REPLACEMENT CAPITAL COVENANT, dated as of March 15, 2007 (this
"Replacement Capital Covenant"), by American International Group, Inc., a
Delaware corporation (together with its successors and assigns, including any
entity surviving or resulting from a merger, consolidation, binding share
exchange, sale, lease or transfer of all or substantially all of the assets or
other business combination, 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 (Euro)1,000,000,000
aggregate principal amount of its Series A-3 Junior Subordinated Debentures due
March 15, 2067 (the "Debentures").
B. This Replacement Capital Covenant is the "Replacement Capital
Covenant" referred to in the Prospectus Supplement, dated March 8, 2007 (the
"Prospectus Supplement"), relating to the Debentures.
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 meanings set forth in
Schedule I hereto.
SECTION 2. Limitations on Redemption and Repurchase of Debentures. The
Corporation hereby promises and covenants to and for the benefit of each Covered
Debtholder that the Corporation shall not repay, redeem, defease or purchase,
and no Subsidiary of the Corporation shall purchase, all or any part of the
Debentures prior to March 15, 2047, except to the extent that the principal
amount repaid or defeased or the applicable redemption or purchase price does
not exceed the sum of the following amounts:
(i) the Applicable Percentage of the aggregate amount of (a) the net
cash proceeds the Corporation and its Subsidiaries have received from the
sale of Common Stock and rights to acquire Common Stock to Persons other
than the Corporation and its Subsidiaries, (b) the Market Value of any
Common Stock (or rights to acquire Common Stock) the Corporation and its
Subsidiaries have delivered as consideration for property or assets in an
arms length transaction and (c) the Market Value of any Common Stock that
the Corporation and its Subsidiaries have issued 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, in each case
since the most recent Measurement Date (without double counting proceeds
received in any prior Measurement Period); plus
(ii) the Applicable Percentage of the aggregate amount of net cash
proceeds the Corporation and its Subsidiaries have received within a
Measurement Period (without double counting proceeds received in any prior
Measurement Period) from the sale of Mandatorily Convertible Preferred
Stock and Debt Exchangeable for Equity to Persons other than the
Corporation and its Subsidiaries; plus
(iii) the Applicable Percentage of the aggregate amount of net cash
proceeds that the Corporation and its Subsidiaries have received within a
Measurement Period (without double counting proceeds received in any prior
Measurement Period) from the sale of Qualifying Capital Securities to
persons other than the Corporation and its Subsidiaries;
provided that the limitations in this Section 2 shall not restrict the
repayment, redemption or other acquisition of any Debentures that the
Corporation has previously defeased in accordance with this Replacement Capital
Covenant.
SECTION 3. Covered Debt. (a) The Corporation represents and warrants
that the Initial Covered Debt is Eligible Senior 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
unsecured, long-term indebtedness for money borrowed that is Eligible Debt;
(ii) if only one series of the Corporation's then outstanding
unsecured, 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
unsecured, long-term indebtedness for money borrowed that is Eligible Debt,
then the Corporation shall identify the series that has the latest
occurring 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 clause (ii) or
(iii) above 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 unsecured, 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
Securities Exchange Act including or incorporating by
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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 Capital Covenant or as soon as practicable
after the date hereof, it shall (x) 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 (y) file a copy of this Replacement Capital Covenant
with the Commission as an exhibit to a Current Report on Form 8-K under the
Securities Exchange Act; (ii) so long as the Corporation is a reporting company
under the Securities Exchange Act, the Corporation will include in each Annual
Report on Form 10-K filed with the Commission under the Securities 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 Form 10-K is filed with the Commission; (iii) if a series of the
Corporation's long-term indebtedness for money borrowed (1) becomes Covered Debt
or (2) ceases to be Covered Debt, the Corporation will 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,
which must include or and incorporate 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 Securities Exchange Act, the Corporation
will post on its website the information otherwise required to be included in
Securities 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 will provide such Holder with an executed 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 date (the "Termination Date") to occur
of (i) Xxxxx 00, 0000, (xx) the date, if any, on which the Holders of a majority
of the then outstanding 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 and (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). Moreover,
if an event of default under the Supplemental Indenture resulting in an
acceleration of the Debentures occurs, this Replacement Capital Covenant shall,
without any further action, immediately terminate upon such acceleration. 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 a majority of the then outstanding 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 the
Holders of the then-effective series of Covered Debt) if any of the following
apply (it being understood that any such amendment or supplement may fall into
one or more of the following): (i) the effect of such amendment or supplement is
solely to impose additional restrictions on, or eliminate certain of, 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
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other instrument with respect to such Covered Debt a written certificate to that
effect, (ii) such amendment or supplement is not materially adverse to the
rights of the Covered Debtholders hereunder 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 materially
adverse to the Covered Debtholders, or (iii) such amendment or supplement
eliminates Common Stock and/or Mandatorily Convertible Preferred Stock as
Replacement Capital Securities if, in the case of this clause (iii), the
Corporation has been advised in writing by a nationally recognized independent
accounting firm that there is more than an insubstantial risk that the failure
to do so would result in a reduction in the Corporation's earnings per share as
calculated for financial reporting purposes.
