424(b)(2)
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-141561
This
prospectus supplement relates to an effective registration
statement under the Securities Act of 1933, but it is not
complete and may be changed. This prospectus supplement and the
accompanying prospectus are not an offer to sell these
securities and they are not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
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SUBJECT TO COMPLETION, DATED
MARCH 26, 2007
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus Dated March 26, 2007)
$
The Chubb Corporation
% Directly-Issued Subordinated
Capital Securities
(DISCSsm)
due 2067
The % Directly-Issued Subordinated Capital Securities
(DISCSsm)
due 2067, which are referred to in this prospectus supplement as
the Debentures, are unsecured, subordinated debentures, and will
bear interest from the date they are issued to but
excluding ,
2017 at an annual rate of %, payable semi-annually in
arrears
on
and
of each year, beginning
on ,
2007. From and
including ,
2017, the Debentures will bear interest at an annual rate equal
to three-month LIBOR plus %, payable quarterly in
arrears
on , , ,
and
of each year, beginning
on ,
2017. So long as no event of default with respect to the
Debentures has occurred and is continuing, we have the right, on
one or more occasions, to defer the payment of interest on the
Debentures as described in this prospectus supplement. We will
not be required to settle deferred interest pursuant to the
alternative payment mechanism described in this prospectus
supplement until we have deferred interest for five consecutive
years or, if earlier, upon a payment of current interest during
a deferral period. We may defer interest for up to ten
consecutive years without giving rise to an event of default.
Deferred interest will accumulate additional interest at an
annual rate equal to the annual interest rate then applicable to
the Debentures. In the event of our bankruptcy, holders of the
Debentures may have a limited claim for any outstanding deferred
interest.
The principal amount of the Debentures will become due
on ,
2037 (or if such day is not a business day, the following
business day), which is referred to in this prospectus
supplement as the scheduled maturity date, only to the extent
that we have received sufficient net proceeds from the sale of
certain qualifying capital securities during a
180-day
period ending on a notice date not more than 15 nor less than 10
business days prior to such date. We will use our commercially
reasonable efforts, subject to certain market disruption events,
to sell enough qualifying capital securities to permit repayment
of the Debentures in full on such scheduled maturity date. If
any principal amount of the Debentures is not paid on the
scheduled maturity date, it will remain outstanding and will
continue to bear interest at three-month LIBOR
plus %, and we will continue to use our commercially
reasonable efforts to sell enough qualifying capital securities
to permit repayment of the Debentures in full.
On ,
2067, which is referred to in this prospectus supplement as the
final maturity date (or if such day is not a business day, the
following business day), we must pay any remaining outstanding
principal and interest in full on the Debentures whether or not
we have sold qualifying capital securities.
We may redeem the Debentures in whole or in part at our option,
or in whole but not in part after the occurrence of certain tax
or rating agency events, at the applicable redemption price set
forth in this prospectus supplement.
Investing in the Debentures involves risks. See Risk
Factors beginning on
page S-6
of this prospectus supplement and the Risk Factors
contained in our Annual Report on
Form 10-K
for the year ended December 31, 2006 incorporated by
reference in this prospectus supplement.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities or
determined if this prospectus supplement or the accompanying
prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
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Underwriting
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Proceeds, Before
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Price to
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Discounts
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Expenses, to The
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Public
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and Commissions
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Chubb Corporation
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Per Debenture
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%
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(1)
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%
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%
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Total
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$
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(1)
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$
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$
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(1) |
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Plus interest accrued on the Debentures, if any,
from ,
2007. |
The underwriters expect to deliver the Debentures in book-entry
form only through The Depository Trust Company for the accounts
of its participants, including Clearstream Banking,
société anonyme, Luxembourg
and/or
Euroclear Bank N.V./S.A., on or
about ,
2007.
Joint Book-Running Managers
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Citigroup
Sole Structuring
Advisor
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Credit Suisse
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Lehman Brothers
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Goldman,
Sachs & Co.
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DISCSsm
is a service mark of Citigroup Global Markets Inc. Citigroup
Global Markets Inc. has applied for patent protection for
certain aspects of the
DISCSsm
structure described in this prospectus supplement.
,
2007
TABLE OF
CONTENTS
PROSPECTUS
SUPPLEMENT
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Page
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S-1
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S-2
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S-6
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S-11
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S-11
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S-12
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S-32
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S-42
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S-45
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S-47
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S-50
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S-50
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PROSPECTUS
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Page
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ABOUT THIS PROSPECTUS
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1
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FORWARD-LOOKING STATEMENTS
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2
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THE CHUBB CORPORATION
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4
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USE OF PROCEEDS
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5
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RATIO OF CONSOLIDATED EARNINGS TO
FIXED CHARGES
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5
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DESCRIPTION OF DEBT SECURITIES
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6
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DESCRIPTION OF JUNIOR SUBORDINATED
DEBT SECURITIES
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15
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DESCRIPTION OF CAPITAL STOCK
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26
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DESCRIPTION OF DEPOSITARY SHARES
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30
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DESCRIPTION OF WARRANTS
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32
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DESCRIPTION OF STOCK PURCHASE
CONTRACTS AND STOCK PURCHASE UNITS
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34
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PLAN OF DISTRIBUTION
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35
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LEGAL MATTERS
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37
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EXPERTS
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37
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WHERE YOU CAN FIND MORE INFORMATION
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37
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INCORPORATION BY REFERENCE
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37
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S-i
ABOUT
THIS PROSPECTUS SUPPLEMENT
This document consists of two parts. The first part is the
prospectus supplement, which describes the specific terms of
this offering. The second part is the prospectus, which
describes more general information, some of which may not apply
to this offering. You should read both this prospectus
supplement and the accompanying prospectus, together with the
documents identified under the heading Where You Can Find
More Information on page 37 of the accompanying
prospectus.
If the information set forth in this prospectus supplement
differs in any way from the information set forth in the
accompanying prospectus, you should rely on the information set
forth in this prospectus supplement.
