Exhibit 10.42
__________________________________________________________
COMMON SECURITIES GUARANTEE AGREEMENT
ACE LIMITED,
AS GUARANTOR
Dated as of December 20, 1999
__________________________________________________________
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND INTERPRETATIONS
SECTION 1.1 Definitions and Interpretations 2
ARTICLE II
GUARANTEE
SECTION 2.1 Guarantee 4
SECTION 2.2 Subordination in an Event of Default Under the Trust Agreement 5
SECTION 2.3 Waiver of Notice and Demand 5
SECTION 2.4 Obligations Not Affected 5
SECTION 2.5 Rights of Holders 6
SECTION 2.6 Guarantee of Payment 6
SECTION 2.7 Subrogation 6
SECTION 2.8 Independent Obligations 6
ARTICLE III
LIMITATION OF TRANSACTIONS; RANKING
SECTION 3.1 Limitation of Transactions 7
SECTION 3.2 Ranking 7
SECTION 3.3 Pari Passu Guarantees 8
ARTICLE IV
TERMINATION
SECTION 4.1 Termination 8
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Successors and Assigns 8
SECTION 5.2 Amendments 9
SECTION 5.3 Notices 9
SECTION 5.4 Benefit 9
SECTION 5.5 Governing Law 10
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GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Common Securities Guarantee"), dated as of
December 20, 1999, is executed and delivered by ACE Limited, a Cayman Islands
company (the "Guarantor"), having its principal executive offices at The ACE
Building, 30 Woodbourne Avenue, Xxxxxxxx XX 08 Bermuda, for the benefit of the
Holders (as defined herein) from time to time of the Common Securities (as
defined herein) of ACE Capital Trust I, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as of
December 20, 1999, among the Trustees named therein, ACE INA Holdings Inc., a
Delaware corporation and a wholly-owned subsidiary of the Guarantor ("ACE INA"),
as depositor (in such capacity, the "Depositor"), and the Holders from time to
time of undivided beneficial ownership interests in the assets of the Issuer
(the "Trust Agreement"), the Issuer is issuing on the date hereof $3,092,800
($3,556,725 if the Underwriters' over-allotment option pursuant to the
Underwriting Agreement is exercised in full), aggregate liquidation preference
of its 8.875% Common Securities (liquidation preference $25 per common security)
(the "Common Securities") representing undivided beneficial interests in the
assets of the Issuer and having the terms set forth in the Trust Agreement;
WHEREAS, the Common Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the issuance of the Issuer's
Preferred Securities (as defined herein), will be used to purchase the
Debentures (as defined herein) of ACE INA (in its capacity as issuer of the
Debentures, the "Debenture Issuer"), which will be deposited with Bank One Trust
Company, National Association, as Property Trustee under the Trust Agreement, as
trust assets; and
WHEREAS, as incentive for the Holders to purchase the Common Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Common Securities Guarantee, to pay to the Holders of the
Common Securities the Guarantee Payments (as defined herein) and to make certain
other payments on the terms and conditions set forth herein;
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Preferred Securities Guarantee") having substantially identical
terms to this Common Securities Guarantee for the benefit of the holders of the
Preferred Securities (as defined in the Trust Agreement) it being understood
that if an Event of Default under the Trust Agreement has occurred and is
continuing, the rights of Holders to receive Guarantee Payments under this
Common Securities Guarantee are subordinated to the rights of holders of the
Preferred Securities to receive guarantee payments under the Preferred
Securities Guarantee ("Preferred Guarantee Payments").
NOW, THEREFORE, in consideration of the purchase by each Holder of Common
Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Common Securities Guarantee
for the benefit of the Holders from time to time of the Common Securities.
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ARTICLE I
DEFINITIONS AND INTERPRETATIONS
SECTION 1.1 Definitions and Interpretations
In this Common Securities Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Common Securities Guarantee, but not
defined in the preamble hereto have the respective meanings assigned to them in
this Section 1.1 or in the Trust Agreement, as the case may be;
(b) a term defined anywhere in this Common Securities Guarantee has the
same meaning throughout;
(c) all references to "the Common Securities Guarantee" or "this Common
Securities Guarantee" are to this Common Securities Guarantee as modified,
supplemented or amended from time to time;
(d) all references in this Common Securities Guarantee to Articles and
Sections are to Articles and Sections of this Common Securities Guarantee,
unless otherwise specified;
(e) a reference to the singular includes the plural and vice versa; and
(f) the masculine, feminine, or neuter genders used herein shall include
the masculine, feminine and neuter genders.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Guarantor shall not be deemed to include the Issuer. For the purpose of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Capitalized Lease Obligations" means an obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
generally accepted accounting principles, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with such principles.
