close of business on the
date fixed for the determination of shareholders entitled to receive such
distribution by a fraction, the numerator of which shall be the Current
Market Price per Ordinary Share on the date fixed for such determination
less the then fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a Board Resolution
filed with the Agent) of the portion of the assets or evidences of
indebtedness so distributed applicable to one Ordinary Share and the
denominator of which shall be such Current Market Price per Ordinary Share,
such adjustment to become effective immediately prior to the opening of
business on the day following the date fixed for the determination of
shareholders entitled to receive such distribution. In any case in which
this paragraph (4) is applicable, paragraph (2) of this Section shall not
be applicable.
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(5) In case the Company shall, (I) by dividend or
otherwise, distribute to all holders of its Ordinary Shares cash (excluding
any cash that is distributed in a Reorganization Event to which Section
5.4(b) applies or as part of a distribution referred to in paragraph (4) of
this Section) in an aggregate amount that, combined together with (II) the
aggregate amount of any other distributions to all holders of its Ordinary
Shares made exclusively in cash within the 12 months preceding the date of
payment of such distribution and in respect of which no adjustment pursuant
to this paragraph (5) or paragraph (6) of this Section has been made and
(III) the aggregate of any cash plus the fair market value (as determined
by the Board of Directors, whose determination shall be conclusive and
described in a Board Resolution) of consideration payable in respect of any
tender or exchange offer by the Company or any of its subsidiaries for all
or any portion of the Ordinary Shares concluded within the 12 months
preceding the date of payment of the distribution described in clause (I)
above and in respect of which no adjustment pursuant to this paragraph (5)
or paragraph (6) of this Section has been made, exceeds 5% of the product
of the Current Market Price per Ordinary Share on the date for the
determination of holders of Ordinary Shares entitled to receive such
distribution times the number of Ordinary Shares outstanding on such date,
then, and in each such case, immediately after the close of business on
such date for determination, the Settlement Rate shall be increased so that
the same shall equal the rate determined by dividing the Settlement Rate in
effect immediately prior to the close of business on the date fixed for
determination of the stockholders entitled to receive such distribution by
a fraction (i) the numerator of which shall be equal to the Current Market
Price per Ordinary Share on the date fixed for such determination less an
amount equal to the quotient of (x) the combined amount distributed or
payable in the transactions described in clauses (I), (II) and (III) above
and (y) the number of Ordinary Shares outstanding on such date for
determination and (ii) the denominator of which shall be equal to the
Current Market Price per Ordinary Share on such date for determination.
(6) In case (I) a tender or exchange offer made by the
Company or any subsidiary of the Company for all or any portion of the
Ordinary Shares shall expire and such tender or exchange offer (as amended
upon the expiration thereof) shall require the payment to shareholders
(based on the acceptance (up to any maximum specified in the terms of the
tender or exchange offer) of Purchased Shares) of an aggregate
consideration having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) that combined together with (II) the aggregate of the cash plus
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution), as
of the expiration of such tender or exchange offer, of consideration
payable in respect of any other tender or exchange offer, by the Company or
any subsidiary of the Company for all or any portion of the Ordinary Shares
expiring within the 12 months preceding the expiration of such tender or
exchange offer and in respect of which no adjustment pursuant to paragraph
(5) of this Section or this paragraph (6) has been made and (III) the
aggregate amount of any distributions to all holders of the Company's
Ordinary Shares made exclusively in cash within the 12 months preceding the
expiration of such tender or exchange offer and in respect of which no
adjustment pursuant to paragraph (5) of this Section or this paragraph (6)
has been made, exceeds 5% of the product of the Current Market Price per
Ordinary Share as of the last time (the "Expiration Time") tenders could
have been made pursuant to such tender or exchange offer (as it may be
amended) times the number of Ordinary Shares outstanding (including any
tendered shares) on the Expiration Time, then, and in each such case,
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immediately prior to the opening of business on the day after the date of
the Expiration Time, the Settlement Rate shall be adjusted so that the same
shall equal the rate determined by dividing the Settlement Rate immediately
prior to the close of business on the date of the Expiration Time by a
fraction (i) the numerator of which shall be equal to (A) the product of
(I) the Current Market Price per Ordinary Share on the date of the
Expiration Time and (II) the number of Ordinary Shares outstanding
(including any tendered shares) on the Expiration Time less (B) the amount
of cash plus the fair market value (determined as aforesaid) of the
aggregate consideration payable to shareholders based on the transactions
described in clauses (I), (II) and (III) above (assuming in the case of
clause (I) the acceptance, up to any maximum specified in the terms of the
tender or exchange offer, of Purchased Shares), and (ii) the denominator of
which shall be equal to the product of (A) the Current Market Price per
Ordinary Share as of the Expiration Time and (B) the number of Ordinary
Shares outstanding (including any tendered shares) as of the Expiration
Time less the number of all shares validly tendered and not withdrawn as of
the Expiration Time (the shares deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares").
(7) The reclassification of Ordinary Shares into
securities including securities other than Ordinary Shares (other than any
reclassification upon a Reorganization Event to which Section 5.4(b)
applies) shall be deemed to involve (a) a distribution of such securities
other than Ordinary Shares to all holders of Ordinary Shares (and the
effective date of such reclassification shall be deemed to be "the date
fixed for the determination of stockholders entitled to receive such
distribution" and the "date fixed for such determination" within the
meaning of paragraph (4) of this Section), and (b) a subdivision, split or
combination, as the case may be, of the number of Ordinary Shares
outstanding immediately prior to such reclassification into the number of
Ordinary Shares outstanding immediately thereafter (and the effective date
of such reclassification shall be deemed to be "the day upon which such
subdivision or split becomes effective" or "the day upon which such
combination becomes effective", as the case may be, and "the day upon which
such subdivision, split or combination becomes effective" within the
meaning of paragraph (3) of this Section).
(8) The "Current Market Price" per Ordinary Share on any
day means the average of the daily Closing Prices for the 5 consecutive
Trading Days selected by the Company commencing not more than 30 Trading
Days before, and ending not later than, the earlier of the day in question
and the day before the "ex date" with respect to the issuance or
distribution requiring such computation. For purposes of this paragraph,
the term "ex date", when used with respect to any issuance or distribution,
shall mean the first date on which the Ordinary Shares trades regular way
on such exchange or in such market without the right to receive such
issuance or distribution.
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(9) All adjustments to the Settlement Rate, shall be
calculated to the nearest 1/10,000th of an Ordinary Share (or if there is
not a nearest 1/10,000th of a share to the next lower 1/10,000th of a
share). No adjustment in the Settlement Rate shall be required unless such
adjustment would require an increase or decrease of at least one percent
therein; provided, however, that any adjustments which by reason of this
subparagraph are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. If an adjustment is made to the
Settlement Rate pursuant to paragraph (1), (2), (3), (4), (5), (6), (7) or
(10) of this Section 5.4(a), an adjustment shall also be made to the
Applicable Market Value solely to determine which of clauses (a), (b) or
(c) of the definition of Settlement Rate in Section 5.1 will apply on the
Purchase Contract Settlement Date. Such adjustment shall be made by
multiplying the Applicable Market Value by a fraction, the numerator of
which shall be the Settlement Rate immediately after such adjustment
pursuant to paragraph (1), (2), (3), (4), (5), (6), (7) or (10) of this
Section 5.4(a) and the denominator of which shall be the Settlement Rate
immediately before such adjustment; provided, however, that if such
adjustment to the Settlement Rate is required to be made pursuant to the
occurrence of any of the events contemplated by paragraph (1), (2), (3), (4),
(5), (7) or (10) of this Section 5.4(a) during the period taken into
consideration for determining the Applicable Market Value, appropriate and
customary adjustments shall be made to the Settlement Rate.
(10) The Company may make such increases in the
Settlement Rate, in addition to those required by this Section, as it
considers to be advisable in order to avoid or diminish any income tax to
any holders of Ordinary Shares resulting from any dividend or distribution
of stock or issuance of rights or warrants to purchase or subscribe for
stock or from any event treated as such for income tax purposes or for any
other reasons.
(b) Adjustment for Consolidation, Merger or Other Reorganization
Event. In the event of (i) any consolidation or merger of the Company with
or into another Person (other than a merger or consolidation in which the
Company is the continuing corporation and in which the Ordinary Shares
outstanding immediately prior to the merger or consolidation is not
exchanged for cash, securities or other property of the Company or another
corporation), (ii) any sale, transfer, lease or conveyance to another
Person of the property of the Company as an entirety or substantially as an
entirety, (iii) any statutory exchange of securities of the Company with
another Person (other than in connection with a merger or acquisition) or
(iv) any liquidation, dissolution or winding up of the Company other than
as a result of or after the occurrence of a Termination Event (any such
event, a "Reorganization Event"), the Settlement Rate will be adjusted to
provide that each Holder of Securities will receive on the Purchase
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Contract Settlement Date with respect to each Purchase Contract forming a
part thereof, the kind and amount of securities, cash and other property
receivable upon such Reorganization Event (without any interest thereon,
and without any right to dividends or distribution thereon which have a
record date that is prior to the Purchase Contract Settlement Date) by a
Holder of the number of Ordinary Shares issuable on account of each
Purchase Contract if the Purchase Contract Settlement Date had occurred
immediately prior to such Reorganization Event assuming such Holder of
Ordinary Shares is not a Person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such
sale or transfer was made, as the case may be (any such Person, a
"Constituent Person"), or an Affiliate of a Constituent Person to the
extent such Reorganization Event provides for different treatment of
Ordinary Shares held by Affiliates of the Company and non-affiliates and
such Holder failed to exercise his rights of election, if any, as to the
kind or amount of securities, cash and other property receivable upon such
Reorganization Event (provided that if the kind or amount of securities,
cash and other property receivable upon such Reorganization Event is not
the same for each Ordinary Share held immediately prior to such
Reorganization Event by other than a Constituent Person or an Affiliate
thereof and in respect of which such rights of election shall not have been
exercised ("non-electing share"), then for the purpose of this Section the
kind and amount of securities, cash and other property receivable upon such
Reorganization Event by each non-electing share shall be deemed to be the
kind and amount so receivable per share by a plurality of the non-electing
shares). In the event of such a Reorganization Event, the Person formed by
such consolidation, merger or exchange or the Person which acquires the
assets of the Company or, in the event of a liquidation or dissolution of
the Company, the Company or a liquidating trust created in connection
therewith, shall execute and deliver to the Agent an agreement supplemental
hereto providing that the Holders of each Outstanding Security shall have
the rights provided by this Section 5.6. Such supplemental agreement shall
provide for adjustments which, for events subsequent to the effective date
of such supplemental agreement, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section. The above
provisions of this Section shall similarly apply to successive
Reorganization Events.
Section 5.5. Notice of Adjustments and Certain Other Events.
(a) Whenever the Settlement Rate is adjusted as herein
provided, the Company shall:
(i) forthwith compute the Settlement Rate in accordance
with Section 5.4 and prepare and transmit to the Agent an
Officer's Certificate setting forth the Settlement Rate, the
method of calculation thereof in reasonable detail, and the facts
requiring such adjustment and upon which such adjustment is based;
and
(ii) within 10 Business Days following the occurrence of
an event that requires an adjustment to the Settlement Rate
pursuant to Section 5.4 (or if the Company is not aware of such
occurrence, as soon as practicable after becoming so aware),
provide a written notice to the Holders of the Securities of the
occurrence of such event and a statement in reasonable detail
setting forth the method by which the adjustment to the Settlement
Rate was determined and setting forth the adjusted Settlement
Rate.
(b) The Agent shall not at any time be under any duty or
responsibility to any Holder of Securities to determine whether any facts
exist which may require any adjustment of the Settlement Rate, or with
respect to the nature or extent or calculation of any such adjustment when
made, or with respect to the method employed in making the same. The Agent
shall not be accountable with respect to the validity or value (or the kind
or amount) of any Ordinary Shares, or of any securities or property, which
may at the time be issued or delivered with respect to any Purchase
Contract; and the Agent makes no representation with respect thereto. The
Agent shall not be responsible for any failure of the Company to issue,
transfer or deliver any Ordinary Shares pursuant to a Purchase Contract or
to comply with any of the duties, responsibilities or covenants of the
Company contained in this Article.
Section 5.6. Termination Event; Notice.
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The Purchase Contracts and all obligations and rights of the
Company and the Holders thereunder, including, without limitation, the
rights and obligations of Holders to purchase Ordinary Shares, shall
immediately and automatically terminate, without the necessity of any
notice or action by any Holder, the Agent or the Company, if, on or prior
to the Purchase Contract Settlement Date, a Termination Event shall have
occurred. Upon and after the occurrence of a Termination Event, the
Securities shall thereafter represent the right to receive the Preferred
Shares, forming a part of such Securities in the case of Income PRIDES, or
Treasury Securities in the case of Growth PRIDES, in accordance with the
provisions of Section 4.3 of the Pledge Agreement. Upon the occurrence of a
Termination Event, the Company shall promptly but in no event later than
two Business Days thereafter give written notice to the Agent, the
Collateral Agent and to the Holders, at their addresses as they appear in
the Register.
Section 5.7. Early Settlement.
(a) Subject to and upon compliance with the provisions of this
Section 5.7, at the option of the Holder thereof, Purchase Contracts
underlying Securities, having an aggregate Stated Amount equal to $1,000 or
an integral multiple thereof, may be settled early ("Early Settlement") in
the case of Income PRIDES on or prior to the fifth Business Day immediately
preceding the Purchase Contract Settlement Date and in the case of Growth
PRIDES on or prior to the second Business Day immediately preceding the
Purchase Contract Settlement Date, in each case, as provided herein. In
order to exercise the right to effect Early Settlement with respect to any
Purchase Contracts, the Holder of the Certificate evidencing Securities
shall deliver such Certificate to the Agent at the Corporate Trust Office
duly endorsed for transfer to the Company or in blank with the form of
Election to Settle Early on the reverse thereof duly completed and
accompanied by payment (payable to the Company in immediately available
funds in an amount (the "Early Settlement Amount") equal to (i) the product
of (A) the Stated Amount times (B) the number of Purchase Contracts with
respect to which the Holder has elected to effect Early Settlement plus
(ii) in the case of Income PRIDES Certificates, if such delivery is made
with respect to any Purchase Contracts during the period from the close of
business on any Record Date next preceding any Payment Date to the opening
of business on such Payment Date, an amount equal to the sum of the
dividends on the related Preferred Shares payable on such Payment Date.
Except as provided in the immediately preceding sentence, no payment or
adjustment shall be made upon Early Settlement of any Purchase Contract on
account of any dividends on the Ordinary Shares issued upon such Early
Settlement. If the foregoing requirements are first satisfied with respect
to Purchase Contracts underlying any Securities at or prior to 5:00 p.m.,
New York City time, on a Business Day, such day shall be the "Early
Settlement Date" with respect to such Securities and if such requirements
are first satisfied after 5:00 p.m., New York City time, on a Business Day
or on a day that is not a Business Day, the "Early Settlement Date" with
respect to such Securities shall be the next succeeding Business Day.
(b) Upon Early Settlement of Purchase Contracts by a Holder of the
related Securities, the Company shall issue, and the Holder shall be
entitled to receive, 1.8991 Ordinary Shares on account of each Purchase
Contract as to which Early Settlement is effected (the "Early Settlement
Rate"). The Early Settlement Rate shall be adjusted in the same manner and
at the same time as the Settlement Rate is adjusted. As promptly as
practicable after Early Settlement of Purchase Contracts in accordance with
the provisions of this Section 5.7, the Company shall issue and shall
deliver to the Agent at the Corporate Trust Office a certificate or
certificates for the full number of Ordinary Shares issuable upon such
Early Settlement together with payment in lieu of any fraction of a share,
as provided in Section 5.8.
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(c) No later than the third Business Day after the applicable
Early Settlement Date the Company shall cause (i) the Ordinary Shares
issuable upon Early Settlement of Purchase Contracts to be issued and
delivered, and (ii) the related Preferred Shares, in the case of Income
PRIDES, or the related Treasury Securities, in the case of Growth PRIDES,
to be released from the Pledge by the Collateral Agent and transferred, in
each case to the Agent for delivery to the Holder thereof or its designee.
(d) Upon Early Settlement of any Purchase Contracts, and subject
to receipt of Ordinary Shares from the Company and the Preferred Shares, or
Treasury Securities, as the case may be, from the Collateral Agent, as
applicable, the Agent shall, in accordance with the instructions provided
by the Holder thereof on the applicable form of Election to Settle Early on
the reverse of the Certificate evidencing the related Securities, (i)
transfer to the Holder the Preferred Shares or Treasury Securities, as the
case may be, forming a part of such Securities, and (ii) deliver to the
Holder a certificate or certificates for the full number of Ordinary Shares
issuable upon such Early Settlement together with payment in lieu of any
fraction of a share, as provided in Section 5.8.
(e) In the event that Early Settlement is effected with respect to
Purchase Contracts underlying less than all the Securities evidenced by a
Certificate, upon such Early Settlement the Company shall execute and the
Agent shall authenticate, countersign and deliver to the Holder thereof, at
the expense of the Company, a Certificate evidencing the Securities as to
which Early Settlement was not effected.
Section 5.8. No Fractional Shares.
No fractional shares or scrip representing fractional Ordinary
Shares shall be issued or delivered upon settlement on the Purchase
Contract Settlement Date or upon Early Settlement of any Purchase
Contracts. If Certificates evidencing more than one Purchase Contract shall
be surrendered for settlement at one time by the same Holder, the number of
full Ordinary Shares which shall be delivered upon settlement shall be
computed on the basis of the aggregate number of Purchase Contracts
evidenced by the Certificates so surrendered. Instead of any fractional
Ordinary Share which would otherwise be deliverable upon settlement of any
Purchase Contracts on the Purchase Contract Settlement Date or upon Early
Settlement, the Company, through the Agent, shall make a cash payment in
respect of such fractional interest in an amount equal to the value of such
fractional shares times the Applicable Market Value. The Company shall
provide the Agent from time to time with sufficient funds to permit the
Agent to make all cash payments required by this Section 5.8 in a timely
manner.
Section 5.9. Charges and Taxes.
The Company will pay all stock transfer and similar taxes
attributable to the initial issuance and delivery of the Ordinary Shares
pursuant to the Purchase Contracts; provided, however, that the Company
shall not be required to pay any such tax or taxes which may be payable in
respect of any exchange of or substitution for a Certificate evidencing a
Security or any issuance of an Ordinary Share in a name other than that of
the registered Holder of a Certificate surrendered in respect of the
Securities evidenced thereby, other than in the name of the Agent, as
custodian for such Holder, and the Company shall not be required to issue
or deliver such share certificates or Certificates unless or until the
Person or Persons requesting the transfer or issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
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ARTICLE VI
REMEDIES
Section 6.1. Unconditional Right of Holders to Purchase Ordinary Shares.
The Holder of any Income PRIDES or Growth PRIDES shall have the
right, which is absolute and unconditional, to purchase Ordinary Shares
pursuant to the Purchase Contract constituting a part of such Security and
to institute suit for the enforcement of any such right to purchase
Ordinary Shares and payment and such rights shall not be impaired without
the consent of such Holder.
Section 6.2. Restoration of Rights and Remedies.
If any Holder has instituted any proceeding to enforce any right
or remedy under this Agreement and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to such Holder,
then and in every such case, subject to any determination in such
proceeding, the Company and such Holder shall be restored severally and
respectively to their former positions hereunder and thereafter all rights
and remedies of such Holder shall continue as though no such proceeding had
been instituted.
Section 6.3. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Certificates in the last
paragraph of Section 3.10, no right or remedy herein conferred upon or
reserved to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law,
be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 6.4. Delay or Omission Not Waiver.
No delay or omission of any Holder to exercise any right or remedy
upon a default shall impair any such right or remedy or constitute a waiver
of any such right. Every right and remedy given by this Article or by law
to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by such Holders.
Section 6.5. Undertaking for Costs.
All parties to this Agreement agree, and each Holder of Income
PRIDES or Growth PRIDES, by its acceptance of such Income PRIDES or Growth
PRIDES 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
Agreement, or in any suit against the Agent for any action taken, suffered
or omitted by it as Agent, the filing by any party litigant in such suit of
an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys'
fees and expenses, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such
party litigant; provided that the provisions of this Section shall not
apply to any suit instituted by the Company, to any suit instituted by the
Agent, to any suit instituted by any Holder, or group of Holders, holding
in the aggregate more than 10% of the Outstanding Securities, or to any
suit instituted by any Holder for the enforcement of dividends on any
Preferred Shares, if declared, on or after the respective Payment Date
therefor in respect of any Security held by such Holder, or for enforcement
of the right to purchase Ordinary Shares under the Purchase Contracts
constituting part of any Security held by such Holder.
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Section 6.6. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension
law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Agreement; and the Company
(to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Agent or
the Holders, but will suffer and permit the execution of every such power
as though no such law had been enacted.
ARTICLE VII
THE AGENT
Section 7.1. Certain Duties and Responsibilities.
(a) (1) The Agent undertakes to perform, with respect to the
Securities, such duties and only such duties as are specifically set forth
in this Agreement and the Pledge Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Agent; and
(2) in the absence of bad faith, willful misconduct or negligence on
its part, the Agent may, with respect to the Securities, conclusively rely,
as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Agent and
conforming to the requirements of this Agreement, but in the case of any
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Agent, the Agent shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Agreement, but need not confirm or investigate the
accuracy of mathematical calculations stated therein.
(b) No provision of this Agreement shall be construed to relieve the
Agent from liability for its own negligent action, its own negligent
failure to act, its own bad faith, or its own willful misconduct, except
that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Agent shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that
the Agent was negligent in ascertaining the pertinent facts; and
(3) no provision of this Agreement shall require the Agent to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if adequate indemnity is not
provided to it.
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(c) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Agent shall be subject to the provisions of
this Section.
(d) The Agent is authorized to execute and deliver the Pledge Agreement
in its capacity as Agent.
Section 7.2. Notice of Default.
Within 30 days after the occurrence of any default by the Company
hereunder of which a Responsible Officer of the Agent has actual knowledge,
the Agent shall transmit by mail to the Company and the Holders of
Securities, as their names and addresses appear in the Register, notice of
such default hereunder, unless such default shall have been cured or
waived.
Section 7.3. Certain Rights of Agent.
Subject to the provisions of Section 7.1:
(a) the Agent may conclusively rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by an Officer's Certificate, Issuer Order or Issuer
Request, and any resolution of the Board of Directors of the Company may be
sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Agreement the Agent shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Agent (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officer's Certificate of the Company;
(d) the Agent may consult with counsel of its selection 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;
(e) the Agent shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Agent, in its discretion, may make reasonable further
inquiry or investigation into such facts or matters related to the
execution, delivery and performance of the Purchase Contracts as it may see
fit, and, if the Agent shall determine to make such further inquiry or
investigation, it shall be given a reasonable opportunity to examine the
books, records and premises of the Company, personally or by agent or
attorney;
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(f) the Agent may execute any of the powers hereunder or perform any
duties hereunder either directly or by or through agents or attorneys or an
Affiliate and the Agent shall not be responsible for any misconduct or
negligence on the part of any agent or attorney or an Affiliate appointed
with due care by it hereunder;
(g) the rights, privileges, protections, immunities and benefits given
to the Agent, including, without limitation, its right to be indemnified,
are extended to, and shall be enforceable by, the Agent in each of its
capacities hereunder, and to each agent custodian and other Person employed
to act hereunder; and
(h) the Agent may request that the Company delivery an Officer's
Certificate setting forth the names of individuals and/or titles of
officers authorized at such time to take specified actions pursuant to this
Agreement, which Officer's Certificate may be signed by any person
authorized to sign an Officer's Certificate, including any person specified
as so authorized in any such certificate previously delivered and not
superseded.
Section 7.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Certificates shall be
taken as the statements of the Company and the Agent assumes no
responsibility for their accuracy. The Agent makes no representations as to
the validity or sufficiency of either this Agreement or of the Securities,
or of the Pledge Agreement or the Pledge. The Agent shall not be
accountable for the use or application by the Company of the proceeds in
respect of the Purchase Contracts.
Section 7.5. May Hold Securities.
Any Registrar or any other agent of the Company, or the Agent and
its Affiliates, in their individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with the Company, the
Collateral Agent or any other Person with the same rights it would have if
it were not Registrar or such other agent, or the Agent.
Section 7.6. Money Held in Custody.
Money held by the Agent in custody hereunder need not be
segregated from the other funds except to the extent required by law or
provided herein. The Agent shall be under no obligation to invest or pay
interest on any money received by it hereunder except as otherwise agreed
in writing with the Company.
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Section 7.7. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Agent from time to time such compensation as
shall be agreed in writing between the Company and the Agent for all
services rendered by it hereunder;
(2) except as otherwise expressly provided herein, to reimburse
the Agent upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Agent in accordance with any
provision of this Agreement (including the reasonable compensation and
the reasonable expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be
attributable to its negligence, willful misconduct or bad faith; and
(3) to indemnify the Agent and any predecessor Agent for, and to
hold it harmless against, any and all loss, liability, damage, claim
or expense, including taxes (other than taxes based on the income of
the Agent), incurred without negligence, willful misconduct or bad
faith on its part, arising out of or in connection with the acceptance
or administration of its duties hereunder, including the costs and
expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
The provisions of this Section 7.7 shall survive the termination
of this Agreement.
Section 7.8. Corporate Agent Required; Eligibility.
There shall at all times be an Agent hereunder which shall be a
corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia,
authorized under such laws to exercise corporate trust powers, having (or
being a member of a bank holding company having) a combined capital and
surplus of at least $50,000,000, subject to supervision or examination by
Federal or State authority and having a Corporate Trust Office in the
Borough of Manhattan, The City of New York, if there be such a corporation
in the Borough of Manhattan, The City of New York, qualified and eligible
under this Article and willing to act on reasonable terms. If such
corporation publishes reports of condition at least annually, pursuant to
law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time
the 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
hereinafter specified in this Article.
Section 7.9. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Agent and no appointment of a
successor Agent pursuant to this Article shall become effective until the
acceptance of appointment by the successor Agent in accordance with the
applicable requirements of Section 7.10.
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(b) The Agent may resign at any time by giving written notice thereof
to the Company 60 days prior to the effective date of such resignation. If
the instrument of acceptance by a successor Agent required by Section 7.10
shall not have been delivered to the Agent within 30 days after the giving
of such notice of resignation, the resigning Agent may petition, at the
expense of the Company, any court of competent jurisdiction for the
appointment of a successor Agent.
(c) The Agent may be removed at any time by Act of the Holders of a
majority in number of the Outstanding Securities delivered to the Agent and
the Company. If the instrument of acceptance by a successor Agent required
by Section 7.10 shall not have been delivered to the Agent within 30 days
after the giving of such notice or removal, the Agent being removed may
petition, at the expense of the Company, any court of competent
jurisdiction for the appointment of a successor Agent.
(d) if at any time:
(1) the Agent fails to comply with Section 310(b) of the TIA, as
if the Agent were an indenture trustee under an indenture qualified
under the TIA, after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months; or
(2) the Agent shall cease to be eligible under Section 7.8 and
shall fail to resign after written request therefor by the Company or
by any such Holder; or
(3) the Agent shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Agent or of its
property shall be appointed or any public officer shall take charge or
control of the Agent or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any such case, (i) the Company by a Board Resolution may remove
the Agent, or (ii) any Holder who has been a bona fide Holder of a Security
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of
the Agent and the appointment of a successor Agent.
(e) If the Agent shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Agent for any cause,
the Company, by a Board Resolution, shall promptly appoint a successor
Agent and shall comply with the applicable requirements of Section 7.10. If
no successor Agent shall have been so appointed by the Company and accepted
appointment in the manner required by Section 7.10, any Holder who has been
a bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Agent.
(f) The Company shall give, or shall cause such successor Agent to
give, notice of each resignation and each removal of the Agent and each
appointment of a successor Agent by mailing written notice of such event by
first-class mail, postage prepaid, to all Holders as their names and
addresses appear in the applicable Register. Each notice shall include the
name of the successor Agent and the address of its Corporate Trust Office.
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Section 7.10. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Agent, every
such successor Agent so appointed shall execute, acknowledge and deliver to
the Company and to the retiring Agent an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Agent
shall become effective and such successor Agent, without any further act,
deed or conveyance, shall become vested with all the rights, powers,
agencies and duties of the retiring Agent; but, on the request of the
Company or the successor Agent, such retiring Agent shall, upon payment of
its charges, execute and deliver an instrument transferring to such
successor Agent all the rights, powers and trusts of the retiring Agent and
shall duly assign, transfer and deliver to such successor Agent all
property and money held by such retiring Agent hereunder.
(b) Upon request of any such successor Agent, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Agent all such rights, powers and agencies
referred to in paragraph (a) of this Section.
(c) No successor Agent shall accept its appointment unless at the time
of such acceptance such successor Agent shall be qualified and eligible
under this Article.
Section 7.11. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the 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 the Agent shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Agent, shall be the successor of the Agent hereunder,
provided such corporation shall be otherwise qualified and eligible under
this Article, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Certificates
shall have been authenticated and executed on behalf of the Holders, but
not delivered, by the Agent then in office, any successor by merger,
conversion or consolidation to such Agent may adopt such authentication and
execution and deliver the Certificates so authenticated and executed with
the same effect as if such successor Agent had itself authenticated and
executed such Securities.
Section 7.12. Preservation of Information; Communications to Holders.
(a) The Agent shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders received by the Agent in
its capacity as Registrar.
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(b) If three or more Holders (herein referred to as "applicants")
apply in writing to the Agent, and furnish to the Agent reasonable proof
that each such applicant has owned a Security for a period of at least six
months preceding the date of such application, and such application states
that the applicants desire to communicate with other Holders with respect
to their rights under this Agreement or under the Securities and is
accompanied by a copy of the form of proxy or other communication which
such applicants propose to transmit, then the Agent shall, mail to all the
Holders copies of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Agent of the materials to be mailed and of payment, or provision for the
payment, of the reasonable expenses of such mailing.
Section 7.13. No Obligations of Agent.
Except to the extent otherwise provided in this Agreement, the
Agent assumes no obligations and shall not be subject to any liability
under this Agreement, the Pledge Agreement or any Purchase Contract in
respect of the obligations of the Holder of any Security thereunder. The
Company agrees, and each Holder of a Certificate, by his acceptance
thereof, shall be deemed to have agreed, that the Agent's execution of the
Certificates on behalf of the Holders shall be solely as agent and
attorney-in-fact for the Holders, and that the Agent shall have no
obligation to perform such Purchase Contracts on behalf of the Holders,
except to the extent expressly provided in Article Five hereof.
Section 7.14. Tax Compliance.
(a) The Agent, on its own behalf and on behalf of the Company, will
comply with all applicable certification, information reporting and
withholding (including "backup" withholding) requirements imposed by
applicable tax laws, regulations or administrative practice with respect to
(i) any payments made with respect to the Securities or (ii) the issuance,
delivery, holding, transfer, redemption or exercise of rights under the
Securities. Such compliance shall include, without limitation, the
preparation and timely filing of required returns and the timely payment of
all amounts required to be withheld to the appropriate taxing authority or
its designated agent.