You should rely only on the information contained in or
incorporated by reference in the accompanying prospectus, this
prospectus supplement and any related free writing prospectus
issued by us. This prospectus supplement may be used only for
the purpose for which it has been prepared. No one is authorized
to give information other than that contained in this prospectus
supplement, the accompanying prospectus, the documents
incorporated by reference or referred to in this prospectus
supplement or the accompanying prospectus which are made
available to the public and in any related free writing
prospectus issued by us. We have not, and the underwriters have
not, authorized any other person to provide you with different
information. If anyone provides you with different or
inconsistent information, you should not rely on it.
We are not, and the underwriters are not, making an offer to
sell these securities in any jurisdiction where the offer or
sale is not permitted. You should not assume that the
information appearing in the accompanying prospectus, this
prospectus supplement or any document incorporated by reference
is accurate as of any date other than the date of the applicable
document. Our business, financial condition, results of
operations and prospects may have changed since that date.
Neither this prospectus supplement nor the accompanying
prospectus constitutes an offer, or an invitation on our behalf
or on behalf of the underwriters, to subscribe for and purchase,
any of the securities and may not be used for or in connection
with an offer or solicitation by anyone, in any jurisdiction in
which such an offer or solicitation is not authorized or to any
person to whom it is unlawful to make such an offer or
solicitation.
S-1
PROSPECTUS
SUPPLEMENT SUMMARY
The following summary highlights selected information
contained elsewhere in this prospectus supplement and may not
contain all of the information that is important to you. We
encourage you to read this prospectus supplement and the
accompanying prospectus, together with the documents identified
under the heading Where You Can Find More
Information on page 37 of the accompanying
prospectus, in their entirety. You should pay special attention
to the Risk Factors section of this prospectus
supplement and the Risk Factors section in our
Annual Report on
Form 10-K
for the year ended December 31, 2006. Unless otherwise
mentioned, all references in this prospectus supplement to
Chubb, we, us, and
our or similar references mean The Chubb
Corporation.
The Chubb
Corporation
The Chubb Corporation was incorporated as a business corporation
under the laws of the State of New Jersey in June 1967. The
Chubb Corporation is a holding company for a family of property
and casualty insurance companies known informally as the Chubb
Group of Insurance Companies and referred to in this prospectus
supplement and the accompanying prospectus as the P&C Group.
Since 1882, the P&C Group has provided property and casualty
insurance to businesses and individuals around the world.
According to A.M. Best, the P&C Group is the
11th largest U.S. property and casualty insurance
group based on 2005 net written premiums.
At December 31, 2006, Chubb and its subsidiaries had total
assets of $50 billion and shareholders equity of
$14 billion. Together with our subsidiaries, we employed
approximately 10,800 persons worldwide on December 31,
2006. The P&C Group provides insurance coverage principally
in the United States, Canada, Europe, Australia, and parts of
Latin America and Asia.
The P&C Group is divided into three strategic business units:
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commercial;
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specialty; and
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personal.
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Chubb Commercial Insurance offers a full range of commercial
customer insurance products, including coverage for multiple
peril, casualty, workers compensation and property and
marine. Chubb Commercial Insurance is known for writing niche
business, where our expertise can add value for our agents,
brokers and policyholders. Chubb Specialty Insurance offers a
wide variety of specialized professional liability products for
privately and publicly owned companies, financial institutions,
professional firms and healthcare organizations. Chubb Specialty
Insurance also includes our surety business. Chubb Personal
Insurance offers products for individuals with fine homes and
possessions who require more coverage choices and higher limits
than standard insurance policies.
In December 2005, we transferred our ongoing reinsurance assumed
business to Harbor Point Limited. Other than pursuant to certain
arrangements entered into with Harbor Point, the P&C Group
generally no longer engages directly in the reinsurance assumed
business. Harbor Point has the right for a transition period of
up to two years to underwrite specific reinsurance business on
the P&C Groups behalf. The P&C Group retains a
portion of any such business and cedes the balance to Harbor
Point.
Our principal executive offices are located at 15 Mountain View
Road, Warren, New Jersey 07061-1615, and our telephone number is
(908) 903-2000.
The
Debentures
Repayment
of Principal
The principal amount of the Debentures, together with accrued
and unpaid interest, will become due
on , 2037 (or if that
date is not a business day, the next business day) which is
referred to in this prospectus supplement as the scheduled
maturity date, subject to the limitations described below.
S-2
We are required to use our commercially reasonable efforts,
subject to a market disruption event, as described under
Description of the Debentures Repayment of
Principal, to raise sufficient net proceeds from the
issuance of qualifying capital securities (as defined in
Description of the Replacement Capital Covenant) in
a 180-day
period ending on a notice date not more than 15 and not less
than 10 business days prior to the scheduled maturity date to
permit repayment of the Debentures in full on the scheduled
maturity date. If we have not raised sufficient net proceeds to
permit repayment in full of the Debentures on the scheduled
maturity date, we will apply any available proceeds to repay the
Debentures, and the unpaid portion will remain outstanding and
will continue to bear interest at three-month LIBOR
plus %, payable quarterly (as described in
Interest), until repaid. We will use our
commercially reasonable efforts, subject to a market disruption
event, to raise sufficient proceeds from the sale of qualifying
capital securities to permit repayment of the Debentures on the
following quarterly interest payment date, and on each quarterly
interest payment date thereafter, until the Debentures are paid
in full.
Any unpaid principal amount of the Debentures, together with
accrued and unpaid interest, will be due and payable
on ,
2067, which is referred to in this prospectus supplement as the
final maturity date, or upon acceleration following an event of
default, regardless of the amount of qualifying capital
securities we have issued and sold by that time.
Although under the replacement capital covenant (described in
Description of the Replacement Capital Covenant) we
are permitted to repay the Debentures using the net cash
proceeds from certain issuances of common stock, qualifying
warrants, mandatorily convertible preferred stock, debt
exchangeable for common equity, debt exchangeable for preferred
equity and qualifying capital securities, we have no obligation
to issue any securities other than qualifying capital securities
or to use the proceeds of the issuance of any other securities
to repay the Debentures on the scheduled maturity date or at any
time thereafter.
