Exhibit 99.1
REPLACEMENT CAPITAL COVENANT, dated as of March 12, 2007 (this
"REPLACEMENT CAPITAL COVENANT"), by The Travelers Companies, Inc., a Minnesota
corporation (together with its successors and assigns, the "CORPORATION"), in
favor of and for the benefit of each Covered Debtholder (as defined below).
RECITALS
A. On the date hereof, the Corporation is issuing $1,000,000,000 aggregate
principal amount of its Junior Subordinated Debentures (including any such
junior subordinated debentures issued after the date hereof that may be
consolidated and form a single series with such Junior Subordinated Debentures
issued on the date hereof, the "DEBENTURES").
B. This Replacement Capital Covenant is the "Replacement Capital Covenant"
referred to in the Prospectus Supplement, dated March 5, 2007, relating to the
Debentures (together with the Prospectus, dated March 5, 2007 attached thereto,
the "PROSPECTUS").
C. The Corporation is entering into and disclosing the content of this
Replacement Capital Covenant in the manner provided below with the intent that
the covenants provided for in this Replacement Capital Covenant be enforceable
by each Covered Debtholder and that the Corporation be estopped from
disregarding the covenants in this Replacement Capital Covenant, in each case to
the fullest extent permitted by applicable law.
D. The Corporation acknowledges that reliance by each Covered Debtholder
upon the covenants in this Replacement Capital Covenant is reasonable and
foreseeable by the Corporation and that, were the Corporation to disregard its
covenants in this Replacement Capital Covenant, each Covered Debtholder would
have sustained an injury as a result of its reliance on such covenants.
NOW, THEREFORE, the Corporation hereby covenants and agrees as follows in
favor of and for the benefit of each Covered Debtholder.
Section 1. Definitions. Capitalized terms used in this Replacement Capital
Covenant (including the Recitals) have the respective meanings set forth in
Schedule I hereto.
Section 2. Limitations on Repayment, Redemption and Purchase of
Debentures. The Corporation hereby promises and covenants to and for the benefit
of each Covered Debtholder that the Corporation shall not repay, redeem or
purchase (for the avoidance of doubt, any reference in this Replacement Capital
Covenant to any repayment of the Corporation's securities will be deemed to
include a reference to defeasance of the Corporation's obligations under the
securities), and will cause its Subsidiaries not to, repay, redeem or purchase,
as applicable, all or any part of the Debentures before March 15, 2047 except to
the extent that the principal amount repaid or the applicable redemption or
purchase price does not exceed the sum of the following amounts raised through
the issuance of Replacement Capital Securities:
(a) the Applicable Percentage of (i) the aggregate amount of net cash
proceeds received by the Corporation and its Subsidiaries from the sale of
Common Stock and Qualifying Warrants (each as defined below) to Persons other
than the Corporation and its Subsidiaries and (ii) the Market Value of any
Common Stock that the Corporation and its Subsidiaries have issued
1
to persons other than the Corporation and its Subsidiaries in connection with
the conversion of any convertible or exchangeable securities, other than
securities for which the Corporation or any of its Subsidiaries has received
equity credit from any NRSRO (as defined below), in each case since the most
recent Measurement Date (without double counting proceeds received in any prior
Measurement Period); plus
(b) the aggregate amount of net cash proceeds received by the Corporation
and its Subsidiaries since the most recent Measurement Date (without double
counting proceeds received in any prior Measurement Period) from the sale of
Mandatorily Convertible Preferred Stock, Debt Exchangeable for Common Equity,
Debt Exchangeable for Preferred Equity and Qualifying Capital Securities to
Persons other than the Corporation and its Subsidiaries.
Section 3. Covered Debt. (a) The Corporation represents and warrants that
the Initial Covered Debt is Eligible Debt.
(b) On or during the 30-day period immediately preceding any Redesignation
Date with respect to the Covered Debt then in effect, the Corporation shall
identify the series of Eligible Debt that will become the Covered Debt on and
after such Redesignation Date in accordance with the following procedures:
(i) the Corporation shall identify each series of its then
outstanding long-term indebtedness for money borrowed that is Eligible
Debt;
(ii) if only one series of the Corporation's then outstanding
long-term indebtedness for money borrowed is Eligible Debt, such series
shall become the Covered Debt commencing on the related Redesignation
Date;
(iii) if the Corporation has more than one outstanding series of
long-term indebtedness for money borrowed that is Eligible Debt, then the
Corporation shall identify the series that has the latest stated final
maturity date as of the date the Corporation is applying the procedures in
this Section 3(b) and such series shall become the Covered Debt on the
related Redesignation Date;
(iv) the series of outstanding long-term indebtedness for money
borrowed that is determined to be Covered Debt pursuant to this Section
3(b) shall be the Covered Debt for purposes of this Replacement Capital
Covenant for the period commencing on the related Redesignation Date and
continuing to but not including the Redesignation Date as of which a new
series of outstanding long-term indebtedness is next determined to be the
Covered Debt pursuant to the procedures set forth in this Section 3(b);
and
(v) in connection with such identification of a new series of
Covered Debt, the Corporation shall, as provided for in Section 3(c), give
a notice and file with the Commission a current report on Form 8-K under
the Exchange Act including or incorporating by reference this Replacement
Capital Covenant as an exhibit within the time frame provided for in such
section.