(b) The Agent shall comply with any written direction received from
the Company with respect to the reasonable application of such requirements
to particular payments or Holders or in other particular circumstances, and
may for purposes of this Agreement rely on any such direction in accordance
with the provisions of Section 7.1(a)(2) hereof.
(c) The Agent shall maintain all appropriate records documenting
compliance with such requirements, and shall make such records available,
on written request, to the Company or its authorized representative within
a reasonable period of time after receipt of such request.
ARTICLE VIII
SUPPLEMENTAL AGREEMENTS
Section 8.1. Supplemental Agreements Without Consent of Holders.
Without the consent of any Holders, the Company and the Agent, at
any time and from time to time, may enter into one or more agreements
supplemental hereto, in form satisfactory to the Company and the Agent, for
any of the following purposes:
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(1) to evidence the succession of another Person to the Company,
and the assumption by any such successor of the covenants of the
Company herein and in the Certificates; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to evidence and provide for the acceptance of appointment
hereunder by a successor Agent; or
(4) to make provision with respect to the rights of Holders
pursuant to the requirements of Section 5.4(b); or
(5) to cure any ambiguity, to correct or supplement any
provisions herein which may be inconsistent with any other provisions
herein, or to make any other provisions with respect to such matters
or questions arising under this Agreement, provided such action shall
not adversely affect the interests of the Holders.
Section 8.2. Supplemental Agreements with Consent of Holders.
With the consent of the Holders of not less than a majority of the
outstanding Purchase Contracts voting together as one class, by Act of said
Holders delivered to the Company and the Agent, the Company, when
authorized by a Board Resolution, and the Agent may enter into an agreement
or agreements supplemental hereto for the purpose of modifying in any
manner the terms of the Purchase Contracts, or the provisions of this
Agreement or the rights of the Holders in respect of the Securities;
provided, however, that, except as contemplated herein, no such
supplemental agreement shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change any Payment Date;
(2) change the amount or the type of Collateral required to be
Pledged to secure a Holder's Obligations under the Purchase Contract,
impair the right of the Holder of any Purchase Contract to receive
distributions on the related Collateral (except for the rights of
Holders of Income PRIDES to substitute the Treasury Securities for the
Pledged Preferred Shares or the rights of holders of Growth PRIDES to
substitute Preferred Shares for the Pledged Treasury Securities) or
otherwise adversely affect the Holder's rights in or to such
Collateral or adversely alter the rights in or to such Collateral;
(3) impair the right to institute suit for the enforcement of any
Purchase Contract;
(4) reduce the number of Ordinary Shares to be purchased pursuant
to any Purchase Contract, increase the price to purchase Ordinary
Shares upon settlement of any Purchase Contract, change the Purchase
Contract Settlement Date or otherwise adversely affect the Holder's
rights under any Purchase Contract; or
(5) reduce the percentage of the outstanding Purchase Contracts
the consent of whose Holders is required for any such supplemental
agreement;
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provided, that if any amendment or proposal referred to above would
adversely affect only the Income PRIDES or the Growth PRIDES, then only the
affected class of Holder as of the record date for the Holders entitled to
vote thereon will be entitled to vote on such amendment or proposal, and
such amendment or proposal shall not be effective except with the consent
of Holders of not less than a majority of such class.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental
agreement, but it shall be sufficient if such Act shall approve the
substance thereof.
Section 8.3. Execution of Supplemental Agreements.
In executing, or accepting the additional agencies created by, any
supplemental agreement permitted by this Article or the modifications
thereby of the agencies created by this Agreement, the Agent shall be
entitled to receive and (subject to Section 7.1) shall be fully protected
in relying upon, an Officer's Certificate and an Opinion of Counsel stating
that the execution of such supplemental agreement is authorized or
permitted by this Agreement. The Agent may, but shall not be obligated to,
enter into any such supplemental agreement which affects the Agent's own
rights, duties or immunities under this Agreement or otherwise.
Section 8.4. Effect of Supplemental Agreements.
Upon the execution of any supplemental agreement under this
Article, this Agreement shall be modified in accordance therewith, and such
supplemental agreement shall form a part of this Agreement for all
purposes; and every Holder of Certificates theretofore or thereafter
authenticated, executed on behalf of the Holders and delivered hereunder
shall be bound thereby.
Section 8.5. Reference to Supplemental Agreements.
Certificates authenticated, executed on behalf of the Holders and
delivered after the execution of any supplemental agreement pursuant to
this Article may, and shall if required by the Agent, bear a notation in
form approved by the Agent as to any matter provided for in such
supplemental agreement. If the Company shall so determine, new Certificates
so modified as to conform, in the opinion of the Agent and the Company, to
any such supplemental agreement may be prepared and executed by the Company
and authenticated, executed on behalf of the Holders and delivered by the
Agent in exchange for Outstanding Certificates.
ARTICLE IX
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 9.1. Covenant Not to Merge, Consolidate, Sell or Convey Property
Except Under Certain Conditions.
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The Company covenants that it will not merge or consolidate with
any other Person or sell, assign, transfer, lease or convey all or
substantially all of its properties and assets to any Person or group of
affiliated Persons in one transaction or a series of related transactions,
unless (i) either the Company shall be the continuing corporation, or the
successor (if other than the Company) shall expressly assume all the
obligations of the Company under the Purchase Contracts, the Preferred
Shares, this Agreement and the Pledge Agreement by one or more supplemental
agreements in form reasonably satisfactory to the Agent and the Collateral
Agent, executed and delivered to the Agent and the Collateral Agent by such
corporation, and (ii) the Company or such successor corporation, as the
case may be, shall not, immediately after such merger or consolidation, or
such sale, assignment, transfer, lease or conveyance, be in default in the
performance of any covenant or condition hereunder, under any of the
Securities or under the Pledge Agreement.
Section 9.2. Rights and Duties of Successor Corporation.
In case of any such consolidation, merger, sale, assignment,
transfer, lease or conveyance and upon any such assumption by a successor
corporation in accordance with Section 9.1, such successor corporation
shall succeed to and be substituted for the Company with the same effect as
if it had been named herein as the Company. Such successor corporation
thereupon may cause to be signed, and may issue either in its own name or
in the name of ACE Limited any or all of the Certificates evidencing
Securities issuable hereunder which theretofore shall not have been signed
by the Company and delivered to the Agent; and, upon the order of such
successor corporation, instead of the Company, and subject to all the
terms, conditions and limitations in this Agreement prescribed, the Agent
shall authenticate and execute on behalf of the Holders and deliver any
Certificates which previously shall have been signed and delivered by the
officers of the Company to the Agent for authentication and execution, and
any Certificate evidencing Securities which such successor corporation
thereafter shall cause to be signed and delivered to the Agent for that
purpose. All the Certificates so issued shall in all respects have the same
legal rank and benefit under this Agreement as the Certificates theretofore
or thereafter issued in accordance with the terms of this Agreement as
though all of such Certificates had been issued at the date of the
execution hereof.
In case of any such consolidation, merger, sale, assignment,
transfer, lease or conveyance such change in phraseology and form (but not
in substance) may be made in the Certificates evidencing Securities
thereafter to be issued as may be appropriate.
Section 9.3. Opinion of Counsel Given to Agent.
The Agent, subject to Sections 7.1 and 7.3, shall receive an
Opinion of Counsel as conclusive evidence that any such consolidation,
merger, sale, assignment, transfer, lease or conveyance, and any such
assumption, complies with the provisions of this Article and that all
conditions precedent to the consummation of any such consolidation, merger,
sale, assignment, transfer, lease or conveyance have been met.
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ARTICLE X
COVENANTS
Section 10.1. Performance Under Purchase Contracts.
The Company covenants and agrees for the benefit of the Holders
from time to time of the Securities that it will duly and punctually
perform its obligations under the Purchase Contracts in accordance with the
terms of the Purchase Contracts and this Agreement.
Section 10.2. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of
New York an office or agency where Certificates may be presented or
surrendered for acquisition of Ordinary Shares upon settlement of the
Purchase Contracts on the Purchase Contract Settlement Date or Early
Settlement and for transfer of Collateral upon occurrence of a Termination
Event, where Certificates may be surrendered for registration of transfer
or exchange, for a Collateral Substitution or re-establishment of an Income
PRIDES and where notices and demands to or upon the Company in respect of
the Securities and this Agreement may be served. The Company will give
prompt written notice to the Agent of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Agent with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office, and the
Company hereby appoints the Agent as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where Certificates 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 of its obligation to maintain an
office or agency in the Borough of Manhattan, The City of New York for such
purposes. The Company will give prompt written notice to the Agent of any
such designation or rescission and of any change in the location of any
such other office or agency. The Company hereby designates as the place of
payment for the Securities the Corporate Trust Office and appoints the
Agent at its Corporate Trust Office as paying agent in such city.
Section 10.3. Company to Reserve Ordinary Shares.
The Company shall at all times prior to the Purchase Contract
Settlement Date reserve and keep available, free from preemptive rights,
out of its authorized but unissued Ordinary Shares the full number of
Ordinary Shares issuable against tender of payment in respect of all
Purchase Contracts constituting a part of the Securities evidenced by
Outstanding Certificates.
Section 10.4. Covenants as to Ordinary Shares.
The Company covenants that all Ordinary Shares which may be issued
against tender of payment in respect of any Purchase Contract constituting
a part of the Outstanding Securities will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
ACE LIMITED
By:____________________________
Name:
Title:
THE BANK OF NEW YORK
as Purchase Contract Agent
By:____________________________
Name:
Title:
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EXHIBIT A
THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
PURCHASE CONTRACT AGREEMENT (AS HEREINAFTER DEFINED) AND IS REGISTERED IN
THE NAME OF THE CLEARING AGENCY OR A NOMINEE THEREOF. THIS CERTIFICATE MAY
NOT BE EXCHANGED IN WHOLE OR IN PART FOR A CERTIFICATE REGISTERED, AND NO
TRANSFER OF THIS CERTIFICATE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE
NAME OF ANY PERSON OTHER THAN SUCH CLEARING AGENCY OR A NOMINEE THEREOF,
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT
AGREEMENT.
Unless this Certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York,
New York) to the Company or its agent for registration of transfer,
exchange or payment, and any Certificate issued is registered in the name
of Cede & Co., or such other name as 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.
No. R-1 CUSIP No.: 004408 20 9
Initial Number of Income PRIDES: -6,000,000-
Income PRIDES Certificate
This Income PRIDES Certificate certifies that Cede & Co. is the
registered Holder of the number of Income PRIDES set forth above, subject
to increase or decrease in the equivalent aggregate principal amount set
forth on the schedule hereto. Each Income PRIDES represents (i) beneficial
ownership by the Holder of one share of 8.25% Cumulative Redeemable
Preferred Stock, Series A, US$1.00 par value per share (the "Preferred
Share"), of ACE Limited, a company duly organized and existing under the
laws of the Cayman Islands (the "Company"), having a stated liquidation
amount of US$50, subject to the Pledge of such Preferred Share by such
Holder pursuant to the Pledge Agreement and (ii) the rights and obligations
of the Holder under one Purchase Contract with the Company. All capitalized
terms used herein which are defined in the Purchase Contract Agreement have
the meaning set forth therein.
Pursuant to the Pledge Agreement, the Preferred Shares
constituting part of each Income PRIDES evidenced hereby have been pledged
to the Collateral Agent, for the benefit of the Company, to secure the
obligations of the Holder under the Purchase Contract comprising a portion
of such Income PRIDES.
The Pledge Agreement provides that all payments of the Stated
Amount of or cash dividends on, any Pledged Preferred Shares (as defined in
the Pledge Agreement) constituting part of the Income PRIDES received by
the Collateral Agent shall be paid by the Collateral Agent by wire transfer
in same day funds (i) in the case of (A) cash dividends with respect to
Pledged Preferred Shares, and (B) any payments of the Stated Amount with
respect to any Preferred Shares that have been released from the Pledge
pursuant to the Pledge Agreement, to the Agent to the account designated by
the Agent, no later than 2:00 p.m., New York City time, on the Business Day
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such payment is received by the Collateral Agent (provided that in the
event such payment is received by the Collateral Agent on a day that is not
a Business Day or after 12:30 p.m., New York City time, on a Business Day,
then such payment shall be made no later than 10:30 a.m., New York City
time, on the next succeeding Business Day) and (ii) in the case of payments
of the Stated Amount of any Pledged Preferred Shares to the Company on the
Purchase Contract Settlement Date (as defined herein) in accordance with
the terms of the Pledge Agreement, in full satisfaction of the respective
obligations of the Holders of the Income PRIDES of which such Pledged
Preferred Shares are a part under the Purchase Contracts forming a part of
such Income PRIDES. Distributions on any Preferred Share forming part of an
Income PRIDES evidenced hereby which are payable quarterly in arrears on
February 16, May 16, August 16 and November 16 of each year, commencing May
16, 2000 (a "Payment Date"), shall, subject to receipt thereof by the Agent
from the Collateral Agent, be paid to the Person in whose name this Income
PRIDES Certificate (or a Predecessor Income PRIDES Certificate) is
registered at the close of business on the Record Date for such Payment
Date.
Each Purchase Contract evidenced hereby obligates the Holder of
this Income PRIDES Certificate to purchase, and the Company to sell, on May
16, 2003 (the "Purchase Contract Settlement Date"), at a price equal to $50
(the "Stated Amount"), a number of ordinary shares, US$0.041666667 par
value per share ("Ordinary Shares"), of the Company, equal to the
Settlement Rate, unless on or prior to the Purchase Contract Settlement
Date there shall have occurred a Termination Event or an Early Settlement
with respect to the Income PRIDES of which such Purchase Contract is a
part, all as provided in the Purchase Contract Agreement and more fully
described on the reverse hereof. The purchase price (the "Purchase Price")
for the Ordinary Shares purchased pursuant to each Purchase Contract
evidenced hereby, if not paid earlier, shall be paid on the Purchase
Contract Settlement Date by application of payment received in respect of
the Stated Amount of the Pledged Preferred Shares pledged to secure the
obligations under such Purchase Contract of the Holder of the Income PRIDES
of which such Purchase Contract is a part.
Dividends on the Preferred Shares will be payable at the office of
the Agent in The City of New York or, at the option of the Company, by
check mailed to the address of the Person entitled thereto as such address
appears on the Income PRIDES Register.
Reference is hereby made to the further provisions set forth on
the reverse hereof, which further provisions shall for all purposes have
the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Agent by manual signature, this Income PRIDES Certificate shall not
be entitled to any benefit under the Pledge Agreement or the Purchase
Contract Agreement or be valid or obligatory for any purpose.
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IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.
ACE LIMITED
By: _______________________________
Name:
Title:
By: _______________________________
Name:
Title:
HOLDER SPECIFIED ABOVE (as to obligations of
such Holder under the Purchase Contracts
evidenced hereby)
By: THE BANK OF NEW YORK
not individually but solely as
Attorney-in-Fact of such Holder
By:___________________________________
Name:
Title:
Dated: April 12, 2000
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AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Income PRIDES Certificates referred to in the
within mentioned Purchase Contract Agreement.
By: THE BANK OF NEW YORK,
as Purchase Contract Agent
By:___________________________________
Authorized Signatory
Dated: April 12, 2000
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(Form of Reverse of Income PRIDES Certificate)
Each Purchase Contract evidenced hereby is governed by a Purchase
Contract Agreement, dated as of April 12, 2000 (as may be supplemented from
time to time, the "Purchase Contract Agreement"), between the Company and
The Bank of New York, a New York banking corporation, as Purchase Contract
Agent (including its successors thereunder, herein called the "Agent"), to
which Purchase Contract Agreement and supplemental agreements thereto
reference is hereby made for a description of the respective rights,
limitations of rights, obligations, duties and immunities thereunder of the
Agent, the Company, and the Holders and of the terms upon which the Income
PRIDES Certificates are, and are to be, executed and delivered.
Each Purchase Contract evidenced hereby obligates the Holder of
this Income PRIDES Certificate to purchase, and the Company to sell, on the
Purchase Contract Settlement Date at a price equal to the Stated Amount
(the "Purchase Price"), a number of Ordinary Shares of the Company equal to
the Settlement Rate, unless, on or prior to the Purchase Contract
Settlement Date, there shall have occurred a Termination Event or an Early
Settlement with respect to the Security of which such Purchase Contract is
a part. The "Settlement Rate" is equal to (a) if the Applicable Market
Value (as defined below) is equal to or greater than $26.3281 (the
"Threshold Appreciation Price"), 1.8991 Ordinary Shares per Purchase
Contract, (b) if the Applicable Market Value is less than the Threshold
Appreciation Price but is greater than $18.9563 (the "Threshold
Depreciation Price"), the number of Ordinary Shares per Purchase Contract
equal to the Stated Amount divided by the Applicable Market Value and (c)
if the Applicable Market Value is less than or equal to the Threshold
Depreciation Price, 2.6376 Ordinary Shares per Purchase Contract, in each
case subject to adjustment as provided in the Purchase Contract Agreement.
No fractional Ordinary Shares will be issued upon settlement of Purchase
Contracts, as provided in the Purchase Contract Agreement.
Each Purchase Contract evidenced hereby, which is settled either
through Early Settlement or Cash Settlement, shall obligate the Holder of
the related Income PRIDES to purchase at the Purchase Price, and the
Company to sell, a number of newly issued Ordinary Shares equal to the
Early Settlement Rate or the Settlement Rate, as applicable.
The "Applicable Market Value" means the average of the Closing
Price per Ordinary Share on each of the 20 consecutive Trading Days ending
on the third Trading Day immediately preceding the Purchase Contract
Settlement Date.
The "Closing Price" of the Ordinary Shares on any date of
determination means the closing sale price (or, if no closing price is
reported, the last reported sale price) of the Ordinary Shares on the New
York Stock Exchange (the "NYSE") on such date or, if the Ordinary Shares is
not listed for trading on the NYSE on any such date, as reported in the
composite transactions for the principal United States securities exchange
on which the Ordinary Shares is so listed, or if the Ordinary Shares is not
so listed on a United States national or regional securities exchange, as
reported by The Nasdaq Stock Market, or, if the Ordinary Shares is not so
reported, the last quoted bid price for the Ordinary Shares in the
over-the-counter market as reported by the National Quotation Bureau or
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similar organization, or, if such bid price is not available, the market
value of the Ordinary Shares on such date as determined by a nationally
recognized independent investment banking firm retained for this purpose by
the Company.
A "Trading Day" means a day on which the Ordinary Shares (A) is
not suspended from trading on any national or regional securities exchange
or association or over-the-counter market at the close of business and (B)
has traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the Ordinary Shares.
In accordance with the terms of the Purchase Contract Agreement,
the Holder of this Income PRIDES Certificate shall pay the Purchase Price
for the Ordinary Shares purchased pursuant to each Purchase Contract
evidenced hereby by effecting a Cash Settlement, or an Early Settlement or
from the proceeds of a remarketing of the related Pledged Preferred Shares
of such holders. A Holder of Income PRIDES who does not elect, on or prior
to 5:00 p.m., New York City time, on the fifth Business Day immediately
preceding the Purchase Contract Settlement Date, to make an effective Cash
Settlement or an Early Settlement, shall pay the Purchase Price for the
Ordinary Shares to be issued under the related Purchase Contract from the
Proceeds of the sale of the related Pledged Preferred Shares held by the
Collateral Agent. Such sale will be made by the Remarketing Agent pursuant
to the terms of the Remarketing Agreement and the Remarketing Underwriting
Agreement on the third Business Day immediately preceding the Purchase
Contract Settlement Date. If, as provided in the Purchase Contract
Agreement, upon the occurrence of a Failed Remarketing the Collateral
Agent, for the benefit of the Company, exercises its rights as a secured
creditor with respect to the Pledged Preferred Shares related to this
Income PRIDES certificate, any accumulated and unpaid dividends on such
Pledged Preferred Shares will become payable by the Company to the holder
of this Income PRIDES Certificate in the manner provided for in the
Purchase Contract Agreement.
The Company shall not be obligated to issue any Ordinary Shares in
respect of a Purchase Contract or deliver any certificates therefor to the
Holder unless it shall have received payment in full of the aggregate
purchase price for the Ordinary Shares to be purchased thereunder in the
manner herein set forth.
Each Purchase Contract evidenced hereby and all obligations and
rights of the Company and the Holder thereunder shall terminate if a
Termination Event shall have occurred. Upon the occurrence of a Termination
Event, the Company shall give written notice to the Agent and to the
Holders, at their addresses as they appear in the Income PRIDES Register.
Upon and after the occurrence of a Termination Event, the Collateral Agent
shall release the Pledged Preferred Share (as defined in the Pledge
Agreement) from the Pledge. An Income PRIDES shall thereafter represent the
right to receive the Preferred Share in accordance with the terms of the
Purchase Contract Agreement and the Pledge Agreement.
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Under the terms of the Pledge Agreement, the Agent will be
entitled to exercise the voting and any other consensual rights pertaining
to the Pledged Preferred Shares. Upon receipt of notice of any meeting at
which holders of Preferred Shares are entitled to vote or upon the
solicitation of consents, waivers or proxies of holders of Preferred
Shares, the Agent shall, as soon as practicable thereafter, mail to the
Income PRIDES holders a notice (a) containing such information as is
contained in the notice or solicitation, (b) stating that each Income
PRIDES holder on the record date set by the Agent therefor (which, to the
extent possible, shall be the same date as the record date for determining
the holders of Preferred Shares entitled to vote) shall be entitled to
instruct the Agent as to the exercise of the voting rights pertaining to
the Preferred Shares constituting a part of such holder's Income PRIDES and
(c) stating the manner in which such instructions may be given. Upon the
written request of the Income PRIDES Holders on such record date, the Agent
shall endeavor insofar as practicable to vote or cause to be voted, in
accordance with the instructions set forth in such requests, the maximum
number of Preferred Shares as to which any particular voting instructions
are received. In the absence of specific instructions from the Holder of an
Income PRIDES, the Agent shall abstain from voting the Preferred Share
evidenced by such Income PRIDES.
The Income PRIDES Certificates are issuable only in registered
form and in denominations of a single Income PRIDES and any integral
multiple thereof. The transfer of any Income PRIDES Certificate will be
registered and Income PRIDES Certificates may be exchanged as provided in
the Purchase Contract Agreement. The Income PRIDES Registrar may require a
Holder, among other things, to furnish appropriate endorsements and
transfer documents permitted by the Purchase Contract Agreement. No service
charge shall be required for any such registration of transfer or exchange,
but the Company and the Agent may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
A holder who elects to substitute a Treasury Security for Preferred Shares
thereby creating Growth PRIDES, shall be responsible for any fees or
expenses payable in connection therewith. Except as provided in the
Purchase Contract Agreement, for so long as the Purchase Contract
underlying an Income PRIDES remains in effect, such Income PRIDES shall not
be separable into its constituent parts, and the rights and obligations of
the Holder of such Income PRIDES in respect of the Preferred Share and
Purchase Contract constituting such Income PRIDES may be transferred and
exchanged only as an Income PRIDES. The holder of an Income PRIDES may
substitute for the Pledged Preferred Shares securing its obligation under
the related Purchase Contract Treasury Securities in an aggregate principal
amount at maturity equal to the aggregate Stated Amount of the Pledged
Preferred Shares in accordance with the terms of the Purchase Contract
Agreement and the Pledge Agreement. From and after such Collateral
Substitution, the Security for which such Pledged Treasury Securities
secures the Holder's obligation under the Purchase Contract shall be
referred to as a "Growth PRIDES." A Holder may make such Collateral
Substitution only in integral multiples of 20 Income PRIDES for 20 Growth
PRIDES. Such Collateral Substitution may cause the equivalent aggregate
principal amount of this Income PRIDES Certificate to be increased or
decreased; provided, however, the equivalent aggregate principal amount of
Income PRIDES Certificate shall not exceed $400,000,000. All such
adjustments to the equivalent aggregate principal amount of this Income
PRIDES Certificate shall be duly recorded by placing an appropriate
notation on the Schedule attached hereto.
A Holder of Growth PRIDES may create or recreate Income PRIDES by
depositing with the Collateral Agent Preferred Shares having an aggregate
Stated Amount equal to the aggregate principal amount at maturity of the
Pledged Treasury Securities comprising part of the Growth PRIDES in
exchange for the release of such Pledged Treasury Securities in accordance
with the terms of the Purchase Contract Agreement and the Pledge Agreement.
Any such recreation may be effected only in integral multiples of 20 Growth
PRIDES for 20 Income PRIDES.
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The Purchase Contracts and all obligations and rights of the
Company and the Holders thereunder, shall immediately and automatically
terminate, without the necessity of any notice or action by any Holder, the
Agent or the Company, if, on or prior to the Purchase Contract Settlement
Date, a Termination Event shall have occurred. Upon the occurrence of a
Termination Event, the Company shall promptly but in no event later than
two Business Days thereafter give written notice to the Agent, the
Collateral Agent and to the Holders, at their addresses as they appear in
the Income PRIDES Register. Upon and after the occurrence of a Termination
Event, the Collateral Agent shall release the Preferred Shares from the
Pledge in accordance with the provisions of the Pledge Agreement.
Subject to and upon compliance with the provisions of the Purchase
Contract Agreement, at the option of the Holder thereof, Purchase Contracts
underlying Securities having an aggregate Stated Amount equal to $1,000 or
an integral multiple thereof may be settled early ("Early Settlement") as
provided in the Purchase Contract Agreement. In order to exercise the right
to effect Early Settlement with respect to any Purchase Contracts evidenced
by this Income PRIDES Certificate, the Holder of this Income PRIDES
Certificate shall deliver this Income PRIDES Certificate to the Agent at
the Corporate Trust Office duly endorsed for transfer to the Company or in
blank with the form of Election to Settle Early set forth below duly
completed and accompanied by payment in the form of immediately available
funds payable to the order of the Company in an amount (the "Early
Settlement Amount") equal to (i) the product of (A) the Stated Amount times
(B) the number of Purchase Contracts with respect to which the Holder has
elected to effect Early Settlement, plus (ii) if such delivery is made with
respect to any Purchase Contracts during the period from the close of
business on any Record Date for any Payment Date to the opening of business
on such Payment Date, the dividends on the related Preferred Shares payable
on such Payment Date, if declared, with respect to such Purchase Contracts.
Upon Early Settlement of Purchase Contracts by a Holder of the related
Securities, the Pledged Preferred Shares underlying such Securities shall
be released from the Pledge as provided in the Pledge Agreement and the
Holder shall be entitled to receive a number of Ordinary Shares on account
of each Purchase Contract forming part of an Income PRIDES as to which
Early Settlement is effected equal to the Early Settlement Rate. The Early
Settlement Rate shall initially be equal to 1.8991 Ordinary Shares and
shall be adjusted in the same manner and at the same time as the Settlement
Rate is adjusted as provided in the Purchase Contract Agreement.
Upon registration of transfer of this Income PRIDES Certificate,
the transferee shall be bound (without the necessity of any other action on
the part of such transferee, except as may be required by the Agent
pursuant to the Purchase Contract Agreement), under the terms of the
Purchase Contract Agreement and the Purchase Contracts evidenced hereby and
the transferor shall be released from the obligations under the Purchase
Contracts evidenced by this Income PRIDES Certificate. The Company
covenants and agrees, and the Holder, by its acceptance hereof, likewise
covenants and agrees, to be bound by the provisions of this paragraph.
A-8
<PAGE>
The Holder of this Income PRIDES Certificate, by its acceptance
hereof, authorizes the Agent to enter into and perform the related Purchase
Contracts forming part of the Income PRIDES evidenced hereby on his behalf
as his attorney-in-fact, expressly withholds any consent to the assumption
(i.e., affirmance) of the Purchase Contracts by the Company or its trustee,
agrees to be bound by the terms and provisions thereof, covenants and
agrees to perform his obligations under such Purchase Contracts, consents
to the provisions of the Purchase Contract Agreement, authorizes the Agent
to enter into and perform the Pledge Agreement on his behalf as its
attorney-in-fact, and consents to the Pledge of the underlying this Income
PRIDES Certificate pursuant to the Pledge Agreement. The Holder further
covenants and agrees, that, to the extent and in the manner provided in the
Purchase Contract Agreement and the Pledge Agreement, but subject to the
terms thereof, payments in respect to the Stated Amount of the Pledged
Preferred Shares on the Purchase Contract Settlement Date shall be paid by
the Collateral Agent to the Company in satisfaction of such Holder's
obligations under such Purchase Contract and such Holder shall acquire no
right, title or interest in such payments.
Subject to certain exceptions, the provisions of the Purchase
Contract Agreement may be amended with the consent of the Holders of a
majority of the Purchase Contracts.
The Purchase Contracts shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York, without
regard to conflicts of laws principles thereof.
The Company, the Agent and its Affiliates and any agent of the
Company or the Agent may treat the Person in whose name this Income PRIDES
Certificate is registered as the owner of the Income PRIDES evidenced
hereby for the purpose of receiving payments of dividends payable quarterly
on the Preferred Shares, if declared, performance of the Purchase Contracts
and for all other purposes whatsoever, whether or not any payments in
respect thereof be overdue and notwithstanding any notice to the contrary,
and neither the Company, the Agent nor any such agent shall be affected by
notice to the contrary.
The Purchase Contracts shall not, prior to the settlement thereof,
entitle the Holder to any of the rights of a holder of Ordinary Shares.
A copy of the Purchase Contract Agreement is available for
inspection at the designated office of the Agent.
A-9
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
---------------------------------
(cust) (minor)
Under Uniform Gifts to Minors Act
_________________________________
(State)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
Additional abbreviations may also be used though not in the above list.
---------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
_______________________________________________________________________________
_______________________________________________________________________________
(Please insert Social Security or Taxpayer I.D. or other Identifying Number
of Assignee)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please Print or Type Name and Address Including Postal Zip Code of Assignee)
the within Income PRIDES Certificates and all rights thereunder, hereby
irrevocably constituting and appointing
_______________________________________________________________________________
attorney to transfer said Income PRIDES Certificates on the books of ACE
Limited with full power of substitution in the premises.
Dated:________________ _____________________________
Signature
A-10
<PAGE>
NOTICE: The signature to this
assignment must correspond
with the name as it appears
upon the face of the within
Income PRIDES Certificates
in every particular, without
alteration or enlargement
or any change whatsoever.
Signature Guarantee:________________________
A-11
<PAGE>
SETTLEMENT INSTRUCTIONS
The undersigned Holder directs that a certificate for Ordinary
Shares deliverable upon settlement on or after the Purchase Contract
Settlement Date of the Purchase Contracts underlying the number of Income
PRIDES evidenced by this Income PRIDES Certificate be registered in the
name of, and delivered, together with a check in payment for any fractional
share, to the undersigned at the address indicated below unless a different
name and address have been indicated below. If shares are to be registered
in the name of a Person other than the undersigned, the undersigned will
pay any transfer tax payable incident thereto.