"Debenture Guarantee" means the full and unconditional payment guarantee
and indemnity of the Debenture Guarantor provided for in the Indenture with
respect to the Debentures.
"Debenture Guarantor" means ACE Limited, in its capacity as guarantor of
the Debentures under the Indenture.
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"Debentures" means the series of subordinated debt securities of the
Debenture Issuer designated the 8.875% Junior Subordinated Deferrable Interest
Debentures due 2029 held by the Property Trustee.
"Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Common Securities Guarantee; provided, however,
that, except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Common Securities, to the extent not paid or
made by or on behalf of the Issuer: (i) any accrued and unpaid Distributions (as
defined in the Trust Agreement) that are required to be paid on such Common
Securities, to the extent the Issuer shall have funds on hand available therefor
at such time, (ii) the redemption price, including all accrued and unpaid
Distributions to the date of redemption (the "Redemption Price") with respect to
Common Securities called for redemption by the Issuer to the extent the Issuer
shall have funds on hand available therefor at such time and (iii) upon a
voluntary or involuntary dissolution, winding-up or liquidation of the Issuer,
unless Debentures are distributed to the Holders, the lesser of (a) the
aggregate of the liquidation preference of $25 per Common Security plus accrued
and unpaid Distributions on the Common Securities to the date of payment, to the
extent the Issuer shall have funds on hand available to make such payment at
such time and (b) the amount of assets of the Issuer remaining available for
distribution to Holders in liquidation of the Issuer (in either case, the
"Liquidation Distribution").
"Holder" shall mean ACE INA Holdings Inc. or, if the Common Securities are
transferred in accordance with the provisions of the Trust Agreement, any other
holder, as registered on the books and records of the Issuer, of any Common
Securities.
"Indebtedness" means, with respect to any Person, (i) the principal of and
any premium and interest on (a) indebtedness of such Person for money borrowed
and (b) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable; (ii)
all Capitalized Lease Obligations of such Person; (iii) all obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business); (iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in (i) through (iii) above)
entered into in the ordinary course of business of such Person to the extent
such letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit); (v) all obligations of the type referred to in clauses (i)
through (iv) of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable as obligor,
guarantor or otherwise; and (vi) all obligations of the type referred to in
clauses (i) through (v) of other Persons secured by any Lien on any property or
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asset of such Person (whether or not such obligation is assumed by such Person),
the amount of such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured; and (vii) any
amendments, modifications, refundings, renewals or extensions of any
indebtedness or obligation described as Indebtedness in clauses (i) through (vi)
above.
"Indenture" means the Subordinated Indenture dated as of December 1, 1999
among the Debenture Issuer, the Debenture Guarantor and Bank One Trust Company,
National Association, as trustee, and any indenture supplemental thereto
pursuant to which the Debentures and the Debenture Guarantee are to be issued to
the Property Trustee of the Issuer.
"Majority in liquidation preference of the Common Securities" means a vote
by Holder(s), voting separately as a class, of more than 50% of the liquidation
preference of all then outstanding Common Securities issued by the Issuer.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association or government or any agency
or political subdivision thereof, or any other entity of whatever nature.
"Preferred Securities" means the securities representing preferred
undivided beneficial interests in the assets of the Issuer.
"Senior Indebtedness" means all Indebtedness of the Guarantor (including
its Indebtedness, as Debenture Guarantor, under the Indenture) outstanding at
any time, except (a) the Indebtedness under this Common Securities Guarantee
and, subject to Sections 2.2 and 3.2 hereof, the Preferred Securities Guarantee,
(b) Indebtedness as to which, by the terms of the instrument creating or
evidencing the same, it is provided that such Indebtedness is subordinated to or
pari passu with this Common Securities Guarantee or to other Indebtedness of the
Guarantor which is subordinated to or pari passu with this Common Securities
Guarantee, (c) Indebtedness of the Guarantor to an Affiliate of the Guarantor,
(d) interest accruing after the filing of a petition initiating any proceeding
referred to in Section 5.1(7) and 5.1(8) of the Indenture unless such interest
is an allowed claim enforceable against the Guarantor in a proceeding under
federal or state bankruptcy laws, (e) trade accounts payable and (f) similar
guarantee agreements issued by the Guarantor on behalf of holders of common
securities of any other ACE Capital Trust or any trust, partnership or other
entity affiliated with the Guarantor which is a financing vehicle of the
Guarantor or any Affiliate of the Guarantor in connection with the issuance by
such entity of common securities or other securities which are similar to common
securities that are guaranteed by the Guarantor pursuant to an instrument that
ranks pari passu with or junior in right of payment to this Common Securities
Guarantee.