(c) Notice. In order to give effect to the intent of the Corporation
described in Recital C, the Corporation covenants that (i) simultaneously with
the execution of this Replacement
2
Capital Covenant or as soon as practicable after the date hereof, it shall (A)
give notice to the Holders of the Initial Covered Debt, in the manner provided
in the indenture relating to the Initial Covered Debt, of this Replacement
Capital Covenant and the rights granted to such Holders hereunder and (B) file a
copy of this Replacement Capital Covenant with the Commission as an exhibit to a
current report on Form 8-K under the Exchange Act; (ii) so long as the
Corporation is a reporting company under the Exchange Act, the Corporation will
include in each annual report filed with the Commission on Form 10-K under the
Exchange Act a description of the covenant set forth in Section 2 and identify
the series of long-term indebtedness for borrowed money that is Covered Debt as
of the date such annual report on Form 10-K is filed with the Commission; (iii)
if a series of the Corporation's long-term indebtedness for money borrowed (A)
becomes Covered Debt or (B) ceases to be Covered Debt pursuant to the procedures
set forth in Section 3(b), the Corporation shall give notice of such occurrence
within 30 days to the holders of such long-term indebtedness for money borrowed
in the manner provided for in the indenture, fiscal agency agreement or other
instrument under which such long-term indebtedness for money borrowed was issued
and report such change in a current report on Form 8-K under the Exchange Act
including or incorporating by reference this Replacement Capital Covenant, and
in the Corporation's next quarterly report on Form 10-Q or annual report on Form
10-K, as applicable; (iv) if, and only if, the Corporation ceases to be a
reporting company under the Exchange Act, the Corporation shall post on its
website the information otherwise required to be included in Exchange Act
filings pursuant to clauses (ii) and (iii) of this Section 3(c); and (v)
promptly upon request by any Holder of Covered Debt, the Corporation shall
provide such Holder with a conformed copy of this Replacement Capital Covenant.
Section 4. Termination, Amendment and Waiver (a) The obligations of the
Corporation pursuant to this Replacement Capital Covenant shall remain in full
force and effect until the earliest (the "TERMINATION DATE") to occur of (i)
March 15, 2047, or, if earlier, the date on which the Debentures are otherwise
repaid, redeemed or purchased in full (in compliance with the terms of this
Replacement Capital Covenant), (ii) the date, if any, on which the Holders of a
majority in principal amount of the then-effective series of Covered Debt
consent or agree in writing to the termination of this Replacement Capital
Covenant and the obligations of the Corporation hereunder, (iii) the date on
which the Corporation ceases to have any series of outstanding Eligible Senior
Debt or Eligible Subordinated Debt (in each case, without giving effect to the
rating requirement in clause (b) of the definition of each such term) and (iv)
the date on which an event of default under the Indenture resulting in an
acceleration of the Debentures occurs. From and after the Termination Date, the
obligations of the Corporation pursuant to this Replacement Capital Covenant
shall be of no further force and effect.
(b) This Replacement Capital Covenant may be amended or supplemented from
time to time by a written instrument signed by the Corporation with the consent
of the Holders of at least a majority in principal amount of the then-effective
series of Covered Debt, provided that this Replacement Capital Covenant may be
amended or supplemented from time to time by a written instrument signed only by
the Corporation (and without the consent of any Holder of the then-effective
series of Covered Debt) if (i) the effect of such amendment or supplement is
solely to impose additional restrictions on the types of securities qualifying
as Replacement Capital Securities, and an officer of the Corporation has
delivered to the Holders of the then-effective series of Covered Debt in the
manner provided for in the indenture, fiscal agency agreement or other
instrument with respect to such Covered Debt a written certificate to that
effect, (ii) such
3
amendment or supplement is not adverse to the Covered Debtholders and an officer
of the Corporation has delivered to the Holders of the then-effective series of
Covered Debt in the manner provided for in the indenture, fiscal agency
agreement or other instrument with respect to such Covered Debt a written
certificate stating that, in his or her determination, such amendment or
supplement is not adverse to such Covered Debtholders, or (iii) such amendment
or supplement eliminates Common Stock, Debt Exchangeable for Common Equity,
Qualifying Warrants and/or Mandatorily Convertible Preferred Stock as
Replacement Capital Securities if, in the case of this clause (iii), after the
date of this Replacement Capital Covenant, an accounting standard or
interpretive guidance of an existing accounting standard issued by an
organization or regulator that has responsibility for establishing or
interpreting accounting standards in the United States becomes effective such
that there is more than an insubstantial risk that failure to eliminate Common
Stock, Debt Exchangeable for Common Equity, Qualifying Warrants and/or
Mandatorily Convertible Preferred Stock as Replacement Capital Securities would
result in a reduction in the Corporation's earnings per share as calculated in
accordance with generally accepted accounting principles in the United States.
(c) For purposes of Sections 4(a) and 4(b), the Holders whose consent or
agreement is required to terminate, amend or supplement the obligations of the
Corporation under this Replacement Capital Covenant shall be the Holders of the
then-effective Covered Debt as of a record date established by the Corporation
that is not more than 30 days prior to the date on which the Corporation
proposes that such termination, amendment or supplement becomes effective.
Section 5. Miscellaneous. (a) THIS REPLACEMENT CAPITAL COVENANT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) This Replacement Capital Covenant shall be binding upon the
Corporation and its successors and assigns and shall inure to the benefit of the
Covered Debtholders as they exist from time to time (it being understood and
agreed by the Corporation that any Person who is a Covered Debtholder at the
time such Person acquires, holds or sells Covered Debt shall retain its status
as a Covered Debtholder for so long as the series of long-term indebtedness for
borrowed money owned by such Person is Covered Debt and, if such Person
initiates a claim or proceeding to enforce its rights under this Replacement
Capital Covenant after the Corporation has violated its covenants in Section 2
and before the series of long-term indebtedness for money borrowed held by such
Person is no longer Covered Debt, such Person's rights under this Replacement
Capital Covenant shall not terminate prior to a Termination Date solely by
reason of such series of long-term indebtedness for money borrowed no longer
being Covered Debt).
(c) All demands, notices, requests and other communications to the
Corporation under this Replacement Capital Covenant shall be deemed to have been
duly given and made if in writing and (i) if served by personal delivery upon
the Corporation, on the day so delivered (or, if such day is not a Business Day,
the next succeeding Business Day), (ii) if delivered by registered post or
certified mail, return receipt requested, or sent to the Corporation by a
national or international courier service, on the date of receipt by the
Corporation (or, if such date of receipt is not a Business Day, the next
succeeding Business Day), or (iii) if sent by telecopier, on the day telecopied,
or if not a Business Day, the next succeeding Business Day, provided that the
telecopy is promptly confirmed by telephone confirmation thereof, and in each
case to the
4
Corporation at the address set forth below, or at such other address as the
Corporation may thereafter notify to Covered Debtholders or post on its website
as the address for notices under this Replacement Capital Covenant:
The Travelers Companies, Inc.