Dated:_________________ _____________________________________
Signature
Signature Guarantee:_________________
(if assigned to another person)
If shares are to be registered
in the name of and delivered to REGISTERED HOLDER
a Person other than the
Holder, please (i) print such
Person's name and address and
(ii) provide a guarantee of your
signature:
Please print name and address
of Registered Holder:
- ---------------------------- ------------------------------------
Name Name
- ---------------------------- ------------------------------------
Address Address
- ---------------------------- ------------------------------------
- ---------------------------- ------------------------------------
- ---------------------------- ------------------------------------
Social Security or other
Taxpayer Identification
Number, if any ____________________________________
A-12
<PAGE>
ELECTION TO SETTLE EARLY
The undersigned Holder of this Income PRIDES Certificate hereby
irrevocably exercises the option to effect Early Settlement in accordance
with the terms of the Purchase Contract Agreement with respect to the
Purchase Contracts underlying the number of Income PRIDES evidenced by this
Income PRIDES Certificate specified below. The option to effect Early
Settlement may be exercised only with respect to Purchase Contracts
underlying Income PRIDES with an aggregate Stated Amount equal to $1,000 or
an integral multiple thereof. The undersigned Holder directs that a
certificate for Ordinary Shares deliverable upon such Early Settlement be
registered in the name of, and delivered, together with a check in payment
for any fractional share and any Income PRIDES Certificate representing any
Income PRIDES evidenced hereby as to which Early Settlement of the related
Purchase Contracts is not effected, to the undersigned at the address
indicated below unless a different name and address have been indicated
below. Pledged Preferred Shares deliverable upon such Early Settlement will
be transferred in accordance with the transfer instructions set forth
below. If shares are to be registered in the name of a Person other than
the undersigned, the undersigned will pay any transfer tax payable incident
thereto.
Dated:__________________ _____________________________
Signature
Signature Guarantee:_______________________________
A-13
<PAGE>
Number of Securities evidenced hereby as to which Early Settlement
of the related Purchase Contracts is being elected:
If Ordinary Shares or Income PRIDES REGISTERED HOLDER
Certificates are to be registered
in the name of and delivered to and
Pledged Preferred Shares are to be
transferred to a Person other than
the Holder, please print such
Person's name and address:
Please print name and address
of Registered Holder:
- ---------------------------- ------------------------------------
Name Name
- ---------------------------- ------------------------------------
Address Address
- ---------------------------- ------------------------------------
- ---------------------------- ------------------------------------
- ---------------------------- ------------------------------------
Social Security or other
Taxpayer Identification
Number, if any ____________________________________
Transfer Instructions for Pledged Preferred Shares Transferable Upon Early
Settlement or a Termination Event:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
A-12
<PAGE>
TO BE ATTACHED TO GLOBAL CERTIFICATES
OUTSTANDING BALANCES
The following increases or decreases in this Global Certificate
have been made:
Equivalent
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized
equivalent equivalent Certificate signatory of
Principal Amount Principal Amount following such Transfer Agent or
of the Global of the Global decrease or Securities
Date Certificate Certificate increase Custodian
- ------ ---------------- ---------------- ---------------- -----------------
A-15
<PAGE>
EXHIBIT B
THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
PURCHASE CONTRACT AGREEMENT (AS HEREINAFTER DEFINED) AND IS REGISTERED IN
THE NAME OF A CLEARING AGENCY OR A NOMINEE THEREOF. THIS CERTIFICATE MAY
NOT BE EXCHANGED IN WHOLE OR IN PART FOR A CERTIFICATE REGISTERED, AND NO
TRANSFER OF THIS CERTIFICATE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE
NAME OF ANY PERSON OTHER THAN SUCH CLEARING AGENCY OR A NOMINEE THEREOF,
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT
AGREEMENT.
Unless this Certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York,
New York) to the Company or its agent for registration of transfer,
exchange or payment, and any Certificate issued is registered in the name
of Cede & Co., or such other name as 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.
No. R-1 CUSIP No.: 004408 30 8
Initial Number of Growth PRIDES :- 0 -
Growth PRIDES Certificate
This Growth PRIDES Certificate certifies that Cede & Co. is the
registered Holder of the number of Growth PRIDES set forth above, subject
to increase or decrease in the equivalent aggregate principal amount set
forth on the schedule hereto. Each Growth PRIDES represents (i) a 1/20th
undivided beneficial ownership interest in a Treasury Security, subject to
the Pledge of such interest in such Treasury Security by such Holder
pursuant to the Pledge Agreement, and (ii) the rights and obligations of
the Holder under one Purchase Contract with ACE Limited, a company duly
organized and existing under the laws of the Cayman Islands (the
"Company"). All capitalized terms used herein which are defined in the
Purchase Contract Agreement have the meaning set forth therein.
Pursuant to the Pledge Agreement, the Treasury Securities
constituting part of each Growth PRIDES evidenced hereby have been pledged
to the Collateral Agent, for the benefit of the Company, to secure the
obligations of the Holder under the Purchase Contract comprising a portion
of such Growth PRIDES.
B-1
<PAGE>
Each Purchase Contract evidenced hereby obligates the Holder of
this Growth PRIDES Certificate to purchase, and the Company, to sell, on
May 16, 2003 (the "Purchase Contract Settlement Date"), at a price equal to
$50 (the "Stated Amount"), a number of ordinary shares, US$0.041666667 par
value per share ("Ordinary Shares"), of the Company equal to the Settlement
Rate, unless on or prior to the Purchase Contract Settlement Date there
shall have occurred a Termination Event or an Early Settlement with respect
to the Growth PRIDES of which such Purchase Contract is a part, all as
provided in the Purchase Contract Agreement and more fully described on the
reverse hereof. The purchase price for the Ordinary Shares purchased
pursuant to each Purchase Contract evidenced hereby will be paid by
application of the Proceeds from the Treasury Securities pledged to secure
the obligations under such Purchase Contract in accordance with the terms
of the Pledge Agreement.
Reference is hereby made to the further provisions set forth on
the reverse hereof, which further provisions shall for all purposes have
the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Agent by manual signature, this Growth PRIDES Certificate shall not
be entitled to any benefit under the Pledge Agreement or the Purchase
Contract Agreement or be valid or obligatory for any purpose.
B-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.
ACE LIMITED
By: ___________________________
Name:
Title:
By: ___________________________
Name:
Title:
HOLDER SPECIFIED ABOVE (as to obligations
of such Holder under the Purchase Contracts)
By: THE BANK OF NEW YORK,
not individually but solely as
Attorney-in-Fact of such Holder
By: ____________________________
Name:
Title:
Dated: April 12, 2000
B-3
<PAGE>
AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Growth PRIDES referred to in the
within-mentioned Purchase Contract Agreement.
By: THE BANK OF NEW YORK,
as Purchase Contract Agent
By:__________________________________
Authorized Signatory
Dated: April 12, 2000
B-4
<PAGE>
(Reverse of Growth PRIDES Certificate)
Each Purchase Contract evidenced hereby is governed by a Purchase
Contract Agreement, dated as of April 12, 2000 (as may be supplemented from
time to time, the "Purchase Contract Agreement") between the Company and
The Bank of New York, a New York banking corporation, as Purchase Contract
Agent (including its successors thereunder, herein called the "Agent"), to
which the Purchase Contract Agreement and supplemental agreements thereto
reference is hereby made for a description of the respective rights,
limitations of rights, obligations, duties and immunities thereunder of the
Agent, the Company and the Holders and of the terms upon which the Growth
PRIDES Certificates are, and are to be, executed and delivered.
Each Purchase Contract evidenced hereby obligates the Holder of
this Growth PRIDES Certificate to purchase, and the Company to sell, on the
Purchase Contract Settlement Date at a price equal to the Stated Amount
(the "Purchase Price") a number of Ordinary Shares of the Company equal to
the Settlement Rate, unless, on or prior to the Purchase Contract
Settlement Date, there shall have occurred a Termination Event or an Early
Settlement with respect to the Security of which such Purchase Contract is
a part. The "Settlement Rate" is equal to (a) if the Applicable Market
Value (as defined below) is equal to or greater than $26.3281 (the
"Threshold Appreciation Price"), 1.8991 Ordinary Shares per Purchase
Contract, (b) if the Applicable Market Value is less than the Threshold
Appreciation Price but is greater than $18.9563 (the "Threshold
Depreciation Price"), the number of Ordinary Shares per Purchase Contract
equal to the Stated Amount divided by the Applicable Market Value and (c)
if the Applicable Market Value is less than or equal to the Threshold
Depreciation Price, 2.6376 Ordinary Shares per Purchase Contract, in each
case subject to adjustment as provided in the Purchase Contract Agreement.
No fractional Ordinary Shares will be issued upon settlement of Purchase
Contracts, as provided in the Purchase Contract Agreement.
Each Purchase Contract evidenced hereby which is settled through
Early Settlement shall obligate the Holder of the related Growth PRIDES to
purchase at the Purchase Price, and the Company to sell, a number of newly
issued Ordinary Shares equal to the Early Settlement Rate.
The "Applicable Market Value" means the average of the Closing
Prices per Ordinary Share on each of the 20 consecutive Trading Days ending
on the third Trading Day immediately preceding the Purchase Contract
Settlement Date.
B-5
<PAGE>
The "Closing Price" of the Ordinary Shares on any date of
determination means the closing sale price (or, if no closing price is
reported, the last reported sale price) of the Ordinary Shares on the New
York Stock Exchange (the "NYSE") on such date or, if the Ordinary Shares is
not listed for trading on the NYSE on any such date, as reported in the
composite transactions for the principal United States securities exchange
on which the Ordinary Shares is so listed, or if the Ordinary Shares is not
so listed on a United States national or regional securities exchange, as
reported by The Nasdaq Stock Market, or, if the Ordinary Shares is not so
reported, the last quoted bid price for the Ordinary Shares in the
over-the-counter market as reported by the National Quotation Bureau or
similar organization, or, if such bid price is not available, the market
value of the Ordinary Shares on such date as determined by a nationally
recognized independent investment banking firm retained for this purpose by
the Company.
A "Trading Day" means a day on which the Ordinary Shares (A) is
not suspended from trading on any national or regional securities exchange
or association or over-the-counter market at the close of business and (B)
has traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the Ordinary Shares.
In accordance with the terms of the Purchase Contract Agreement,
the Holder of this Growth PRIDES Certificate shall pay the Purchase Price
for the Ordinary Shares purchased pursuant to each Purchase Contract
evidenced hereby by effecting either an Early Settlement of each such
Purchase Contract or by applying a principal amount at maturity of the
Pledged Treasury Securities underlying such Holder's Growth PRIDES equal to
the Stated Amount of such Purchase Contract to the purchase of the Ordinary
Shares.
The Company shall not be obligated to issue any Ordinary Shares in
respect of a Purchase Contract or deliver any certificates therefor to the
Holder unless it shall have received payment in full of the aggregate
purchase price for the Ordinary Shares to be purchased thereunder in the
manner herein set forth.
Each Purchase Contract evidenced hereby and all obligations and
rights of the Company and the Holder thereunder shall terminate if a
Termination Event shall have occurred. Upon the occurrence of a Termination
Event, the Company shall give written notice to the Agent and to the
Holders, at their addresses as they appear in the Growth PRIDES Register.
Upon and after the occurrence of a Termination Event, the Collateral Agent
shall release the Pledged Treasury Securities (as defined in the Pledge
Agreement) forming a part of each Growth PRIDES from the Pledge. A Growth
PRIDES shall thereafter represent the right to receive the Treasury
Securities forming a part of such Growth PRIDES in accordance with the
terms of the Purchase Contract Agreement and the Pledge Agreement.
B-6
<PAGE>
The Growth PRIDES Certificates are issuable only in registered
form and only in denominations of a single Growth PRIDES and any integral
multiple thereof. The transfer of any Growth PRIDES Certificate will be
registered and Growth PRIDES Certificates may be exchanged as provided in
the Purchase Contract Agreement. The Growth PRIDES Registrar may require a
Holder, among other things, to furnish appropriate endorsements and
transfer documents permitted by the Purchase Contract Agreement. No service
charge shall be required for any such registration of transfer or exchange,
but the Company and the Agent may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
A Holder who elects to substitute Preferred Shares for Pledged Treasury
Securities, thereby recreating Income PRIDES, shall be responsible for any
fees or expenses payable in connection therewith. Except as provided in the
Purchase Contract Agreement, for so long as the Purchase Contract
underlying a Growth PRIDES remains in effect, such Growth PRIDES shall not
be separable into its constituent parts, and the rights and obligations of
the Holder of such Growth PRIDES in respect of the Treasury Security and
the Purchase Contract constituting such Growth PRIDES may be transferred
and exchanged only as a Growth PRIDES. The Holder of a Growth PRIDES may
substitute for the Pledged Treasury Securities securing its obligation
under the related Purchase Contract Preferred Shares with a Stated Amount
equal to the aggregate principal amount at maturity of the Pledged Treasury
Securities in accordance with the terms of the Purchase Contract Agreement
and the Pledge Agreement. From and after such Collateral Substitution, the
Security for which such Preferred Shares secures the Holder's obligation
under the Purchase Contract shall be referred to as an "Income PRIDES." A
Holder may make such Collateral Substitution only in integral multiples of
20 Growth PRIDES for 20 Preferred Shares. Such Collateral Substitution may
cause the equivalent aggregate principal amount at maturity of this Growth
PRIDES Certificate to be increased or decreased; provided, however, the
equivalent aggregate principal amount outstanding under this Growth PRIDES
Certificate shall not exceed $400,000,000. All such adjustments to the
equivalent aggregate principal amount of this Growth PRIDES Certificate
shall be duly recorded by placing an appropriate notation on the Schedule
attached hereto.
A Holder of Income PRIDES may create or recreate a Growth PRIDES
by delivering to the Collateral Agent Treasury Securities in an aggregate
principal amount at maturity equal to the aggregate Stated Amount of the
Pledged Preferred Shares in exchange for the release of such Pledged
Preferred Shares in accordance with the terms of the Purchase Contract
Agreement and the Pledge Agreement. Any such recreation of a Growth PRIDES
may be effected only in multiples of 20 Income PRIDES for 20 Growth PRIDES.
The Purchase Contracts and all obligations and rights of the
Company and the Holders thereunder, including, without limitation, the
rights of the Holders to receive and the obligation of the Company to pay
Contract Adjustment Payments, shall immediately and automatically
terminate, without the necessity of any notice or action by any Holder, the
Agent or the Company, if, on or prior to the Purchase Contract Settlement
Date, a Termination Event shall have occurred. Upon the occurrence of a
Termination Event, the Company shall promptly but in no event later than
two business days thereafter give written notice to the Agent, the
Collateral Agent and to the Holders, at their addresses as they appear in
the Growth PRIDES Register. Upon and after the occurrence of a Termination
Event, the Collateral Agent shall release the Treasury Securities from the
Pledge in accordance with the provisions of the Pledge Agreement.
B-7
<PAGE>
Subject to and upon compliance with the provisions of the Purchase
Contract Agreement, at the option of the Holder thereof, Purchase Contracts
underlying Securities having an aggregate Stated Amount equal to $1,000 or
an integral multiple thereof may be settled early ("Early Settlement") as
provided in the Purchase Contract Agreement. In order to exercise the right
to effect Early Settlement with respect to any Purchase Contracts evidenced
by this Growth PRIDES Certificate, the Holder of this Growth PRIDES
Certificate shall deliver this Growth PRIDES Certificate to the Agent at
the Corporate Trust Office duly endorsed for transfer to the Company or in
blank with the form of Election to Settle Early set forth below duly
completed and accompanied by payment in the form of immediately available
funds payable to the order of the Company in an amount (the "Early
Settlement Amount") equal to the product of (A) the Stated Amount times (B)
the number of Purchase Contracts with respect to which the Holder has
elected to effect Early Settlement. Upon Early Settlement of Purchase
Contracts by a Holder of the related Securities, the Pledged Treasury
Securities underlying such Securities shall be released from the Pledge as
provided in the Pledge Agreement and the Holder shall be entitled to
receive a number of Ordinary Shares on account of each Purchase Contract
forming part of a Growth PRIDES as to which Early Settlement is effected
equal to the Early Settlement Rate. The Early Settlement Rate shall
initially be equal to 1.8991 Ordinary Shares and shall be adjusted in the
same manner and at the same time as the Settlement Rate is adjusted as
provided in the Purchase Contract Agreement.
Upon registration of transfer of this Growth PRIDES Certificate,
the transferee shall be bound (without the necessity of any other action on
the part of such transferee, except as may be required by the Agent
pursuant to the Purchase Contract Agreement), under the terms of the
Purchase Contract Agreement and the Purchase Contracts evidenced hereby and
the transferor shall be released from the obligations under the Purchase
Contracts evidenced by this Growth PRIDES Certificate. The Company
covenants and agrees, and the Holder, by his acceptance hereof, likewise
covenants and agrees, to be bound by the provisions of this paragraph.
The Holder of this Growth PRIDES Certificate, by his acceptance
hereof, authorizes the Agent to enter into and perform the related Purchase
Contracts forming part of the Growth PRIDES evidenced hereby on his behalf
as its attorney-in-fact, expressly withholds any consent to the assumption
(i.e., affirmance) of the Purchase Contracts by the Company or its trustee
in the event that the Company becomes the subject of a case under the
Bankruptcy Code, agrees to be bound by the terms and provisions thereof,
covenants and agrees to perform its obligations under such Purchase
Contracts, consents to the provisions of the Purchase Contract Agreement,
authorizes the Agent to enter into and perform the Pledge Agreement on his
behalf as his attorney-in-fact, and consents to the Pledge of the Treasury
Securities underlying this Growth PRIDES Certificate pursuant to the Pledge
Agreement. The Holder further covenants and agrees, that, to the extent and
in the manner provided in the Purchase Contract Agreement and the Pledge
Agreement, but subject to the terms thereof, payments in respect to the
Stated Amount of the Pledged Treasury Securities on the Purchase Contract
Settlement Date shall be paid by the Collateral Agent to the Company in
satisfaction of such Holder's obligations under such Purchase Contract and
such Holder shall acquire no right, title or interest in such payments.
B-8
<PAGE>
Subject to certain exceptions, the provisions of the Purchase
Contract Agreement may be amended with the consent of the Holders of a
majority of the Purchase Contracts.
The Purchase Contracts shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York, without
regard to conflicts of laws principles thereof.
The Company, the Agent and its Affiliates and any agent of the
Company or the Agent may treat the Person in whose name this Growth PRIDES
Certificate is registered as the owner of the Growth PRIDES evidenced
hereby for the purpose of receiving payments of interest on the Treasury
Securities, performance of the Purchase Contracts and for all other
purposes whatsoever, whether or not any payments in respect thereof be
overdue and notwithstanding any notice to the contrary, and neither the
Company, the Agent nor any such agent shall be affected by notice to the
contrary.
The Purchase Contracts shall not, prior to the settlement thereof,
entitle the Holder to any of the rights of a holder of Ordinary Shares.
A copy of the Purchase Contract Agreement is available for
inspection at the designated office of the Agent.
B-9
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
---------------------------
(cust) (minor)
Under Uniform Gifts to Minors Act
____________________________
(State)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants in
common
Additional abbreviations may also be used though not in the above list.
------------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto_______________________________________________________________
_______________________________________________________________________________
(Please insert Social Security or Taxpayer I.D. or other Identifying Number of
Assignee)
_______________________________________________________________________________
_______________________________________________________________________________
(Please Print or Type Name and Address Including Postal Zip Code of Assignee)
the within Growth PRIDES Certificates and all rights thereunder, hereby
irrevocably constituting and appointing
_______________________________________________________________________________
attorney to transfer said Growth PRIDES Certificates on the books of ACE
Limited with full power of substitution in the premises.
B-10
<PAGE>
Dated: _________________ __________________________
Signature
NOTICE: The signature to this
assignment must correspond with the
name as it appears upon the face
of the within Growth PRIDES
Certificates in every particular,
without alteration or enlargement
or any change whatsoever.
Signature Guarantee:__________________
B-11
<PAGE>
SETTLEMENT INSTRUCTIONS
The undersigned Holder directs that a certificate for Ordinary
Shares deliverable upon settlement on or after the Purchase Contract
Settlement Date of the Purchase Contracts underlying the number of Growth
PRIDES evidenced by this Growth PRIDES Certificate be registered in the
name of, and delivered, together with a check in payment for any fractional
share, to the undersigned at the address indicated below unless a different
name and address have been indicated below. If shares are to be registered
in the name of a Person other than the undersigned, the undersigned will
pay any transfer tax payable incident thereto.
Dated:_______________________ ______________________________
Signature
Signature Guarantee:
If shares are to be registered in
the name of and delivered REGISTERED HOLDER
to a Person other than the
Holder, please print such Person's
name and address:
Please print name and
address of Registered
Holder:
_______________________________ ________________________________
Name Name
_______________________________ ________________________________
Address Address
_______________________________ ________________________________
_______________________________ ________________________________
_______________________________ ________________________________
Social Security or other
Taxpayer Identification
Number, if any ________________________________
B-12
<PAGE>
ELECTION TO SETTLE EARLY
The undersigned Holder of this Growth PRIDES Certificate hereby
irrevocably exercises the option to effect Early Settlement in accordance
with the terms of the Purchase Contract Agreement with respect to the
Purchase Contracts underlying the number of Growth PRIDES evidenced by this
Growth PRIDES Certificate specified below. The option to effect Early
Settlement may be exercised only with respect to Purchase Contracts
underlying Growth PRIDES with an aggregate Stated Amount equal to $1,000 or
an integral multiple thereof. The undersigned Holder directs that a
certificate for Ordinary Shares deliverable upon such Early Settlement be
registered in the name of, and delivered, together with a check in payment
for any fractional share and any Growth PRIDES Certificate representing any
Growth PRIDES evidenced hereby as to which Early Settlement of the related
Purchase Contracts is not effected, to the undersigned at the address
indicated below unless a different name and address have been indicated
below. Pledged Treasury Securities deliverable upon such Early Settlement
will be transferred in accordance with the transfer instructions set forth
below. If shares are to be registered in the name of a Person other than
the undersigned, the undersigned will pay any transfer tax payable incident
thereto.
Dated:______________________ ________________________________
Signature
Signature Guarantee: _________________________
B-13
<PAGE>
Number of Securities evidenced hereby as to which Early Settlement
of the related Purchase Contracts is being elected:
If Ordinary Shares or Growth REGISTERED HOLDER
PRIDES Certificates are to
be registered in the name of and
delivered to and Pledged Treasury
Securities are to be transferred to
a Person other than the Holder, please
print such Person's name and address:
Please print name and
address of Registered
Holder:
___________________________________ __________________________________
Name Name
___________________________________ __________________________________
Address Address
___________________________________ __________________________________
___________________________________ __________________________________
___________________________________ __________________________________
Social Security or other
Taxpayer Identification
Number, if any __________________________________
Transfer Instructions for Pledged Treasury Securities Transferable Upon Early
Settlement or a Termination Event:
___________________________________
___________________________________
___________________________________
B-14
<PAGE>
TO BE ATTACHED TO GLOBAL CERTIFICATES
OUTSTANDING BALANCES
The following increases or decreases in this Global Certificate have been made:
Equivalent
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized
equivalent equivalent Certificate signatory of
Principal Amount Principal Amount following such Transfer Agent or
of the Global of the Global decrease or Securities
Date Certificate Certificate increase Custodian
- ------ ---------------- ---------------- ---------------- -----------------
B-15
<PAGE>
EXHIBIT C
INSTRUCTION FROM PURCHASE CONTRACT AGENT TO
COLLATERAL AGENT
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York
Attention: Corporate Trust Administration
Re: FELINE PRIDES of ACE Limited (the "Company"),
We hereby notify you in accordance with Section 4.1 of the Pledge
Agreement, dated as of April 12, 2000, among the Company, yourselves, as
Collateral Agent, and ourselves, as Purchase Contract Agent and as
attorney-in-fact for the holders of [Income PRIDES] [Growth PRIDES] from
time to time, that the holder of securities listed below (the "Holder") has
elected to substitute [$_____ aggregate principal amount at maturity of
Treasury Securities] [$_______ Stated Amount of Preferred Shares] in
exchange for the [Pledged Preferred Shares] [Pledged Treasury Securities]
held by you in accordance with the Pledge Agreement and has delivered to us
a notice stating that the Holder has transferred [Treasury Securities]
[Preferred Shares] to you, as Collateral Agent. We hereby instruct you,
upon receipt of such [Pledged Treasury Securities] [Pledged Preferred
Shares], and upon the payment by such Holder of any applicable fees, to
release the [Preferred Shares] [Treasury Securities] related to such
[Income PRIDES] [Growth PRIDES] to us in accordance with the Holder's
instructions.
Date:____________________ _______________________________
By:____________________________
Name:
Title:
Signature Guarantee:___________
Please print name and address of Registered Holder electing to substitute
[Treasury Securities] [Preferred Shares] for the [Pledged Preferred Shares]
[Pledged Treasury Securities]:
C-1
<PAGE>
- ----------------------------- ---------------------------------
Name Social Security or other Taxpayer
Identification Number, if any
- -----------------------------
Address
- -----------------------------
- -----------------------------
C-2
<PAGE>
EXHIBIT D
INSTRUCTION TO PURCHASE CONTRACT AGENT
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York
Attention: Corporate Trust Administration
Re: FELINE PRIDES of ACE Limited (the "Company"),
The undersigned Holder hereby notifies you that it has delivered
to The Bank of New York, as Collateral Agent, [$_______ aggregate principal
amount at maturity of Treasury Securities] [$_______ Stated Amount of
Preferred Shares] in exchange for the [Pledged Preferred Shares] [Pledged
Treasury Securities] held by the Collateral Agent, in accordance with
Section 4.1 of the Pledge Agreement, dated April 12, 2000, among you, the
Company and the Collateral Agent. The undersigned Holder has paid the
Collateral Agent all applicable fees relating to such exchange. The
undersigned Holder hereby instructs you to instruct the Collateral Agent to
release to you on behalf of the undersigned Holder the [Pledged Preferred
Shares] [Pledged Treasury Securities] related to such [Income PRIDES]
[Growth PRIDES].
Date:____________________ _______________________________
By:____________________________
Signature Guarantee:____________
Dated:
Please print name and address of Registered Holder:
- ------------------------- __________________________________
Name Social Security or other Taxpayer
Identification Number, if any
Address
- -------------------------
- -------------------------
- -------------------------
D-1
<PAGE>
EXHIBIT E
NOTICE TO SETTLE BY SEPARATE CASH
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York
Attention: Corporate Trust Administration
Re: FELINE PRIDES of ACE Limited (the "Company"),
The undersigned Holder hereby irrevocably notifies you in
accordance with Section 5.3 of the Purchase Contract Agreement, dated as of
April 12, 2000 between the Company, yourselves, as Purchase Contract Agent
and as Attorney-in-Fact for the Holders of the Purchase Contracts, that
such Holder has elected to pay to the Collateral Agent, on or prior to
11:00 a.m. New York City time, on the Business Day immediately preceding
the Purchase Contract Settlement Date, (in lawful money of the United
States by [certified or cashiers check] [wire transfer] in immediately
available funds), $_________ as the Purchase Price for the Ordinary Shares
issuable to such Holder by the Company under the related Purchase Contract
on the Purchase Contract Settlement Date. The undersigned Holder hereby
instructs you to notify promptly the Collateral Agent of the undersigned
Holders election to make such cash settlement with respect to the Purchase
Contracts related to such Holder's [Income PRIDES] [Growth PRIDES].
Date:____________________ ____________________________________
By:_________________________________
Signature Guarantee:________________
Dated:
Please print name and address of Registered Holder:
__________________________ ___________________________________
Name Social Security or other Taxpayer
Identification Number, if any
Address
- -------------------------
- -------------------------
- -------------------------
E-1
Exhibit 10.3
REMARKETING AGREEMENT
REMARKETING AGREEMENT, dated as of April 12, 2000 (the
"Remarketing Agreement") by and among ACE Limited, a company organized and
existing under the laws of the Cayman Islands ("the "Company"), The Bank of
New York, a New York banking corporation, not individually but solely as
Purchase Contract Agent and as attorney-in-fact of the holders of Purchase
Contracts (each as defined in the Purchase Contract Agreement (as defined
herein)), and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Remarketing Agent").
WITNESSETH:
WHEREAS, the Company has issued its FELINE PRIDES (the "FELINE
PRIDES") in an aggregate Stated Amount of $300,000,000 under the Purchase
Contract Agreement, dated as of April 12, 2000, by and between the Purchase
Contract Agent and the Company (the "Purchase Contract Agreement"); and
WHEREAS, the Company will issue concurrently in connection with
the issuance of the FELINE PRIDES 8.25% Cumulative Redeemable Preferred
Shares, Series A, par value US$1.00 per Preferred Share (the "Preferred
Shares") in an aggregate stated liquidation amount of $300,000,000; and
WHEREAS, the FELINE PRIDES will initially consist of 6,000,000 units
referred to as "Income PRIDES"; and
WHEREAS, the Preferred Shares will be pledged pursuant to the
Pledge Agreement (the "Pledge Agreement"), dated as of April 12, 2000, by
and among the Company, The Bank of New York, as collateral agent (the
"Collateral Agent"), and the Purchase Contract Agent, to secure an Income
PRIDES holder's obligations under the related Purchase Contract on the
Purchase Contract Settlement Date; and
WHEREAS, the Preferred Shares that have been tendered by the
related holders of Preferred Shares, or of Income PRIDES holders will be
remarketed by the Remarketing Agent on the third Business Day immediately
preceding the Purchase Contract Settlement Date; and
WHEREAS, the applicable dividend rate on the Preferred Shares that
remain outstanding on and after the Purchase Contract Settlement Date will
be reset to the Reset Rate to be determined by the Reset Agent; and
WHEREAS, the Company has requested Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") to act as the
Reset Agent and as the Remarketing Agent, and as such to perform the
services described herein; and
WHEREAS, Merrill Lynch is willing to act as Reset Agent and
Remarketing Agent and as such to perform such duties on the terms and
conditions expressly set forth herein;
NOW, THEREFORE, for and 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 Purchase Contract
Agreement or, if not therein defined, the Pledge Agreement.
Section 2. Appointment and Obligations of Remarketing Agent. The
Company hereby appoints Merrill Lynch and Merrill Lynch hereby accepts such
appointment, (i) as the Reset Agent to determine in consultation with the
Company, in the manner provided for by the terms of the Preferred Shares,
the Reset Rate, that in the opinion of the Reset Agent, will, when applied
to the Preferred Shares, enable a Preferred Share to have a market value of
approximately 100.5% of the aggregate stated liquidation amount of such
Preferred Share, provided, that the Company may limit such Reset Rate to be
no higher than the One-Month Treasury Bill plus 200 basis points (2%), and
(ii) as the exclusive Remarketing Agent to remarket the Preferred Shares,
of such Preferred Shareholders electing to have their Preferred Shares
remarketed, or of such Income PRIDES holders who have not early settled the
related Purchase Contracts and have failed to notify the Purchase Contract
Agent, on or prior to the fifth Business Day immediately preceding the
Purchase Contract Settlement Date, of their intention to settle the related
<PAGE>
Purchase Contracts through Cash Settlement, for settlement on the Purchase
Contract Settlement Date, pursuant to the Remarketing Underwriting
Agreement with the Company and the Purchase Contract Agent, substantially
in the form attached hereto as Exhibit A (with such changes as the Company,
the Purchase Contract Agent and the Remarketing Agent may agree upon, it
being understood that changes may be necessary in the representations,
warranties, covenants and other provisions of the Remarketing Underwriting
Agreement due to changes in law or facts and circumstances). rsuant to
the Remarketing Underwriting Agreement, the Remarketing Agent, either as
the sole remarketing underwriter or as the representative of a syndicate
including the Remarketing Agent and one or more other remarketing
underwriters designated by the Remarketing Agent, will agree, subject to
the terms and conditions set forth therein, that the Remarketing Agent and
any such other remarketing underwriters will purchase severally the
Preferred Shares to be sold by the holder or holders of Preferred Shares or
Income PRIDES on the Purchase Contract Settlement Date and use their
reasonable efforts to remarket such Preferred Shares (such purchase and
remarketing being hereinafter referred to as the "Remarketing"), at a price
of approximately 100.5% of such Preferred Share's aggregate stated
liquidation amount plus any accumulated and unpaid dividends.