(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 by reason of such series of long-term
indebtedness for money borrowed no longer being Covered Debt). Other than the
Covered Debtholders as provided in the previous sentence, no other Person shall
have any rights under this Replacement Capital Covenant or be deemed a third
party beneficiary of this Replacement Capital Covenant. In particular, no holder
of the Debentures is a third party beneficiary of this Replacement Capital
Covenant, it being understood that such holders may have rights under the
Subordinated Indenture.
(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) or (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), and in each case to the 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:
American International Group, Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Secretary
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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.
AMERICAN INTERNATIONAL GROUP, INC.
By: /s/ Xxxxxx X. Gender
------------------------------------
Name: Xxxxxx X. Gender
----------------------------------
Title: Vice President and Treasurer
---------------------------------
ANNEX I
DEFINITIONS
"Alternative Payment Mechanism" means, with respect to any securities
or combination of securities (together in this definition, "securities"),
provisions in the related transaction documents that require 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) that the Corporation has received during the 180 days prior to
the related Distribution Date from the issuance of APM Qualifying
Securities to persons that are not Subsidiaries of the Corporation up to
the Preferred Cap in the case of APM Qualifying Securities that are
Qualifying Non-Cumulative 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, unless otherwise required at
the time by any applicable regulatory authority or if an event of default
has occurred and is continuing;
(c) if deferral of Distributions continues for more than one year,
require the Corporation not to redeem or repurchase any of its securities
ranking junior to or pari passu with any APM Qualifying Securities the
proceeds of which were used to settle deferred interest during the relevant
deferral period until at least one year after all deferred Distributions
have been paid, except where non-payment would cause the Corporation to
breach the terms of the relevant instrument;
(d) 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 rights to purchase Common Stock, during the first five years
of any deferral period (x) an amount from the issuance thereof
pursuant to the Alternative Payment Mechanism equal to 2% of the
Corporation's most recently published market capitalization or (y) a
number of shares of Common Stock or rights to purchase a number of
shares of Common Stock not in excess of 2% of the number of shares of
outstanding Common Stock set forth in the Corporation's most recently
published financial statements (the amount in clause (x) or (y) is
referred to as the "Common Cap"); and
(ii) in the case of APM Qualifying Securities that are Qualifying
Non-Cumulative Perpetual Preferred Stock, an amount from the issuance
thereof pursuant to the related Alternative Payment Mechanism
(including at any point in time from all prior issuances thereof
pursuant to such Alternative Payment Mechanism) equal to 25% of the
liquidation or principal amount of the securities that are the subject
of the related Alternative Payment Mechanism (the "Preferred Cap");
(e) permit the Corporation, at its option, to impose a limitation on
the issuance of APM Qualifying Securities consisting of Common Stock and
rights to purchase Common Stock, in each case to a maximum issuance cap to
be set at the Corporation's discretion and otherwise substantially similar
to the "maximum share number" and "maximum warrant number", respectively,
each as defined in the Prospectus Supplement, provided that such maximum
issuance cap will be subject to the Corporation's agreement to use
commercially reasonable efforts to increase the maximum issuance cap when
reached and (i) simultaneously satisfy its future fixed or contingent
obligations under other securities and derivative instruments that provide
for settlement or payment in shares of Common Stock or (ii) if the
Corporation cannot increase the maximum issuance cap 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;
(f) in the case of securities other than Non-Cumulative Perpetual
Preferred Stock, include a Bankruptcy Claim Limitation Provision; and
(g) permit the Corporation, at its option, to provide that if the
Corporation is involved in a merger, consolidation, amalgamation, binding
share exchange or conveyance, transfer or lease of assets substantially as
an entirety to any other person or a similar transaction (a "business
combination") where immediately after the consummation of the business
combination more than 50% of the surviving or resulting entity's voting
stock is owned by the shareholders of the other party to the business
combination or continuing directors cease for any reason to constitute a
majority of the directors of the surviving or resulting entity, 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. "Continuing director" means a
director who was a director of the Corporation at the time the definitive
agreement relating to the transaction was approved by the Corporation's
board of directors;
provided (and it being understood) that:
(1) 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;
(2) 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, the Preferred Cap, and any maximum
issuance cap referred to above, as applicable; and
(3) 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 up to the Common Cap, the Preferred Cap
and any maximum issuance cap referred to above, as applicable, in
proportion to the total amounts that are due on such securities.