000 Xxxxxxxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000
Attention: General Counsel
5
IN WITNESS WHEREOF, the Corporation has caused this Replacement Capital
Covenant to be executed by its duly authorized officer, as of the day and year
first above written.
THE TRAVELERS COMPANIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President,
Corporate Controller and
Treasurer
[Signature page to the Replacement Capital Covenant]
Exhibit 99.1
Schedule I
DEFINITIONS
"ALTERNATIVE PAYMENT MECHANISM" means, with respect to any securities or
combination of securities (together in this definition, "SUCH SECURITIES"),
provisions in the related transaction documents requiring the Corporation to
issue (or use commercially reasonable efforts to issue) one or more types of APM
Qualifying Securities raising eligible proceeds at least equal to the deferred
Distributions on such securities and apply the proceeds to pay unpaid
Distributions on such securities, commencing on the earlier of (x) the first
Distribution Date after commencement of a deferral period on which the
Corporation pays current Distributions on such securities and (y) the fifth
anniversary of the commencement of such deferral period, and that:
(a) define "eligible proceeds" to mean, for purposes of such Alternative
Payment Mechanism, the net proceeds (after underwriters' or placement agents'
fees, commissions or discounts and other expenses relating to the issuance or
sale of the relevant securities, where applicable, and including the fair market
value of property received by the Corporation or any of its Subsidiaries as
consideration for such securities) that the Corporation has received during the
180 days prior to the related Distribution Date from the issuance of APM
Qualifying Securities, up to the Preferred Cap (as defined in paragraph (f)
below) in the case of APM Qualifying Securities that are Qualifying
Non-Cumulative Perpetual Preferred Stock or Mandatorily Convertible Preferred
Stock;
(b) permit the Corporation to pay current Distributions on any
Distribution Date out of any source of funds but (x) require the Corporation to
pay deferred Distributions only out of eligible proceeds and (y) prohibit the
Corporation from paying deferred Distributions out of any source of funds other
than eligible proceeds;
(c) if deferral of Distributions continues for more than one year (or such
shorter period as provided for in the terms of such securities), require the
Corporation not to repay, redeem or purchase any APM Qualifying Securities of
the Corporation or any securities of the Corporation that on a bankruptcy or
liquidation of the Corporation rank pari passu or junior to such APM Qualifying
Securities until at least one year after all deferred Distributions have been
paid;
(d) may include a provision that, notwithstanding the Common Cap (as
defined in paragraph (f) below) and the Preferred Cap, for purposes of paying
deferred Distributions, limits the ability of the Corporation to sell shares of
Common Stock, Qualifying Warrants, or Mandatorily Convertible Preferred Stock
above an aggregate cap specified in the transaction documents (a "SHARE CAP"),
subject to the Corporation's agreement to use commercially reasonable efforts to
increase the Share Cap amount and (i) only to the extent that it can do so and
simultaneously satisfy its future fixed or contingent obligations under other
7
securities and derivative instruments that provide for settlement or payment in
shares of Common Stock or (ii) if the Corporation cannot increase the Share Cap
amount as contemplated in the preceding clause, by requesting its Board of
Directors to adopt a resolution for shareholder vote at the next occurring
annual shareholders meeting to increase the number of shares of the
Corporation's authorized Common Stock for purposes of satisfying the
Corporation's obligations to pay deferred Distributions, provided that such
Share Cap shall not represent a lower proportion of the Corporation's
outstanding shares of Common Stock as of the date of issuance of such APM
Qualifying Securities than the Share Cap Amount applicable to the Debentures
represents as a proportion of the Corporation's outstanding shares of Common
Stock as of the date of the Prospectus Supplement;
(e) permit the Corporation, at its option, to provide that if the
Corporation is involved in a merger, consolidation, amalgamation or conveyance,
transfer or lease of assets substantially as an entirety to any other person (a
"BUSINESS COMBINATION") where immediately after the consummation of the business
combination more than 50% of the voting stock of the surviving entity of the
business combination, or the person to whom all or substantially all of the
Corporation's assets are conveyed, transferred or leased, is owned by the
shareholders of the other party to the business combination, then clauses (a),
(b) and (c) above will not apply to any deferral period that is terminated on
the next interest payment date following the date of consummation of the
business combination; and
(f) limit the obligation of the Corporation to issue (or use commercially
reasonable efforts to issue) APM Qualifying Securities up to:
(i) in the case of APM Qualifying Securities that are Common Stock
or Qualifying Warrants, an aggregate amount of all Common Stock issued or
issuable upon the exercise of such Qualifying Warrants pursuant to the
Alternative Payment Mechanism with respect to deferred Distributions
during the first five years of any deferral period equal to 2% of the
total number of issued and outstanding shares of the Common Stock of the
Company as of the date of the Corporation's most recently publicly
available consolidated financial statements as of the date of such
issuance (the "COMMON CAP"), provided (and it being understood) that the
Common Cap shall cease to apply to such deferral period by a date (as
specified in the related transaction documents) which shall be not later
than the fifth anniversary of the commencement of such deferral period;
and
(ii) in the case of APM Qualifying Securities that are Qualifying
Non-Cumulative Perpetual Preferred Stock or Mandatorily Convertible
Preferred Stock, an amount from the issuance of such Qualifying
Non-Cumulative Perpetual Preferred Stock and then still-
8
outstanding Mandatorily Convertible Preferred Stock pursuant to the
related Alternative Payment Mechanism (including, in the case of
Qualifying Non-Cumulative Perpetual Preferred Stock, at any point in time
from all prior issuances thereof pursuant to such Alternative Payment
Mechanism) equal to 25% of the initial principal or stated amount of the
securities that are the subject of the related Alternative Payment
Mechanism (the "PREFERRED CAP");
(iii) provided (and it being understood) that:
(A) the Corporation shall not be obligated to issue (or use
commercially reasonable efforts to issue) APM Qualifying Securities
for so long as a Market Disruption Event has occurred and is
continuing;
(B) if, due to a Market Disruption Event or otherwise, the
Corporation is able to raise and apply some, but not all, of the
eligible proceeds necessary to pay all deferred Distributions on any
Distribution Date, the Corporation will apply any available eligible
proceeds to pay accrued and unpaid Distributions on the applicable
Distribution Date in chronological order subject to the Common Cap,
Preferred Cap and Share Cap (if any), as applicable; and
if the Corporation has outstanding more than one class or series of
securities under which it is obligated to sell a type of APM Qualifying
Securities and apply some part of the proceeds to the payment of deferred
Distributions, then on any date and for any period the amount of net proceeds
received by the Corporation from those sales and available for payment of
deferred Distributions on such securities shall be applied to such securities on
a pro rata basis in proportion to the total amounts that are due on such
securities.