Notwithstanding the preceding sentence, the Remarketing Agent shall not
remarket any Preferred Shares for a price less than 100% of the aggregate
stated liquidation preference of such Preferred Shares, plus accumulated
and unpaid dividends. The proceeds of such remarketing, less a fee, shall
be paid to the Collateral Agent in accordance with Section 4.6 of the
Pledge Agreement and Section 5.2 of the Purchase Contract Agreement (each
of which Sections are incorporated herein by reference).
Section 3. Fees. With respect to the Remarketing, the Remarketing Agent
shall retain as Remarketing Fee an amount not exceeding 25 basis points
(.25%) of the aggregate stated liquidation amount of the remarketed
securities from any amount received in connection with such Remarketing in
excess of the aggregate stated liquidation amount of such remarketed
Preferred Shares plus any accumulated and unpaid dividends. In addition,
the Reset Agent shall receive from the Company a reasonable and customary
fee as the Reset Agent Fee (the "Reset Agent Fee"); provided, however, that
if the Remarketing Agent shall also act as the Reset Agent, then the Reset
Agent shall not be entitled to receive any such Reset Agent Fee.
Section 4. Replacement and Resignation of Remarketing Agent. (a) The
Company may in its absolute discretion replace Merrill Lynch in its
capacity hereunder as the Remarketing Agent and/or as the Reset Agent by
giving notice prior to 3:00 p.m., New York City time, on the eleventh
Business Day immediately prior to the Purchase Contract Settlement Date.
Any such replacement 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 and/or the Reset Agent. Upon providing
such notice, the Company shall use all commercially reasonable efforts to
appoint such a successor and to enter into a remarketing agreement with
such successor as soon as reasonably practicable.
(b) Merrill Lynch may resign at any time and be discharged from
its duties and obligations hereunder as the Remarketing Agent and/or as the
Reset Agent by giving notice prior to 3:00 p.m., New York City time, on the
eleventh Business Day immediately prior to the Purchase Contract Settlement
Date. 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 and/or the Reset Agent. Upon
receiving notice from the Remarketing Agent and/or the Reset Agent that it
wishes to resign hereunder, the Company shall use all commercially
reasonable efforts to appoint such a successor and enter into a remarketing
agreement with it as soon as reasonably practicable.
Section 5. Dealing in the Securities. The Remarketing Agent, when acting
hereunder or under the Remarketing Underwriting Agreement or 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 Shares. With respect to any
Preferred Shares owned by it, the Remarketing Agent may exercise any vote
or join in any action with like effect as if it did not act in any capacity
hereunder. The Remarketing Agent, 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.
2
<PAGE>
Section 6. Registration Statement and Prospectus. In connection with
the Remarketing, if and to the extent required (in the opinion of counsel for
either the Remarketing Agent or the Company) by applicable law, regulations
or interpretations in effect at the time of such Remarketing, the Company
shall use its reasonable efforts to have a registration statement relating
to the Preferred Shares effective under the Securities Act of 1933 by the
third Business Day immediately preceding the Purchase Contract Settlement
Date, shall furnish a current prospectus and/or prospectus supplement to be
used in such Remarketing by the remarketing underwriter or underwriters
under the Remarketing Underwriting Agreement, and shall pay all expenses
relating thereto.
Section 7. Conditions to the Remarketing Agent's Obligations. The
obligations of the Remarketing Agent and any other remarketing underwriters
to purchase and remarket the Preferred Shares shall be subject to the terms
and conditions of the Remarketing Underwriting Agreement.
If at any time during the term of this Agreement, the
Company is in default with respect to the payment of a dividend on the
Preferred Shares, then the obligations and duties of the Remarketing Agent
under this Agreement shall be suspended until such default has been cured.
The Company will give the Remarketing Agent notice of all such defaults.
Section 8. Termination of Remarketing Agreement. This Agreement shall
terminate as to the Remarketing Agent and/or the Reset Agent on the
effective date of its replacement pursuant to Section 4(a) hereof or
pursuant to Section 4(b) hereof.
Section 9. Remarketing Agent's Performance; Duty of Care. The duties and
obligations of the Remarketing Agent hereunder shall be determined solely by
the express provisions of this Agreement and the Remarketing Underwriting
Agreement.
Section 10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
Section 11. Term of Agreement. Unless otherwise terminated in accordance
with the provisions hereof and except as otherwise provided herein, this
Agreement shall remain in full force and effect from the date hereof until
the first day thereafter on which no Preferred Shares are outstanding.
Section 12. Successors and Assigns. The rights and obligations of the
Company hereunder may not be assigned or delegated to any other person
without the prior written consent of Merrill Lynch as the Remarketing Agent
and/or as the Reset Agent. The rights and obligations of Merrill Lynch as
the Remarketing Agent and/or as the Reset Agent 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 Company and Merrill Lynch as the Remarketing Agent and/or as the
Reset Agent and their respective successors and assigns. The terms
"successors" and "assigns" shall not include any purchaser of Securities
merely because of such purchase.
Section 13. 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 will not be used in
the interpretation of any provision of this Agreement.
Section 14. 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 15. 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 16. Amendments. This Agreement may be amended by any instrument
in writing signed by the parties hereto.
3
<PAGE>
Section 17. 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, return receipt requested
and postage prepaid. All such notices, requests, consents or other
communications shall be addressed as follows: if to the Company, ACE
Limited, The ACE Building, 30 Woodbourne Avenue, Hamilton HM 08 Bermuda,
Attention: General Counsel and Secretary with a copy to Mayer, Brown &
Platt, 190 South La Salle Street, Chicago, IL 60603-3441, Attention: Edward
S. Best; if to the Remarketing Agent or Reset Agent (if Merrill Lynch & Co.
is the Remarketing Agent or the Reset Agent), to Merrill Lynch & Co., World
Financial Center, North Tower, New York, New York 10281, Attention:
Investment Banking, with a copy to Brown & Wood LLP, One World Trade
Center, New York, NY 10048, Attention: L. Markus Wiltshire; and if to the
Purchase Contract Agent, to 101 Barclay Street, Floor 21 West, New York, New
York 10286, Attention: Corporate Trust Administration, or to such other
address as any of the above shall specify to the other in writing.
Section 18. Consent to Jurisdiction; Miscellaneous. Each of the parties
hereto hereby expressly and irrevocably submits to the non-exclusive
jurisdiction of any competent court in the place of its domicile and any
United States Federal or New York State court sitting in the Borough of
Manhattan in The City of New York in any action, suit or proceeding arising
out of or relating to this Agreement or the transactions contemplated
hereby to the extent that such court has subject matter jurisdiction over
the controversy, and expressly and irrevocably waives, to the extent
permitted under applicable law, any immunity from the jurisdiction thereof
and any claim or defense in such action, suit or proceeding based on a
claim of improper venue, forum non conveniens or any similar basis to which
it might otherwise be entitled in any such action, suit or proceeding. The
Company irrevocably appoints ACE USA, Inc., 1133 Avenue of the Americas,
32nd Floor, New York, New York 10036 as its authorized agent in the Borough
of Manhattan in The City of New York upon which process may be served in
any such action, suit or proceeding, and agrees that service of process
upon such agent, and written notice of said service to the Company by the
person serving the same to the address provided in Section 18, shall be
deemed in every respect effective service of process upon the Company, in
any such action, suit or proceeding. The Company further agrees to take any
and all action as may be necessary to maintain such designation and
appointment of such agent in full force and effect for a period of seven
years from the date of this Agreement.
Section 19. Waiver of Immunities. To the extent that the Company or any
of its properties, assets or revenues may have or may hereafter become
entitled to, or have attributed to them, any right of immunity, on the
grounds of sovereignty, from any legal action, suit or proceeding, from
set-off or counterclaim, from the jurisdiction of any court, from service
of process, from attachment upon or prior to judgment, or from attachment
in aid of execution of judgment, or from execution of judgment, other legal
process or proceeding for the giving of any relief or for the enforcement
of any judgment, in any jurisdiction in which proceedings may at any time
be commenced, with respect to their obligations, liabilities or any other
matter under or arising out of or in connection with this Agreement or any
additional agreement, the Company hereby irrevocably and unconditionally,
to the extent permitted by applicable law, waives and agrees not to plead
or claim any such immunity and consents to such relief and enforcement.
Section 20. Judgment Currency. The Company agrees to indemnify each of
the Remarketing Agent and the Purchase Contract Agent against any loss
incurred by such party as a result of any judgment or order being given or made
for any amount due hereunder and such judgment or order being expressed and
paid in a currency (the "Judgment Currency") other than United States
dollars and as a result of any variation as between (i) the rate of
exchange at which the United States dollar amount is converted into the
Judgment Currency for the purpose of such judgment or order, and (ii) the
rate of exchange at which the such party is able to purchase United States
dollars with the amount of the Judgment Currency actually received by such
party. The foregoing indemnity shall constitute a separate and independent
obligation of the Company and shall continue in full force and effect
notwithstanding any such judgment or order as aforesaid. The term "rate of
exchange" shall include any premiums and costs of exchange payable in
connection with the purchase of, or conversion into, the relevant currency.
4
<PAGE>
IN WITNESS WHEREOF, each of the Company, the Purchase Contract
Agent and the Remarketing Agent has caused this 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:
Title:
CONFIRMED AND ACCEPTED:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: ----------------------------------------
Authorized Signatory
THE BANK OF NEW YORK
not individually but solely as Purchase Contract
Agent and as attorney-in-fact for the holders of
the Purchase Contracts
By: -----------------------------------------
Name:
Title:
5
<PAGE>
Exhibit A to
Remarketing Agreement
FORM OF REMARKETING UNDERWRITING AGREEMENT
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Remarketing Underwriter") hereby agrees to purchase the
Preferred Shares (the "Securities"), that have been tendered by the holders
of the Preferred Shares or the Income PRIDES for sale on o .
1. Definitions. Capitalized terms used and not defined in this
Agreement shall have the meanings assigned to them in the purchase contract
agreement (the "Purchase Contract Agreement"), the pledge agreement (the
"Pledge Agreement"), the underwriting agreement (the "Underwriting
Agreement"), each as identified in Schedule I hereto.
2. Registration Statement and Prospectus. If required (in the
opinion of counsel to either the Remarketing Underwriter or the Company) by
applicable law, the Company has filed with the Securities and Exchange
Commission, and there has become effective, a registration statement on
Form S-3 (No.__________________), including a prospectus, relating to the
Securities. Such registration statement, as amended to the date of this
Agreement, is hereinafter referred to as the "Registration Statement," the
prospectus included in the Registration Statement is hereinafter referred
to as the "Basic Prospectus" and the Basic Prospectus, as amended or
supplemented to the date of this Agreement to relate to the Securities and
to the remarketing of the Securities, is hereinafter referred to as the
"Final Prospectus" (including in each case all documents incorporated by
reference).
3. Provisions Incorporated by Reference. (a) Subject to Section
3(b), the provisions of the Underwriting Agreement shall be incorporated,
as applicable, into this Agreement and made applicable to the obligations
of the Remarketing Underwriter, except as explicitly amended hereby (with
such changes as the Company, the Purchase Contract Agent and the
Remarketing Agent may agree upon, it being understood that changes may be
necessary in the representations, warranties, covenants and other
provisions hereof due to changes in law or facts and circumstances).
(b) With respect to the provisions of the Underwriting Agreement
incorporated herein, for the purposes hereof, (i) all references therein to
the "Underwriter" or "Underwriters" shall be deemed to refer to the
Remarketing Underwriter; (ii) all references therein to the "Securities"
which are the subject thereof shall be deemed to refer to the Securities as
defined herein; (iii) all references therein to the "Closing Date" shall be
deemed to refer to the Remarketing Closing Date specified in Schedule I
hereto (the "Remarketing Closing Date"); (iv) all references therein to the
"Registration Statement" and the "Prospectus" shall be deemed to refer to
the Registration Statement and the Final Prospectus, respectively, as
defined herein.
4. Purchase and Sale; Remarketing Underwriting Fee. Subject to the
terms and conditions and in reliance upon the representations and
warranties herein set forth or incorporated herein, the Remarketing
Underwriter agrees to purchase from the registered holder or holders
thereof in the manner specified in Section 5 hereof, the aggregate stated
liquidation amount of Securities set forth in Schedule I hereto at a
purchase price not less than 100% of such Securities' aggregate stated
liquidation amount plus any accumulated and unpaid dividends thereon. In
connection therewith, the registered holder or holders thereof agree, in
the manner specified in Section 5 hereof, to pay to the Remarketing
Underwriter a Remarketing Underwriting Fee equal to ______basis points
(.__%) of the aggregate stated liquidation amount of the Securities, from
any amount received in connection with such Remarketing in excess of the
aggregate stated liquidation amount of the Securities plus any accumulated
and unpaid dividends. The right of each holder of Securities to have
Securities tendered for purchase shall be limited to the extent that (i)
the Remarketing Underwriter conducts a remarketing pursuant to the terms of
the Remarketing Agreement, (ii) the Remarketing Underwriter is able to find
a purchaser or purchasers for tendered Securities and (iii) such purchaser
or purchasers deliver the purchase price therefor to the Remarketing
Underwriter. The Remarketing Underwriter is not obligated to purchase any
Securities that would otherwise remain unsold in a remarketing. Neither the
Company nor the Remarketing Underwriter shall be obligated in any case to
provide funds to make payment upon tender of Securities for remarketing.
A-1
<PAGE>
5. Delivery and Payment. Delivery of payment for the remarketed
Securities and payment of the Remarketing Underwriting Fee shall be made on
the Remarketing Closing Date (which shall be the Purchase Contract
Settlement Date) at the location and time specified in Schedule I hereto,
which date and time may be postponed by agreement between the Remarketing
Underwriter, the Company and the [registered holder or holders thereof].
Delivery of payment for the remarketed Securities shall be [to or upon the
order of the [registered holder or holders of the remarketed Securities] by
certified or official bank check or checks drawn on or by a New York
Clearing House bank and payable in immediately available funds] [in
immediately available funds by wire transfer to an account or accounts
designated by the [Company] [registered holder or holders of the remarketed
Securities] or, if the remarketed Securities are represented by a Global
Security, by any method of transfer agreed upon by the Remarketing
Underwriter and the depositary for the Securities.
[It is understood that any registered holder or, if the
Securities are represented by a Global Security, any beneficial owner, that
has an account at the Remarketing Underwriter and tenders its Securities
through such account will not be required to pay any fee or commission to
the Remarketing Underwriter.]
If the Securities are not represented by a Global Security,
certificates for the Securities shall be registered in such names and
denominations as the Remarketing Underwriter may request not less than
three full business days in advance of the Remarketing Closing Date, and
the Company and the [registered holder or holders thereof] agree to have
such certificates available for inspection, packaging and checking by the
Remarketing Underwriter in New York, New York not later than 1:00 p.m. on
the Business Day prior to the Remarketing Closing Date.
6. 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, return receipt requested
and postage prepaid. All such notices, requests, consents or other
communications shall be addressed as follows: if to the Company, to ACE
Limited, The ACE Building, 30 Woodbourne Avenue, Hamilton HM 08 Bermuda,
Attention: General Counsel and Secretary with a copy to Mayer, Brown &
Platt, 190 South La Salle Street, Chicago, IL 60603-3441, Attention: Edward
S. Best; if to the Remarketing Underwriter, to Merrill Lynch & Co., World
Financial Center, North Tower, New York, New York 10281, Attention:
Investment Banking, with a copy to Brown & Wood LLP, One World Trade
Center, New York, NY 10048, Attention: L. Markus Wiltshire; and if to the
Purchase Contract Agent, to 101 Barclay Street, Floor 21 West, New York, New
York 10286, Attention: Corporate Trust Administration, or to such other
address as any of the above shall specify to the other in writing.
A-2
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding
agreement among the Company, the Purchase Contract Agent and the
Remarketing Underwriter.
Very truly yours,
ACE LIMITED
By:-----------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:---------------------------------------------
Authorized Signatory
THE BANK OF NEW YORK
not individually but solely as Purchase Contract
Agent and as attorney-in-fact for the holders
of the Purchase Contracts
By:---------------------------------------------
Name:
Title:
A-3
<PAGE>
SCH-I-1
SCHEDULE I
Purchase Contract Agreement dated as of April 12, 2000 by and between Ace
Limited, a Cayman Islands company, and The Bank of New York, a New York
banking corporation
Pledge Agreement dated as of April 12, 2000 by and between Ace Limited, a
Cayman Islands company, and The Bank of New York, as Collateral Agent,
Custodial Agent and Securities Intermediary, and as Purchase Contract Agent
Registration Statement No. 333-78841
Aggregate Stated Liquidation Amount of Securities: $300,000,000 ($345,000,000
if the Underwriters' over-allotment option is exercised)
Underwriting Agreement, dated as of April 6, 2000 between Ace Limited and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bank
of America Securities LLC and Donaldson, Lufkin & Jenrette Securities
Corporation
Remarketing Underwriting Fee: .25% (.0025)
Remarketing Closing Date, Time and Location:
SCH-I-1
Exhibit 10.4
PLEDGE AGREEMENT
among
ACE LIMITED,
THE BANK OF NEW YORK,
as Collateral Agent, Custodial Agent
and Securities Intermediary
AND
THE BANK OF NEW YORK,
as Purchase Contract Agent
Dated as of April 12, 2000
<PAGE>
Table of Contents
Page
ARTICLE I
Definitions.
Section 1.1 Definitions.......................................2
ARTICLE II
Pledge; Control and Perfection.
Section 2.1 The Pledge........................................5
Section 2.2 Control and Perfection............................6
ARTICLE III
Distributions on Pledged Collateral.
ARTICLE IV
Substitution, Release, Repledge and Settlement of Preferred Shares.
Section 4.1 Substitution for Preferred Shares and the
Creation of Growth Prides.........................9
Section 4.2 Substitution of Treasury Securities and the
Creation of Income Prides.........................9
Section 4.3 Termination Event................................10
Section 4.4 Cash Settlement..................................10
Section 4.5 Early Settlement.................................12
Section 4.6 Application of Proceeds Settlement...............12
ARTICLE V
Voting Rights --Preferred Shares.
ARTICLE VI
Rights and Remedies
Section 6.1 Rights and Remedies of the Collateral Agent......14
Section 6.2 Substitutions....................................15
ARTICLE VII
Representations and Warranties; Covenants.
Section 7.1 Representations and Warranties...................15
Section 7.2 Covenants........................................16
ARTICLE VIII
The Collateral Agent.
Section 8.1 Appointment, Powers and Immunities...............17
Section 8.2 Instructions of the Company......................17
Section 8.3 Reliance by Collateral Agent.....................18
Section 8.4 Rights in Other Capacities.......................18
Section 8.5 Non-Reliance on Collateral Agent.................18
Section 8.6 Compensation and Indemnity.......................19
Section 8.7 Failure to Act...................................19
Section 8.8 Resignation of Collateral Agent..................20
Section 8.9 Right to Appoint Agent or Advisor................20
Section 8.10 Survival.........................................21
Section 8.11 Exculpation......................................21
ARTICLE IX
Amendment.
Section 9.1 Amendment Without Consent of Holders.............21
Section 9.2 Amendment with Consent of Holders................21
Section 9.3 Execution of Amendments..........................22
Section 9.4 Effect of Amendments.............................22
Section 9.5 Reference to Amendments..........................22
i
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ARTICLE X
Miscellaneous.
Section 10.1 No Waiver........................................23
Section 10.2 GOVERNING LAW....................................23
Section 10.3 Notices..........................................23
Section 10.4 Successors and Assigns...........................23
Section 10.5 Counterparts.....................................24
Section 10.6 Severability.....................................24
Section 10.7 Expenses, Etc....................................24
Section 10.8 Security Interest Absolute.......................24
Section 10.9 Consent to Jurisdiction; Miscellaneous...........25
Section 10.10 Waiver of Immunities.............................25
Section 10.11 Judgement Currency...............................25
EXHIBIT A
Instruction to Collateral Agent............................................A-1
EXHIBIT B
Instruction to Purchase Contract Agent.....................................B-1
EXHIBIT C
Instruction to Custodial Agent Regarding Remarketing.......................C-1
EXHIBIT D
Instruction to Custodial Agent Regarding Withdrawal from Remarketing.......D-1
ii
<PAGE>
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of April 12, 2000 (this "Agreement"),
among ACE Limited, a corporation organized and existing under the laws of
the Cayman Islands (the "Company"), The Bank of New York, a New York
banking corporation, not individually but solely as collateral agent (in
such capacity, together with its successors in such capacity, the
"Collateral Agent"), as custodial agent (in such capacity, together with
its successors in such capacity, the "Custodial Agent"), as "securities
intermediary" as defined in Section 8-102(a)(14) of the Code (as defined
herein) (in such capacity, together with its successors in such capacity,
the "Securities Intermediary"), and as purchase contract agent and as
attorney-in-fact of the Holders (as defined in the Purchase Contract
Agreement) from time to time of the Securities (as hereinafter defined) (in
such capacity, together with its successors in such capacity, the "Purchase
Contract Agent") under the Purchase Contract Agreement (as herein after
defined).
RECITALS
The Company and the Purchase Contract Agent are parties to the
Purchase Contract Agreement, dated as of the date hereof (as modified and
supplemented and in effect from time to time, the "Purchase Contract
Agreement"), pursuant to which there may be issued up to 6,000,000 FELINE
PRIDES of the Company (6,900,000 if the Underwriters' over-allotment option
pursuant to the Underwriting Agreement and Pricing Agreement is exercised
in full), having a stated amount of $50 (the "Stated Amount") per FELINE
PRIDES.
The FELINE PRIDES will initially consist of 6,000,000 units
(referred to as "Income PRIDES") with a face amount, per Income PRIDES,
equal to the Stated Amount. Each Income PRIDES will be comprised of (a) a
stock purchase contract (the "Purchase Contract") under which the holder
will purchase from the Company not later than May 16, 2003 (the "Purchase
Contract Settlement Date"), for an amount of cash equal to the Stated
Amount, a number of ordinary shares, $0.041666667 par value per ordinary
share (the "Ordinary Shares"), of the Company equal to the Settlement Rate
(as defined below), and (b) beneficial ownership of one 8.25% Cumulative
Redeemable Preferred Share, Series A, US$1.00 par value per share (each, a
"Preferred Share") of the Company, having a stated liquidation preference
equal to the Stated Amount.
As provided herein, holders of Income PRIDES may substitute
collateral in order to create units of Growth PRIDES ("Growth PRIDES" and
together, with the Income PRIDES, the "Securities"). Each Growth PRIDES so
created will be comprised of (a) a Purchase Contract under which the holder
will purchase from the Company not later than the Purchase Contract
Settlement Date, for an amount in cash equal to the Stated Amount, a number
of Ordinary Shares of the Company equal to the Settlement Rate, and (b) a
1/20th undivided beneficial interest in a zero-coupon U.S. Treasury
Security (CUSIP No. 912833 FS4) having a principal amount at maturity equal
to $1,000 and maturing on May 15, 2003 (the "Treasury Securities").
Pursuant to the terms of the Purchase Contract Agreement and the
Purchase Contracts, the Holders, from time to time, of the Securities have
irrevocably authorized the Purchase Contract Agent, as attorney-in-fact of
such Holders, among other things, to execute and deliver this Agreement on
behalf of such Holders and to grant the pledge provided hereby of the
Preferred Shares and any Treasury Securities delivered in exchange therefor
to secure each Holder's obligations under the related Purchase Contract, as
provided herein and subject to the terms hereof. Upon such pledge, the
Preferred Shares and the Treasury Securities will be beneficially owned by
the Holders but will be owned of record by the Purchase Contract Agent
subject to the Pledge hereunder.
Accordingly, the Company, the Collateral Agent, the Securities
Intermediary, the Custodial Agent and the Purchase Contract Agent, on its
own behalf and as attorney-in-fact of the Holders from time to time of the
Securities, agree as follows:
<PAGE>
ARTICLE I
Definitions
Section 1.1 Definitions. For all purposes of this agreement, except
as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the singular;
(b) 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 or other subdivision;
(c) the following terms have the meanings assigned to them
in the Purchase Contract Agreement: (i) Act, (ii) Agent, (iii) Board
Resolution, (iv) Business Day, (v) Cash Settlement, (vi)
Certificate, (vii) Contract Adjustment Payments, (viii) Early
Settlement, (ix) Early Settlement Amount, (x) Early Settlement
Date, (xi) Failed Remarketing, (xii) Holder, (xiii) Opinion of
Counsel, (xiv) Outstanding Securities, (xv) Remarketing Agent,
(xvi) Remarketing Agreement, (xvii) Settlement Rate and (xviii)
Termination Event; and
"Agreement" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more agreements
supplemental hereto entered into pursuant to the applicable provisions
hereof.
"Cash" means any coin or currency of the United States as at the
time shall be legal tender for payment of public and private debts.
"Code" has the meaning specified in Section 6.1 hereof.
"Collateral" has the meaning specified in Section 2.1 hereof.
"Collateral Account" means the securities account (number 016570)
maintained at The Bank of New York in the name "The Bank of New York, as
Purchase Contract Agent on behalf of the holders of certain securities of
ACE Limited, Collateral Account subject to the security interest of The
Bank of New York, as Collateral Agent, for the benefit of ACE Limited, as
pledgee" and any successor account.
"Collateral Agent" has the meaning specified in the first
paragraph of this Agreement.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor shall have become such, and
thereafter "Company" shall mean such successor.
"Custodial Agent" has the meaning specified in the Recitals.
"Intermediary" means any entity that in the ordinary course of its
business maintains securities accounts for others and is acting in that
capacity.
"Ordinary Shares" has the meaning specified in the Recitals.
2
<PAGE>
"Permitted Investments" means any one of the following which shall
mature not later than the next succeeding Business Day: (i) any evidence of
indebtedness with an original maturity of 365 days or less issued, or
directly and fully guaranteed or insured, by the United States of America
or any agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof or
such indebtedness constitutes a general obligation of it); (ii) deposits,
certificates of deposit or acceptances with an original maturity of 365
days or less of any institution which is a member of the Federal Reserve
System having combined capital and surplus and undivided profits of not
less than US$200,000,000 at the time of deposit; (iii) investments with an
original maturity of 365 days or less of any Person that are fully and
unconditionally guaranteed by a bank of the type referred to in clause (ii);
(iv) investments in commercial paper, other than commercial paper issued by
the Company or its affiliates, of any corporation incorporated under the
laws of the United States or any State thereof, which commercial paper has
a rating at the time of purchase at least equal to "A-1" by Standard &
Poor's Ratings Services ("S&P") or at least equal to "P-1" by Moody's
Investors Service, Inc. ("Moody's"); and (v) investments in money market
funds registered under the Investment Company Act of 1940, as amended, and
rated in the highest applicable rating category by S&P or Moody's.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Pledge" has the meaning specified in Section 2.1 hereof.
"Pledged Preferred Shares" has the meaning specified in Section
2.1 hereof.
"Pledged Treasury Securities" has the meaning specified in Section
2.1 hereof.
"Preferred Shares" has the meaning specified in the Recitals.
"Proceeds" means all interest, dividends, cash, instruments,
securities, financial assets (as defined in Sections 8-102(a)(9) of the
Code) and other property from time to time received, receivable or
otherwise distributed upon the sale, exchange, collection or disposition of
the Collateral or any proceeds thereof.
"Purchase Contract" has the meaning specified in the Recitals.
"Purchase Contract Agent" has the meaning specified in the first
paragraph of this Agreement.
"Purchase Contract Agreement" has the meaning specified in the
Recitals.
"Purchase Contract Settlement Date" has the meaning specified in
the Recitals.
"Remarketing Underwriting Agreement" means the Remarketing
Underwriting Agreement attached as Exhibit A to the Remarketing Agreement.
"Securities" has the meaning specified in the Recitals.
"Securities Intermediary" has the meaning specified in the first
paragraph of this Agreement.
"Security Entitlement" has the meaning set forth in Section
8-102(a)(17) of the Code.
"Separate Preferred Shares" means any Preferred Shares that are
not Pledged Preferred Shares.
"Stated Amount" has the meaning specified in the Recitals.
3
<PAGE>
"TRADES" means the Treasury/Reserve Automated Debt Entry System
maintained by the Federal Reserve Bank of New York pursuant to the TRADES
Regulations.
"TRADES Regulations" means the regulations of the United States
Department of the Treasury, published at 31 C.F.R. Part 357, as amended
from time to time. Unless otherwise defined herein, all terms defined in
the TRADES Regulations are used herein as therein defined.
"Transfer" means, with respect to the Collateral and in accordance
with the instructions of the Collateral Agent, the Purchase Contract Agent
or the Holder, as applicable:
(i) in the case of Collateral consisting of securities which
cannot be delivered by book-entry or which the parties agree are to
be delivered in physical form, delivery in appropriate physical form
to the recipient accompanied by any duly executed instruments of
transfer, assignments in blank, transfer tax stamps and any other
documents necessary to constitute a legally valid transfer to the
recipient; and
(ii) in the case of Collateral consisting of securities
maintained in book-entry form, by causing a "securities intermediary"
(as defined in Section 8-102(a)(14) of the Code) to (i) credit a
"security entitlement" (as defined in Section 8-102(a)(17) of the
Code) with respect to such securities to a "securities account" (as
defined in Section 8-501(a) of the Code) maintained by or on behalf
of the recipient and (ii) to issue a confirmation to the recipient
with respect to such credit. In the case of Collateral to be delivered
to the Collateral Agent, the securities intermediary shall be the
Securities Intermediary and the securities account shall be the
Collateral Account.
"Treasury Security" has the meaning specified in the Recitals.
"Trust" has the meaning specified in the Recitals.
"Value" with respect to any item of Collateral on any date means,
as to (i) a Preferred Share, the Stated Amount, (ii) Cash, the face amount
thereof and (iii) Treasury Securities, the aggregate principal amount
thereof at maturity.
4
<PAGE>
ARTICLE II
Pledge; Control and Perfection.