I-2
"APM Qualifying Securities" means, with respect to an Alternative
Payment Mechanism, one or more of the following (as designated in the
transaction documents for the Qualifying Capital Securities that include an
Alternative Payment Mechanism):
(i) Common Stock; or
(ii) rights to purchase Common Stock; and
(iii) Qualifying Non-Cumulative Preferred Stock;
provided that if the APM Qualifying Securities for any Alternative Payment
Mechanism include both Common Stock and rights to purchase Common Stock, such
Alternative Payment Mechanism may permit, but need not require, the Corporation
to issue rights to purchase Common Stock.
"Applicable Percentage" means:
(i) in the case of any Common Stock or rights to acquire Common Stock,
a percentage equivalent of 1 divided by (a) 75% with respect to any
repayment, redemption or purchase prior to Xxxxx 00, 0000, (x) 50% with
respect to any repayment, redemption or purchase on or after March 15, 2017
and prior to March 15, 2037 and (c) 25% with respect to any repayment,
redemption or purchase on or after March 15, 2037 (for example, prior to
March 15, 2017, the Applicable Percentage in the case of such securities
will be 133.33%);
(ii) in the case of any Mandatorily Convertible Preferred Stock, a
percentage equivalent of 1 divided by (a) 75% with respect to any
repayment, redemption or purchase prior to March , 2017, (b) 50% with
respect to any repayment, redemption or purchase on or after March 15, 2017
and prior to March 15, 2037 and (c) 25% with respect to any repayment,
redemption or purchase on or after March 15, 2037 (for example, prior to
March 15, 2017, the Applicable Percentage in the case of such securities
will be 133.33%);
(iii) in the case of any Debt Exchangeable for Equity or any
Qualifying Capital Securities described in clause (i) of the definition of
that term, a percentage equivalent of 0.75 divided by (a) 75% with respect
to any repayment, redemption or purchase prior to Xxxxx 00, 0000, (x) 50%
with respect to any repayment, redemption or purchase on or after March 15,
2017 and prior to March 15, 2037 and (c) 25% with respect to any repayment,
redemption or purchase on or after March 15, 2037 (for example, on or after
March 15, 2037 and prior to March 15, 2037, the Applicable Percentage in
the case of such securities will be 150%);
(iv) in the case of any Qualifying Capital Securities described in
clause (ii) of the definition of that term, a percentage equivalent of 0.50
divided by (a) 50% with respect to any repayment, redemption or purchase on
or after March 15, 2017 and prior to March 15, 2037 and (b) 25% with
respect to any repayment, redemption or purchase on or after March 15, 2037
(for example, after March 15, 2037, the Applicable Percentage in the case
of such securities will be 200%); and
(v) in the case of any Qualifying Capital Securities described in
clause (iii) of the definition of that term, 100%.
"Assurance Agreement" means the Assurance Agreement, by the
Corporation in favor of eligible employees dated as of June 27, 2005, relating
to certain obligations of Starr International
I-3
Company, Inc. (as such agreement may be amended, supplemented, extended,
modified or replaced from time to time).