"APM QUALIFYING SECURITIES" means one or more of the following:
(a) Common Stock;
(b) Qualifying Warrants;
(c) Qualifying Non-Cumulative Perpetual Preferred Stock; and
(d) Mandatorily Convertible Preferred Stock.
"APPLICABLE PERCENTAGE" means 1 divided by (i) 75% with respect to any
repayment, redemption or purchase prior to Xxxxx 00, 0000, (xx) 50% with respect
to any repayment, redemption or purchase on or after March 15, 2017 and prior to
9
March 15, 2037 and (iii) 25% with respect to any repayment, redemption or
purchase on or after March 15, 2037.
"BUSINESS DAY" means each day other than (a) a Saturday or Sunday or (b) a
day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed, and, on or after March 15,
2017, a day that is not a London business day. A "LONDON BUSINESS DAY" is any
day on which dealings in deposits in U.S. dollars are transacted in the London
interbank market.
"COMMISSION" means the United States Securities and Exchange Commission.
"COMMON STOCK" means common stock of the Corporation (including treasury
shares of common stock), common stock issued pursuant to any dividend
reinvestment plan or employee benefit plans of the Corporation, a security of
the Corporation's ranking upon the liquidation, dissolution or winding up of the
Corporation junior to the Qualifying Non-Cumulative Perpetual Preferred Stock
and pari passu with the common stock of the Corporation, that tracks the
performance of, or relates to the results of, a business, unit or division of
the Corporation, and any securities issued in exchange therefor in connection
with a merger, consolidation, binding share exchange, business combination,
recapitalization or other similar event.
"CORPORATION" has the meaning specified in the introduction to this
instrument.
"COVERED DEBT" means (a) at the date of this Replacement Capital Covenant
and continuing to but not including the first Redesignation Date, the Initial
Covered Debt and (b) thereafter, commencing with each Redesignation Date and
continuing to but not including the next succeeding Redesignation Date, the
Eligible Debt identified pursuant to Section 3(b) as the Covered Debt for such
period.
"COVERED DEBTHOLDER" means each Person (whether a Holder or a beneficial
owner holding through a participant in a clearing agency) that buys, holds or
sells long-term indebtedness for money borrowed of the Corporation during the
period that such long-term indebtedness for money borrowed is Covered Debt.
"DEBENTURES" has the meaning specified in Recital A.
"DEBT EXCHANGEABLE FOR COMMON EQUITY" means a security or combination of
securities (together in this definition, "such securities") that:
(a) gives the holder a beneficial interest in (i) debt securities of the
Corporation that are not redeemable prior to settlement of the stock purchase
10
contract referred to in subclause (ii) hereof and (ii) a fractional interest in
a stock purchase contract for a share of common stock of the Corporation that
will be settled in three years or less, with the number of shares of common
stock purchasable pursuant to such stock purchase contract to be within a range
established at the time of issuance of such debt securities;
(b) provides that the investors directly or indirectly grant to the
Corporation a security interest in such debt securities and their proceeds
(including any substitute collateral permitted under the transaction documents)
to secure the investors' direct or indirect obligation to purchase common stock
of the Corporation pursuant to such stock purchase contracts;
(c) includes a remarketing feature pursuant to which the debt securities
of the Corporation are remarketed to new investors commencing not later than the
settlement date of the purchase contract;
(d) provides for the proceeds raised in the remarketing to be used to
purchase common stock of the Corporation under the stock purchase contracts and,
if there has not been a successful remarketing by the settlement date of the
purchase contract, provides that the stock purchase contracts will be settled by
the Corporation acquiring its debt securities or other collateral directly or
indirectly pledged by investors in the Debt Exchangeable for Common Equity.
"DEBT EXCHANGEABLE FOR PREFERRED EQUITY" means a security or combination
of securities (together in this definition, "such securities") that:
(a) gives the holder a beneficial interest in (i) subordinated debt
securities of the Corporation that include a provision requiring the Corporation
to issue (or use commercially reasonable efforts to issue) one or more types of
APM Qualifying Securities raising proceeds at least equal to the deferred
Distributions on such subordinated debt securities commencing not later than the
second anniversary of the commencement of such deferral period and that are the
most junior subordinated debt of the Corporation (or rank pari passu with the
most junior subordinated debt of the Corporation) (in this definition,
"subordinated debt" of the Corporation) and (ii) a fractional interest in a
stock purchase contract for a share of non-cumulative perpetual preferred stock
of the Corporation that ranks pari passu with or junior to all other preferred
stock of the Corporation (in this definition, "preferred stock" of the
Corporation);
(b) provides that the investors directly or indirectly grant to the
Corporation a security interest in such subordinated debt securities and their
proceeds (including any substitute collateral permitted under the transaction
documents) to secure the investors' direct or indirect obligation to purchase
preferred stock of the Corporation pursuant to such stock purchase contracts;
(c) includes a remarketing feature pursuant to which the subordinated debt
of the Corporation is remarketed to new investors commencing not later than
11
the first Distribution Date that is at least five years after the date of
issuance of securities or earlier in the event of an early settlement event
based on: (i) the dissolution of the issuer of such debt exchangeable for
preferred equity or (ii) one or more financial tests set forth in the terms of
the instrument governing such debt exchangeable for preferred equity;
(d) provides for the proceeds raised in the remarketing to be used to
purchase preferred stock of the Corporation under the stock purchase contracts
and, if there has not been a successful remarketing by the first Distribution
Date that is six years after the date of issuance of such securities, provides
that the stock purchase contracts will be settled by the Corporation acquiring
its subordinated debt securities or other collateral directly or indirectly
pledged by investors in the Debt Exchangeable for Preferred Equity;
(e) includes a replacement capital covenant substantially similar to this
Replacement Capital Covenant or an Other Qualifying Capital Replacement Covenant
that will apply to such securities and to the preferred stock of the
Corporation, and will not include Debt Exchangeable for Preferred Equity as a
Replacement Capital Security; and
(f) if applicable, after the issuance of such preferred stock of the
Corporation, provides the holders of such securities with a beneficial interest
in such preferred stock of the Corporation.