ARTICLE II
GUARANTEE
SECTION 2.1 Guarantee
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The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by or on behalf of the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer, through the Debenture Issuer, to pay such amounts to the Holders.
SECTION 2.2 Subordination in an Event of Default Under the Trust Agreement
Notwithstanding anything to the contrary contained herein, if an event of
default under the Trust Agreement has occurred and is continuing, the rights of
the Holders of the Common Securities to receive the Guarantee Payments under
this Common Securities Guarantee shall be subordinated to the rights of the
holders of Preferred Securities to receive Preferred Guarantee Payments, and no
Guarantee Payments shall be made to the Holders of Common Securities hereunder
unless payment in full in cash of all accumulated and unpaid Preferred Guarantee
Payments on all outstanding Preferred Securities shall have been made or
provided for, and all funds immediately available to the Property Trustee shall
be first applied to the payment in full in cash of all such Preferred Guarantee
Payments then due and payable. The Guarantor's obligation to make Guarantee
Payments will not be discharged except by payment of the Guarantee Payments in
full.
SECTION 2.3 Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this Common Securities
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the Issuer
or any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
SECTION 2.4 Obligations Not Affected
The obligations, covenants, agreements and duties of the Guarantor under
this Common Securities Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Common Securities to be performed or
observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Common Securities or the extension of
time for the performance of any other obligation under, arising out of, or in
connection with, the Common Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Debentures or so provided by the Indenture);
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(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Common Securities, or any
action on the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Common Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 2.4 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
the consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 2.5 Rights of Holders
Any Holder of the Common Securities may institute a legal proceeding
directly against the Guarantor to enforce its rights under this Common
Securities Guarantee. The Guarantor waives any right or remedy to require that
any such action be brought first against the Issuer or any other Person before
so proceeding directly against the Guarantor.
SECTION 2.6 Guarantee of Payment
This Common Securities Guarantee creates a guarantee of payment and not of
collection. This Common Securities Guarantee will not be discharged except by
payment of the Guarantee Payments in full (without duplication of amounts
theretofore paid by the Issuer) or upon distribution of Debentures to Holders as
provided in the Trust Agreement.
SECTION 2.7 Subrogation
The Guarantor shall be subrogated to all rights, if any, of the Holders
against the Issuer in respect of any amounts paid to such Holders by the
Guarantor under this Common Securities Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any right that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Common Securities Guarantee, if, at the time of
any such payment, any amounts are due and unpaid under this Common Securities
Guarantee. If any amount shall be paid to the Guarantor in violation of the
preceding sentence, the Guarantor agrees to hold such amount in trust for the
Holders and to pay over such amount to the Holders.
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SECTION 2.8 Independent Obligations
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Common Securities, and that
the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Common Securities Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 2.4 hereof.
ARTICLE III
LIMITATION OF TRANSACTIONS; RANKING
SECTION 3.1 Limitation of Transactions
The Guarantor hereby covenants and agrees that, so long as any Common
Securities remain outstanding, it will not, and will not permit any of its
Subsidiaries (including the Debenture Issuer) to, (a) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the outstanding capital stock of the
Debenture Issuer or the Guarantor, as the case may be, or (b) make any payment
of principal of, interest or premium, if any, on or repay, repurchase or redeem
any debt security of the Debenture Issuer or the Guarantor, as the case may be,
that ranks junior in interest to the Debentures or the guarantee in respect
thereof, as the case may be, or make any guarantee payments with respect to any
guarantee by the Debenture Issuer or the Guarantor, as the case may be, of the
debt securities of any Subsidiary of the Debenture Issuer or the Guarantor, as
the case may be, if such guarantee ranks junior in interest to the Debentures or
the guarantee in respect thereof, as the case may be (other than (i) dividends
or distributions on the Capital Stock (as defined in the Indenture) of the
Debenture Issuer paid or made to the Guarantor and dividends or distributions in
Common Stock (as defined in the Indenture) of the Debenture Issuer or the
Guarantor, as the case may be, (ii) redemptions or purchases of any rights
outstanding under a shareholder rights plan of the Debenture Issuer or the
Guarantor, as the case may be, or any successor to such rights plan, or the
declaration of a dividend of such rights or the issuance of stock under such
plans in the future, (iii) payments under any preferred securities guarantee
issued by the Guarantor, and (iv) purchases of Common Stock related to the
issuance of Common Stock under any benefit plans of the Debenture Issuer, the
Guarantor or its Subsidiaries, as the case may be, for their respective
directors, officers or employees) if at such time (1) there shall have occurred
any event of which the Debenture Issuer or the Guarantor, as the case may be,
has actual knowledge that (A) with the giving of notice or the lapse of time or
both would constitute an Event of Default under the Indenture and (B) in respect
of which the Debenture Issuer or the Guarantor, as the case may be, shall not
have taken reasonable steps to cure, (2) the Guarantor shall be in default with
respect to its payment of any obligations under this Common Securities Guarantee
or (3) the Debenture Issuer shall have given notice of its election to begin an
Extension Period (as defined in the Indenture) with respect to the Debentures as
provided in the Indenture and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.