"Bankruptcy Claim Limitation Provision" means, with respect to any
securities or combination of securities that have an Alternative Payment
Mechanism or a Mandatory Trigger Provision (together in this definition,
"securities"), provisions that, upon any liquidation, dissolution, winding up or
reorganization or in connection with any insolvency, receivership or proceeding
under any bankruptcy law with respect to the issuer, limit the claim of the
holders of such securities to Distributions that accumulate during (A) any
deferral period, in the case of securities that have an Alternative Payment
Mechanism or (B) any 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, in the case of securities having a Mandatory Trigger
Provision, to:
(i) in the case of securities having an Alternative Payment Mechanism
or Mandatory Trigger Provision with respect to which the APM Qualifying
Securities do not include Qualifying Non-Cumulative Preferred Stock, 25% of
the stated or principal amount of such securities then outstanding; and
(ii) in the case of any other securities, the sum of (x) the amount of
accumulated and unpaid Distributions (including compounded amounts) that
relate to the earliest two years of the portion of the deferral period for
which Distributions have not been paid and (y) an amount equal to the
excess, if any, of the Preferred Cap over the aggregate amount of net
proceeds from the sale of Qualifying Non-Cumulative Preferred Stock that
the issuer has applied to pay such Distributions pursuant to the
Alternative Payment Mechanism or the Mandatory Trigger Provision, provided
that the holders of such securities are deemed to agree that, to the extent
the remaining claim exceeds the amount set forth in subclause (x), the
amount they receive in respect of such excess shall not exceed the amount
they would have received had such claim ranked pari passu with the
interests of the holders, if any, of Qualifying Non-Cumulative Preferred
Stock.
"Business Day" means each day other than (a) a Saturday or Sunday or
(b) a day on which banking institutions in New York, New York are authorized or
required by law or executive order to remain closed or, 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 U.S. dollars are transacted in the London interbank
market.
"Commission" means the United States Securities and Exchange
Commission or any successor agency.
"Common Cap" has the meaning specified in the definition of
Alternative Payment Mechanism.
"Common Stock" means any equity securities (including equity
securities held as treasury shares) or rights to acquire equity securities of
the Corporation that have no preference in the payment of dividends or amounts
payable upon the liquidation, dissolution or winding up of the Corporation
(including a security that tracks the performance of, or relates to the results
of, a business, unit or division of the Corporation), and any securities that
have no preference in the payment of dividends or amounts payable upon
liquidation, dissolution or winding up and are issued in exchange therefor in
connection with a merger, consolidation, binding share exchange, business
combination, recapitalization or other similar event.
I-4
"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, provided that, except as provided in Section 5(b), a Person who has sold
all of its right, title and interest in Covered Debt shall cease to be a Covered
Debtholder at the time of such sale if, at such time, the Corporation has not
breached or repudiated, or threatened to breach or repudiate, its obligations
hereunder.
"Debentures" has the meaning specified in Recital A.
"Debt Exchangeable for Equity" means a security or combination of
securities (together in this definition, "securities") that:
(i) gives the holder a beneficial interest in (a) debt securities of
the Corporation that include a provision requiring it 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 two years after the Corporation first defers distributions on such
securities and that are the most junior subordinated debt of the
Corporation (or rank pari passu with the most junior subordinated debt of
the Corporation) and (b) a fractional interest in a stock purchase contract
for Qualifying Non-Cumulative Preferred Stock;
(ii) provides that the holders 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 holders' direct or indirect obligation to purchase
stock pursuant to such stock purchase contracts;
(iii) includes a remarketing feature pursuant to which such debt
securities of the Corporation are remarketed to new holders commencing
within five years from the date of issuance of the security or earlier in
the event of an early settlement event based on (a) the capital ratios of
the Corporation or (b) the dissolution of the Corporation;
(iv) provides for the proceeds raised in the remarketing to be used to
purchase Qualifying Non-Cumulative Preferred Stock 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 debt
securities of the Corporation, provides that the stock purchase contracts
will be settled by the Corporation exercising its remedies as a secured
party with respect to such debt securities or other collateral directly or
indirectly pledged by holders in the Debt Exchangeable for Equity;
I-5
(v) includes a Qualifying Replacement Capital Covenant, provided that
such replacement capital covenant will apply to such securities and to the
Qualifying Non-Cumulative Preferred Stock and will not include Debt
Exchangeable for Equity as a replacement security for such securities or
the Qualifying Non-Cumulative Preferred Stock; and
(vi) after the issuance of such Qualifying Non-Cumulative Preferred
Stock, provides the holder of the security with a beneficial interest in
such Qualifying Non-Cumulative Preferred Stock.