"DISTRIBUTION DATE" means, as to any securities or combination of
securities, the dates on which periodic Distributions on such securities are
scheduled to be made.
"DISTRIBUTION PERIOD" means, as to any securities or combination of
securities, each period from and including the later of the issue date and a
Distribution Date for such securities to but excluding the next succeeding
Distribution Date for such securities.
"DISTRIBUTIONS" means, as to a security or combination of securities,
dividends, interest payments or other income distributions to the holders
thereof that are not Subsidiaries of the Corporation.
"ELIGIBLE DEBT" means, at any time, indebtedness, other than the
Debentures and securities that are pari passu with the Debentures, that is
Eligible Subordinated Debt or, if no Eligible Subordinated Debt is then
outstanding, Eligible Senior Debt.
"ELIGIBLE SENIOR DEBT" means, at any time in respect of any issuer, each
series of outstanding unsecured long-term indebtedness for money borrowed of
such issuer that (a) upon a bankruptcy, liquidation, dissolution or winding-up
of the issuer, ranks most senior among the issuer's then outstanding classes of
indebtedness for money borrowed, (b) is then assigned a rating by at least one
12
NRSRO (provided that this clause (b) shall apply on a Redesignation Date only if
on such date the issuer has outstanding senior long-term indebtedness for money
borrowed that satisfies the requirements of clauses (a), (c) and (d) that is
then assigned a rating by at least one NRSRO), (c) has an outstanding principal
amount of not less than $100,000,000, and (d) was issued through or with the
assistance of a commercial or investment banking firm or firms acting as
underwriters, initial purchasers or placement or distribution agents. For
purposes of this definition as applied to securities with a CUSIP number, each
issuance of long-term indebtedness for money borrowed that has (or, if such
indebtedness is held by a trust or other intermediate entity established
directly or indirectly by the issuer, the securities of such intermediate entity
that have) a separate CUSIP number shall be deemed to be a series of the
issuer's long-term indebtedness for money borrowed that is separate from each
other series of such indebtedness.
"ELIGIBLE SUBORDINATED DEBT" means, at any time in respect of any issuer,
each series of the issuer's then outstanding unsecured long-term indebtedness
for money borrowed that (a) upon a bankruptcy, liquidation, dissolution or
winding-up of the issuer, ranks subordinate to the issuer's then outstanding
series of indebtedness for money borrowed that ranks most senior, (b) is then
assigned a rating by at least one NRSRO (provided that this clause (b) shall
apply on a Redesignation Date only if on such date the issuer has outstanding
subordinated long-term indebtedness for money borrowed that satisfies the
requirements in clauses (a), (c) and (d) that is then assigned a rating by at
least one NRSRO), (c) has an outstanding principal amount of not less than
$100,000,000, and (d) was issued through or with the assistance of a commercial
or investment banking firm or firms acting as underwriters, initial purchasers
or placement or distribution agents. For purposes of this definition as applied
to securities with a CUSIP number, each issuance of long-term indebtedness for
money borrowed that has (or, if such indebtedness is held by a trust or other
intermediate entity established directly or indirectly by the issuer, the
securities of such intermediate entity that have) a separate CUSIP number shall
be deemed to be a series of the issuer's long-term indebtedness for money
borrowed that is separate from each other series of such indebtedness.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"HOLDER" means, as to the Covered Debt then in effect, each holder of such
Covered Debt as reflected on the securities register maintained by or on behalf
of the Corporation with respect to such Covered Debt.
"INDENTURE" means the junior subordinated indenture, dated March 12, 2007
between the Corporation and The Bank of New York, as junior subordinated
indenture trustee, as supplemented by the Supplemental Indenture.
"INITIAL COVERED DEBT" means the Corporation's 6.750% Senior Notes due
2036 (CUSIP: 000000XX0).
13
"INTENT-BASED REPLACEMENT DISCLOSURE" means, as to any security or
combination of securities (together in this definition, "securities"), that the
issuer has publicly stated its intention, either in the prospectus or other
offering document under which such securities were initially offered for sale or
in filings with the Commission made by the issuer under the Exchange Act prior
to or contemporaneously with the issuance of such securities, that the issuer,
to the extent the securities provide the issuer with equity credit, will repay,
redeem or purchase such securities only with the proceeds of replacement capital
securities that have terms and provisions at the time of repayment, redemption
or purchase that are as or more equity-like than the securities then being
repaid, redeemed or purchased, raised within 180 days prior to the applicable
repayment, redemption or purchase date.
"MANDATORILY CONVERTIBLE PREFERRED STOCK" means preferred stock with (a)
no prepayment obligation on the part of the issuer thereof, whether at the
election of the holders or otherwise, and (b) a requirement that such preferred
stock convert into common stock of the issuer within three years from the date
of its issuance at a conversion ratio within a range established at the time of
issuance of such preferred stock.