Interest
From ,
2007 to but
excluding ,
2017, or earlier redemption date, the Debentures will bear
interest at the annual rate of %. Chubb will pay that
interest semi-annually in arrears
on
and
of each year, beginning
on ,
2007, subject to our rights and obligations described in
Description of the Debentures Option to Defer
Interest Payments and Description of the
Debentures Alternative Payment Mechanism. From
and
including ,
2017, the Debentures will bear interest at an annual rate equal
to three-month LIBOR plus % payable quarterly in arrears
on , ,
and
of each year, beginning
on ,
2017, subject to our rights and obligations described in
Description of the Debentures Option to Defer
Interest Payments and Description of the
Debentures Alternative Payment Mechanism.
So long as no event of default with respect to the Debentures
has occurred and is continuing, we have the right on one or more
occasions to defer the payment of interest on the Debentures as
described in Description of the
Debentures Option to Defer Interest
Payments. We will not be required to settle deferred
interest pursuant to the alternative payment mechanism described
in Description of the
Debentures Alternative Payment Mechanism
until we have deferred interest for five consecutive years or,
if earlier, upon a payment of current interest during a deferral
period. We may defer interest for up to ten consecutive years
without giving rise to an event of default. Deferred interest
will accumulate additional interest at an annual rate equal to
the annual interest rate then applicable to the Debentures. In
the event of our bankruptcy, holders of the Debentures may have
a limited claim for any outstanding deferred interest.
If we elect to defer interest payments, we will not be permitted
to pay deferred interest on the Debentures (including compounded
interest thereon) during the deferral period from any source
other than the net proceeds from the issuance of APM qualifying
securities, which consist of our common stock, qualifying
preferred stock, qualifying warrants and mandatorily convertible
preferred stock, as described in Description of the
Debentures Alternative Payment Mechanism.
S-3
Subordination
The Debentures will be unsecured, subordinated and junior in
right of payment to all of our existing and future senior
indebtedness, but will rank equally in right of payment upon
liquidation, dissolution or winding up with debt that by its
terms does not rank senior upon our liquidation, dissolution or
winding up to the Debentures and with our trade creditors, and
will be effectively subordinated to all liabilities of our
subsidiaries. Substantially all of our existing indebtedness is
senior to the Debentures. See Description of the
Debentures Subordination for the definition of
senior indebtedness.
The terms of the Debentures permit us to make any payment of
principal, or current or deferred interest, on our indebtedness
that ranks on a parity with the Debentures upon our liquidation,
dissolution or winding up, which are referred to in this
prospectus supplement as pari passu securities, that is
made pro rata to the amounts due on such pari
passu securities (including the Debentures), provided
that payments of deferred interest are made in accordance
with the last paragraph under Description of the
Debentures Alternative Payment Mechanism to
the extent it applies, and permit us to make any payments of
deferred interest on pari passu securities that, if not
made, would cause us to breach the terms of the instrument
governing such pari passu securities.
Certain
Payment Restrictions Applicable to Chubb
At any time when we have given notice of our election to defer
interest payments on the Debentures but the related deferral
period has not yet commenced or a deferral period is continuing,
we generally may not make payments on or redeem or purchase any
shares of our capital stock or any of our debt securities or
guarantees that rank upon our liquidation, dissolution or
winding up on a parity with or junior to the Debentures, subject
to certain limited exceptions. In addition, subject to certain
limited exceptions, if any deferral period lasts longer than one
year, the restrictions on our ability to redeem or purchase any
of our APM qualifying securities or any of our securities that
upon our bankruptcy or liquidation rank pari passu or
junior to such APM qualifying securities will continue until the
first anniversary of the date on which all deferred interest has
been paid.
Redemption
of the Debentures
We may elect to redeem the Debentures in whole or in part at any
time, subject to the redemption prices described below. In
addition, the Debentures are redeemable, in whole but not in
part, if certain tax or rating agency events occur, as described
in Description of the Debentures
Redemption. In the case of any redemption on or
after ,
2017, the redemption price will be equal to 100% of the
principal amount of the Debentures being redeemed plus any
accrued and unpaid interest. In the case of any redemption
before ,
2017, the redemption price will be equal to the greater of
(i) 100% of the principal amount of the Debentures being
redeemed and (ii) the applicable make-whole amount, in each
case plus any accrued and unpaid interest. For a description of
the changes that would permit such a redemption and the
applicable make-whole amounts, see Description of the
Junior Subordinated Debentures Redemption. Any
redemption of the Debentures
before ,
2047 will be subject to the limitations described in
Description of the Replacement Capital Covenant.
Events of
Default
The following events are events of default with respect to the
Debentures:
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default in the payment of interest, including compounded
interest, in full on any Debentures for a period of 30 days
after the conclusion of a
10-year
period following the commencement of any deferral period if at
such time such deferral period has not ended or on the final
maturity date;
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default in the payment of principal on the Debentures when due,
whether at stated maturity, upon redemption, upon a declaration
of acceleration or otherwise, subject to the limitations
described in Description of the Debentures
Repayment of Principal; or
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certain events of bankruptcy, insolvency or receivership of
Chubb.
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If an event of default under the junior subordinated indenture
(as defined in Description of the Debentures) occurs
and is continuing, the trustee or the holders of at least 25% in
aggregate principal amount of the outstanding
S-4
Debentures may declare the entire principal amount of, and all
accrued but unpaid interest on, all Debentures to be due and
payable immediately.
Material
United States Federal Income Tax Considerations
There is no statutory, judicial or administrative authority that
directly addresses the U.S. federal income tax treatment of
securities similar to the Debentures. Based on, among other
things, certain assumptions and certain representations made by
us, Debevoise & Plimpton LLP, our special tax counsel,
will render its opinion generally to the effect that, although
the matter is not free from doubt, the Debentures will be
treated as indebtedness for U.S. federal income tax
purposes. Such opinion is not binding on the Internal Revenue
Service, or IRS, or any court and there can be no assurance that
the IRS or a court will agree with such opinion. We agree, and
by acquiring a Debenture each beneficial owner of a Debenture
agrees, to treat the Debentures as indebtedness for
U.S. federal income tax purposes. See Material United
States Federal Income Tax Considerations.