Section 2.1 The Pledge. The Holders from time to time acting through
the Purchase Contract Agent, as their attorney-in-fact, and the Purchase
Contract Agent, as such attorney-in-fact, hereby pledge and grant to the
Collateral Agent, for the benefit of the Company, as collateral security
for the performance when due by such Holders of their respective
obligations under the related Purchase Contracts, a security interest in
all of the right, title and interest of the Purchase Contract Agent and
such Holders (a) in the Preferred Shares constituting a part of the
Securities and any Treasury Securities delivered in exchange for any
Preferred Shares, and any Preferred Shares delivered in exchange for any
Treasury Securities, in accordance with Section 4.2 hereof, in each case
that have been Transferred to or received by the Collateral Agent and not
released by the Collateral Agent to such Holders under the provisions of
this Agreement; (b) in payments made by Holders pursuant to Section 4.4;
(c) in the Collateral Account and all securities, financial assets, Cash
and other property credited thereto and all Security Entitlements related
thereto; and (d) all Proceeds of the foregoing (all of the foregoing,
collectively, the "Collateral"). Prior to or concurrently with the
execution and delivery of this Agreement, the Purchase Contract Agent, on
behalf of the initial Holders of the Securities, shall cause the Preferred
Shares comprising a part of the Income PRIDES to be Transferred to the
Collateral Agent for the benefit of the Company. Such Preferred Shares
shall be Transferred by physically delivering such Securities to the
Securities Intermediary indorsed in blank and causing the Securities
Intermediary to credit the Collateral Account with such Securities and
sending the Collateral Agent a confirmation of the deposit of such
Securities. In the event a Holder of Income PRIDES so elects, such Holder
may Transfer Treasury Securities to the Collateral Agent for the benefit of
the Company in exchange for the release by the Collateral Agent on behalf
of the Company to the Purchase Contract Agent of Preferred Shares with an
aggregate stated liquidation preference equal to the aggregate principal
amount at maturity of the Treasury Securities so Transferred on behalf of
such Holder. Such Treasury Securities shall be Transferred to the
Collateral Account maintained by the Collateral Agent at the Securities
Intermediary by book-entry transfer to the Collateral Account in accordance
with the TRADES Regulations and other applicable law and by the notation by
the Securities Intermediary on its books that a Security Entitlement with
respect to such Treasury Securities has been credited to the Collateral
Account. For purposes of perfecting the Pledge under applicable law,
including, to the extent applicable, the TRADES Regulations or the Uniform
Commercial Code as adopted and in effect in any applicable jurisdiction,
the Collateral Agent shall be the agent of the Company as provided herein.
The pledge provided in this Section 2.1 is herein referred to as the
"Pledge" and the Preferred Shares or Treasury Securities subject to the
Pledge, excluding any Preferred Shares or Treasury Securities released from
the Pledge as provided in Sections 4.1 and 4.2 hereof, respectively, are
hereinafter referred to as "Pledged Preferred Shares" or the "Pledged
Treasury Securities," respectively. Subject to the Pledge and the
provisions of Section 2.2 hereof, the Holders from time to time shall have
full beneficial ownership of the Collateral. Whenever directed by the
Collateral Agent acting on behalf of the Company, the Securities
Intermediary shall have the right to reregister the Preferred Shares or any
other Securities held in physical form in its name.
Except as may be required in order to release Preferred Shares in
connection with a Holder's election to convert its investment from an
Income PRIDES to a Growth PRIDES, or except as otherwise required to
release Securities as specified herein, neither the Collateral Agent nor
the Securities Intermediary shall relinquish physical possession of any
certificate evidencing a Preferred Share prior to the termination of this
Agreement. If it becomes necessary for the Securities Intermediary to
relinquish physical possession of a certificate in order to release a
portion of the Preferred Shares evidenced thereby from the Pledge, the
Securities Intermediary shall use its best efforts to obtain physical
possession of a replacement certificate evidencing any Preferred Shares
remaining subject to the Pledge hereunder registered to it or endorsed in
blank within fifteen days of the date it relinquished possession. The
Securities Intermediary shall promptly notify the Company and the
Collateral Agent of the Securities Intermediary's failure to obtain
possession of any such replacement certificate as required hereby.
5
<PAGE>
Section 2.2 Control and Perfection. (a) In connection with the Pledge
granted in Section 2.1, and subject to the other provisions of this
Agreement, the Holders from time to time acting through the Purchase
Contract Agent, as their attorney-in-fact, hereby authorize and direct the
Securities Intermediary (without the necessity of obtaining the further
consent of the Purchase Contract Agent or any of the Holders), and the
Securities Intermediary agrees, to comply with and follow any instructions
and entitlement orders (as defined in Section 8-102(a)(8) of the Code) that
the Collateral Agent on behalf of the Company may give in writing with
respect to the Collateral Account, the Collateral credited thereto and any
Security Entitlements with respect to any thereof. Such instructions and
entitlement orders may, without limitation, direct the Securities
Intermediary to transfer, redeem, sell, liquidate, assign, deliver or
otherwise dispose of the Preferred Shares, the Treasury Securities and any
Security Entitlements with respect thereto and to pay and deliver any
income, proceeds or other funds derived therefrom to the Company. The
Holders from time to time acting through the Purchase Contract Agent hereby
further authorize and direct the Collateral Agent, as Agent of the Company,
to itself issue instructions and entitlement orders, and to otherwise take
action, with respect to the Collateral Account, the Collateral credited
thereto and any Security Entitlements with respect thereto, pursuant to the
terms and provisions hereof, all without the necessity of obtaining the
further consent of the Purchase Contract Agent or any of the Holders. The
Collateral Agent shall be the agent of the Company and shall act as
directed in writing by the Company. Without limiting the generality of the
foregoing, the Collateral Agent shall issue entitlement orders to the
Securities Intermediary when and as directed by the Company.
(b) The Securities Intermediary hereby confirms and agrees that:
(i) it is a Person that in the ordinary course of business maintains securities
accounts for others and is acting in that capacity, (ii) all securities or
other property underlying any financial assets credited to the Collateral
Account shall be registered in the name of the Securities Intermediary,
indorsed to the Securities Intermediary or in blank or credited to another
Collateral Account maintained in the name of the Securities Intermediary
and in no case will any financial asset credited to the Collateral Account
be registered in the name of the Purchase Contract Agent, the Collateral
Agent, the Company or any Holder, payable to the order of, or specially
indorsed to, the Purchase Contract Agent, the Collateral Agent, the Company
or any Holder except to the extent the foregoing have been specially
indorsed to the Securities Intermediary or in blank; (iii) all property
delivered to the Securities Intermediary pursuant to this Pledge Agreement
(including, without limitation, any Preferred Shares or Treasury
Securities) will be promptly credited to the Collateral Account; (iv) the
Collateral Account is an account to which financial assets are or may be
credited, and the Securities Intermediary shall, subject to the terms of
this Agreement, treat the Purchase Contract Agent as entitled to exercise
the rights of any financial asset credited to the Collateral Account; (v)
the Securities Intermediary has not entered into, and until the termination
of this Agreement will not enter into, any agreement with any other person
relating to the Collateral Account and/or any financial assets credited
thereto pursuant to which it has agreed to comply with entitlement orders
(as defined in Section 8-102(a)(8) of the Code) of such other person; and
(vi) the Securities Intermediary has not entered into, and until the
termination of this Agreement will not enter into, any agreement with the
Company, the Collateral Agent or the Purchase Contract Agent purporting to
limit or condition the obligation of the Securities Intermediary to comply
with entitlement orders as set forth in this Section 2.2 hereof.
(c) The Securities Intermediary hereby agrees that each item of
property (whether investment property, financial asset, security, instrument
or cash) credited to the Collateral Account shall be treated as a "financial
asset" within the meaning of Section 8-102(a)(9) of the Code.
(d) In the event of any conflict between this Agreement (or any
portion thereof) and any other agreement now existing or hereafter entered
into, the terms of this Agreement shall prevail.
(e) The Purchase Contract Agent hereby irrevocably constitutes and
appoints the Collateral Agent and the Company, with full power of substitution,
as the Purchase Contract Agent's attorney-in-fact to take on behalf of, and in
the name, place and stead of the Purchase Contract Agent and the Holders,
any action necessary or desirable to perfect and to keep perfected the
security interest in the Collateral referred to in Section 2.1. The grant
of such power-of-attorney shall not be deemed to require of the Collateral
Agent any specific duties or obligations not otherwise assumed by the
Collateral Agent hereunder.
6
<PAGE>
ARTICLE III
Distributions on Pledged Collateral.
So long as the Purchase Contract Agent is the registered owner of
the Pledged Preferred Shares and is acting in such capacity, it shall
receive all payments thereon. If the Pledged Preferred Shares are
reregistered, such that the Collateral Agent becomes the registered holder,
all payments of the Stated Amount, or cash dividends on, the Pledged
Preferred Shares, as the case may be, and all payments of the principal of,
or cash distributions on, any Pledged Treasury Securities received by the
Collateral Agent that are properly payable hereunder shall be paid by the
Collateral Agent by wire transfer in same day funds:
(i) In the case of (A) cash dividends with respect to the Pledged
Preferred Shares and (B) any payments of the Stated Amount with
respect to any Preferred Shares that have been released from the
Pledge pursuant to Section 4.3 hereof, to the Purchase Contract Agent,
for the benefit of the relevant Holders of Securities, to the account
designated by the Purchase Contract Agent for such purpose, no later
than 2:00 p.m., New York City time, on the Business Day such payment
is received by the Collateral Agent (provided that in the event such
payment is received by the Collateral Agent on a day that is not a
Business Day or after 12:30 p.m., New York City time, on a Business
Day, then such payment shall be made no later than 10:30 a.m., New
York City time, on the next succeeding Business Day);
(ii) In the case of any principal payments with respect to any
Treasury Securities that have been released from the Pledge pursuant
to Section 4.3 hereof, to the Holders of the Growth PRIDES to the
accounts designated by them in writing for such purpose no later than
2:00 p.m., New York City time, on the Business Day such payment is
received by the Collateral Agent (provided that in the event such
payment is received by the Collateral Agent on a day that is not a
Business Day or after 12:30 p.m., New York City time, on a Business
Day, then such payment shall be made no later than 10:30 a.m., New
York City time, on the next succeeding Business Day); and
(iii) In the case of payments of the Stated Amount of any Pledged
Preferred Shares or the principal of any Pledged Treasury Securities,
to the Company on the Purchase Contract Settlement Date in accordance
with the procedure set forth in Section 4.6(a) or 4.6(b) hereof, in
full satisfaction of the respective obligations of the Holders
under the related Purchase Contracts.
All payments received by the Purchase Contract Agent as provided
herein shall be applied by the Purchase Contract Agent pursuant to the
provisions of the Purchase Contract Agreement. If, notwithstanding the
foregoing, the Purchase Contract Agent shall receive any payments of the
Stated Amount on account of any Preferred Share, that, at the time of such
payment, is a Pledged Preferred Share or a Holder of a Growth PRIDES shall
receive any payments of principal on account of any Treasury Securities
that, at the time of such payment, are Pledged Treasury Securities, the
Purchase Contract Agent or such Holder shall hold the same as trustee of an
express trust for the benefit of the Company (and promptly deliver the same
over to the Company) for application to the obligations of the Holders
under the related Purchase Contracts, and the Holders shall acquire no
right, title or interest in any such payments of Stated Amount or principal
so received.
7
<PAGE>
ARTICLE IV
Substitution, Release, Repledge and Settlement of Preferred Shares.
Section 4.1 Substitution for Preferred Shares and the Creation of
Growth Prides. At any time on or prior to the fifth Business Day immediately
preceding the Purchase Contract Settlement Date, a Holder of Income PRIDES
shall have the right to substitute Treasury Securities for the Preferred
Shares securing such Holder's obligations under the Purchase Contract(s)
comprising a part of its Income PRIDES in integral multiples of 20 Income
PRIDES by (a) Transferring to the Collateral Agent Treasury Securities
having a Value equal to the aggregate Stated Amount of the Pledged
Preferred Shares to be released and (b) delivering the related Income
PRIDES to the Purchase Contract Agent, accompanied by a notice,
substantially in the form of Exhibit B hereto, to the Purchase Contract
Agent stating that such Holder has Transferred Treasury Securities to the
Collateral Agent pursuant to clause (a) above (stating the Value of the
Treasury Securities Transferred by such Holder) and requesting that the
Purchase Contract Agent instruct the Collateral Agent to release from the
Pledge the Pledged Preferred Shares related to such Income PRIDES. The
Purchase Contract Agent shall instruct the Collateral Agent in the form
provided in Exhibit A. Upon receipt of Treasury Securities from a Holder of
Income PRIDES and the related instruction from the Purchase Contract Agent,
the Collateral Agent shall release the Pledged Preferred Shares and shall
promptly Transfer such Pledged Preferred Shares free and clear of any lien,
pledge or security interest created hereby, to the Purchase Contract Agent.
All items Transferred and/or substituted by any Holder pursuant to this
Section 4.1, Section 4.2 or any other Section of this Agreement shall be
Transferred and/or substituted free and clear of all liens, claims and
encumbrances.
Section 4.2 Substitution of Treasury Securities and the Creation of
Income Prides. At any time on or prior to the fifth Business Day immediately
preceding the Purchase Contract Settlement Date, a Holder of Growth PRIDES
shall have the right to reestablish Income PRIDES consisting of the
Purchase Contracts and Preferred Shares in integral multiples of 20 Income
PRIDES by (a) Transferring to the Collateral Agent Preferred Shares having
a Value equal to the Value of the Pledged Treasury Securities to be
released and (b) delivering the related Growth PRIDES to the Purchase
Contract Agent, accompanied by a notice, substantially in the form of
Exhibit B hereto, to the Purchase Contract Agent stating that such Holder
has transferred Preferred Shares to the Collateral Agent pursuant to clause
(a) above and requesting that the Purchase Contract Agent instruct the
Collateral Agent to release from the Pledge the Pledged Treasury Securities
related to such Growth PRIDES. The Purchase Contract Agent shall instruct
the Collateral Agent in the form provided in Exhibit A. Upon receipt of the
Preferred Shares from such Holder and the instruction from the Purchase
Contract Agent, the Collateral Agent shall release the Treasury Securities
and shall promptly Transfer such Treasury Securities, free and clear of any
lien, pledge or security interest created hereby, to the Purchase Contract
Agent.
Section 4.3 Termination Event. Upon receipt by the Collateral Agent
of written notice from the Company or the Purchase Contract Agent that there
has occurred a Termination Event, the Collateral Agent shall release all
Collateral from the Pledge and shall promptly Transfer any Pledged
Preferred Shares and Pledged Treasury Securities to the Purchase Contract
Agent for the benefit of the Holders of the Income PRIDES and the Growth
PRIDES, respectively, free and clear of any lien, pledge or security
interest or other interest created hereby.
If such Termination Event shall result from the Company's becoming
a debtor under any applicable uniform bankruptcy laws, and if the
Collateral Agent shall for any reason fail promptly to effectuate the
release and Transfer of all Pledged Preferred Shares or of the Pledged
Treasury Securities, as the case may be, as provided by this Section 4.3,
the Purchase Contract Agent shall (i) use its best efforts to obtain an
opinion of a recognized law firm practicing law in the applicable
jurisdiction to the effect that, as a result of the Company's being the
debtor in such a bankruptcy case, the Collateral Agent will not be
prohibited from releasing or Transferring the Collateral as provided in
this Section 4.3, and shall deliver such opinion to the Collateral Agent
within ten days after the occurrence of such Termination Event, and if (y)
the Purchase Contract Agent shall be unable to obtain such opinion within
ten days after the occurrence of such Termination Event or (z) the
Collateral Agent shall continue, after delivery of such opinion, to refuse
to effectuate the release and Transfer of all Pledged Preferred Shares or
the Pledged Treasury Securities, as the case may be, as provided in this
Section 4.3, then the Purchase Contract Agent shall within fifteen days
after the occurrence of such Termination Event commence an action or
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proceeding in the court with jurisdiction of the Company's case under the
any such applicable bankruptcy laws seeking an order requiring the
Collateral Agent to effectuate the release and transfer of all Pledged
Preferred Shares or of the Pledged Treasury Securities, as the case may be,
as provided by this Section 4.3 or (ii) commence an action or proceeding
like that described in subsection (i)(z) hereof within ten days after the
occurrence of such Termination Event.
Section 4.4 Cash Settlement. (a) Upon receipt by the Collateral Agent
of (i) a notice from the Purchase Contract Agent promptly after the receipt by
the Purchase Contract Agent of such notice that a Holder of an Income
PRIDES or Growth PRIDES has elected, in accordance with the procedures
specified in Section 5.2(a)(i) or (d)(i) of the Purchase Contract
Agreement, respectively, to settle its Purchase Contract with Cash and (ii)
payment of the amount required to settle such contract by such Holder on or
prior to 11:00 a.m., New York City time, on the Business Day immediately
preceding the Purchase Contract Settlement Date in lawful money of the
United States by certified or cashiers' check or wire transfer in
immediately available funds payable to or upon the order of the Company,
then the Collateral Agent shall promptly invest any Cash received from a
Holder in connection with a Cash Settlement in Permitted Investments. Upon
receipt of the proceeds upon the maturity of the Permitted Investments on
the Purchase Contract Settlement Date, the Collateral Agent shall pay the
portion of such proceeds and deliver any certified or cashiers' checks
received and any funds so wired, in an aggregate amount equal to the
Purchase Price, to the Company on the Purchase Contract Settlement Date,
and shall distribute any funds in respect of the interest earned from the
Permitted Investments to the Purchase Contract Agent for payment to the
relevant Holder.
(b) If a Holder of an Income PRIDES fails to notify the Purchase
Contract Agent of its intention to make a Cash Settlement in accordance with
Section 5.2(a)(i) of the Purchase Contract Agreement, such failure shall
constitute an event of default under the Purchase Contract Agreement and
hereunder, and the Holder shall be deemed to have consented to the disposition
of the Pledged Preferred Shares pursuant to the remarketing as described in
Section 5.2(b) of the Purchase Contract Agreement, which is incorporated
herein by reference. If a Holder of an Income PRIDES does notify the
Purchase Contract Agent as provided in Section 5.2(a)(i) of the Purchase
Contract Agreement of its intention to pay the Purchase Price in cash, but
fails to make such payment as required by Section 5.2(a)(ii) of the
Purchase Contract Agreement, such failure will constitute an event of
default under the Purchase Contract Agreement and hereunder, and the
Preferred Shares of such a Holder will not be remarketed but instead the
Collateral Agent, for the benefit of the Company, will exercise its rights
as a secured party with respect to such Preferred Shares at the written
direction of the Company to retain or dispose of the Collateral in
accordance with applicable law. In addition, in the event of a Failed
Remarketing as described in Section 5.2(b) of the Purchase Contract
Agreement, such Failed Remarketing shall constitute an event of default
hereunder by such Holder and the Collateral Agent, for the benefit of the
Company, will also exercise its rights as a secured party with respect to
such Preferred Shares at the written direction of the Company to retain or
dispose of the Collateral in accordance with applicable law.
(c) If a Holder of a Growth PRIDES fails to notify the Purchase
Contract Agent of such Holder's intention to make a Cash Settlement in
accordance with Section 5.2(d)(i) of the Purchase Contract Agreement, or if a
Holder of a Growth PRIDES does notify the Purchase Contract Agent as provided
in paragraph 5.2(d)(i) of the Purchase Contract Agreement of its intention to
pay the Purchase Price in cash, but fails to make such payment as required
by paragraph 5.2(d)(ii) of the Purchase Contract Agreement, such failure
shall constitute an event of default hereunder by such Holder and upon the
maturity of any Pledged Treasury Securities, if any, held by the Collateral
Agent on the Business Day immediately preceding the Purchase Contract
Settlement Date, the principal amount at maturity of the Pledged Treasury
Securities received by the Collateral Agent shall, upon written direction
of the Company, be invested promptly in any Permitted Investments. On the
Purchase Contract Settlement Date, an amount equal to the Purchase Price
will be remitted to the Company as payment thereof. In the event the sum of
the proceeds from the related Pledged Treasury Securities and the
investment earnings earned from such investments is in excess of the
aggregate Purchase Price of the Purchase Contracts being settled thereby,
the Collateral Agent will distribute such excess to the Purchase Contract
Agent for the benefit of the Holder of the related Growth PRIDES or Income
PRIDES when received.
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Section 4.5 Early Settlement. Upon written notice to the Collateral
Agent by the Purchase Contract Agent that one or more Holders of Securities
have elected to effect Early Settlement of their respective obligations under
the Purchase Contracts forming a part of such Securities in accordance with
the terms of the Purchase Contracts and the Purchase Contract Agreement
(setting forth the number of such Purchase Contracts as to which such
Holders have elected to effect Early Settlement), and that the Purchase
Contract Agent has received from such Holders, and paid to the Company as
confirmed in writing by the Company, the related Early Settlement Amounts
pursuant to the terms of the Purchase Contracts and the Purchase Contract
Agreement and that all conditions to such Early Settlement have been
satisfied, then the Collateral Agent shall release from the Pledge, (a)
Pledged Preferred Shares in the case of a Holder of Income PRIDES or (b)
Pledged Treasury Securities in the case of a Holder of Growth PRIDES, as
the case may be, with a principal amount at maturity equal to the product
of (i) the Stated Amount times (ii) the number of such Purchase Contracts
as to which such Holders have elected to effect Early Settlement and shall
Transfer all such Pledged Preferred Shares or Pledged Treasury Securities,
as the case may be, free and clear of the Pledge created hereby, to the
Purchase Contract Agent for the benefit of the Holders.
Section 4.6 Application of Proceeds Settlement. (a) In the event a
Holder of Income PRIDES has not elected to make an effective Cash Settlement by
notifying the Purchase Contract Agent in the manner provided for in
paragraph 5.4(a)(i) in the Purchase Contract Agreement or has not made an
Early Settlement of the Purchase Contract(s) underlying its Income PRIDES,
such Holder shall be deemed to have elected to pay for the Ordinary Shares
to be issued under such Purchase Contract(s) from the Proceeds of the
related Pledged Preferred Shares. The Collateral Agent shall, by 10:00
a.m., New York City time, on the fourth Business Day immediately preceding
the Purchase Contract Settlement Date, without any instruction from such
Holder of Income PRIDES, present the related Pledged Preferred Shares to
the Remarketing Agent for remarketing. Upon receiving such Pledged
Preferred Shares, the Remarketing Agent, pursuant to the terms of the
Remarketing Agreement and the Remarketing Underwriting Agreement, will use
its reasonable efforts to remarket such Pledged Preferred Shares on such
date at a price not less than approximately 100.5% of the aggregate Value
of such Pledged Preferred Shares, plus accumulated and unpaid dividends, if
any, thereon. After deducting as the remarketing fee an amount not
exceeding 25 basis points (.25%) of the aggregate Value of the Pledged
Preferred Shares from any amount of such Proceeds in excess of the
aggregate Value, plus such accumulated and unpaid dividends of the
remarketed Pledged Preferred Shares, the Remarketing Agent will remit the
entire amount of the Proceeds of such remarketing to the Collateral Agent.
On the Purchase Contract Settlement Date, the Collateral Agent shall apply
that portion of the Proceeds from such remarketing equal to the aggregate
Value, plus such accumulated and unpaid distributions of such Pledged
Preferred Shares, to satisfy in full the obligations of such Holders of
Income PRIDES to pay the Purchase Price to purchase the Ordinary Shares
under the related Purchase Contracts. The remaining portion of such
Proceeds, if any, shall be distributed by the Collateral Agent to the
Purchase Contract Agent for payment to the Holders. If the Remarketing
Agent advises the Collateral Agent in writing that it cannot remarket the
related Pledged Preferred Shares of such Holders of Income PRIDES at a
price not less than 100% of the aggregate Value of such Pledged Preferred
Shares plus any accumulated and unpaid distributions, thus resulting in a
Failed Remarketing and an event of default under the Purchase Contract
Agreement and hereunder, the Collateral Agent, for the benefit of the
Company will, at the written direction of the Company, retain or dispose of
the Pledged Preferred Shares in accordance with applicable law and satisfy
in full, from any such disposition or retention, such Holder's obligation
to pay the Purchase Price for the Ordinary Shares.
(b) In the event a Holder of Growth PRIDES has not made an Early
Settlement of the Purchase Contract(s) underlying its Growth PRIDES, such
Holder shall be deemed to have elected to pay for the Ordinary Shares to be
issued under such Purchase Contract(s) from the Proceeds of the related Pledged
Treasury Securities. On the Business Day immediately prior to the Purchase
Contract Settlement Date, the Collateral Agent shall invest the Cash proceeds
of the maturing Pledged Treasury Securities in any overnight Permitted
Investments. Without receiving any instruction from any such Holder of
Growth PRIDES, the Collateral Agent shall apply the Proceeds of the related
Pledged Treasury Securities to the settlement of such Purchase Contracts on
the Purchase Contract Settlement Date.
In the event the sum of the Proceeds from the related Pledged
Treasury Securities and the investment earnings from the investment in
overnight Permitted Investments is in excess of the aggregate Purchase
Price of the Purchase Contracts being settled thereby, the Collateral Agent
shall distribute such excess, when received, to the Purchase Contract Agent
for the benefit of the Holder.
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(c) Pursuant to the Remarketing Agreement and subject to the terms of
the Remarketing Underwriting Agreement, on or prior to the fifth Business Day
immediately preceding the Purchase Contract Settlement Date, but no earlier
than the Payment Date immediately preceding the Purchase Contract
Settlement Date, holders of Separate Preferred Shares may elect to have
their Separate Preferred Shares remarketed by delivering their Separate
Preferred Shares, together with a notice of such election, substantially in
the form of Exhibit C hereto, to the Custodial Agent. The Custodial Agent
will hold such Separate Preferred Shares in an account separate from the
Collateral Account. A holder of Separate Preferred Shares electing to have
its Separate Preferred Shares remarketed will also have the right to
withdraw such election by written notice to the Custodial Agent,
substantially in the form of Exhibit D hereto, on or prior to the fifth
Business Day immediately preceding the Purchase Contract Settlement Date,
upon which notice the Custodial Agent will return such Separate Preferred
Shares to such holder. On the fourth Business Day immediately preceding the
Purchase Contract Settlement Date, the Custodial Agent will deliver to the
Remarketing Agent for remarketing all Separate Preferred Shares delivered
to the Custodial Agent pursuant to this Section 4.6(c) and not withdrawn
pursuant to the terms hereof prior to such date. The portion of the
proceeds from such remarketing equal to the aggregate Value of such
Separate Preferred Shares will automatically be remitted by the Remarketing
Agent to the Custodial Agent for the benefit of the holders of such
Separate Preferred Shares. In addition, after deducting as the remarketing
fee an amount not exceeding 25 basis points (.25%) of the Value of the
remarketed Separate Preferred Shares, from any amount of such proceeds in
excess of the aggregate Value of the remarketed Separate Preferred Shares
plus any accumulated and unpaid dividends thereon, the Remarketing Agent
will remit to the Custodial Agent the remaining portion of the proceeds, if
any, for the benefit of such holders. If, despite using its reasonable
efforts, the Remarketing Agent advises the Custodial Agent in writing that
it cannot remarket the related Separate Preferred Shares of such holders at
a price not less than 100% of the aggregate Value of such Separate
Preferred Shares plus accumulated and unpaid dividends and thus resulting
in a Failed Remarketing, the Remarketing Agent will promptly return such
Preferred Shares to the Custodial Agent for redelivery to such holders.
ARTICLE V
Voting Rights --Preferred Shares.
Provided no default hereunder or under the Purchase Contract
exists, the Purchase Contract Agent may exercise, or refrain from
exercising, any and all voting and other consensual rights pertaining to
the Pledged Preferred Shares or any part thereof for any purpose not
inconsistent with the terms of this Agreement and in accordance with the
terms of the Purchase Contract Agreement; provided, that the Purchase
Contract Agent shall not exercise or, as the case may be, shall not refrain
from exercising such right if, in the judgment of the Company, such action
would impair or otherwise have a material adverse effect on the value of
all or any of the Pledged Preferred Shares; and provided, further, that the
Purchase Contract Agent shall give the Company and the Collateral Agent at
least five days' prior written notice of the manner in which it intends to
exercise, or its reasons for refraining from exercising, any such right.
Upon receipt of any notices and other communications in respect of any
Pledged Preferred Shares, including notice of any meeting at which holders
of Preferred Shares are entitled to vote or solicitation of consents,
waivers or proxies of holders of Preferred Shares, the Collateral Agent
shall use reasonable efforts to send promptly to the Purchase Contract
Agent such notice or communication, and as soon as reasonably practicable
after receipt of a written request therefor from the Purchase Contract
Agent, execute and deliver to the Purchase Contract Agent such proxies and
other instruments in respect of such Pledged Preferred Shares (in form and
substance satisfactory to the Collateral Agent) as are prepared by the
Purchase Contract Agent with respect to the Pledged Preferred Shares.
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ARTICLE VI
Rights and Remedies
Section 6.1 Rights and Remedies of the Collateral Agent. (a) In
addition to the rights and remedies specified in Section 4.4 hereof or
otherwise available at law or in equity, after an event of default hereunder,
the Collateral Agent shall have all of the rights and remedies with respect to
the Collateral of a secured party under the Uniform Commercial Code (or any
successor thereto) as in effect in the State of New York from time to time
(the "Code") (whether or not the Code is in effect in the jurisdiction
where the rights and remedies are asserted) and the TRADES Regulations and
such additional rights and remedies to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights and remedies
hereunder may be asserted. Wherever reference is made in this Agreement to
any section of the Code, such reference shall be deemed to include a
reference to any provision of the Code which is a successor to, or
amendment of, such section. Without limiting the generality of the
foregoing, such remedies may include, to the extent permitted by applicable
law, (i) retention of the Pledged Preferred Shares or other Collateral in
full satisfaction of the Holders' obligations under the Purchase Contracts
or (ii) sale of the Pledged Preferred Shares or other Collateral in one or
more public or private sales. Each Holder through the Purchase Contract
Agent agrees and acknowledges that the Collateral is of a type customarily
sold in a recognized market and that, accordingly, no notice of intended
disposition of the Collateral need be given by the Collateral Agent.
(b) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, in the event the Collateral Agent is
unable to make payments to the Company on account of principal payments of
any Pledged Treasury Securities as provided in Article III hereof in
satisfaction of the obligations of the Holder of Growth PRIDES of which
such Pledged Treasury Securities is a part under the related Purchase
Contracts, the inability to make such payments shall constitute an event of
default hereunder and the Collateral Agent shall have and may exercise,
with reference to such Pledged Treasury Securities and such obligations of
such Holder, any and all of the rights and remedies available to a secured
party under the Code and the TRADES Regulations after default by a debtor,
and as otherwise granted herein or under any other law.
(c) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, the Collateral Agent is hereby
irrevocably authorized to receive and collect all payments of (i) the
Stated Amount of or, cash dividends on, the Pledged Preferred Shares, or
(ii) the principal amount at maturity of the Pledged Treasury Securities,
subject, in each case, to the provisions of Section 3, and as otherwise
granted herein.
(d) The Purchase Contract Agent, individually and as attorney-in-fact
for each Holder of Securities, in the event such Holder becomes the Holder of a
Growth PRIDES, agrees that, from time to time, upon the written request of
the Company, Collateral Agent, the Purchase Contract Agent or such Holder
shall execute and deliver such further documents and do such other acts and
things as the Collateral Agent may reasonably request in order to maintain
the Pledge, and the perfection and priority thereof, and to confirm the
rights of the Collateral Agent hereunder. The Purchase Contract Agent shall
have no liability to any Holder for executing any documents or taking any
such acts requested by the Collateral Agent hereunder, except for liability
for its own negligent act, its own negligent failure to act, its bad faith
or its own willful misconduct.
Section 6.2 Substitutions. Whenever a Holder has the right to
substitute Treasury Securities or Preferred Shares, as the case may be, for
Collateral held by the Collateral Agent, such substitution shall not constitute
a novation of the security interest created hereby.