"MANDATORY TRIGGER PROVISION" means, as to any security or combination of
securities (together in this definition, "securities"), provisions in the terms
thereof or of the related transaction agreements that (a) require or, at its
option in the case of non-cumulative perpetual preferred stock, permit the
issuer of such securities to make payment of Distributions on such securities
only pursuant to the issue and sale of APM Qualifying Securities, within no more
than two years of a failure to satisfy one or more financial tests set forth in
the terms of such securities or related transaction agreements, in an amount
such that the net proceeds of such sale are at least equal to the amount of
unpaid Distributions on such securities (including without limitation all
deferred and accumulated amounts) and in either case require the application of
the net proceeds of such sale to pay such unpaid Distributions, provided that:
(1) if the APM Qualifying Securities issued and sold are Qualifying
Non-Cumulative Perpetual Preferred Stock or Mandatorily Convertible Preferred
Stock, the amount of the net proceeds of Qualifying Non-Cumulative Perpetual
Preferred Stock and Mandatorily Convertible Preferred Stock applied, together
with the net proceeds of all prior issuances of Qualifying Non-Cumulative
Preferred Stock and any still-outstanding Mandatorily Convertible Preferred
Stock applied during the current and all prior deferral periods, to pay such
Distributions pursuant to such provision may not exceed 25% of the initial
liquidation or principal amount of such securities and (2) if the APM Qualifying
Securities issued and sold are Common Stock or Qualifying Warrants and if the
Mandatory Trigger provision does not require such issuance and sale within one
year of such failure, the number of shares of Common Stock issued or issuable
upon the exercise of such Qualifying Warrants plus the number of shares of
Common Stock previously issued or issuable upon the exercise of previously
issued Qualifying Warrants may not
14
exceed 2% of the total number of issued and outstanding shares of the
Corporation's Common Stock as of the date of the Corporation's most recent
publicly available consolidated financial statements as of the date of such
issuance, (b) prohibit the issuer from purchasing any APM Qualifying Securities
or any of the Corporation's securities that on the Corporation's bankruptcy or
liquidation rank pari passu or junior to such APM Qualifying Securities prior to
the date that is six months after the issuer applies the net proceeds of the
sales described in clause (a) to pay such unpaid Distributions, and (c) upon any
liquidation, dissolution, winding up, reorganization or in connection with any
insolvency, receivership or proceeding under any bankruptcy law with respect to
the Corporation, limit the claim of the holders of such securities (other than
non-cumulative perpetual preferred stock) to Distributions that accumulate
during a period in which the Corporation fails to satisfy one or more financial
tests set forth in the terms of such securities or related transaction
agreements to (x) 25% of the principal amount of such securities then
outstanding in the case of securities not permitting the issuance and sale
pursuant to the provisions described in clause (a) above of securities other
than Common Stock or Qualifying Warrants or (y) Distributions that relate to the
earliest two years of the portion of the deferral period for which Distributions
have not been paid in all other cases. No remedy other than Permitted Remedies
may arise by the terms of such securities or related transaction agreements in
favor of the holders of such securities as a result of the issuer's failure to
pay Distributions because of the Mandatory Trigger Provision or as a result of
the issuer's exercise of its right under an Optional Deferral Provision until
Distributions have been deferred for one or more Distribution Periods that total
together at least ten years.
"MARKET DISRUPTION EVENTS" means one or more events or circumstances
substantially similar to those listed as "Market Disruption Events" in the
Supplemental Indenture.
"MARKET VALUE" means, on any date, the closing sale price per share of
Common Stock (or if no closing sale price is reported, the average of the bid
and ask prices or, if more than one in either case, the average of the average
bid and the average ask prices) on that date as reported in composite
transactions by the New York Stock Exchange or, if the Common Stock is not then
listed on the New York Stock Exchange, as reported by the principal U.S.
securities exchange on which the Common Stock is traded or quoted; if the Common
Stock is not either listed or quoted on any U.S. securities exchange on the
relevant date, the market price will be the average of the mid-point of the bid
and ask prices for the Common Stock on the relevant date submitted by at least
three nationally recognized independent investment banking firms selected by the
Corporation for this purpose.
"MEASUREMENT DATE" means (a) with respect to any repayment, redemption or
purchase of Debentures on or prior to the Scheduled Maturity, the date that is
180 days and (b) with respect to any repayment, redemption or purchase of
Debentures after the Scheduled Maturity, the date that is 90 days, in
15
each case prior to delivery of notice of such redemption or prior to the date of
such repayment or purchase.
"MEASUREMENT PERIOD" means the period from a Measurement Date to the
related notice date or repayment or purchase date. Measurement Periods cannot
run concurrently.
"NO PAYMENT PROVISION" means a provision or provisions in the transaction
documents for securities (referred to in this definition as "such securities")
that include the following:
(a) an Alternative Payment Mechanism; and
(b) an Optional Deferral Provision modified and supplemented from the
general definition of that term to provide that:
(i) the issuer of such securities may, in its sole discretion, defer
in whole or in part payment of Distributions on such securities for one or
more consecutive Distribution Periods of up to five years or, if a Market
Disruption Event has occurred and is continuing, ten years, without any
remedy other than Permitted Remedies and the obligations (and limitations
on obligations) described in the definition of "Alternative Payment
Mechanism" applying; and
(ii) if the Corporation becomes subject to a bankruptcy, insolvency,
receivership or similar proceeding prior to the redemption or repayment of
such securities, the holders of such securities will have no claim to any
deferred and unpaid Distributions except for Distributions that relate to
the earliest two years of the portion of the deferral period for which
distributions have not been paid on such securities; provided, however,
that holders of such securities may have an additional preferred equity
claim in respect of deferred and unpaid Distributions which are in excess
of Distributions that relate to the earliest two years of the portion of
the deferral period for which Distributions have not been paid on such
securities that is senior to the Corporation's Common Stock and is or
would be pari passu with any Qualifying Non-Cumulative Preferred Stock up
to the amount equal to their pro rata shares of any unused portion of the
Preferred Cap (as defined in the definition of "Alternative Payment
Mechanism").