Form
The Debentures will be represented by one or more global
securities registered in the name of Cede & Co., as
nominee for The Depository Trust Company, or DTC. Beneficial
interests in the Debentures will be represented through
book-entry accounts of financial institutions acting on behalf
of beneficial owners as direct and indirect participants in DTC.
Investors may elect to hold interests in the global securities
through either DTC (in the United States), or Clearstream
Luxembourg or Euroclear (in Europe) if they are participants in
those systems, or indirectly through organizations which are
participants in those systems.
Replacement
Capital Covenant
Around the time of the initial issuance of the Debentures, we
will enter into a replacement capital covenant in
which we will covenant for the benefit of holders of one or more
designated series of our indebtedness other than the Debentures
(which will initially be our 6.8% debentures due
November 15, 2031 (CUSIP: 171232AE1)), that we will not
repay, redeem, defease or purchase, and that no subsidiary of
ours will purchase, all or any part of the Debentures
before ,
2047, unless, subject to certain limitations, during the
applicable measurement period, as defined in Description
of the Replacement Capital Covenant, we have received
proceeds from the sale of replacement capital securities (as
defined in Description of the Replacement Capital
Covenant) in the specified amounts described in
Description of the Replacement Capital Covenant.
The replacement capital covenant will terminate upon the
occurrence of certain events, including an acceleration of the
Debentures due to the occurrence of an event of default. The
replacement capital covenant is not intended for the benefit of
holders of the Debentures and may not be enforced by them,
except that we will agree in the junior subordinated indenture
that we will not amend the replacement capital covenant to
impose additional restrictions on the type or amount of
qualifying capital securities that we may include for purposes
of determining whether or to what extent repayment, redemption,
defeasance or purchase of the Debentures is permitted, except
with the consent of the holders of at least a majority in
principal amount of the Debentures.
S-5
RISK
FACTORS
Your investment in the Debentures will involve certain risks,
including risks that relate to us and our business and specific
risks relating to the Debentures that are described below. Risks
relating to us and our business are described in, and
incorporated by reference from the section entitled Risk
Factors in our Annual Report on
Form 10-K
for the year ended December 31, 2006. See Where You
Can Find More Information in the accompanying prospectus.
In consultation with your own financial and legal advisors, you
should carefully consider the information included in or
incorporated by reference in this prospectus supplement and the
accompanying prospectus, and pay special attention to the
following discussion of risks relating to the Debenture before
deciding whether an investment in the Debentures is suitable for
you. The Debentures will not be an appropriate investment for
you if you are not knowledgeable about their significant
features or financial matters in general. You should not
purchase the Debentures unless you understand, and know that you
can bear, these investment risks.
Risks
Relating to the Debentures
Our
obligation to repay the Debentures on the scheduled maturity
date is subject to the issuance of qualifying capital
securities.
Our obligation to repay the Debentures on the scheduled maturity
date
of ,
2037 is limited. We are required to repay the Debentures on the
scheduled maturity date only to the extent that we have raised
sufficient net proceeds from the issuance of qualifying capital
securities (as defined in Description of the Replacement
Capital Covenant) within a
180-day
period ending on a notice date not more than 15 or less than 10
business days prior to such date. If we have not raised
sufficient net proceeds from the issuance of qualifying capital
securities to permit repayment of the Debentures on the
scheduled maturity date, we will not be required to repay the
unpaid amount until (i) we have raised sufficient net
proceeds to permit repayment in full in accordance with this
requirement, (ii) we redeem the Debentures, (iii) an
event of default occurs or (iv) the final maturity date for
the Debentures. Our ability to raise sufficient net proceeds in
connection with this obligation to repay the Debentures will
depend on, among other things, market conditions at the time the
obligation arises, as well as the acceptability to prospective
investors of the terms of the securities. Although we have
agreed to use our commercially reasonable efforts, subject to a
market disruption event, to raise sufficient net proceeds from
the issuance of qualifying capital securities during the
180-day
period referred to above to repay the Debentures on the
scheduled maturity date and on each interest payment date after
the scheduled maturity date until the Debentures are repaid in
full, our failure to do so would not be an event of default or
give rise to a right of acceleration or similar remedy with
respect to the Debentures until the final maturity date, and we
will be excused from using our commercially reasonable efforts
if certain market disruption events occur.
We
have the right to defer interest for 10 years without
causing an event of default.
We have the right to defer interest on the Debentures for a
period of up to 10 consecutive years so long as no event of
default with respect to the Debentures has occurred and is
continuing. Although we would be subject to the alternative
payment mechanism after we have deferred interest for a period
of five consecutive years (or such shorter period resulting from
our payment of current interest), if we are unable to raise
sufficient eligible proceeds (as defined in Description of
the Debentures Option to Defer Interest
Payments), we may fail to pay accrued interest on the
Debentures for a period of up to 10 consecutive years without
causing an event of default with respect to the Debentures.
During any such deferral period, holders of Debentures will
receive limited or no current payments on the Debentures and, so
long as we are otherwise in compliance with our obligations,
such holders will have no remedies against us for nonpayment
unless we fail to pay all deferred interest (including
compounded interest) at the end of the
10-year
deferral period, at the final maturity date or at the earlier
accelerated maturity date, redemption date or repayment date of
the Debentures.
Our
ability to pay deferred interest is limited by the terms of the
alternative payment mechanism, and is subject to market
disruption events and other factors beyond our
control.