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ARTICLE VII
Representations and Warranties; Covenants.
Section 7.1 Representations and Warranties. The Holders from time to
time, acting through the Purchase Contract Agent as their attorney-in-fact (it
being understood that the Purchase Contract Agent shall not be liable for
any representation or warranty made by or on behalf of a Holder), hereby
represent and warrant to the Collateral Agent, which representations and
warranties shall be deemed repeated on each day a Holder Transfers
Collateral that:
(a) such Holder has the power to grant a security interest in
and lien on the Collateral;
(b) such Holder is the sole beneficial owner of the Collateral
and, in the case of Collateral delivered in physical form, is the sole
holder of such Collateral and is the sole beneficial owner of, or
has the right to Transfer, the Collateral it Transfers to the
Collateral Agent, free and clear of any security interest, lien,
encumbrance, call, liability to pay money or other restriction
other than the security interest and lien granted under Section
2.1 hereof;
(c) upon the Transfer of the Collateral to the Collateral
Account, the Collateral Agent, for the benefit of the Company, will
have a valid and perfected first priority security interest therein
(assuming that any central clearing operation or any Intermediary
or other entity not within the control of the Holder involved in
the Transfer of the Collateral, including the Collateral Agent,
gives the notices and takes the action required of it hereunder
and under applicable law for perfection of that interest and
assuming the establishment and exercise of control pursuant to
Section 2.2 hereof); and
(d) the execution and performance by the Holder of its
obligations under this Agreement will not result in the creation of
any security interest, lien or other encumbrance on the Collateral
other than the security interest and lien granted under Section
2.1 hereof or violate any provision of any existing law or
regulation applicable to it or of any mortgage, charge, pledge,
indenture, contract or undertaking to which it is a party or which
is binding on it or any of its assets.
Section 7.2 Covenants. The Holders from time to time, acting through
the Purchase Contract Agent as their attorney-in-fact (it being understood that
the Purchase Contract Agent shall not be liable for any covenant made by or
on behalf of a Holder), hereby covenant to the Collateral Agent that for so
long as the Collateral remains subject to the Pledge:
(a) neither the Purchase Contract Agent nor such Holders will
create or purport to create or allow to subsist any mortgage, charge,
lien, pledge or any other security interest whatsoever over the
Collateral or any part of it other than pursuant to this
Agreement;
(b) neither the Purchase Contract Agent nor such Holders will
sell or otherwise dispose (or attempt to dispose) of the Collateral
or any part of it except for the beneficial interest therein, subject
to the pledge hereunder, transferred in connection with the Transfer
of the Securities; and
(c) if any Collateral is delivered to any Holder or to the
Purchase Contract Agent, such Holder or the Purchase Contract Agent
will deliver the sum to the Collateral Agent, properly indorsed when
required, and in the form received.
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ARTICLE VIII
The Collateral Agent.
Section 8.1 Appointment, Powers and Immunities. The Collateral Agent
shall act as Agent for the Company hereunder with such powers as are
specifically vested in the Collateral Agent by the terms of this Agreement,
together with such other powers as are reasonably incidental thereto. Each of
the Collateral Agent, the Custodial Agent and the Securities Intermediary: (a)
shall have no duties or responsibilities except those expressly set forth
in this Agreement and no implied covenants or obligations shall be inferred
from this Agreement against any of them, nor shall any of them be bound by
the provisions of any agreement by any party hereto beyond the specific
terms hereof; (b) shall not be responsible for any recitals contained in
this Agreement, or in any certificate or other document referred to or
provided for in, or received by it under, this Agreement, the Income
PRIDES, Growth PRIDES or the Purchase Contract Agreement, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement (other than as against the Collateral Agent), the Securities or
the Purchase Contract Agreement or any other document referred to or
provided for herein or therein or for any failure by the Company or any
other Person (except the Collateral Agent, the Custodial Agent or the
Securities Intermediary, as the case may be) to perform any of its
obligations hereunder or thereunder or for the perfection, priority or,
except as expressly required hereby, maintenance of any security interest
created hereunder; (c) shall not be required to initiate or conduct any
litigation or collection proceedings hereunder (except in the case of the
Collateral Agent, pursuant to directions furnished under Section 8.2
hereof, subject to Section 8.6 hereof); (d) shall not be responsible for
any action taken or omitted to be taken by it hereunder or under any other
document or instrument referred to or provided for herein or in connection
herewith or therewith, except for its own negligence, bad faith or willful
misconduct; and (e) shall not be required to advise any party as to selling
or retaining, or taking or refraining from taking any action with respect
to, the Securities or other property deposited hereunder. Subject to the
foregoing, during the term of this Agreement, the Collateral Agent shall
take all reasonable action in connection with the safekeeping and
preservation of the Collateral hereunder.
No provision of this Agreement shall require the Collateral Agent,
the Custodial Agent or the Securities Intermediary to expend or risk its
own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder. In no event shall the Collateral Agent, the
Custodial Agent or the Securities Intermediary be liable for any amount in
excess of the Value of the Collateral. Notwithstanding the foregoing, the
Collateral Agent, the Custodial Agent, the Purchase Contract Agent and
Securities Intermediary, each in its individual capacity, hereby waive any
right of setoff, bankers lien, liens or perfection rights as securities
intermediary or any counterclaim with respect to any of the Collateral.
Section 8.2 Instructions of the Company. The Company shall have the
right, by one or more instruments in writing executed and delivered to the
Collateral Agent, the Custodial Agent or the Securities Intermediary, as
the case may be, to direct the time, method and place of conducting any
proceeding for the realization of any right or remedy available to the
Collateral Agent, or of exercising any power conferred on the Collateral
Agent, the Custodial Agent or the Securities Intermediary, as the case may
be, or to direct the taking or refraining from taking of any action
authorized by this Agreement; provided, however, that (i) such direction
shall not conflict with the provisions of any law or of this Agreement and
(ii) the Collateral Agent, the Custodial Agent and the Securities
Intermediary shall be adequately indemnified as provided herein. Nothing in
this Section 8.2 shall impair the right of the Collateral Agent in its
discretion to take any action or omit to take any action which it deems
proper and which is not inconsistent with such direction.
Section 8.3 Reliance by Collateral Agent. Each of the Securities
Intermediary, the Custodial Agent and the Collateral Agent shall be
entitled conclusively to rely upon any certification, order, judgment,
opinion, notice or other communication (including, without limitation, any
thereof by telephone or facsimile) believed by it in good faith to be
genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons (without being required to determine the
correctness of any fact stated therein), and upon advice and statements of
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legal counsel and other experts selected by the Collateral Agent, the
Custodial Agent or the Securities Intermediary, as the case may be. As to
any matters not expressly provided for by this Agreement, the Collateral
Agent, the Custodial Agent and the Securities Intermediary shall in all
cases be fully protected in acting, or in refraining from acting, hereunder
in accordance with instructions given by the Company in accordance with
this Agreement.
Section 8.4 Rights in Other Capacities. The Collateral Agent, the
Custodial Agent and the Securities Intermediary and their affiliates may
(without having to account therefor to the Company) accept deposits from, lend
money to, make their investments in and generally engage in any kind of
banking, trust or other business with the Purchase Contract Agent, any Holder
of Income PRIDES or Growth PRIDES and any holder of Separate Preferred Shares
(and any of their respective subsidiaries or affiliates) as if it were not
acting as the Collateral Agent, the Custodial Agent or the Securities
Intermediary, as the case may be, and the Collateral Agent, the Custodial
Agent and the Securities Intermediary and their affiliates may accept fees
and other consideration from the Purchase Contract Agent, any Holder of
Income PRIDES or Growth PRIDES or any holder of Separate Preferred Shares
without having to account for the same to the Company; provided that each
of the Securities Intermediary, the Custodial Agent and the Collateral
Agent covenants and agrees with the Company that it shall not accept,
receive or permit there to be created in favor of itself and shall take no
affirmative action to permit there to be created in favor of any other
Person, any security interest, lien or other encumbrance of any kind in or
upon the Collateral and the Collateral shall not be commingled with any
other assets of any such Person.
Section 8.5 Non-Reliance on Collateral Agent. None of the Securities
Intermediary, the Custodial Agent or the Collateral Agent shall be required
to keep itself informed as to the performance or observance by the Purchase
Contract Agent or any Holder of Securities of this Agreement, the Purchase
Contract Agreement, the Income PRIDES or Growth PRIDES or any other
document referred to or provided for herein or therein or to inspect the
properties or books of the Purchase Contract Agent or any Holder of Income
PRIDES or Growth PRIDES. The Collateral Agent, the Custodial Agent and the
Securities Intermediary shall not have any duty or responsibility to
provide the Company or the Remarketing Agent with any credit or other
information concerning the affairs, financial condition or business of the
Purchase Contract Agent, any Holder of Income PRIDES or Growth PRIDES or
any holder of Separate Preferred Shares (or any of their respective
subsidiaries or affiliates) that may come into the possession of the
Collateral Agent, the Custodial Agent or the Securities Intermediary or any
of their respective affiliates.
Section 8.6 Compensation and Indemnity. The Company agrees: (i) to
pay each of the Collateral Agent and the Custodial Agent from time to time such
compensation as shall be agreed in writing between the Company and the
Collateral Agent or the Custodial Agent, as the case may be, for all
services rendered by each of them hereunder and (ii) to indemnify the
Collateral Agent, the Custodial Agent and the Securities Intermediary for,
and to hold each of them harmless from and against, any loss, liability or
reasonable out-of-pocket expense incurred without negligence, willful
misconduct or bad faith on its part, arising out of or in connection with
the acceptance or administration of its powers and duties under this
Agreement, including the reasonable out-of-pocket costs and expenses
(including reasonable fees and expenses of counsel) of defending itself
against any claim or liability in connection with the exercise or
performance of such powers and duties. The Collateral Agent, the Custodial
Agent and the Securities Intermediary shall each promptly notify the
Company of any third party claim which may give rise to the indemnity
hereunder and give the Company the opportunity to participate in the
defense of such claim with counsel reasonably satisfactory to the
indemnified party, and no such claim shall be settled without the written
consent of the Company, which consent shall not be unreasonably withheld.
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Section 8.7 Failure to Act. In the event of any ambiguity in the
provisions of this Agreement or any dispute between or conflicting claims by or
among the parties hereto or any other Person with respect to any funds or
property deposited hereunder, the Collateral Agent and the Custodial Agent
shall be entitled, after prompt notice to the Company and the Purchase
Contract Agent, at its sole option, to refuse to comply with any and all
claims, demands or instructions with respect to such property or funds so
long as such dispute or conflict shall continue, and neither the Collateral
Agent nor the Custodial Agent shall be or become liable in any way to any
of the parties hereto for its failure or refusal to comply with such
conflicting claims, demands or instructions. The Collateral Agent and the
Custodial Agent shall be entitled to refuse to act until either (i) such
conflicting or adverse claims or demands shall have been finally determined
by a court of competent jurisdiction or settled by agreement between the
conflicting parties as evidenced in a writing, satisfactory to the
Collateral Agent or the Custodial Agent, as the case may be, or (ii) the
Collateral Agent or the Custodial Agent, as the case may be, shall have
received security or an indemnity reasonably satisfactory to the Collateral
Agent or the Custodial Agent, as the case may be, sufficient to save the
Collateral Agent or the Custodial Agent, as the case may be, harmless from
and against any and all loss, liability or reasonable out-of-pocket expense
which the Collateral Agent or the Custodial Agent, as the case may be, may
incur by reason of its acting without bad faith, willful misconduct or
gross negligence. The Collateral Agent or the Custodial Agent may in
addition elect to commence an interpleader action or seek other judicial
relief or orders as the Collateral Agent or the Custodial Agent, as the
case may be, may deem necessary. Notwithstanding anything contained herein
to the contrary, neither the Collateral Agent nor the Custodial Agent shall
be required to take any action that is in its opinion contrary to law or to
the terms of this Agreement, or which would in its opinion subject it or
any of its officers, employees or directors to liability.
Section 8.8 Resignation of Collateral Agent. Subject to the
appointment and acceptance of a successor Collateral Agent or Custodial Agent
as provided below, (a) the Collateral Agent and the Custodial Agent may resign
at any time by giving not less than 20 days prior notice thereof to the Company
and the Purchase Contract Agent as attorney-in-fact for the Holders of
Income PRIDES or Growth PRIDES, (b) the Collateral Agent and the Custodial
Agent may be removed at any time by the Company and (c) if the Collateral
Agent or the Custodial Agent fails to perform any of its material
obligations hereunder in any material respect for a period of not less than
20 days after receiving written notice of such failure by the Purchase
Contract Agent and such failure shall be continuing, the Collateral Agent
or the Custodial Agent may be removed by the Purchase Contract Agent. The
Purchase Contract Agent shall promptly notify the Company of any removal of
the Collateral Agent pursuant to clause (c) of the immediately preceding
sentence. Upon any such resignation or removal, the Company shall have the
right to appoint a successor Collateral Agent or Custodial Agent, as the
case may be. If no successor Collateral Agent or Custodial Agent, as the
case may be, shall have been so appointed and shall have accepted such
appointment within 30 days after the retiring Collateral Agent's or
Custodial Agent's giving of notice of resignation or such removal, then the
retiring Collateral Agent or Custodial Agent, as the case may be, may, at
the expense of the Company, petition any court of competent jurisdiction
for the appointment of a successor Collateral Agent or Custodial Agent, as
the case may be. Each of the Collateral Agent and the Custodial Agent shall
be a bank which has an office in New York, New York with a combined capital
and surplus of at least $50,000,000. Upon the acceptance of any appointment
as Collateral Agent or Custodial Agent, as the case may be, hereunder by a
successor Collateral Agent or Custodial Agent, as the case may be, such
successor shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Collateral Agent or Custodial
Agent, as the case may be, and the retiring Collateral Agent or Custodial
Agent, as the case may be, shall take all appropriate action to transfer
any money and property held by it hereunder (including the Collateral) to
such successor. The retiring Collateral Agent or Custodial Agent shall,
upon such succession, be discharged from its duties and obligations as
Collateral Agent or Custodial Agent hereunder. After any retiring
Collateral Agent's or Custodial Agent's resignation hereunder as Collateral
Agent or Custodial Agent, the provisions of this Section 8.8 shall continue
in effect for its benefit in respect of any actions taken or omitted to be
taken by it while it was acting as the Collateral Agent or Custodial Agent.
Any resignation or removal of the Collateral Agent hereunder shall be
deemed for all purposes of this Agreement as the simultaneous resignation
or removal of the Custodial Agent and the Securities Intermediary.
16
<PAGE>
Section 8.9 Right to Appoint Agent or Advisor. The Collateral Agent
shall have the right to appoint agents or advisors in connection with any of
its duties hereunder, and the Collateral Agent shall not be liable for any
action taken or omitted by, or in reliance upon the advice of, such agents
or advisors selected in good faith. The appointment of agents pursuant to
this Section 8.9 shall be subject to prior consent of the Company, which
consent shall not be unreasonably withheld.
Section 8.10 Survival. The provisions of this Article 8 shall survive
termination of this Agreement and the resignation or removal of the
Collateral Agent or the Custodial Agent.
Section 8.11 Exculpation. Anything in this Agreement to the contrary
notwithstanding, in no event shall any of the Collateral Agent, the
Custodial Agent or the Securities Intermediary or their officers, employees
or agents be liable under this Agreement to any third party for indirect,
special, punitive, or consequential loss or damage of any kind whatsoever,
including lost profits, whether or not the likelihood of such loss or
damage was known to the Collateral Agent, the Custodial Agent or the
Securities Intermediary, or any of them, incurred without any act or deed
that is found to be attributable to gross negligence, bad faith or willful
misconduct on the part of the Collateral Agent, the Custodial Agent or the
Securities Intermediary.
ARTICLE IX
Amendment.
Section 9.1 Amendment Without Consent of Holders. Without the consent
of any Holders or the holders of any Separate Preferred Shares, the Company,
the Collateral Agent, the Custodial Agent, the Securities Intermediary and
the Purchase Contract Agent, at any time and from time to time, may amend
this Agreement, in form satisfactory to the Company, the Collateral Agent,
the Custodial Agent, the Securities Intermediary and the Purchase Contract
Agent, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company, and the assumption by any such successor of the covenants of
the Company; or
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company so long as such covenants or such surrender do not
adversely affect the validity, perfection or priority of the security
interests granted or created hereunder; or
(3) to evidence and provide for the acceptance of appointment
hereunder by a successor Collateral Agent, Securities Intermediary
or Purchase Contract Agent; or
(4) to cure any ambiguity, to correct or supplement any
provisions herein which may be inconsistent with any other such
provisions herein, or to make any other provisions with respect to
such matters or questions arising under this Agreement, provided
such action shall not adversely affect the interests of the Holders.
Section 9.2 Amendment with Consent of Holders. With the consent of
the Holders of not less than a majority of the Purchase Contracts at the time
outstanding, by Act of said Holders delivered to the Company, the Purchase
Contract Agent or the Collateral Agent, as the case may be, the Company,
when duly authorized, the Company, the Purchase Contract Agent, the
Collateral Agent, the Custodial Agent and the Securities Intermediary may
amend this Agreement for the purpose of modifying in any manner the
provisions of this Agreement or the rights of the Holders in respect of the
Income PRIDES and Growth PRIDES; provided, however, that no such
supplemental agreement shall, without the consent of the Holder of each
Outstanding Income PRIDES and Growth PRIDES adversely affected thereby,
(1) change the amount or type of Collateral underlying an
Income PRIDES or Growth PRIDES (except for the rights of holders
of Income PRIDES to substitute the Treasury Securities for the
Pledged Preferred Shares, or the rights of Holders of Growth PRIDES
to substitute Preferred Shares for the Pledged Treasury Securities),
impair the right of the Holder of any Income PRIDES or Growth PRIDES
to receive distributions on the underlying Collateral or otherwise
adversely affect the Holder's rights in or to such Collateral; or
(2) otherwise effect any action that would require the
consent of the Holder of each Outstanding Income PRIDES or Growth
PRIDES affected thereby pursuant to the Purchase Contract Agreement
if such action were effected by an agreement supplemental thereto;
or
17
<PAGE>
(3) reduce the percentage of Purchase Contracts the consent of
whose Holders is required for any such amendment.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such Act shall approve the substance thereof.
Section 9.3 Execution of Amendments. In executing any amendment
permitted by this Section, the Collateral Agent, the Custodial Agent, the
Securities Intermediary and the Purchase Contract Agent shall be entitled to
receive and (subject to Section 6.1 hereof, with respect to the Collateral
Agent, and Section 7.1 of the Purchase Contract Agreement, with respect to the
Purchase Contract Agent) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions
precedent, if any, to the execution and delivery of such amendment have
been satisfied.
Section 9.4 Effect of Amendments. Upon the execution of any amendment
under this Article 9, this Agreement shall be modified in accordance therewith,
and such amendment shall form a part of this Agreement for all purposes;
and every Holder of Certificates theretofore or thereafter authenticated,
executed on behalf of the Holders and delivered under the Purchase Contract
Agreement shall be bound thereby.
Section 9.5 Reference to Amendments. Security Certificates
authenticated, executed on behalf of the Holders and delivered after the
execution of any amendment pursuant to this Section may, and shall if required
by the Collateral Agent or the Purchase Contract Agent, bear a notation in form
approved by the Purchase Contract Agent and the Collateral Agent as to any
matter provided for in such amendment. If the Company shall so determine,
new Security Certificates so modified as to conform, in the opinion of the
Collateral Agent, the Purchase Contract Agent and the Company, to any such
amendment may be prepared and executed by the Company and authenticated,
executed on behalf of the Holders and delivered by the Purchase Contract
Agent in accordance with the Purchase Contract Agreement in exchange for
Outstanding Security Certificates.
ARTICLE X
Miscellaneous.
Section 10.1 No Waiver. No failure on the part of any party hereto or
any of its agents to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise by any party
hereto or any of its agents of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
Section 10.2 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Without
limiting the foregoing, the above choice of law is expressly agreed to by
the Securities Intermediary, the Collateral Agent and the Holders from time
to time acting through the Purchase Contract Agent, as their
attorney-in-fact, in connection with the establishment and maintenance of
the Collateral Account.
18
<PAGE>
Section 10.3 Notices. All notices, requests, consents and other
communications provided for herein (including, without limitation, any
modifications of, or waivers or consents under, this Agreement) shall be
given or made in writing (including, without limitation, by telecopy)
delivered to the intended recipient at the "Address for Notices" specified
below its name on the signature pages hereof or, as to any party, at such
other address as shall be designated by such party in a notice to the other
parties. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
Section 10.4 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
Company, the Collateral Agent, the Custodial Agent, the Securities
Intermediary and the Purchase Contract Agent, and the Holders from time to
time of the Income PRIDES and Growth PRIDES, by their acceptance of the
same, shall be deemed to have agreed to be bound by the provisions hereof
and to have ratified the agreements of, and the grant of the Pledge
hereunder by, the Purchase Contract Agent.
Section 10.5 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this Agreement
by signing any such counterpart.
Section 10.6 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect
in such jurisdiction and shall be liberally construed in order to carry out
the intentions of the parties hereto as nearly as may be possible and (ii)
the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
Section 10.7 Expenses, Etc. The Company agrees to reimburse the
Collateral Agent and the Custodial Agent for: (a) all reasonable out-of-pocket
costs and expenses of the Collateral Agent and the Custodial Agent (including,
without limitation, the reasonable fees and expenses of counsel to the
Collateral Agent and the Custodial Agent), in connection with (i) the
negotiation, preparation, execution and delivery or performance of this
Agreement and (ii) any modification, supplement or waiver of any of the
terms of this Agreement; (b) all reasonable costs and expenses of the
Collateral Agent (including, without limitation, reasonable fees and
expenses of counsel) in connection with (i) any enforcement or proceedings
resulting or incurred in connection with causing any Holder of Securities
to satisfy its obligations under the Purchase Contracts forming a part of
the Securities and (ii) the enforcement of this Section 10.7; and (c) all
transfer, stamp, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of this
Agreement or any other document referred to herein and all costs, expenses,
taxes, assessments and other charges incurred in connection with any
filing, registration, recording or perfection of any security interest
contemplated hereby.
19
<PAGE>
Section 10.8 Security Interest Absolute. All rights of the Collateral
Agent and security interests hereunder, and all obligations of the Holders from
time to time hereunder, shall be absolute and unconditional irrespective
of:
(a) any lack of validity or enforceability of any provision of
the Purchase Contracts or the Securities or any other agreement or
instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
any other term of, or any increase in the amount of, all or any of
the obligations of Holders of Securities under the related Purchase
Contracts, or any other amendment or waiver of any term of, or any
consent to any departure from any requirement of, the Purchase
Contract Agreement or any Purchase Contract or any other agreement
or instrument relating thereto; or
(c) any other circumstance which might otherwise constitute a
defense available to, or discharge of, a borrower, a guarantor
or a pledgor.
Section 10.9 Consent to Jurisdiction; Miscellaneous. Each of the
parties hereto hereby expressly and irrevocably submits to the
non-exclusive jurisdiction of any competent court in the place of its
domicile and any United States Federal or New York State court sitting in
the Borough of Manhattan in The City of New York in any action, suit or
proceeding arising out of or relating to this Underwriting Agreement or the
transactions contemplated hereby to the extent that such court has subject
matter jurisdiction over the controversy, and expressly and irrevocably
waives, to the extent permitted under applicable law, any immunity from the
jurisdiction thereof and any claim or defense in such action, suit or
proceeding based on a claim of improper venue, forum non conveniens or any
similar basis to which it might otherwise be entitled in any such action,
suit or proceeding. The Company irrevocably appoints ACE USA, Inc., 1133
Avenue of the Americas, 32nd Floor, New York, New York 10036 as its
authorized agent in the Borough of Manhattan in The City of New York upon
which process may be served in any such action, suit or proceeding, and
agrees that service of process upon such agent, and written notice of said
service to the Company by the person serving the same to the address
provided in Section 10.9, shall be deemed in every respect effective
service of process upon the Company, in any such action, suit or
proceeding. The Company further agrees to take any and all action as may be
necessary to maintain such designation and appointment of such agent in
full force and effect for a period of seven years from the date of this
Agreement.
Section 10.10 Waiver of Immunities. To the extent that the Company or
any of its properties, assets or revenues may have or may hereafter become
entitled to, or have attributed to them, any right of immunity, on the
grounds of sovereignty, from any legal action, suit or proceeding, from
set-off or counterclaim, from the jurisdiction of any court, from service
of process, from attachment upon or prior to judgment, or from attachment
in aid of execution of judgment, or from execution of judgment, other legal
process or proceeding for the giving of any relief or for the enforcement
of any judgment, in any jurisdiction in which proceedings may at any time
be commenced, with respect to their obligations, liabilities or any other
matter under or arising out of or in connection with this Agreement or any
additional agreement, the Company hereby irrevocably and unconditionally,
to the extent permitted by applicable law, waives and agrees not to plead
or claim any such immunity and consents to such relief and enforcement.
20
<PAGE>
Section 10.11 Judgment Currency. The Company agrees to indemnify
each of the Purchase Contract Agent and the Collateral Agent against any loss
incurred by such party as a result of any judgment or order being given or
made for any amount due hereunder and such judgment or order being
expressed and paid in a currency (the "Judgment Currency") other than
United States dollars and as a result of any variation as between (i) the
rate of exchange at which the United States dollar amount is converted into
the Judgment Currency for the purpose of such judgment or order, and (ii)
the rate of exchange at which such party is able to purchase United States
dollars with the amount of the Judgment Currency actually received by such
party. The foregoing indemnity shall constitute a separate and independent
obligation of the Company and shall continue in full force and effect
notwithstanding any such judgment or order as aforesaid. The term "rate of
exchange" shall include any premiums and costs of exchange payable in
connection with the purchase of, or conversion into, the relevant currency.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
ACE LIMITED
By:__________________________________
Name:
Title:
Address for Notices:
ACE Limited
The ACE Building
30 Woodbourne Avenue
Hamilton HM 08 Bermuda
Attention: General Counsel and Secretary
Telecopy:
THE BANK OF NEW YORK, as Purchase
Contract Agent and as attorney-in-fact of
the Holders from time to time of the Income
PRIDES and Growth PRIDES
By:__________________________________
Name:
Title:
Address for Notices:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Telecopy: (212) 815-5915
THE BANK OF NEW YORK, as Collateral Agent,
Custodial Agent and as Securities
Intermediary
By:__________________________________
Name:
Title:
Address for Notices:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Telecopy: (212) 815-5915
21
<PAGE>
EXHIBIT A
INSTRUCTION FROM PURCHASE CONTRACT AGENT TO COLLATERAL AGENT
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: FELINE PRIDES of ACE Limited (the "Company")
We hereby notify you in accordance with Section [4.1] [4.2] of the
Pledge Agreement, dated as of April 12, 2000 (the "Pledge Agreement") among
the Company, yourselves, as Collateral Agent, Custodial Agent and
Securities Intermediary and ourselves, as Purchase Contract Agent and as
attorney-in-fact for the holders of [Income PRIDES] [Growth PRIDES] from
time to time, that the holder of the Securities listed below (the "Holder")
has elected to substitute [$_____ aggregate principal amount at maturity of
Treasury Securities] [$_______Stated Amount of Preferred Shares in exchange
for an equal Value of [Pledged Preferred Shares] [Pledged Treasury
Securities] held by you in accordance with the Pledge Agreement and has
delivered to us a notice stating that the Holder has Transferred [Treasury
Securities] [Preferred Shares] to you, as Collateral Agent. We hereby
instruct you, upon receipt of such [Pledged Treasury Securities] [Pledged
Preferred Securities], to release the [Preferred Shares] [Treasury
Securities] related to such [Income PRIDES] [Growth PRIDES] to us in
accordance with the Holder's instructions. Capitalized terms used herein
but not defined shall have the meaning set forth in the Pledge Agreement.
Date:_____________________ ____________________________
By:____________________________________
Name:
Title:
Signature Guarantee:
____________________________________
A-1
<PAGE>
Please print name and address of Registered Holder electing to substitute
[Treasury Securities] [Preferred Shares] for the [Pledged Preferred Shares]
[Pledged Treasury Securities]:
_________________________ ________________________________________
Name Social Security or other Taxpayer
Identification Number, if any
_________________________
Address
_________________________
_________________________
A-2
<PAGE>
EXHIBIT B
INSTRUCTION TO PURCHASE CONTRACT AGENT
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: FELINE PRIDES of ACE Limited (the "Company")
The undersigned Holder hereby notifies you that it has delivered
to The Bank of New York, as Collateral Agent, [$_______ aggregate principal
amount at maturity of Treasury Securities] [$ aggregate Stated Amount of
Preferred Shares in exchange for an equal Value of [Pledged Preferred
Shares] [Pledged Treasury Securities] held by the Collateral Agent, in
accordance with Section 4.1 of the Pledge Agreement, dated April 12, 2000
(the "Pledge Agreement"), between you, as Purchase Contract Agent and
Collateral Agent, and the Company. The undersigned Holder hereby instructs
you as Purchase Contract Agent to instruct the Collateral Agent to release
to you on behalf of the undersigned Holder the [Pledged Preferred Shares]
[Pledged Treasury Securities] related to such [Income PRIDES] [Growth
PRIDES]. Capitalized terms used herein but not defined shall have the
meaning set forth in the Pledge Agreement.
Date:_________________________ _________________________
Signature Guarantee:_____________________
Please print name and address of Registered Holder:
______________________________ ___________________________________________
Name Social Security or other Taxpayer
Identification Number, if any
______________________________
Address
B-1
<PAGE>
EXHIBIT C
INSTRUCTION TO CUSTODIAL AGENT REGARDING REMARKETING
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: Preferred Shares of ACE Limited (the "Company")
The undersigned hereby notifies you in accordance with Section
4.6(c) of the Pledge Agreement, dated as of April 12, 2000 (the "Pledge
Agreement"), among the Company, yourselves, as Collateral Agent, Securities
Intermediary and Custodial Agent, and yourselves, as Purchase Contract
Agent and as attorney-in-fact for the Holders of Income PRIDES and Growth
PRIDES from time to time, that the undersigned elects to deliver
$__________ stated liquidation amount of Preferred Shares for delivery to
the Remarketing Agent on the fourth Business Day immediately preceding the
Purchase Contract Settlement Date for remarketing pursuant to Section
4.6(c) of the Pledge Agreement. The undersigned will, upon request of the
Remarketing Agent, execute and deliver any additional documents deemed by
the Remarketing Agent or by the Company to be necessary or desirable to
complete the sale, assignment and transfer of the Preferred Shares tendered
hereby.
The undersigned hereby instructs you, upon receipt of the Proceeds
of such remarketing from the Remarketing Agent to deliver such Proceeds to
the undersigned in accordance with the instructions indicated herein under
"A. Payment Instructions." The undersigned hereby instructs you, in the
event of Failed Remarketing, upon receipt of the Preferred Shares tendered
herewith from the Remarketing Agent, to be delivered to the person(s) and
the address(es) indicated herein under "B. Delivery Instructions."