"NON-CUMULATIVE" means, with respect to any securities, that the issuer
may elect not to make any number of periodic Distributions without any remedy
arising under the terms of the securities or related agreements in favor of the
holders, other than one or more Permitted Remedies.
"NRSRO" means a nationally recognized statistical rating organization
within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act.
16
"OPTIONAL DEFERRAL PROVISION" means, as to any securities, provisions in
the terms thereof or of the related transaction agreements to the effect of
either (a) or (b) below:
(a) (i) the issuer of such securities may, in its sole discretion, defer
in whole or in part payment of Distributions on such securities for one or more
consecutive Distribution Periods of up to five years or, if a Market Disruption
Event is continuing, ten years, without any remedy other than Permitted Remedies
and (ii) an Alternative Payment Mechanism (provided that such Alternative
Payment Mechanism need not apply during the first five years of any deferral
period and need not include a Common Cap or Preferred Cap); or
(b) the issuer of such securities may, in its sole discretion, defer in
whole or in part payment of Distributions on such securities for one or more
consecutive Distribution Periods up to ten years, without any remedy other than
Permitted Remedies.
"OTHER QUALIFYING CAPITAL REPLACEMENT COVENANT" means a replacement
capital covenant, as identified by the Corporation's Board of Directors acting
in good faith and in its reasonable discretion and reasonably construing the
definitions and other terms of this Replacement Capital Covenant, (i) entered
into by a company that at the time it enters into such replacement capital
covenant is a reporting company under the Exchange Act and (ii) that restricts
the related issuer from redeeming or purchasing identified securities except
from the applicable percentage of the proceeds of specified replacement capital
securities that have terms and provisions at the time of redemption or purchase
that are as or more equity-like than the securities then being redeemed or
purchased, raised within 180 days prior to the applicable redemption or purchase
date.
"PERMITTED REMEDIES" means, with respect to any securities, one or more of
the following remedies:
(a) rights in favor of the holders of such securities permitting such
holders to elect one or more directors of the issuer (including any such rights
required by the listing requirements of any stock or securities exchange on
which such securities may be listed or traded), and
(b) complete or partial prohibitions preventing the issuer from paying
Distributions on or purchasing Common Stock or other securities that rank pari
passu with or junior as to Distributions to such securities for so long as
Distributions on such securities, including unpaid Distributions, remain unpaid.
"PERSON" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
17
"PROSPECTUS" has the meaning specified in Recital B.
"QUALIFYING CAPITAL SECURITIES" means securities (other than Common Stock,
Qualifying Warrants, Mandatorily Convertible Preferred Stock and Debt
Exchangeable for Common Equity) that, in the determination of the Corporation's
Board of Directors reasonably construing the definitions and other terms of this
Replacement Capital Covenant, meet one of the following criteria:
(a) in connection with any repayment, redemption or purchase of Debentures
prior to March 15, 2017:
(i) securities issued by the Corporation or its Subsidiaries that
(A) rank pari passu with or junior to the Debentures upon the liquidation,
dissolution or winding up of the Corporation, (B) have no maturity or a
maturity of at least 60 years and (C) either (x) are subject to a
replacement capital covenant substantially similar to this Replacement
Capital Covenant or an Other Qualifying Capital Replacement Covenant and
have either a No Payment Provision or are Non-Cumulative or (y) have a
Mandatory Trigger Provision and are subject to Intent-Based Replacement
Disclosure and have either an Optional Deferral Provision or a No Payment
Provision; or
(ii) preferred stock issued by the Corporation or its Subsidiaries
that (A) is Non-Cumulative, (B) has no prepayment obligation on the part
of the issuer thereof, whether at the election of the holders or
otherwise, (C) has no maturity or a maturity of at least 60 years and (D)
either (x) is subject to a replacement capital covenant substantially
similar to this Replacement Capital Covenant or an Other Qualifying
Capital Replacement Covenant or (y) has a Mandatory Trigger Provision and
is subject to Intent-Based Replacement Disclosure; or
(iii) securities issued by the Corporation or its Subsidiaries that
(A) rank pari passu or junior to the Debentures, (B) have no maturity or a
maturity of at least 40 years, (C) are subject to a replacement capital
covenant substantially similar to this Replacement Capital Covenant or an
Other Qualifying Capital Replacement Covenant, (D) have an Optional
Deferral Provision and (E) have a Mandatory Trigger Provision; or
(b) in connection with any repayment, redemption or purchase of Debentures
at any time on or after March 15, 2017 but prior to March 15, 2037:
(i) all securities described under clause (a) of this definition;
(ii) securities issued by the Corporation or its Subsidiaries that
(A) rank pari passu with or junior to the Debentures upon a liquidation,
dissolution or winding up of the Corporation, (B) have no maturity or a
maturity of at least 60 years, (C) are subject to a replacement capital
18
covenant substantially similar to this Replacement Capital Covenant or an
Other Qualifying Capital Replacement Covenant and (D) have an Optional
Deferral Provision;
(iii) securities issued by the Corporation or its Subsidiaries that
(A) rank pari passu with or junior to the Debentures upon a liquidation,
dissolution or winding up of the Corporation, (B) are Non-Cumulative or
have a No Payment Provision, (C) have no maturity or a maturity of at
least 60 years and (D) are subject to Intent-Based Replacement Disclosure;
(iv) securities issued by the Corporation or its Subsidiaries that
(A) rank pari passu with or junior to the Debentures upon a liquidation,
dissolution or winding up of the Corporation, (B) are Non-Cumulative or
have a No Payment Provision, (C) have no maturity or a maturity of at
least 40 years and (D) are subject to a replacement capital covenant
substantially similar to this Replacement Capital Covenant or an Other
Qualifying Capital Replacement Covenant;
(v) securities issued by the Corporation or its Subsidiaries that
(A) rank pari passu with or junior to the Debentures upon a liquidation,