If we elect to defer interest payments, we will not be permitted
to pay deferred interest on the Debentures (and compounded
interest thereon) during the deferral period, which may last up
to 10 years, from any source other than the net proceeds
from the issuance of APM qualifying securities, as described in
Description of the Debentures Alternative
Payment Mechanism. Our ability to issue certain APM
qualifying securities is limited by a preferred
S-6
stock issuance cap which limits the net proceeds from the
issuance of qualifying preferred stock and unconverted
mandatorily convertible preferred stock that we may apply to the
payment of deferred interest with respect to all deferral
periods to 25% of the aggregate principal amount of the
Debentures. Our ability to issue certain APM qualifying
securities, however, is also limited by a common equity issuance
cap, pursuant to which we will not be obligated to issue common
stock to the extent the number of shares of common stock
previously issued or issuable upon exercise of previously issued
qualified warrants during a deferal period would exceed 2% of
the total number of issued and outstanding shares of our common
stock pursuant to the alternative payment mechanism to pay
deferred interest at any time prior to the fifth anniversary of
the commencement of the relevant deferral period. Additionally,
our ability to sell shares of our common stock, qualifying
warrants or mandatorily convertible preferred stock for purposes
of paying deferred interest on the Debentures is limited by a
share cap under which we will not be permitted to issue such
securities to the extent that the number of shares of our common
stock to be so issued (or which would be issuable upon exercise
or conversion of any such qualifying warrants or mandatorily
convertible preferred stock) would
exceed million shares of
common stock, provided that we will be required to use
commercially reasonable efforts to increase this share cap or
obtain shareholder consent to increase the number of our
authorized shares of common stock to satisfy our obligations to
pay deferred interest as described in Description of the
Debentures Alternative Payment Mechanism. If
we have reached the share cap and the preferred stock issuance
cap, we may continue to defer interest on the Debentures, and
such deferral will not constitute an event of default unless
such deferral period exceeds 10 years.
The occurrence of a market disruption event may prevent or delay
a sale of APM qualifying securities pursuant to the alternative
payment mechanism and, accordingly, the payment of deferred
interest on the Debentures. Market disruption events include
events and circumstances both within and beyond our control,
such as the failure to obtain approval of a regulatory body or
governmental authority to issue APM qualifying securities or
shareholder consent to increase the shares available for
issuance in a sufficient amount, in each case notwithstanding
our commercially reasonable efforts. Moreover, we may encounter
difficulties in successfully marketing our APM qualifying
securities, particularly during times that we are subject to the
restrictions on dividends as a result of the deferral of
interest. See Description of the Debentures
Option to Defer Interest Payments,
Alternative Payment Mechanism and
Market Disruption Events.
The
junior subordinated indenture limits our obligation to raise
proceeds from the sale of common stock to pay deferred interest
and generally does not obligate us to issue qualifying
warrants.
Under the junior subordinated indenture, we will not be
obligated to issue common stock in excess of the common equity
issuance cap pursuant to the alternative payment mechanism to
pay deferred interest at any time prior to the fifth anniversary
of the commencement of the relevant deferral period. Once we
reach the common equity issuance cap for a deferral period, we
will no longer be obligated to sell common stock to pay deferred
interest relating to such deferral period, although we will
continue to have the right to sell common stock at our election
if we have reached the common equity issuance cap. In addition,
the sale of qualifying warrants to raise proceeds to pay
deferred interest is an option that we have, but we are not
obligated to sell qualifying warrants and no party may require
us to do so. See Description of the Debentures
Alternative Payment Mechanism.
We
have the ability under certain circumstances to narrow the
definition of replacement capital securities, which may make it
more difficult for us to succeed in selling sufficient
replacement capital securities to repay the Debentures on the
scheduled maturity date.
We may, without the consent of the holders of the Debentures,
amend the definition of replacement capital securities for the
purposes of the replacement capital covenant to eliminate common
stock or mandatorily convertible preferred stock from the
definition if, after the issue date, 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, which, as a result, causes us to
believe that there is more than an insubstantial risk that
failure to do so would result in a reduction in our earnings per
share as calculated for financial reporting purposes. The
elimination of common stock or mandatorily convertible preferred
stock from the definition of replacement capital securities,
together with continued
S-7
application of the preferred stock cap, may make it more
difficult for us to succeed in selling sufficient replacement
capital securities to repay the Debentures on the scheduled
maturity date.
Deferral
of interest payments could adversely affect the market price of
the Debentures.
We currently do not intend to exercise our right to defer
payments of interest on the Debentures. However, if we exercise
that right in the future, the market price of the Debentures is
likely to be affected. As a result of the existence of our
deferral right, the market price of the Debentures may be more
volatile than the market prices of other securities that are not
subject to optional deferrals. If we do defer interest on the
Debentures and you elect to sell Debentures during the period of
that deferral, you may not receive the same return on your
investment as a holder that continues to hold its Debentures
until we pay the deferred interest at the end of the deferral
period.
If you
waive our covenant to pay deferred interest only with proceeds
from the sale of APM qualifying securities, our credit rating
may be negatively affected.
The junior subordinated indenture contains a covenant that
permits us to pay deferred interest only with net proceeds from
the sale of APM qualifying securities, except in limited
circumstances. This covenant may be amended, and compliance with
this covenant may be waived, solely by the holders of a majority
of the outstanding principal amount of Debentures, and no holder
of our senior debt will have the right to enforce this covenant.
Although, in the short term, you may have an economic incentive
to waive this covenant in order to receive deferred interest, if
such covenant is waived and we pay deferred interest with funds
received from any other source, our credit rating may be
negatively affected. A negative effect on our credit rating may
have an adverse affect on our business or financial condition,
which in turn could have an adverse effect on our ability to pay
future interest on the Debentures.
The
junior subordinated indenture does not limit the amount of
indebtedness for money borrowed we may issue that ranks senior
to the Debentures upon our liquidation, dissolution or winding
up or in right of payment as to principal or
interest.
The Debentures will be subordinate and junior in right of
payment upon our liquidation, dissolution or winding up to all
of our indebtedness for money borrowed that is not by its terms
expressly made pari passu with or junior to the
Debentures upon liquidation, dissolution or winding up, and will
be pari passu with trade creditors and other pari
passu securities.
Pari passu securities means indebtedness that by its
terms ranks equally with the Debentures in right of payment and
upon liquidation, dissolution or winding up. We may issue or
have outstanding pari passu securities as to which we are
required to make payments of interest that are not made pro
rata with payments of interest on other pari passu
securities (including the Debentures) and that, if not made,
would cause us to breach the terms of the instrument governing
such pari passu securities. The terms of the Debentures
permit us to make any payment of principal, or current or
deferred interest on pari passu securities that is made
pro rata to the amounts due on such pari passu
securities (including the Debentures), provided that such
payments are made in accordance with the last paragraph under
Description of the Debentures Alternative
Payment Mechanism to the extent it applies, and permit us
to make any payments of deferred interest on pari passu
securities that, if not made, would cause us to breach the
terms of the instrument governing such pari passu
securities.