With this notice, the undersigned hereby (i) represents and
warrants that the undersigned has full power and authority to tender, sell,
assign and transfer the Preferred Shares tendered hereby and that the
undersigned is the record owner of any Preferred Shares tendered herewith
in physical form or a participant in The Depositary Trust Company ("DTC")
and the beneficial owner of any Preferred Shares tendered herewith by
book-entry transfer to your account at DTC and (ii) agrees to be bound by
the terms and conditions of Section 4.6(c) of the Pledge Agreement.
Capitalized terms used herein but not defined shall have the meaning set
forth in the Pledge Agreement.
Date:_______________________
___________________________________
By:________________________________
Name:
Title:
Signature Guarantee:__________________
Please print name and address:
______________________________ _______________________________________
Name Social Security or other Taxpayer
Identification Number, if any
______________________________
Address
C-1
<PAGE>
A. PAYMENT INSTRUCTIONS
Proceeds of the remarketing should be paid by check in the name of the
person(s) set forth below and mailed to the address set forth below.
Name(s)____________________________
(Please Print)
Address____________________________
(Please Print)
___________________________________
___________________________________
(Zip Code)
______________________________________________
(Tax Identification or Social Security Number)
B. DELIVERY INSTRUCTIONS
In the event of a Failed Remarketing, Preferred Shares which are in
physical form should be delivered to the person(s) set forth below and
mailed to the address set forth below.
Name(s)___________________________
(Please Print)
Address___________________________
(Please Print)
___________________________________
___________________________________
(Zip Code)
______________________________________________
(Tax Identification or Social Security Number)
In the event of a Failed Remarketing, Preferred Shares which are in
book-entry form should be credited to the account at The Depositary Trust
Company set forth below.
________________________
DTC Account Number
Name of Account Party:______________________
C-2
<PAGE>
EXHIBIT D
INSTRUCTION TO CUSTODIAL AGENT REGARDING
WITHDRAWAL FROM REMARKETING
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: Preferred Shares of ACE Limited (the "Company")
The undersigned hereby notifies you in accordance with Section
4.6(c) of the Pledge Agreement, dated as of April 12, 2000 (the "Pledge
Agreement") among the Company, yourselves, as Collateral Agent, Securities
Intermediary and Custodial Agent and yourselves, as Purchase Contract Agent
and as attorney-in-fact for the Holders of Income PRIDES and Growth PRIDES
from time to time, that the undersigned elects to withdraw the $_____
aggregate stated liquidation amount of Preferred Shares delivered to the
Custodial Agent on ___________, for remarketing pursuant to Section 4.6(c)
of the Pledge Agreement. The undersigned hereby instructs you to return
such Preferred Shares to the undersigned in accordance with the
undersigned's instructions. With this notice, the Undersigned hereby agrees
to be bound by the terms and conditions of Section 4.6(c) of the Pledge
Agreement. Capitalized terms used herein but not defined shall have the
meaning set forth in the Pledge Agreement.
Date:___________________ ___________________________________
By:_________________________________
Name:_______________________________
Title:______________________________
Signature Guarantee:_________________
Please print name and address:
_________________________________ ____________________________________
(Name) Social Security or other Taxpayer
____________________________________
Identification Number, if any
____________________________________
Address
D-1
<PAGE>
A. DELIVERY INSTRUCTIONS
In the event of a Failed Remarketing, Preferred Shares which are in
physical form should be delivered to the person(s) set forth below and
mailed to the address set forth below.
Name(s)__________________________
(Please Print)
Address__________________________
(Please Print)
_________________________________
(Zip Code)
________________________________________________
(Tax Identification or Social Security Number)
In the event of a Failed Remarketing, Preferred Shares which are in
book-entry form should be credited to the account at The Depositary Trust
Company set forth below.
____________________________
DTC Account Number
Name of Account Party:___________________________
Exhibit 10.5
CONFORMED COPY
ACE USA OFFICER
DEFERRED COMPENSATION PLAN
--------------------------
(as amended through January 1, 2000)
<PAGE>
TABLE OF CONTENTS
SECTION 1................................................................. 1
General .........................................................1
1.1. Purpose ...........................................1
1.2. Effective Date.....................................1
1.3. Related Companies and Employers....................1
1.4. Operation and Administration.......................1
1.5. Plan Year..........................................1
1.6. Gender and Number..................................1
1.7. Notices ...........................................2
1.8. Form and Time of Elections.........................2
1.9. Other Costs and Benefits...........................2
1.10. Evidence..........................................2
1.11. Action by Employers...............................2
SECTION 2..................................................................2
Participation.....................................................2
2.1. Participant........................................2
2.2. Deferral Election..................................3
2.3. Eligible Compensation..............................3
2.4. Plan Not Contract of Employment....................3
SECTION 3..................................................................3
Plan Accounting...................................................3
3.1. Accounts...........................................3
3.2. Adjustment of Accounts.............................3
3.3. Crediting Under Deferral Election..................4
3.4. Investment Return Dates............................4
3.5. Participant Selection of Investment Return Rate....4
3.6. Statement of Accounts..............................4
SECTION 4..................................................................5
Distributions.....................................................5
4.1. General ...........................................5
4.2. Distribution Election..............................5
4.3. Beneficiary........................................5
4.4. Distributions to Disabled Persons..................5
4.5. Benefits May Not be Assigned.......................5
4.6. Offset ...........................................6
4.7. Unforeseeable Emergency............................6
-i-
<PAGE>
SECTION 5..................................................................6
Source of Benefit Payments........................................6
5.1. Liability for Benefit Payments.....................6
5.2. No Guarantee.......................................7
SECTION 6..................................................................7
Committee.........................................................7
6.1. Powers of Committee................................7
6.2. Delegation by Committee............................7
6.3. Information to be Furnished to Committee...........8
6.4. Liability and Indemnification of Committee.........8
SECTION 7..................................................................8
Amendment and Termination.........................................8
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ACE USA
OFFICER DEFERRED COMPENSATION PLAN
SECTION 1
General
1.1. Purpose. The ACE USA Officer Deferred Compensation Plan (the
"Plan") has been established by ACE Limited (the "Company") so that it, and
each of the Related Companies which, with the consent of the Company,
adopts the Plan may provide its eligible employees with an opportunity to
build additional financial security, thereby aiding such companies in
attracting and retaining employees of exceptional ability.
1.2. Effective Date. The "Effective Date" of the Plan is January 1, 1998.
1.3. Related Companies and Employers. For purposes of the Plan, the
term "Related Company" means any company during any period in which it is a
"subsidiary corporation," as that term is defined in section 424(f) of the
United States Internal Revenue Code of 1986, as amended (the "Code") with
respect to the Company. The Company and each Related Company which adopts
the Plan for the benefit of its eligible employees are referred to below
collectively as the "Employers" and individually as an "Employer." A
Related Company may adopt the Plan by action of its Board of Directors;
provided that a Related Company will be considered to have adopted the Plan
for its Eligible Employees (without the need for action by its Board of
Directors) if an executive officer of the Related Company announces such
adoption to the Eligible Employees.
1.4. Operation and Administration. The authority to control and
manage the operation and administration of the Plan shall be vested in the
Compensation Committee (the "Committee") of the Board of Directors of the
Company (the "Board"). In controlling and managing the operation and
administration of the Plan, the Committee shall have the rights, powers and
duties set forth in Section 6. Capitalized terms in the Plan shall be
defined as set forth in the Plan.
1.5. Plan Year. The term "Plan Year" means the fiscal year of the
Company.
1.6. Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
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1.7. Notices. Any notice or document required to be filed with the
Plan Administrator or the Committee under the Plan will be properly filed
if delivered or mailed to the Plan Administrator, in care of the Company,
at its principal executive offices. The Plan Administrator may, by advance
written notice to affected persons, revise such notice procedure from time
to time. Any notice required under the Plan may be waived by the person
entitled to notice.
1.8. Form and Time of Elections. Unless otherwise specified herein,
each election required or permitted to be made by any Participant or other
person entitled to benefits under the Plan, and any permitted modification
or revocation thereof, shall be in writing filed at such times, in such
form, and subject to such restrictions and limitations as the Plan
Administrator shall require. In addition to any other deferral elections
made under this Plan, an election to defer the receipt of an award under
the ACE Limited Annual Performance Incentive Plan will be made under this
Plan.
1.9. Other Costs and Benefits. The Plan is intended to defer, but not
to eliminate, payment of compensation to a Participant. Accordingly, if any
compensation or benefits that would otherwise be provided to a Participant
in the absence of the Plan are reduced or eliminated by reason of deferral
under the Plan, the Company shall equitably compensate the Participant for
such reduction or elimination. However, no reimbursement will be made for
increased taxes resulting from benefits under the Plan (whether resulting
from a change in individual income tax rates or otherwise).
1.10. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting
on it considers pertinent and reliable, and signed, made or presented by the
proper party or parties.
1.11. Action by Employers. Any action required or permitted to be taken
by any Employer shall be by resolution of its board of directors, or by a duly
authorized officer of the Employer.
SECTION 2
Participation
2.1. Participant. Subject to the terms of the Plan, an individual
shall be eligible to make deferrals under the Plan during any period he or she
is an Eligible Employee. For purposes of the Plan, the term "Eligible Employee"
for any period shall mean any individual during any period he or she is a
Bermuda-based employee of an Employer;
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provided that the Committee may designate any other employee of an Employer
or member of a group of employees of an Employer as an Eligible Employee.
2.2. Deferral Election. An Eligible Employee shall participate in the
Plan by electing to defer payment of all or a portion of his or her
Eligible Compensation pursuant to the terms of a "Deferral Election." An
individual's Deferral Election shall be filed with the Plan Administrator
prior to the period to which it relates. Except as otherwise provided by
the Committee, a Participant may not revoke any Deferral Elections. The
Committee may revoke a Participant's Deferral Election as of the date on
which the Participant ceases to be an Eligible Employee (provided that this
sentence shall not be construed to permit the Committee to revoke a
Distribution Election by reason of the Participant ceasing to be an
Eligible Employee).
2.3. Eligible Compensation. For purposes of the Plan, a Participant's
"Eligible Compensation" from any Employer for any Plan Year means (i)
salary otherwise payable to him by the Employer, (ii) amounts payable under
the ACE Limited Annual Performance Incentive Plan and (iii) amounts which
are designated by the Committee as compensation eligible for deferral in
accordance with the Plan.
2.4. Plan Not Contract of Employment. The Plan does not constitute a
contract of employment, and participation in the Plan will not give any
employee the right to be retained in the employ of any Employer nor any
right or claim to any benefit under the Plan, unless such right or claim
has specifically accrued under the terms of the Plan.
SECTION 3
Plan Accounting
3.1. Accounts. The Plan Administrator shall establish an Account for
each Participant who has filed a Deferral Election. If a Participant's
Eligible Compensation subject to a Deferral Election would otherwise be
payable from more than one Employer, a separate Account shall be
established for the Participant with respect to the Eligible Compensation
from each such Employer. The amount held in an Account established on
behalf of a Participant will be expressed in United States dollars.
3.2. Adjustment of Accounts. Each Account shall be adjusted in
accordance with this Section 3 in a uniform manner as of such periodic
"Accounting Dates" as may be determined by the Committee from time to time.
As of each Accounting Date, the balance of each Account shall be adjusted
as follows:
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(a) first, charge to the Account balance the amount of any distributions
under the Plan with respect to that Account that have not previously
been charged;
(b) then, adjust the Account balance for the applicable Investment Return
Rate(s); and
(c) then, credit to the Account balance the amount to be credited to that
Account in accordance with subsection 3.3 that have not previously
been credited.
3.3. Crediting Under Deferral Election. The balance of a
Participant's Account for any period shall be credited, in accordance with
the provisions of paragraph 3.2(c), with the amount by which his or her
Eligible Compensation for that period is reduced pursuant to a Deferral
Election. Such crediting shall occur as of the date on which such Eligible
Compensation would otherwise have been paid to the Participant by the
Employer were it not for the reduction made pursuant to the Deferral
Election or, if such date is not an Accounting Date, as of the first
Accounting Date occurring thereafter.
3.4. Investment Return Rates. The "Investment Return Rate(s)" with
respect to the Account(s), or portions of the Account(s), of any
Participant for any period shall be the Investment Return Rate(s) elected
by the individual in accordance with subsection 3.5 from among such
investment alternatives (if any) for that period which, in the discretion
of the Committee, are offered from time to time under this paragraph 3.4.
3.5. Participant Selection of Investment Return Rate. The Investment
Return Rate alternatives under the Plan, and a Participant's ability to
choose among Investment Return Rate alternatives, shall be determined in
accordance with rules established by the Committee from time; provided,
however, that the Company may not modify the Investment Return Rate with
respect to periods prior to the adoption of such modification.
3.6. Statement of Accounts. As soon as practicable after the end of
each Plan Year, and at such other times as determined by the Committee or
the Chief Executive Officer of the Company, the Company shall provide each
Participant having one or more Accounts under the Plan with a statement of
the transactions in his or her Accounts during that year and his or her
Account balances as of the end of the year.
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<PAGE>
SECTION 4
Distributions
4.1. General. Subject to this Section 4, the balance of a
Participant's Account(s) with respect to any year shall be distributed in
accordance with the Participant's Distribution Election. In no event shall
the amount distributed with respect to any Participant's Account as of any
date exceed the amount of the Account balance as of that date.
4.2. Distribution Election. A Participant's Distribution Election shall
specify the manner (including the time and form of distribution) in which the
Participant's Account(s) shall be distributed, subject to such restrictions
and limitations as may be imposed by the Committee.
4.3. Beneficiary. Subject to the terms of the Plan, any benefits
payable to a Participant under the Plan that have not been paid at the time
of the Participant's death shall be paid at the time and in the form
determined in accordance with the foregoing provisions of the Plan, to the
beneficiary designated by the Participant in writing filed with the Plan
Administrator in such form and at such time as the Plan Administrator shall
require. A beneficiary designation form will be effective only when the
signed form is filed with the Plan Administrator while the Participant is
alive and will cancel all beneficiary designation forms filed earlier. If a
deceased Participant failed to designate a beneficiary, or if the
designated beneficiary of a deceased Participant dies before him or before
complete payment of the Participant's benefits, the amounts shall be paid
to the legal representative or representatives of the estate of the last to
die of the Participant and his or her designated beneficiary.
4.4. Distributions to Disabled Persons. Notwithstanding the
provisions of this Section 4, if, in the Plan Administrator's opinion, a
Participant or beneficiary is under a legal disability or is in any way
incapacitated so as to be unable to manage his or her financial affairs,
the Plan Administrator may direct that payment be made to a relative or
friend of such person for his or her benefit until claim is made by a
conservator or other person legally charged with the care of his or her
person or his or her estate, and such payment shall be in lieu of any such
payment to such Participant or beneficiary. Thereafter, any benefits under
the Plan to which such Participant or beneficiary is entitled shall be paid
to such conservator or other person legally charged with the care of his or
her person or his or her estate.
4.5. Benefits May Not be Assigned. Neither the Participant nor any
other person shall have any voluntary or involuntary right to commute, sell,
assign, pledge,
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<PAGE>
anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey
in advance of actual receipt of the amounts, if any, payable hereunder, or
any part hereof, which are expressly declared to be unassignable and
non-transferable. No part of the amounts payable shall be, prior to actual
payment, subject to seizure or sequestration for payment of any debts,
judgements, alimony or separate maintenance owed by the Participant or any
other person, or be transferred by operation of law in the event of the
Participant's or any other person's bankruptcy or insolvency.
4.6. Offset. Notwithstanding the provisions of subsection 4.5, if, at
the time payments are to be made under the Plan, the Participant or
beneficiary or both are indebted or obligated to any Employer or Related
Company, then the payments remaining to be made to the Participant or the
beneficiary or both may, at the discretion of the Plan Administrator, be
reduced by the amount of such indebtedness, or obligation, provided,
however, that an election by the Plan Administrator not to reduce any such
payment shall not constitute a waiver of the claim for such indebtedness or
obligation.
4.7. Unforeseeable Emergency. Prior to the date otherwise scheduled
for distribution of his or her benefits under the Plan, upon a showing of
an unforeseeable emergency, a Participant may elect to accelerate payment
of an amount not exceeding the lesser of (a) the amount necessary to meet
the emergency or (b) the sum of his or her Account balance(s) under the
Plan. For purposes of the Plan, the term "unforeseeable emergency" shall
mean an unanticipated emergency that is caused by an event beyond the
control of the Participant (or the control of the beneficiary, if the
amount is payable to a beneficiary) and that would result in severe
financial hardship to the individual if early withdrawal were not
permitted. The determination of "unforeseeable emergency" shall be made by
the Plan Administrator, based on such information as the Plan Administrator
shall deem to be necessary.
SECTION 5
Source of Benefit Payments
5.1. Liability for Benefit Payments. Subject to the provisions of
this Section 5, an Employer shall be liable for payment of benefits under
the Plan with respect to any Participant to the extent that such benefits
are attributable to the deferral of compensation otherwise payable by that
Employer to the Participant. Any disputes relating to liability of
Employers for benefit payments shall be resolved by the Committee.
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<PAGE>
5.2. No Guarantee. Neither a Participant nor any other person shall,
by reason of the Plan, acquire any right in or title to any assets, funds
or property of the Employers whatsoever, including, without limitation, any
specific funds, assets, or other property which the Employers, in their
sole discretion, may set aside in anticipation of a liability under the
Plan. A Participant shall have only a contractual right to the amounts, if
any, payable under the Plan, unsecured by any assets of the Employers.
Nothing contained in the Plan shall constitute a guarantee by any of the
Employers that the assets of the Employers shall be sufficient to pay any
benefits to any person.
SECTION 6
Committee
6.1. Powers of Committee. Responsibility for the day-to-day
administration of the Plan shall be vested in the Plan Administrator, which
shall be the Committee. The authority to control and manage all other
aspects of the operation and administration of the Plan shall also be
vested in the Committee. The Committee is authorized to interpret the Plan,
to establish, amend, and rescind any rules and regulations relating to the
Plan, to determine the terms and provisions of any agreements made pursuant
to the Plan, and to make all other determinations that may be necessary or
advisable for the administration of the Plan. Except as otherwise
specifically provided by the Plan, any determinations to be made by the
Committee under the Plan shall be decided by the Committee in its sole
discretion. Any interpretation of the Plan by the Committee and any
decision made by it under the Plan is final and binding on all persons.
6.2. Delegation by Committee. The Committee may allocate all or any
portion of its responsibilities and powers to any one or more of its members
and may delegate all or any part of its responsibilities and powers to any
person or persons selected by it. Any such allocation or delegation may be
revoked by the Committee at any time. Until the Committee takes action to
the contrary:
(a) The Chief Executive Officer of the Company shall be delegated the
power and responsibility to take all actions assigned to or permitted
to be taken by the Committee under Section 2, Section 3, and Section
4 (other than the powers and responsibility of the Plan
Administrator).
(b) The powers and responsibilities of the Plan Administrator shall be
delegated to the Chief Administration Officer (or his or her
delegate) of the Company, subject to such direction as may be
provided to the Chief Administration Officer or his or
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her delegate from time to time by the Committee and the Chief Executive
Officer of the Company.
6.3. Information to be Furnished to Committee. The Employers and
Related Companies shall furnish the Committee with such data and
information as may be required for it to discharge its duties. The records
of the Employers and Related Companies as to an employee's or Participant's
employment, termination of employment, leave of absence, reemployment and
Eligible Compensation shall be conclusive on all persons unless determined
to be incorrect. Participants and other persons entitled to benefits under
the Plan must furnish the Committee such evidence, data or information as
the Committee considers desirable to carry out the Plan.
6.4. Liability and Indemnification of Committee. No member or
authorized delegate of the Committee shall be liable to any person for any
action taken or omitted in connection with the administration of the Plan
unless attributable to his or her own fraud or willful misconduct; nor
shall the Employers be liable to any person for any such action unless
attributable to fraud or willful misconduct on the part of a director or
employee of the Employers. The Committee, the individual members thereof,
and persons acting as the authorized delegates of the Committee under the
Plan, shall be indemnified by the Employers against any and all
liabilities, losses, costs and expenses (including legal fees and expenses)
of whatsoever kind and nature which may be imposed on, incurred by or
asserted against the Committee or its members or authorized delegates by
reason of the performance of a Committee function if the Committee or its
members or authorized delegates did not act dishonestly or in willful
violation of the law or regulation under which such liability, loss, cost
or expense arises. This indemnification shall not duplicate but may
supplement any coverage available under any applicable insurance.
SECTION 7
Amendment and Termination
The Committee may, at any time, amend or terminate the Plan
(including the rules for administration of the Plan), subject to the
following:
(a) Subject to the following provisions of this Section 7, no amendment
or termination may materially adversely affect the rights of any
Participant or beneficiary under the Plan.
(b) The Committee may revoke the right to defer Eligible Compensation under
the Plan.
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(c) The Plan may not be amended to delay the date on which benefits are
otherwise payable under the Plan without the consent of each affected
Participant. The Committee may amend the Plan to accelerate the date
on which Plan benefits are otherwise payable under the Plan and
eliminate all future deferrals under the Plan, thereby terminating
the Plan.
(d) The Committee may amend the Plan to modify or eliminate any
Investment Return Rate alternative, except that any such amendment
may not modify the Investment Return Rate with respect to periods
prior to the adoption of the amendment.
(e) Notwithstanding any other provision of the Plan to the contrary,
neither the Committee nor the Board may delegate its rights and
responsibilities under this Section 7; provided, however, that, the
Board of Directors may, from time to time, substitute itself, or
another committee of the Board, for the Compensation Committee under
this Section 7.
IN WITNESS WHEREOF, ACE Limited has caused this Plan to be executed by its
duly authorized officer this ______, day of _________, 1997.
ACE Limited
By:__________________________
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Exhibit 10.6
ACE USA
SUPPLEMENTAL EMPLOYEE RETIREMENT SAVINGS PLAN
---------------------------------------------
(Effective July 2, 1999)
Mayer, Brown & Platt
Chicago
<PAGE>
ACE USA
SUPPLEMENTAL EMPLOYEE RETIREMENT SAVINGS PLAN
CERTIFICATE
I, , Executive Vice President of ACE INA Holdings Inc., hereby
certify that the attached document is a full, true and complete copy of ACE USA
SUPPLEMENTAL EMPLOYEE RETIREMENT SAVINGS PLAN, as in effect on July 2, 1999
and as presently in effect.
Dated this day of , 19 .
----- -------------------- ---
___________________________
Executive Vice President as Aforesaid
(Seal)
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<PAGE>
TABLE OF CONTENTS
Page
SECTION 1 General................................................... 1
1.1. History, Purpose and Effective Date....................... 1
1.2. Employers and Related Companies........................... 1
1.3. Plan Administration....................................... 2
1.4. Applicable Laws........................................... 2
1.5. Plan Year................................................. 2
1.6. Gender and Number......................................... 2
1.7. Notices................................................... 2
1.8. Form and Time of Election................................. 2
1.9. Evidence.................................................. 3
1.10. Action by Employers....................................... 3
1.11. Limitations on Provisions................................. 3
1.12. Assignment and Alienation; Forfeitures.................... 3
SECTION 2 Participation............................................. 3
2.1. Participation............................................. 3
2.2. Restricted Participation.................................. 3
2.3. Plan Not Contract of Employment........................... 4
SECTION 3 Supplemental Retirement Plan Benefits..................... 4
3.1. Participation............................................. 4
3.2. Amount of Supplemental Basic Plan Benefit................. 4
SECTION 4 Supplemental Savings Plan Benefits........................ 5
4.1. Participation............................................. 5
4.2. Supplemental Before-Tax Contributions..................... 5
4.3. Supplemental Matching Contributions....................... 5
4.4. Supplemental Discretionary Matching Contributions......... 6
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SECTION 5 Participant Accounts and Distribution of Accounts......... 6
5.1. Participant Accounts...................................... 6
5.2. Adjustment of Accounts.................................... 7
5.3. Investment Return Rates................................... 7
5.4. Participant Selection of Investment Return Rate........... 7
5.5. Statement of Accounts..................................... 7
5.6 Distribution.............................................. 8
5.7. Distributions to Persons Under Disability................. 8
5.8. Unforeseen Emergency Distributions........................ 8
5.9. Forfeiture of Certain Accounts............................ 8
SECTION 6 Source of Benefit Payments................................ 9
6.1. Liability for Benefit Payments............................ 9
6.2. No Guarantee.............................................. 9
6.3. Successors................................................ 9
SECTION 7 AMENDMENT AND TERMINATION.................................10
7.1 Amendment and Termintion..................................10
7.2 Successors................................................10
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ACE USA
SUPPLEMENTAL EMPLOYEE RETIREMENT SAVINGS PLAN
---------------------------------------------
(Effective July 2, 1999)
SECTION 1
General
1.1. History, Purpose and Effective Date. ACE INA Holdings Inc.
(the "Company") has established the ACE USA Employee Retirement Savings
Plan and the ACE USA Basic Employee Retirement Savings Plan to provide
retirement and other benefits to or on behalf of its eligible employees and
the employees of each Related Company (as defined in subsection 1.2) which,
with the consent of the Company, adopt one or both of the plans; and the
Company's wholly-owned subsidiary, ACE American Insurance Company (formerly
CIGNA Insurance Company), has established the ACE USA Puerto Rico Employee
Retirement Savings Plan and the ACE USA Basic Puerto Rico Employee
Retirement Savings Plan to provide retirement and other benefits to or on
behalf of its eligible employees and the employees of each Related Company
which, with the consent of the ACE American Insurance Company, adopt one or
both of the plans. (The ACE USA Employee Retirement Savings Plan, the ACE
USA Basic Employee Retirement Savings Plan, the ACE USA Puerto Rico
Employee Retirement Savings Plan and the ACE USA Basic Puerto Rico Employee
Retirement Savings Plan are collectively referred to as the "Qualified
Plans.") The Company and any Related Company which adopts this plan for the
benefit of its eligible employees are referred to below, collectively, as
the "Employers" and individually as an "Employer". Contrary to the desire
of the Company and the Employers, the amount of the benefits payable to or
on account of participants under the Qualified Plans may be limited by
reason of the application of certain provisions of the Internal Revenue
Code of 1986, as amended (the "Code"). Therefore, the Company has
established the ACE USA Supplemental Employee Retirement Savings Plan (the
"Plan") effective as of July 2, 1999 (the "Effective Date") to assure that
affected individuals will receive total retirement and other benefits in an
amount equal to the amount that they would have received under the
applicable Qualified Plan if certain limitations of the Code were not
applicable. The Plan is intended to constitute an unfunded "excess benefit
plan" within the meaning of Section 3(36) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"); provided, however, that, to the
extent, if any, that the Plan provides benefits which cannot be provided by
an excess benefit plan, the Plan shall constitute an unfunded plan
maintained primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees.
1.2. Employers and Related Companies. The term "Related Company"
means any corporation or trade or business during any period during which
it is, along with the Company, a member of a controlled group of
corporations or a controlled group of trades or businesses, as described in
sections 414(b) and 414(c), respectively, of the Code. The Company and each
Related Company, which, with the Company's consent, adopts the Plan are
referred to below collectively as the "Employers" and individually as an
"Employer".
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1.3. Plan Administration. The authority to control and manage the
operation and administration of the Plan shall be vested in the Committee
(the "Committee") appointed by the Board of Directors of the Company. In
controlling and managing the operation and administration of the Plan, the
Committee will have full and discretionary power and authority to interpret
and construe the provisions of the Plan and to determine the amount of
benefits and the rights or eligibility of employees or Participants (as
defined in subsections 3.1 and 4.1, respectively) under the Plan, and will
have such other power and authority as may be necessary to discharge its
duties hereunder. Any interpretation of the Plan and any decision made by
the Committee on any matter within the discretion of the Committee shall be
binding on all persons. A misstatement or other mistake of fact shall be
corrected when it becomes known, and the Committee shall make such
adjustment on account thereof as it considers equitable and practicable.
The Committee may delegate such of its ministerial or discretionary duties
and functions as it may deem appropriate to any employee or group of
employees of any Employer.
1.4. Applicable Laws. The Plan shall be construed and
administered in accordance with the laws of the Commonwealth of Pennsylvania to
the extent that such laws are not preempted by the laws of the United States
of America.
1.5. Plan Year. The "Plan Year" shall be the twelve-consecutive
month period beginning on each January 1; provided, however, that the first
Plan Year shall be a short plan year, beginning on the Effective Date and
ending December 31, 1999.
1.6. Gender and Number. Where the context admits, words in one
gender shall include the other gender, words in the singular shall include the
plural and the plural shall include the singular.
1.7. Notices. Any notice or document required to be filed with the
Committee under the Plan will be properly filed if delivered or mailed by
registered mail, postage prepaid, to the Committee, in care of the Company,
at its principal executive offices. Any notice required under the Plan may
be waived by the person entitled to notice.
1.8. Form and Time of Elections. Unless otherwise specified
herein, any election or consent permitted or required to be made or given
by any Participant or other person entitled to benefits under the Plan, and
any permitted modification or revocation thereof, shall be made in writing
or shall be given by means of such interactive telephone system as the
Committee may designate from time to time as the sole vehicle for executing
regular transactions under the Plan (referred to generally herein as the
"Phone System"). Each Participant shall have a personal identification
number or "PIN" for purposes of executing transactions through the Phone
System, and entry by a Participant of his PIN shall constitute his valid
signature for purposes of any transaction the Committee determines may or
should be executed by means of the Phone System. Any election made through
the Phone System shall be considered submitted to the Committee on the date
it is electronically transmitted.
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1.9. Evidence. Evidence required of anyone under the Plan may be
by certificate, affidavit, document or other information which the person
acting on it considers pertinent and reliable, and signed, made or presented
by the proper party or parties.
1.10. Action by Employers. Any action required or permitted to be
taken under the Plan by any Employer which is a corporation shall be by
resolution of its Board of Directors, or by a person or persons authorized
by its Board of Directors. Any action required or permitted to be taken by
any Employer which is a partnership shall be by a general partner of such
partnership or by a duly authorized officer thereof.
1.11. Limitations on Provisions. The provisions of the Plan and
any benefits payable hereunder shall be limited as described herein. Any
benefit payable under the Qualified Plans shall be paid solely in
accordance with the terms and conditions of the applicable Qualified Plan
and nothing in this Plan shall operate or be construed in any way to
modify, amend, or affect the terms and provisions of the Qualified Plans.
1.12. Assignment and Alienation; Forfeitures. The benefits payable
to any Participant or Beneficiary under the Plan may not be voluntarily or
involuntarily pledged, assigned, alienated, transferred or otherwise
anticipated. In the event a Participant or Beneficiary attempts to do so,
any amount that is subject to the purported pledge, assignment, alienation,
transfer or other anticipation shall be immediately forfeited and neither
the Participant nor his Beneficiary shall have any further rights to such
benefits.
SECTION 2
Participation
2.1. Participation. Participation in the Plan for purposes of
Supplemental Basic Plan Benefits and Supplemental Savings Plan Benefits
shall be determined in accordance with Sections 3 and 4, respectively. Once
an eligible employee becomes a Participant in the Plan, as long as he
continues to have an Account balance under the Plan he will remain a
Participant for all purposes under the Plan, except for purposes of the
contribution provisions of Sections 3 and 4 and the withdrawal provisions
of subsection 5.8.