"Distribution Date" means, as to any securities or combination of
securities, the dates on which 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 a Distribution Date for such
securities to but not including the next succeeding Distribution Date for such
securities.
"Distributions" means, as to a security or combination of securities,
dividends, interest or other income distributions to the holders or beneficial
owners thereof that are not Subsidiaries of the Corporation.
"Eligible Debt" means, at any time, 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 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
unsecured indebtedness for money borrowed, (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 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 $250,000,000, 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 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
unsecured 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
$250,000,000, 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
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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.
"Employee Benefit Plan" means any written or oral purchase, savings,
option, bonus, appreciation, profit sharing, thrift, incentive, pension or
similar plan or arrangement or any written or oral compensatory contract or
arrangement.
"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.
"Initial Covered Debt" means the Corporation's 6.25% Notes due 2036,
CUSIP No. 000000XX0.
"Intent-Based Replacement Disclosure" means, as to any security or
combination of 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 prior to or contemporaneously with the issuance of such securities, that
the issuer will redeem or repurchase such securities only with the proceeds of
replacement capital securities that have terms and provisions at the time of
redemption or repurchase that are as or more equity-like than the securities
then being redeemed or repurchased, raised within 180 days prior to the
applicable redemption or repurchase date.
"Mandatorily Convertible Preferred Stock" means cumulative 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
the preferred stock convert into Common Stock of the Corporation within three
years from the date of its issuance at a conversion ratio within a range
established at the time of issuance of the preferred stock.
"Mandatory Trigger Provision" means, as to any security or combination
of securities, provisions in the terms thereof or of the related transaction
agreements that:
(i) 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 issuance and sale of
APM Qualifying Securities, within 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 at least equal the amount of unpaid Distributions on such securities
and any pari passu 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 on those
securities and any pari passu securities, provided that (A) if the
Mandatory Trigger Provision does not require such issuance and sale within
one year of such failure, the amount of common stock or rights to acquire
common stock the net proceeds of which the issuer must apply to pay such
Distributions pursuant to such provision may not exceed the Common Cap, and
(B) the amount of Qualifying Non-Cumulative Preferred Stock the net
proceeds of which the issuer may apply to pay such Distributions pursuant
to such provision may not exceed the Preferred Cap;
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(ii) if the provisions described in clause (i) do not require such
issuance and sale within one year of such failure, prohibit the Corporation
from repurchasing any of its securities ranking junior to or pari passu
with any APM qualifying securities the proceeds of which were used to
settle deferred interest during the relevant deferral period prior to the
date six months after the issuer applies the net proceeds of the sales
described in clause (i) to pay such unpaid Distributions in full, except
where non-payment would cause the Corporation to breach the terms of the
relevant instrument; and
(iii) other than in the case of non-cumulative perpetual preferred
stock, include a Bankruptcy Claim Limitation Provision.
No remedy other than Permitted Remedies will 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 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, (i) in the case of Common Stock,
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 and (ii) in the case
of rights to acquire Common Stock, a value determined by the Corporation's Board
of Directors (or a duly authorized committee thereof) in good faith.
"Measurement Date" means with respect to any repayment, redemption,
defeasance or purchase of the Debentures (i) on or prior to March 15, 2037, the
date 180 days prior to delivery of notice of such repayment, defeasance or
redemption or the date of such purchase and (ii) after March 15, 2037, the date
90 days prior to the date of such repayment, redemption, defeasance or purchase,
except that, if during the 90 days (or any shorter period) preceding the date
that is 90 days prior to the date of such repayment, redemption, defeasance or
purchase, net cash proceeds described above were received but no repayment,
redemption, defeasance or purchase was made in connection therewith, the
measurement date shall be the date upon which such 90-day (or shorter) period
prior to the 90-day period prior to the date such repayment, redemption,
defeasance or purchase began.
"Measurement Period" with respect to any notice date or purchase date
means the period (i) beginning on the Measurement Date with respect to such
notice date or purchase date and (ii) ending on such notice date or purchase
date. Measurement Periods cannot run concurrently.
"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. Securities that
include an Alternative Payment Mechanism shall also be deemed to be
Non-Cumulative, other than for
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the purposes of the definitions of APM Qualifying Securities and Qualifying
Non-Cumulative Preferred Stock.