SECTION 3.2 Ranking
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This Common Securities Guarantee will constitute an unsecured obligation of
the Guarantor and will rank subordinate and junior in right of payment to all
Senior Indebtedness of the Guarantor. Subject to Section 2.2 hereof and the
immediately follwing paragraph, the Common Securities Guarantee will rank pari
passu with the Guarantor's obligations under the Preferred Securities Guarantee.
If an event of default under the Trust Agreement has occurred and is
continuing, the rights of holders of the Common Securities of the Issuer to
receive Guarantee Payments are subordinated to the rights of holders of the
Preferred Securities to receive Preferred Guarantee Payments, with the result
that no Guarantee Payments shall be made unless payment in full in cash of all
accumulated and unpaid Preferred Guarantee Payments on all outstanding Preferred
Securities shall have been made or provided for, and all funds immediately
available to the Property Trustee shall first be applied to the payment in full
in cash of all such Preferred Guarantee Payments then due and payable.
SECTION 3.3 Pari Passu Guarantees
This Common Securities Guarantee shall rank pari passu with any similar
guarantee agreements issued by the Guarantor on behalf of holders of common
securities of any other ACE Capital Trust or any trust, partnership or other
entity affiliated with the Guarantor which is a financing vehicle of the
Guarantor or any Affiliate of the Guarantor in connection with the issuance by
such entity of common securities or other securities which are similar to common
securities that are guaranteed by the Guarantor pursuant to an instrument that
ranks pari passu with or junior in right of payment to this Common Securities
Guarantee.
ARTICLE IV
TERMINATION
SECTION 4.1 Termination
This Common Securities Guarantee shall terminate and be of no further force
and effect upon (i) full payment of the Redemption Price of all Common
Securities, (ii) the distribution of the Debentures to all Holders in exchange
for the Preferred Securities or (iii) full payment of the amounts payable in
accordance with the Trust Agreement upon liquidation of the Issuer.
Notwithstanding the foregoing, this Common Securities Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
Holder must restore payment of any sums paid with respect to the Common
Securities or under this Common Securities Guarantee.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Successors and Assigns
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All guarantees and agreements contained in this Common Securities Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Common
Securities then outstanding. Except in connection with a consolidation, merger,
or sale involving the Guarantor that is permitted under Article 8 of the
Indenture and pursuant to which the assignee agrees in writing to perform the
Guarantor's obligations hereunder, the Guarantor shall not assign its
obligations hereunder.
SECTION 5.2 Amendments
Except with respect to any changes that do not adversely affect the rights
of Holders in any material respect (in which case no consent of Holders will be
required), this Common Securities Guarantee may only be amended with the prior
approval of the Holders of at least a Majority in liquidation preference of the
Common Securities. The provisions of Article VI of the Trust Agreement
concerning meetings of Holders apply to the giving of such approval.
SECTION 5.3 Notices
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by first class mail, as
follows:
(a) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders):
ACE Limited
The ACE Building
30 Woodbourne Avenue
Xxxxxxxx, XX 08, Bermuda
Attn: General Counsel and Secretary
(b) If given to the Issuer, at the Issuer's address set forth below or
such other address as the Issuer may give notice to the Holders:
ACE Capital Trust I
c/o ACE INA Holdings Inc.
Two Liberty Place
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: General Counsel and Secretary
(c) If given to any Holder, at the address set forth on the books and
records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which
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no notice was given, such notice or other document shall be deemed to have been
delivered on the date of such refusal or inability to deliver.
SECTION 5.4 Benefit
This Common Securities Guarantee is solely for the benefit of the Holders
and is not separately transferable from the Common Securities.
SECTION 5.5 Governing Law
THIS COMMON SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND PERFORMED IN THAT STATE
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THIS COMMON SECURITIES GUARANTEE is executed as of the day and year first
above written.
ACE LIMITED,
as Guarantor
By:
Name:
Title:
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