Our
ability to meet our payment obligations on the Debentures will
be affected by the ability of our subsidiaries to pay dividends
and the Debentures will be effectively subordinated to the
obligations of our subsidiaries.
We are a holding company and rely primarily on dividends from
our subsidiaries to meet our obligations for payment of interest
and principal on our outstanding debt obligations, including the
Debentures. The ability of our insurance subsidiaries to pay
dividends to us in the future will depend on their statutory
surplus, earnings and regulatory restrictions. We and our
insurance subsidiaries are subject to regulation by some states
as an insurance holding company system. This regulation
generally provides that transactions among companies within the
holding company system must be fair and reasonable. Transfers of
assets among affiliated companies, certain dividend
S-8
payments from insurance subsidiaries and certain material
transactions between companies within the system may require
prior notice to, or prior approval by, state regulatory
authorities. Our insurance subsidiaries are also subject to
licensing and supervision by government regulatory agencies in
the jurisdiction in which they do business. These regulations
may set standards of solvency that must be met and maintained,
the nature of and limitations on investment and the nature of
and limitations on dividends to policyholders and shareholders.
The inability of our insurance subsidiaries to pay dividends to
us in an amount sufficient to meet our debt service obligations
and other cash requirements could harm our ability to meet our
obligations under the Debentures.
Because we are a holding company, our right to participate in
any distribution of the assets of our subsidiaries, upon a
subsidiarys liquidation, dissolution, winding up or
reorganization or otherwise, and thus our ability to make
payments of principal and interest on the Debentures from such
distribution, is subject to the prior claims of creditors of any
such subsidiary, except to the extent that we may be a creditor
of that subsidiary and our claims are recognized. Our
subsidiaries are separate and distinct legal entities and have
no obligation, contingent or otherwise, to pay amounts due under
our contracts or otherwise to make any funds available to us.
Accordingly, the payments on our Debentures effectively will be
subordinated to all existing and future liabilities of our
subsidiaries.
Our
right to repay, redeem, defease or purchase the Debentures is
limited by a replacement capital covenant that we are making in
favor of certain of our debtholders.
At or around the time of issuance of the Debentures, we will
enter into a replacement capital covenant pursuant to which we
will covenant that we will not repay, redeem, defease or
purchase, and none of our subsidiaries will purchase, all or any
part of the Debentures on or
before ,
2047, unless during the applicable measurement period we or our
subsidiaries have received sufficient net proceeds from the sale
of common stock, qualifying warrants, mandatorily convertible
preferred stock, debt exchangeable for common equity, debt
exchangeable for preferred equity and certain other qualifying
capital securities (as described in Description of the
Replacement Capital Covenant). Although under the
replacement capital covenant, the principal amount of Debentures
that we may repay may be based on the net cash proceeds from
certain issuances of common stock, qualifying warrants,
mandatorily convertible preferred stock, debt exchangeable for
common equity, debt exchangeable for preferred equity and
qualifying capital securities (as described in Description
of the Replacement Capital Covenant), we may modify the
replacement capital covenant without your consent to the extent
that such modification does not impose additional restrictions
on the type or amount of qualifying capital securities that we
may include for purposes of determining whether or to what
extent repayment, redemption, defeasance or purchase of the
Debentures is permitted. In addition, beginning at the scheduled
maturity date, we have no obligation to use commercially
reasonable efforts to issue any securities other than qualifying
capital securities under the replacement capital covenant to
repay the Debentures. See Description of the Replacement
Capital Covenant.
There
can be no assurance that the Internal Revenue Service or a court
will agree with the characterization of the Debentures as
indebtedness for United States federal income tax
purposes.
The Debentures are novel financial instruments, and there is no
statutory, judicial or administrative authority that directly
addresses the United States federal income tax treatment of
securities similar to the Debentures. Thus, no assurance can be
given that the Internal Revenue Service or a court will agree
with the characterization of the Debentures as indebtedness for
United States federal income tax purposes. If, contrary to the
opinion of our special tax counsel, the Debentures were
recharacterized as our equity, payments on the Debentures to
non-United
States holders would generally be subject to United States
federal withholding tax at a rate of 30% (or such lower
applicable income tax treaty rate). See Material United
States Federal Income Tax Considerations.
We may
redeem the Debentures at any time, including if there is a
challenge to their tax characterization or certain other events
occur.
We may redeem all or any part of the Debentures at our option at
any time or all, but not less than all, of the Debentures if
certain changes occur relating to the tax treatment of the
Debentures or the rating agency equity credit accorded to the
Debentures. The redemption price for the Debentures will be
equal to their principal amount, if redeemed on or
after ,
2017, and will be equal to the greater of (x) their
principal amount and (y) a make-whole price, if redeemed
prior
to ,
2017, in each case plus accrued and unpaid interest through the
date of
S-9
redemption. If the Debentures were redeemed, the redemption
would be a taxable event to you. See Description of the
Debentures Redemption.
An Internal Revenue Service pronouncement or threatened
challenge resulting in a tax event could occur at any time.
Similarly, changes in rating agency methodology for assigning
equity credit to the Debentures could result in the Debentures
being redeemed earlier than would otherwise be the case. See
Description of the Debentures Redemption
for a further description of those events.
If
interest payments on the Debentures are deferred, holders of the
Debentures will be required to recognize income for
U.S. federal income tax purposes in advance of the receipt
of cash attributable to such income.
If we do defer interest payments on the Debentures, the
Debentures would be treated as issued with original issue
discount, or OID, at the time of such deferral, and all stated
interest due after such deferral would be treated as OID. In
such case, a United States holder would be required to include
such stated interest in income as it accrued, regardless of its
regular method of accounting, using a constant yield method,
before such holder receives any payment attributable to such
income, and would not separately report the actual cash payments
of interest on the Debentures as taxable income. See
Material United States Federal Income Tax
Considerations United States Holder
Interest Income and Original Issue Discount.
Claims
would be limited upon bankruptcy, insolvency or
receivership.