"NRSRO" means a nationally recognized statistical rating organization
within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act
or any successor provision or, upon adoption, any rule for the registration of
nationally recognized statistical rating organizations adopted by the Securities
and Exchange Commission.
"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 5 years of any
deferral period and need not include a Common Cap or a 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.
"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 on the issuer paying Distributions on or repurchasing 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, corporation or other entity,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Cap" has the meaning specified in the definition of
Alternative Payment Mechanism.
"Prospectus Supplement" has the meaning specified in Recital B.
"Qualifying Capital Securities" means securities (other than Common
Stock, rights to acquire Common Stock or securities exchangeable for or
convertible into Common Stock) that, in the determination of the Corporation's
Board of Directors (or a duly authorized committee thereof) reasonably
construing the definitions and other terms of this Replacement Capital Covenant,
meet one of the following criteria:
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(i) in connection with any repayment, redemption or purchase of
Debentures prior to March 15, 2017:
(A) junior subordinated debt securities and guarantees issued by
the Corporation or its Subsidiaries with respect to trust preferred
securities if the junior subordinated debt securities and guarantees
(1) rank pari passu with or junior to the Debentures upon the
liquidation, dissolution or winding-up of the Corporation, (2) are
Non-Cumulative, (3) have no maturity or a maturity of at least 60
years and (4) are subject to a Qualifying Replacement Capital
Covenant;
(B) securities issued by the Corporation or its Subsidiaries that
(1) rank pari passu with or junior to the Debentures upon the
liquidation, dissolution or winding-up of the Corporation, (2) have no
maturity or a maturity of at least 60 years and (3)(i) are
Non-Cumulative and are subject to a Qualifying Replacement Capital
Covenant or (ii) have a Mandatory Trigger Provision and an Optional
Deferral Provision and are subject to Intent-Based Replacement
Disclosure; or
(C) securities issued by the Corporation or its Subsidiaries that
(1) rank pari passu with or junior to the Debentures, (2) have no
maturity or a maturity of at least 40 years, (3) are subject to a
Qualifying Replacement Capital Covenant and (4) have a Mandatory
Trigger Provision and an Optional Deferral Provision; or
(ii) in connection with any repayment, redemption or purchase of
Debentures on or after March 15, 2017 and prior to March 15, 2037:
(A) all types of securities described that would be Qualifying
Capital Securities on or prior to March 15, 2017;
(B) securities issued by the Corporation or its Subsidiaries that
(1) rank pari passu with or junior to the Debentures upon the
liquidation, dissolution or winding-up of the Corporation, (2) have no
maturity or a maturity of at least 60 years, (3) are subject to a
Qualifying Replacement Capital Covenant and (4) have an Optional
Deferral Provision;
(C) securities issued by the Corporation or its Subsidiaries that
(1) rank pari passu with or junior to the Debentures upon a
liquidation, dissolution or winding up of the Corporation, (2) are
Non-Cumulative, (3) have no maturity or a maturity of at least 60
years and (4) are subject to Intent-Based Replacement Disclosure; or
(D) securities issued by the Corporation or its Subsidiaries that
(1) rank pari passu with or junior to the Debentures upon the
liquidation, dissolution or winding-up of the Corporation, (2) have no
maturity or a maturity of at least 40 years and (3) (a) are
Non-Cumulative and subject to a Qualifying Replacement Capital
Covenant or (b) have a Mandatory Trigger Provision and an Optional
Deferral Provision and are subject to Intent-Based Replacement
Disclosure;
(E) securities issued by the Corporation or its Subsidiaries that
(1) rank junior to all of the senior and subordinated debt of the
Corporation other than the Debentures and the pari passu securities,
(2) have a Mandatory Trigger Provision and an
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Optional Deferral Provision and are subject to Intent-Based
Replacement Disclosure and (3) have no maturity or a maturity of at
least 60 years;
(F) cumulative preferred stock issued by the Corporation or its
Subsidiaries that (1) has no prepayment obligation on the part of the
issuer thereof, whether at the election of the holders or otherwise,
and (2) (a) has no maturity or a maturity of at least 60 years and (b)
is subject to a Qualifying Replacement Capital Covenant; or
(G) other securities issued by the Corporation or its
Subsidiaries that (1) rank upon a liquidation, dissolution or
winding-up of the Corporation (a) pari passu with or junior to the