dissolution or winding up of the Corporation, (B) have an Optional
Deferral Provision, (C) have a Mandatory Trigger Provision and (D) have no
maturity or a maturity of at least 60 years;
(vi) cumulative preferred stock issued by the Corporation or its
Subsidiaries that (A) has no prepayment obligation on the part of the
issuer thereof, whether at the election of the holders or otherwise, and
(B) (x) has no maturity or a maturity of at least 60 years and (y) is
subject to a replacement capital covenant substantially similar to this
Replacement Capital Covenant or an Other Qualifying Capital Replacement
Covenant; or
(vii) other securities issued by the Corporation or its Subsidiaries
that (A) rank upon a liquidation, dissolution or winding-up of the
Corporation either (x) pari passu with or junior to the Debentures or (y)
pari passu with the claims of the Corporation's trade creditors and junior
to all of the Corporation's long-term indebtedness for money borrowed
(other than the Corporation's long-term indebtedness for money borrowed
from time to time outstanding that by its terms ranks pari passu with such
securities on a liquidation, dissolution or winding-up of the
Corporation), (B) have an Optional Deferral Provision or a No Payment
Provision and (C) have a Mandatory Trigger Provision and (D) either (x)
have no maturity or a maturity of at least 40 years and Intent-Based
Replacement Disclosure or (y) have no maturity or a maturity of at least
30 years and are subject to a replacement capital covenant substantially
similar to this Replacement Capital Covenant or an Other Qualifying
Capital Replacement Covenant; or
19
(c) in connection with any repayment, redemption or purchase of Debentures
at any time on or after March 15, 2037:
(i) securities described under clause (b) of this definition;
(ii) preferred stock issued by the Corporation that (A) (x) has no
maturity or a maturity of at least 60 years and (y) is subject to
Intent-Based Replacement Disclosure and (B) is Non-Cumulative;
(iii) securities issued by the Corporation or its Subsidiaries that
(A) rank pari passu with or junior to the Debentures upon a liquidation,
dissolution or winding up of the Corporation, (B) either (x) have no
maturity or a maturity of at least 40 years and are subject to
Intent-Based Replacement Disclosure or (y) have no maturity or a maturity
at least 30 years and are subject to a replacement capital covenant
substantially similar to this Replacement Capital Covenant or an Other
Qualifying Capital Replacement Covenant and (C) are Non-Cumulative;
(iv) securities issued by the Corporation or its Subsidiaries that
(A) rank pari passu with or junior to the Debentures upon a liquidation,
dissolution or winding up of the Corporation, (B) have an Optional
Deferral Provision, (C) have a Mandatory Trigger Provision, (D) have no
maturity or a maturity at least 30 years and (E) are subject to
Intent-Based Replacement Disclosure; or
(v) cumulative preferred stock issued by the Corporation or its
Subsidiaries that either (A) has no maturity or a maturity of at least 60
years and is subject to Intent-Based Replacement Disclosure or (B) has a
maturity of at least 40 years and is subject to a replacement capital
covenant substantially similar to this Replacement Capital Covenant or an
Other Qualifying Capital Replacement Covenant.
"QUALIFYING NON-CUMULATIVE PERPETUAL PREFERRED STOCK" means non-cumulative
preferred stock of the Corporation that ranks pari passu with or junior to all
other preferred stock of the Corporation, is perpetual and (a) is subject to a
replacement capital covenant substantially similar to this Replacement Capital
Covenant or an Other Qualifying Capital Replacement Covenant, provided that the
applicable percentage as defined in such covenant is defined as 1 divided by
75%, and that the qualifying capital securities permitted under such covenant
are limited to those as described under clause (a) of the definition of
Qualifying Capital Securities in this Replacement Capital Covenant or (b) is
subject to both (i) mandatory suspension of dividends in the event the
Corporation breaches certain financial metrics specified within the offering
documents, and (ii) Intent-Based Replacement Disclosure. Additionally, in both
(a) and (b) the transaction documents shall provide for no remedies as a
consequence of non-payment of Distributions other than Permitted Remedies.
20
"QUALIFYING WARRANTS" means any net share settled warrants to purchase the
Corporation's Common Stock that (1) have an exercise price greater than the
current stock market price, determined as specified in the instrument governing
such warrants, of the Corporation's Common Stock, and (2) the Corporation is not
entitled to redeem for cash and the holders of which are not entitled to require
the Corporation to purchase for cash in any circumstances.
"REDESIGNATION DATE" means, as to the Covered Debt in effect at any time,
the earliest of (a) the date that is two years prior to the final maturity date
of such Covered Debt, (b) if the Corporation elects to redeem or repay, or the
Corporation or a Subsidiary of the Corporation elects to purchase, such Covered
Debt either in whole or in part with the consequence that after giving effect to
such redemption, repayment or purchase the outstanding principal amount of such
Covered Debt is less than $100,000,000, the applicable redemption, repayment or
purchase date and (c) if such Covered Debt is not Eligible Subordinated Debt,
the date on which the Corporation issues long-term indebtedness for money
borrowed that is Eligible Subordinated Debt.
"REPLACEMENT CAPITAL COVENANT" has the meaning specified in the
introduction to this instrument.
"REPLACEMENT CAPITAL SECURITIES" means,
(a) Common Stock and Qualifying Warrants;
(b) Mandatorily Convertible Preferred Stock;
(c) Debt Exchangeable for Preferred Equity;
(d) Debt Exchangeable for Common Equity; and
(e) Qualifying Capital Securities.
"SCHEDULED MATURITY" means March 15, 2037.
"SUBSIDIARY" means, at any time, any Person the shares of stock or other
ownership interests of which having ordinary voting power to elect a majority of
the board of directors or other managers of such Person are at the time owned,
or the management or policies of which are otherwise at the time controlled,
directly or indirectly through one or more intermediaries (including other
Subsidiaries) or both, by another Person.
"SUPPLEMENTAL INDENTURE" means the First Supplemental Indenture, dated as
of March 12, 2007, between the Corporation and The Bank of New York, as trustee.
"TERMINATION DATE" has the meaning specified in Section 4(a).
21