2.2. Restricted Participation. Notwithstanding any other provision
of the Plan to the contrary, if the Committee determines that participation
by one or more Participants or Beneficiaries shall cause the Plan as
applied to any Employer to be subject to Part 2, 3 or 4 of Title I of
ERISA, the entire interest of such Participant or Beneficiary under the
Plan shall, in the discretion of the Committee, be immediately paid to such
Participant or Beneficiary, as applicable, by the applicable Employer or
Employers, or shall otherwise be segregated from the Plan, and such
Participant(s) or Beneficiary(ies) shall cease to have any interest under
the Plan.
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2.3. Plan Not Contract of Employment. The Plan does not constitute
a contract of employment, and participation in the Plan will not give any
employee the right to be retained in the employ of any Employer nor any
right or claim to any benefit under the Plan, unless such right or claim
has specifically accrued under the terms of the Plan.
SECTION 3
Supplemental Basic Plan Benefits
3.1. Participation. Subject to the terms and conditions of the
Plan, each employee of an Employer shall become a "Participant" in the Plan for
purposes of Supplemental Basic Plan Benefits on the first day on which all of
the following conditions are satisfied:
(a) he is a participant in the ACE USA Basic Employee
Retirement Savings Plan or he is a participant in the ACE
USA Puerto Rico Basic Employee Retirement Savings Plan;
(b) his salary grade is 54 level or above (or such other
comparable classification designated by the Employer); and
(c) his benefits under either the ACE USA Basic Employee
Retirement Savings Plan or the ACE USA Puerto Rico Basic
Employee Retirement Savings Plan are limited by either or
both of sections 415 and 401(a)(17) of the Code.
3.2. Amount of Supplemental Basic Plan Benefit. For any Plan Year,
a Participant shall be credited with a "Supplemental Basic Plan Benefit"
which consists of an amount equal to the difference, if any, between (a)
the Employer contributions that would have been contributed on behalf of
the Participant to the ACE USA Basic Employee Retirement Savings Plan or to
the ACE USA Puerto Rico Basic Employee Retirement Savings Plan for that
Plan Year, in accordance with the terms thereof determined without regard
to the limitations of sections 401(a)(17) or 415 of the Code and (b) the
amount of the Employer contributions actually made to the ACE USA Basic
Employee Retirement Savings Plan or to the ACE USA Puerto Rico Basic
Employee Retirement Savings Plan on behalf of the Participant. Credits of
the Supplemental Basic Plan Benefit to the Participant's Supplemental Basic
Plan Account pursuant to this subsection 3.2 shall be made at the same time
that Employer contributions would otherwise have been credited to his
accounts under the ACE USA Basic Employee Retirement Savings Plan or the
ACE USA Puerto Rico Basic Employee Retirement Savings Plan, as applicable.
-4-
<PAGE>
SECTION 4
Supplemental Savings Plan Benefits
4.1. Participation. Subject to the terms and conditions of the
Plan, each employee of an Employer shall become a "Participant" in the Plan for
purposes of Supplemental Savings Plan Benefits on the first day on which all of
the following conditions are satisfied:
(a) he is a participant in the ACE USA Employee Retirement
Savings Plan or a participant in the ACE USA Puerto Rico
Employee Retirement Savings Plan;
(b) his salary grade is 54 level or above (or such other
comparable classification designated by the Employer); and
(c) his benefits under either the ACE USA Employee Retirement
Savings Plan or the ACE USA Puerto Rico Employee
Retirement Savings Plan are limited by any or all of
sections 415, 401(a)(17), 402(g), 401(k) or 401(m) of the
Code.
A "Participant's Supplemental Savings Plan Benefit" consists of
the amounts credited to his accounts, if any, pursuant to subsections 4.2
through 4.4.
4.2. Supplemental Before-Tax Contributions. For any Plan Year, in
the event the Participant's before-tax elective contributions to the ACE
USA Employee Retirement Savings Plan are limited by the provisions of
sections 401(a)(17), 401(k)(3), 402(g) or 415 of the Code, as applicable,
his compensation for the Plan Year will continue to be reduced by, and the
Participant's Supplemental Before-Tax Account credited with, an amount
equal to the amount of before-tax elective contributions that would have
been made under the ACE USA Employee Retirement Savings Plan had the
provisions of sections 401(a)(17), 401(k)(3), 402(g) or 415 of the Code, as
applicable, not applied to him. Credits to the Participant's Supplemental
Before-Tax Account pursuant to this subsection 4.2 shall be made at the
same time that before-tax elective contributions would otherwise have been
credited to his accounts under the ACE USA Employee Retirement Savings
Plan. A Participant's election to make before-tax contributions under the
ACE USA Employee Retirement Savings Plan shall be deemed to be an election
to make elective salary deferral contributions under the Plan, and such
election shall remain in effect until modified or revoked by the individual
in accordance with the terms of the Plan. Notwithstanding the foregoing
provisions of this section 4.2, salary reductions shall continue and an
amount shall be credited to the Participant's Supplemental Before-Tax
Account in accordance with this section 4.2 (and Supplemental Matching
Contributions and Supplemental Discretionary Matching Contributions, if
any, shall be credited to the Participant's applicable accounts in
accordance with sections 4.3 and 4.4) for a Plan Year only if the
Participant's before-tax elective contributions to the ACE USA Employee
Retirement Savings Plan have reached the maximum amount permitted under
section 402(g) of the Code or the maximum elective contributions permitted
under the Plan, in accordance with Treas. Reg. section 1.401(k)(1)(e)(6)(iv);
and the Committee shall require that the Participant elect (and not reduce) in
the Plan Year the maximum
-5-
<PAGE>
deferral percentage permitted under the ACE USA Employee Retirement Savings
Plan in order to receive a Supplemental Savings Plan Benefit for the Plan
Year under this Plan, and shall establish such other administrative
procedures as are necessary to comply with such regulations.
4.3. Supplemental Matching Contributions. Subject to the
requirements of section 4.2, for any Plan Year, a Participant's
Supplemental Matching Account shall be credited with an amount equal to the
difference, if any, between (a) the matching contributions that would have
been contributed on behalf of the Participant to the ACE USA Employee
Retirement Savings Plan for that Plan Year, in accordance with the terms
thereof and based on his before-tax elective contributions under the ACE
USA Employee Retirement Savings Plan or based on his after-tax elective
contributions under the ACE USA Puerto Rico Employee Retirement Savings
Plan, as applicable, determined without regard to the limitations of
sections 401(a)(17), 401(k)(3), 401(m), 402(g) or 415 of the Code, and (b)
the amount of matching contributions actually made to the ACE USA Employee
Retirement Savings Plan or the ACE USA Puerto Rico Employee Retirement
Savings Plan, as applicable, on behalf of the Participant. Credits to the
Participant's Accounts pursuant to this subsection 4.3 shall be made at the
same time that matching contributions would otherwise have been credited to
his accounts under either the ACE USA Employee Retirement Savings Plan or
the ACE USA Puerto Rico Employee Retirement Savings Plan, as applicable.
4.4. Supplemental Discretionary Matching Contributions. Subject to
the requirements of section 4.2, for any Plan Year, a Participant's
Supplemental Discretionary Matching Account shall be credited with an
amount equal to the difference, if any, between (a) the discretionary
matching contributions that would have been contributed on behalf of the
Participant to the ACE USA Employee Retirement Savings Plan for that Plan
Year, in accordance with the terms thereof and based on his before-tax
salary deferral election under the ACE USA Employee Retirement Savings Plan
or based on his elective after-tax contribution under the ACE USA Puerto
Rico Employee Retirement Savings Plan, as applicable, determined without
regard to the limitations of sections 401(a)(17), 401(k)(3), 401(m), 402(g)
or 415 of the Code, and (b) the amount of discretionary matching
contributions actually made to the ACE USA Employee Retirement Savings Plan
or the ACE USA Puerto Rico Employee Retirement Savings Plan, as applicable,
on behalf of the Participant. Credits to the Participant's Accounts
pursuant to this subsection 4.4 shall be made at the same time that
discretionary matching contributions would otherwise have been credited to
his accounts under either the ACE USA Employee Retirement Savings Plan or
the ACE USA Puerto Rico Employee Retirement Savings Plan, as applicable.
SECTION 5
Participant Accounts and Distribution of Accounts
5.1. Participant Accounts. The Committee shall maintain the
following bookkeeping "Accounts" in the name of each person who is a
Participant in the Plan:
-6-
<PAGE>
(a) a "Supplemental Basic Account" in the name of each
Participant which shall reflect Supplemental Basic
Contributions, if any, made on his behalf;
(b) a "Supplemental Before-Tax Account" in the name of each
Participant which shall reflect Supplemental Before-Tax
Contributions, if any, made on his behalf;
(c) a "Supplemental Matching Account" in the name of each
Participant which shall reflect Supplemental Matching
Contributions, if any, made on his behalf;
(d) a "Supplemental Discretionary Matching Account" in the
name of each Participant which shall reflect Supplemental
Discretionary Matching Contributions, if any, made on his
behalf.
5.2. Adjustment of Accounts. Each Participant's Accounts shall be
adjusted in accordance with this Section 5 in a uniform manner as of each
Valuation Date, as follows:
(a) first, charge to the Account balance the amount of any
distributions under the Plan with respect to that Account
that have not previously been charged;
(b) then, adjust the Account balance for the applicable
Investment Return Rate(s); and
(c) then, credit to the Account balance the amount to be
credited to that Account in accordance with subsections
3.2 and 4.2 through 4.4 that have not previously been
credited.
Except as otherwise designated by the Committee, the term "Valuation Date"
means each business day of the year.
5.3. Investment Return Rates. The "Investment Return Rate(s)" with
respect to the Account(s), or portions of the Supplemental Account(s), of
any Participant for any period shall be the Investment Return Rate(s)
elected by the individual in accordance with subsection 5.4 from among such
investment alternatives (if any) for that period which, in the discretion
of the Committee, are offered from time to time under this paragraph 5.3.
5.4. Participant Selection of Investment Return Rate. The
Investment Return Rate alternatives under the Plan, and a Participant's
ability to choose among Investment Return Rate alternatives, shall be
determined in accordance with rules established by the Committee from time
to time; provided, however, that the Company may not modify the Investment
Return Rate with respect to periods prior to the adoption of such
modification.
5.5. Statement of Accounts. As soon as practicable after the last
day of each Plan Year, and at such other times as determined by the Committee,
the Committee will cause to be delivered to each Participant a statement of the
balance of his Accounts as of that day.
-7-
<PAGE>
5.6. Distribution. Subject to the terms and conditions of the
Plan, the Supplemental Basic Plan Benefit and the Supplemental Savings Plan
Benefit to which a Participant or Beneficiary is entitled shall be paid to
him as soon as practicable following his Termination Date in one lump sum
cash payment. In the event of a Participant's death, any Participant
Accounts which have not yet been paid to the Participant shall be paid to
one or more Beneficiaries. A Participant's "Beneficiary" shall be the legal
or natural person designated by the Participant by writing filed with the
Committee. If no Beneficiary is designated on the date of the Participant's
death, or if the designated Beneficiary predeceases the Participant, the
Participant's Account balances shall be paid to the Participant's estate.
The Account shall be paid to the Beneficiary (or estate) in a lump sum
payment as soon as practicable after the Participant's date of death. A
Participant's "Termination Date" is the date on which his employment with
the Employer and the Related Companies is terminated for any reason.
5.7. Distributions to Persons Under Disability. In the event a
Participant or his Beneficiary is declared incompetent and a conservator or
other person legally charged with the care of his person or of his estate
is appointed, any benefit to which such Participant or Beneficiary is
entitled under the Plan shall be paid to such conservator or other person
legally charged with the care of his person or of his estate.
5.8. Unforeseen Emergency Distributions. Subject to such terms and
conditions as the Committee may from time to time impose in its sole
discretion, upon written request of a Participant and the showing by the
Participant of an Unforeseen Emergency (as defined below), the Committee
may authorize payment of all or a portion of the Participant's Account
balance and/or accelerate the payment of any installment payments being
made from the Plan, but only to the extent reasonably necessary to satisfy
the Participant's Unforeseen Emergency. For purposes of the Plan, an
"Unforeseen Emergency" means an unanticipated emergency that is caused by
an event beyond the Participant's control and that would result in severe
financial hardship to the Participant if early or accelerated distribution
of the Participant's Account balance were not permitted. The Committee
shall have the sole discretion to determine all matters relating to
Unforeseen Emergency distributions.
5.9. Forfeiture of Certain Accounts. Notwithstanding any provision
of the Plan to the contrary, in no event shall any amount attributable to
the Participant's Supplemental Basic Plan Account, Supplemental Matching
Contribution Account or Supplemental Discretionary Matching Contribution
Account be payable to or on account of a Participant whose Termination Date
occurs prior to the Participant's completion of twelve consecutive months
of employment with an Employer for any reason other than the death of the
Participant. For purposes of determining whether a Participant has
completed twelve consecutive months of employment with an Employer, an
individual who immediately prior to the Effective Date was employed by
CIGNA Corporation or one of its subsidiaries (the "CIGNA Group"), and who
pursuant to the terms of the Acquisition Agreement dated as of January 11,
1999 between CIGNA Corporation, CIGNA Holdings, Inc. and ACE Limited (the
"Acquisition Agreement") became an employee of an Employer or a Related
Company (an "Acquisition Employee") shall be credited with service for his
employment with the CIGNA Group. An individual who was employed by the
CIGNA
-8-
<PAGE>
Group immediately before the Effective Date who does not become an employee
of an Employer or Related Company pursuant to the terms of the Acquisition
Agreement (and who is therefore not an Acquisition Employee) but who
subsequently becomes an employee of an Employer or Related Company, shall
be treated as a new employee for all purposes of the Plan.
SECTION 6
Source of Benefit Payments
6.1. Liability for Benefit Payments. The amount of any benefit
payable under the Plan shall be paid from the general revenues of the
Employer of the Participant with respect to whom the benefit is payable;
provided, however, that if a Participant has been employed by more than one
Employer, the portion of his Plan benefits payable by any such Employer
shall be that portion accrued while the Participant was employed by that
Employer, and earnings on such portion. An Employer's obligation under the
Plan shall be reduced to the extent that any amounts due under the Plan are
paid from one or more trusts, the assets of which are subject to the claims
of general creditors of the Employer or any affiliate thereof; provided,
however, that nothing in the Plan shall require the Company or any Employer
to establish any trust to provide benefits under the Plan.
6.2. No Guarantee. Neither a Participant nor any other person
shall, by reason of the Plan, acquire any right in or title to any assets,
funds or property of the Employers whatsoever, including, without
limitation, any specific funds, assets, or other property which the
Employers, in their sole discretion, may set aside in anticipation of a
liability under the Plan. A Participant shall have only a contractual right
to the amounts, if any, payable under the Plan, unsecured by any assets of
the Employers. Nothing contained in the Plan shall constitute a guarantee
by any of the Employers that the assets of the Employers shall be
sufficient to pay any benefits to any person.
6.3. Successors, The obligations of the Company and each Employer
under the Plan shall be binding on any assignee or successor in interest
thereto. Prior to any merger, consolidation or sale of assets, the Company,
or if applicable, the Employer, shall require any such successor to
expressly assume all of the Company's, or if applicable, all of the
Employer's, obligations under the Plan.
-9-
<PAGE>
SECTION 7
Amendment and Termination
7.1. Amendment and Termination. The Company may, at any time,
amend or terminate the Plan subject to the following:
(a) Subject to the following provisions of this
subsection 7.1, no amendment or termination
shall materially adversely affect the
rights of any Participant or Beneficiary
with respect to such Participant's Accounts
under the Plan, determined as of the date
of such amendment or termination, without
the consent of the Participant or
Beneficiary, unless required to comply with
applicable law.
(b) The Company may prospectively eliminate the
right to have amounts credited to any
Account pursuant to the provisions of
subsections 3.2, 4.2, 4.3 or 4.4, or reduce
the amount which is required to be credited
to any such Account pursuant to those
provisions.
(c) The Plan may not be amended to delay the
date on which benefits are otherwise
payable under the Plan without the consent
of each affected Participant. The Company
may amend the Plan to accelerate the date
on which Plan benefits are otherwise
payable under the Plan, thereby terminating
the Plan.
(d) The Company may amend the Plan to modify or
eliminate any Investment Return Rate
alternative, except that any such amendment
may not modify the Investment Return Rate
with respect to periods prior to the
adoption of the amendment.
7.2. Successors. The obligations of the Company and each Employer
under the Plan shall be binding on any assignee or successor in interest
thereto. Prior to any merger, consolidation or sale of assets, the Company,
or if applicable, the Employer, shall require any such successor to expressly
assume all of the Company's, or if applicable, all of the Employer's,
obligations under the Plan.
-10-
EXHIBIT 10.7
SECOND AMENDMENT TO CREDIT AGREEMENTS
This Second Amendment dated as of March 15, 2000 amends (i) the
$2,050,000,000 Credit Agreement dated as of June 11, 1999, as amended as of
November 16, 1999, among ACE INA Holdings Inc. ("ACE INA"), ACE Limited
("Parent"), certain subsidiary guarantors, various lenders, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("ML&Co."), as Lead Arranger and
Syndication Agent, and Morgan Guaranty Trust Company of New York ("MGT"),
as Administrative Agent, (ii) the $750,000,000 Credit Agreement dated as of
June 11, 1999, as amended as of November 16, 1999, among Parent, ACE
Bermuda Insurance Ltd. ("ACE Bermuda"), Tempest Reinsurance Company Limited
("Tempest"), ACE INA, ML&Co., as Lead Arranger and Syndication Agent, and
MGT, as Administrative Agent, and (iii) the $250,000,000 Credit Agreement
dated as of June 11, 1999, as amended as of November 16, 1999, among
Parent, ACE Bermuda, Tempest, ACE INA, Mellon Bank, as Issuing Bank,
ML&Co., as Lead Arranger and Syndication Agent, and MGT, as Administrative
Agent (collectively the "Agreements").
Parent and the Required Lenders (as defined in each of the
Agreements) and, in the case of the Agreement referred to in clause (i) of
the preceding paragraph (the "ACE INA Agreement"), ACE INA hereby agree
that each of the Agreements shall be amended as follows:
1. Section 1.01 of each of the Agreements is amended to add thereto
in the appropriate alphabetical position the following
definition:
"Securitization Transaction" means any sale,
assignment or other transfer by Parent or any Subsidiary
of any accounts receivable, premium finance loan
receivables, lease receivables or other payment
obligations owing to Parent or such Subsidiary or any
interest in any of the foregoing, together in each case
with any collections and other proceeds thereof, any
collection or deposit accounts related thereto, and any
collateral, guaranties or other property or claims in
favor of Parent or such Subsidiary supporting or securing
payment by the obligor thereon of, or otherwise related
to, any such receivables.
2. Section 5.01(h) of each of the Agreements is amended to read in its
entirety as follows:
(h) Transactions with Affiliates. Conduct, and
cause each of its Subsidiaries to conduct, all
transactions otherwise permitted under the Loan Documents
with any of their Affiliates (other than any such
transactions between Loan Parties or wholly-owned
Subsidiaries of Loan Parties) on terms that are fair and
reasonable and no less favorable than it would obtain in
a comparable arm's-length transaction with a Person not
an Affiliate.
-1-
<PAGE>
3. Section 5.02(a) of each of the Agreements is amended by deleting
the word "and" at the end of clause (xv) thereof, inserting ";
and" at the end of clause (xvi), and adding the following clause
(xvii) thereto:
(xvii) Liens arising in connection with
Securitization Transactions; provided that the aggregate
principal amount of the investment or claim held at any
time by all purchasers, assignees or other transferees of
(or of interests in) receivables and other rights to
payment in all Securitization Transactions shall not
exceed U.S.$250,000,000.
4. Section 5.02(e) of the ACE INA Agreement and Section 5.02(d) of
each of the other two Agreements is amended by deleting the word
"and" at the end of the clause (v) thereof, inserting "; and" at
the end of clause (vi) thereof, and adding the following clause
(vii) thereto:
(vii) Securitization Transactions; provided that
the aggregate principal amount of the investment or claim
held at any time by all purchasers, assignees or other
transferees of (or of interests in) receivables and other
rights to payment in all Securitization Transactions
(together with the aggregate principal amount of any
other obligations secured by such Liens) shall not exceed
U.S.$250,000,000.
The foregoing amendment shall become effective with respect to
each Agreement on the date on which the Administrative Agent under and as
defined in such Agreement has received counterparts hereof (by facsimile or
otherwise) signed by the Parent, the Required Lenders under such Agreement
and, in the case of the ACE INA Agreement, ACE INA. Except as amended
hereby, each Agreement shall remain in full force and effect and is hereby
ratified and confirmed in all respects.
This Second Amendment may be executed in any number of
counterparts and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. This
Second Amendment shall be governed by, and construed in accordance with,
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by their respective officers thereunto duly
authorized as of the date first above written.
-2-
<PAGE>
ACE LIMITED
The Common Seal of ACE Limited was
hereunto affixed in the presence of:
- ------------------------------------
Director
- ------------------------------------
Secretary
ACE INA HOLDINGS INC.
By: -------------------------------
Title:
MERRILL LYNCH CAPITAL CORPORATION
By:--------------------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:--------------------------------
Title:
BANK OF AMERICA, N.A.
By:--------------------------------
Title:
-3-
<PAGE>
CHASE MANHATTAN BANK
By:--------------------------------
Title:
MELLON BANK, N.A.
By:--------------------------------
Title:
ABN-AMRO BANK N.V.
By:--------------------------------
Title:
BANCO SANTANDER CENTRAL HISPANO,
S.A.
By:--------------------------------
Title:
THE BANK OF NEW YORK
By:--------------------------------
Title:
-4-
<PAGE>
THE BANK OF NOVA SCOTIA
By:--------------------------------
Title:
BANK ONE, N.A. (MAIN OFFICE CHICAGO)
By:--------------------------------
Title:
BARCLAYS BANK PLC
By:--------------------------------
Title:
BANQUE NATIONALE DE PARIS
By:--------------------------------
Title:
By:--------------------------------
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.
By:--------------------------------
Title:
-5-
<PAGE>
CIBC INC.
By:--------------------------------
Title:
CITIBANK, N.A.
By:--------------------------------
Title:
COMERICA BANK
By:--------------------------------
Title:
COMMERZBANK AKTIENGESELLSCHAFT
NEW YORK BRANCH
By:--------------------------------
Title:
By:--------------------------------
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:--------------------------------
Title:
-6-
<PAGE>
CREDIT SUISSE FIRST BOSTON
By:--------------------------------
Title:
By:--------------------------------
Title:
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES
By:--------------------------------
Title:
By:--------------------------------
Title:
FIRST UNION NATIONAL BANK
By:--------------------------------
Title:
FLEET NATIONAL BANK
By:--------------------------------
Title:
-7-
<PAGE>
ING BANK N.V., LONDON BRANCH
By:--------------------------------
Title:
By:--------------------------------
Title:
KBC BANK
By:--------------------------------
Title:
By:--------------------------------
Title:
LLOYDS TSB BANK PLC
By:--------------------------------
Title:
By:--------------------------------
Title:
ROYAL BANK OF CANADA
By:--------------------------------
Title
-8-
<PAGE>
SOCIETE GENERALE
By:--------------------------------
Title:
STATE STREET BANK AND TRUST
COMPANY
By:--------------------------------
Title:
STANDARD CHARTERED BANK
By:--------------------------------
Title:
By:--------------------------------
Title:
-9-
EXHIBIT 10.8
AMENDMENT TO LETTER OF CREDIT FACILITY AGREEMENT
This Amendment dated as of March 15, 2000 amends the
(pound)290,000,000 Letter of Credit Facility Agreement dated November __,
1999 (the "Agreement") between ACE Limited (the "Account Party"), ACE
Bermuda Insurance Ltd., as guarantor (the "Guarantor"), various banks (the
"Banks"), Citibank, N.A., as arranger, Barclays Bank plc and ING Barings,
as co-arrangers, and Citibank International plc, as agent (the "Agent") and
trustee for the Banks.
The Account Party, the Guarantor, the Agent and the Banks hereby
agree that the Agreement shall be amended as follows:
1. Clause 1.1 of the Agreement is amended to add thereto in the
appropriate alphabetical position the following definition:
"Securitization Transaction" means any sale,
assignment or other transfer by the Account Party or any
Subsidiary of any accounts receivable, premium finance
loan receivables, lease receivables or other payment
obligations owing to the Account Party or such Subsidiary
or any interest in any of the foregoing, together in each
case with any collections and other proceeds thereof, any
collection or deposit accounts related thereto, and any
collateral, guaranties or other property or claims in
favor of the Account Party or such Subsidiary supporting
or securing payment by the obligor thereon of, or
otherwise related to, any such receivables.
2. Clause 15.9 of the Agreement is amended by deleting the word "and"
at the end of sub-clause 15.9.15, inserting "; and" at the end of
sub-clause 15.9.16, and adding the following sub-clause 15.9.17:
15.9.17 Liens arising in connection with Securitization
Transactions; provided that the aggregate
principal amount of the investment or claim held
at any time by all purchasers, assignees or
other transferees of (or of interests in)
receivables and other rights to payment in all
Securitization Transactions (toegther with the
aggregate principal amount of any other
obligations secured by such Liens) shall not
exceed U.S.$250,000,000.
The foregoing amendments shall become effective on the date on
which the Agent has received counterparts hereof (by facsimile or
otherwise) signed by the Account Party, the Guarantor, the Banks and the
Agent. Except as amended hereby, the Agreement shall remain in full force
and effect and is hereby ratified and confirmed in all respects.
-1-
<PAGE>
This Amendment may be executed in any number of counterparts and
by the different parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. This Amendment shall
be governed by, and construed in accordance with, English law.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their respective officers thereunto duly authorized as of
the date first above written.
-2-
<PAGE>
ACE LIMITED
The Common Seal of ACE Limited was
hereunto affixed in the presence of:
- ------------------------------------
Director
- ------------------------------------
Secretary
ACE BERMUDA INSURANCE LTD.
The Common Seal of ACE Bermuda
Insurance Ltd. was
hereunto affixed in the presence of:
- -----------------------------------
Director
- -----------------------------------
Secretary
CITIBANK INTERNATIONAL
By:-------------------------------
Title:----------------------------
CITIBANK, N.A.
By:-------------------------------
Title:----------------------------
BARCLAYS BANK PLC
-3-
<PAGE>
By:-------------------------------
Title:----------------------------
ING BANK N.V., LONDON BRANCH
By:-------------------------------
Title:----------------------------
ABN AMRO BANK N.V., LONDON BRANCH
By:-------------------------------
Title:----------------------------
NATIONAL WESTMINSTER BANK PLC
By:-------------------------------
Title:----------------------------
CREDIT LYONNAIS NEW YORK BRANCH
By:-------------------------------
Title:----------------------------
-4-
EXHIBIT 10.9
AMENDMENT TO REIMBURSEMENT AGREEMENT
This Amendment dated as of March 15, 2000 amends the Reimbursement
Agreement dated as of September 8, 1999, among ACE Limited ("Parent"), ACE
Bermuda Insurance Ltd. ("ACE Bermuda"), Tempest Reinsurance Company Limited
("Tempest"), the Banks party thereto, Deutsche Bank AG, New York and/or
Cayman Islands Branches and Fleet National Bank, as Documentation Agents,
and Mellon Bank, as Issuing Bank and Administrative Agent (the
"Agreement").
Parent, the Issuing Bank and the Required Banks (as defined in the
Agreement) hereby agree that the Agreement shall be amended as follows:
1. Section 1.01 of the Agreement is amended to add thereto in the
appropriate alphabetical position the following definition:
"Securitization Transaction" means any sale,
assignment or other transfer by Parent or any Subsidiary
of any accounts receivable, premium finance loan
receivables, lease receivables or other payment
obligations owing to Parent or such Subsidiary or any
interest in any of the foregoing, together in each case
with any collections and other proceeds thereof, any
collection or deposit accounts related thereto, and any
collateral, guaranties or other property or claims in
favor of Parent or such Subsidiary supporting or securing
payment by the obligor thereon of, or otherwise related
to, any such receivables.
2. Section 5.01(h) of the Agreement is amended to read in its entirety
as follows:
(h) Transactions with Affiliates. Conduct, and
cause each of its Subsidiaries to conduct, all
transactions otherwise permitted under the Loan Documents
with any of their Affiliates (other than any such
transactions between Loan Parties or wholly-owned
Subsidiaries of Loan Parties) on terms that are fair and
reasonable and no less favorable than it would obtain in
a comparable arm's-length transaction with a Person not
an Affiliate.
3. Section 5.02(a) of each of the Agreements is amended by deleting
the word "and" at the end of clause (xiv) thereof, renumbering
clause (xvi) thereof as clause (xv), inserting "; and" at the end
of clause (xv), and adding the following clause (xvi) thereto:
(xvi) Liens arising in connection with
Securitization Transactions; provided that the aggregate
principal amount of the investment or claim held at any
time by all purchasers, assignees or other transferees of
(or of interests in) receivables and other rights to
payment in all Securitization Transactions
-1-
<PAGE>
(together with the aggregate principal amount of any
other obligations secured by such Liens) shall not exceed
U.S.$250,000,000.
4. Section 5.02(d) of the Agreement is amended by deleting the word
"and" at the end of the clause (v) thereof, inserting "; and" at
the end of clause (vi) thereof, and adding the following clause
(vii) thereto:
(vii) Securitization Transactions; provided that
the aggregate principal amount of the investment or claim
held at any time by all purchasers, assignees or other
transferees of (or of interests in) receivables and other
rights to payment in all Securitization Transactions
shall not exceed U.S.$250,000,000.
The foregoing amendment shall become effective with respect to the
Agreement on the date on which the Administrative Agent has received
counterparts hereof (by facsimile or otherwise) signed by the Parent, the
Issuing Bank and the Required Banks. Except as amended hereby, the
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects.
This Amendment may be executed in any number of counterparts and
by the different parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. This Amendment shall
be governed by, and construed in accordance with, the laws of the State of
New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their respective officers thereunto duly authorized as of
the date first above written.
-2-
<PAGE>
ACE LIMITED
The Common Seal of ACE Limited was
hereunto affixed in the presence of:
- ------------------------------
Director
- ------------------------------
Secretary
MELLON BANK, N.A., as
Administrative Agent, Issuing
Bank and Bank
By:-------------------------------
Title:
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES
By:-------------------------------
Title:
By:-------------------------------
Title:
FLEET NATIONAL BANK
By:-------------------------------
Title:
-3-
<PAGE>
THE BANK OF BERMUDA, LIMITED
By:-------------------------------
Title
THE BANK OF NEW YORK
By:-------------------------------
Title:
BANQUE NATIONALE DE PARIS
By:-------------------------------
Title:
By:-------------------------------
Title:
SOCIETE GENERALE
By:-------------------------------
Title:
-4-
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> MAR-31-2000
<DEBT-HELD-FOR-SALE> 10,003,071
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 651,572
<MORTGAGE> 0
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<TOTAL-INVEST> 12,005,840
<CASH> 807,921
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<TOTAL-ASSETS> 30,245,298
<POLICY-LOSSES> 16,857,235
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0
0
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1,104,806
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<INCOME-TAX> (33,000)
<INCOME-CONTINUING> 174,513
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<NET-INCOME> 174,513
<EPS-BASIC> .80
<EPS-DILUTED> .80
<RESERVE-OPEN> 0
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