In certain events of our bankruptcy, insolvency or receivership
prior to the redemption or repayment of any Debentures, whether
voluntary or not, a holder of Debentures will have no claim for,
and thus no right to receive, deferred and unpaid interest
(including compounded interest thereon) that has not been
settled through the application of the alternative payment
mechanism to the extent the amount of such interest exceeds two
years of accumulated and unpaid interest (including compounded
interest thereon) on such holders Debentures.
As a
holder of the Debentures you will have limited rights of
acceleration.
An event of default is generally limited to payment defaults
after giving effect to our deferral rights, and specific events
of bankruptcy, insolvency and reorganization relating to us. The
junior subordinated indenture for the Debentures provides that
the trustee must give holders notice of all defaults or events
of default within 90 days after they become known to the
trustee. However, except in the cases of a default or an event
of default in payment on the Debentures, the trustee will be
protected in withholding the notice if its responsible officers
determine that withholding of the notice is in the interest of
such holders. There is no right of acceleration upon breaches by
us of other covenants under the junior subordinated indenture.
The
secondary market for the Debentures may be
illiquid.
We do not intend to apply to list the Debentures on the New York
Stock Exchange or any other securities exchange. We can give you
no assurance as to the liquidity of any market that may develop
for the Debentures.
S-10
USE OF
PROCEEDS
We expect to receive net proceeds from this offering, after
deducting underwriting discounts and commissions and other
offering expenses payable by us, of approximately
$ .
We currently intend to use the net proceeds from this offering
to purchase shares of our common stock, subject to market
conditions and other business conditions.
CAPITALIZATION
The following table sets forth our consolidated capitalization
as of December 31, 2006:
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on an actual basis; and
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as adjusted to reflect (i) the redemption of
$125 million of 8.675% capital securities on
February 1, 2007 and (ii) the sale of the Debentures
in this offering, but has not been adjusted to reflect our
application of the net proceeds we expect to receive from such
sale. See Use of Proceeds.
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You should read the information in this table together with our
consolidated financial statements and the related notes and with
Managements Discussion and Analysis of Financial
Condition and Results of Operations in our Annual Report
on
Form 10-K
for the year ended December 31, 2006 which is incorporated
by reference in the accompanying prospectus. See Where You
Can Find More Information in the accompanying prospectus.
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At December 31, 2006
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Actual
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As Adjusted
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(in millions)
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Debt
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$
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2,466
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$
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2,341
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Sale of the Debentures in this
offering
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Total Debt
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2,466
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Shareholders Equity
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13,863
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13,863
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Total Capitalization
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$
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16,329
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$
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S-11
DESCRIPTION
OF THE DEBENTURES
The following is a brief description of the terms of the
Debentures and the junior subordinated indenture, as
supplemented as described below. It does not purport to be
complete in all respects. This description is subject to and
qualified in its entirety by reference to the description of
certain terms of the Debentures and junior subordinated
indenture in the accompanying prospectus and to the Debentures
and the junior subordinated indenture referred to below, copies
of which are available upon request from us. References to
we, us and our in the
following description refer only to The Chubb Corporation and
not any of its subsidiaries.
The Debentures will be issued pursuant to the junior
subordinated indenture, dated as of March ,
2007, between us and The Bank of New York Trust Company, N.A.,
as trustee. We refer to the junior subordinated indenture, as
amended and supplemented by a first supplemental indenture, to
be dated as
of ,
2007, as the junior subordinated indenture, and to The Bank of
New York Trust Company, N.A. or its successor, as trustee. You
should read the junior subordinated indenture for provisions
that may be important to you.
When we use the term holder in this prospectus supplement with
respect to a registered Debenture, we mean the person in whose
name such Debenture is registered in the security register. We
expect that the Debentures will be held in book-entry form only,
as described in Book-Entry System, and will be held
in the name of DTC or its nominee.
The junior subordinated indenture does not limit the amount of
debt that we or our subsidiaries may incur under the junior
subordinated indenture or under other indentures to which we are
or become a party. The Debentures are not convertible into or
exchangeable for our common stock or authorized preferred stock.
General
We will initially issue $ in
aggregate principal amount of Debentures. We may, without the
consent of holders of the Debentures, increase the principal
amount of the Debentures by issuing additional Debentures in the
future on the same terms and conditions as the Debentures being
offered in this prospectus supplement in all respects, except
for any difference in the issue date, issue price and interest
accrued prior to the issue date of the additional Debentures,
and with the same CUSIP number as the Debentures offered hereby,
so long as such additional Debentures are fungible for
U.S. federal income tax purposes with the Debentures
offered in this prospectus supplement. The Debentures offered in
this prospectus supplement and any additional Debentures would
rank equally and ratably in right of payment and would be
treated as a single series of junior subordinated debt
securities for all purposes under the junior subordinated
indenture.
The Debentures will be subordinate and junior in right of
payment upon our liquidation (whether in bankruptcy or
otherwise) to all of our senior indebtedness, as defined in
Subordination.
Interest
Rate and Interest Payment Dates
Fixed
Rate Period
From ,
2007 to but
excluding ,
2017, or earlier redemption date, the Debentures will bear
interest at the annual rate of % and we will pay
interest semi-annually in arrears
on
and
of each year, beginning
on ,
2007, subject to our rights and obligations under
Option to Defer Interest Payments and
Alternative Payment Mechanism below. We
refer to these dates as interest payment dates and we refer to
the period beginning on and
including ,
2007 and ending on but excluding the first interest payment date
and each successive period beginning on and including an
interest payment date and ending on but excluding the next
interest payment date
until ,
2017 as a fixed rate interest period. Interest payments will be
made to the persons or entities in whose names the Debentures
are registered at the close of business
on
or ,
as the case may be, next preceding the relevant interest payment
date. The amount of interest payable for any fixed rate interest
period will be computed on the basis of a
360-day year
consisting of twelve
30-day
months. In the event that any interest payment date on or
before ,
2017 would otherwise fall on a day that is not a business day,
the interest payment due on that date will be postponed to the
next day that is a business day, and no interest will accrue as
a result of that postponement.