Debentures or (b) 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); and (2)
either (x) have no maturity or a maturity of at least 40 years and
have a Mandatory Trigger Provision and an Optional Deferral Provision
and are subject to Intent-Based Replacement Disclosure or (y) have no
maturity or a maturity of at least 25 years and are subject to a
Qualifying Replacement Capital Covenant and have a Mandatory Trigger
Provision and an Optional Deferral Provision; or
(iii) in connection with any repayment, redemption or purchase of
Debentures at any time after March 15, 2037:
(A) all of the types of securities that would be Qualifying
Capital Securities prior to March 15, 2037;
(B) securities issued by the Corporation or its Subsidiaries that
(1) rank pari passu with or junior to the Debentures upon a
liquidation, dissolution or winding up, (2) either (a) have no
maturity or a maturity of at least 60 years and have Intent-Based
Replacement Disclosure or (b) have no maturity or a maturity of at
least 30 years and are subject to a Qualifying Replacement Capital
Covenant and (3) have an Optional Deferral Provision;
(C) securities issued by the Corporation or its Subsidiaries that
(1) rank junior to all of the senior and subordinated debt of the
Corporation other than the Debentures and any other pari passu
securities, (2) have a Mandatory Trigger Provision and an Optional
Deferral Provision and are subject to Intent-Based Replacement
Disclosure and (3) have no maturity or a maturity of at least 30
years; or
(D) preferred stock issued by the Corporation or its Subsidiaries
that either (1) has no maturity or a maturity of at least 60 years and
Intent-Based Replacement Disclosure or (2) has a maturity of at least
40 years and is subject to a Qualifying Replacement Capital Covenant.
"Qualifying Non-Cumulative Preferred Stock" means non-cumulative
perpetual preferred stock issued by the Corporation or its Subsidiaries that (a)
ranks pari passu with or junior to all other outstanding preferred stock of the
issuer other than a preferred stock that is issued or issuable pursuant to a
stockholders' rights plan or similar plan or arrangement, and (b) contains no
remedies other
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than Permitted Remedies and either (i) is subject to Intent-Based Replacement
Disclosure and has a provision that prohibits the Corporation from making any
Distributions thereon upon the Corporation's failure to satisfy one or more
financial tests set forth therein or (ii) is subject to a replacement capital
covenant substantially similar to this Replacement Capital Covenant.
"Qualifying Replacement Capital Covenant" means (a) a replacement
capital covenant substantially similar to this Replacement Capital Covenant
applicable to the Debentures or (b) a replacement capital covenant, as
identified by the Corporation's Board of Directors, or a duly authorized
committee thereof, 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 Securities
Exchange Act and (ii) that restricts the related issuer from redeeming or
purchasing identified securities except out of the proceeds of specified
Replacement Capital Securities that have terms and provisions at the
time of redemption or repurchase that are as or more equity-like than the
securities then being redeemed or repurchased, raised within 180 days prior to
the applicable redemption or repurchase date.
"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 the
Corporation or a Subsidiary of the Corporation elects to repurchase, such
Covered Debt either in whole or in part with the consequence that after giving
effect to such redemption or repurchase the outstanding principal amount of such
Covered Debt is less than $100,000,000, the applicable redemption or repurchase
date and (c) if such Covered Debt is not Eligible Subordinated Debt of the
Corporation, 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 rights to acquire Common Stock;
(b) Mandatorily Convertible Preferred Stock;
(c) Debt Exchangeable for Equity; and
(d) Qualifying Capital Securities.
"Rights to acquire Common Stock" includes any right to acquire Common
Stock, including any right to acquire Common Stock pursuant to a stock purchase
plan, Employee Benefit Plan or the Assurance Agreements.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
"Subordinated Indenture" means the Junior Subordinated Debt Indenture,
dated as of March 13, 2007, between the Corporation and The Bank of New York, as
trustee, as amended and supplemented by the Supplemental Indenture and as
further amended and supplemented from time to time in accordance with its terms.
"Supplemental Indenture" means the First Supplemental Indenture, dated
as of March 15, 2007, between the Corporation and The Bank of New York, as
trustee.
"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, directly or indirectly through one or more intermediaries (including
other Subsidiaries) or both, by another Person.
"Termination Date" has the meaning specified in Section 4(a).
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