S-12
Floating
Rate Period
The Debentures will bear interest at an annual rate equal to
three-month LIBOR, as defined below, plus %, accruing
from and
including ,
2017, computed on the basis of a
360-day year
and the actual number of days elapsed. We will pay interest on
the Debentures quarterly in arrears
on , ,
and ,
beginning
on ,
2017, to the persons or entities in whose names the Debentures
are registered at the close of business on the 15th day
preceding the relevant interest payment date, subject to our
rights and obligations under Option to Defer
Interest Payments and Alternative
Payment Mechanism below. References in this prospectus
supplement to interest payment dates
after ,
2017 are to these dates and we refer to the period beginning on
and
including ,
2017 and ending on but excluding the next interest payment date
and each successive period beginning on and including an
interest payment date and ending on but excluding the next
interest payment as a floating rate interest period and together
with the fixed rate period, each an interest period. In the
event that any interest payment date during a floating rate
interest period would otherwise fall on a day that is not a
business day, the interest payment due on that date will be
postponed to the next day that is a business day, except that if
such business day is in the next succeeding calendar month, then
such interest payment date will be the immediately preceding
business day. Interest will accrue to but excluding the date
that interest is actually paid.
For the purposes of calculating interest due on the Debentures
during any floating rate interest period:
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Three-month LIBOR means, with respect to any floating rate
interest period, the rate (expressed as a percentage per annum)
for deposits in U.S. dollars for a three-month period
commencing on the first day of that floating rate interest
period that appears on Reuters Page LIBOR01 as of
11:00 a.m., London time, on the LIBOR determination date
for that floating rate interest period. If such rate does not
appear on Reuters Page LIBOR01, three-month LIBOR will be
determined on the basis of the rates at which deposits in
U.S. dollars for a three-month period commencing on the
first day of that floating rate interest period and in a
principal amount of not less than $1,000,000 are offered to
prime banks in the London interbank market by four major banks
in the London interbank market selected by the calculation agent
(after consultation with us), at approximately 11:00 a.m.,
London time, on the LIBOR determination date for that floating
rate interest period. The calculation agent will request the
principal London office of each of these banks to provide a
quotation of its rate. If at least two such quotations are
provided, three-month LIBOR with respect to that floating rate
interest period will be the arithmetic mean (rounded upward if
necessary to the nearest whole multiple of 0.00001%) of such
quotations. If fewer than two quotations are provided,
three-month LIBOR with respect to that floating rate interest
period will be the arithmetic mean (rounded upward if necessary
to the nearest whole multiple of 0.00001%) of the rates quoted
by three major banks in New York City selected by the
calculation agent, at approximately 11:00 a.m., New York
City time, on the first day of that floating rate interest
period for loans in U.S. dollars to leading European banks
for a three-month period commencing on the first day of that
floating rate interest period and in a principal amount of not
less than $1,000,000. However, if fewer than three banks
selected by the calculation agent to provide quotations are
quoting as described above, three-month LIBOR for that floating
rate interest period will be the same as three-month LIBOR as
determined for the previous floating rate interest period or, in
the case of the interest period beginning
on ,
2017, %. The establishment of
three-month LIBOR for each floating rate interest period by the
calculation agent shall (in the absence of manifest error) be
final and binding.
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Calculation agent means The Bank of New York Trust Company,
N.A., or any other successor appointed by us, acting as
calculation agent.
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London banking day means any day on which commercial banks are
open for general business (including dealings in deposits in
U.S. dollars) in London.
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LIBOR determination date means the second London banking day
immediately preceding the first day of the relevant floating
rate interest period.
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Reuters Page LIBOR01 means the display so designated on the
Reuters 3000 Xtra (or such other page as may replace that page
on that service, or such other service as may be nominated as
the information vendor, for the purpose of displaying rates or
prices comparable to the London Interbank Offered rate for
U.S. dollar deposits).
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S-13
General
Business day means any day other than (i) a Saturday or
Sunday, (ii) a day on which banking institutions in The
City of New York are authorized or required by law or executive
order to remain closed or (iii) a day on which the
corporate trust office of the trustee, is closed for business.
Accrued interest that is not paid on the applicable interest
payment date will bear additional interest, to the extent
permitted by law, at the interest rate in effect from time to
time, from the relevant interest payment date, compounded on
each subsequent interest payment date. When we use the term
interest in this prospectus supplement, we are referring not
only to regularly scheduled interest payments but also to
interest on interest payments not paid on the applicable
interest payment date.
Option to
Defer Interest Payments
So long as no event of default with respect to the Debentures
has occurred and is continuing, we may elect at one or more
times to defer payment of interest on the Debentures for one or
more consecutive interest periods that do not exceed
10 years. We may defer payment of interest prior to, on or
after the scheduled maturity date, subject to our obligations
described in Alternative Payment
Mechanism and Repayment of
Principal below. We may not defer interest beyond the
final maturity date, as defined in Repayment
of Principal below, or the earlier accelerated maturity
date, as described in Events of Default;
Waiver and Notice, or other repayment or redemption in
full of the Debentures.
Deferred interest on the Debentures will bear interest at the
then applicable interest rate, compounded on each interest
payment date, subject to applicable law. As used in this
prospectus supplement, a deferral period refers to the period
beginning on an interest payment date with respect to which we
elect to defer interest and ending on the earlier of
(i) the tenth anniversary of that interest payment date and
(ii) the next interest payment date on which we have paid
all deferred and unpaid amounts (including compounded interest
on such deferred amounts) and all other accrued interest on the
Debentures.
We have agreed in the junior subordinated indenture that,
subject to the occurrence and continuation of a market
disruption event (as described in Market
Disruption Events below):
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commencing on the earlier of (i) the first interest payment
date during the deferral period on which we pay current interest
on the Debentures (which we may do from any source of funds) or
(ii) the fifth anniversary of the commencement of the
deferral period, if on such date such deferral period has not
ended, we will be required to use our commercially reasonable
efforts to sell APM qualifying securities (as defined in
Alternative Payment Mechanism) pursuant
to the alternative payment mechanism (as described in
Alternative Payment Mechanism) and apply
the eligible proceeds (as defined in
Alternative Payment Mechanism) to the
payment of any deferred interest (including compounded interest
thereon) on the next interest payment date, and this requirement
will continue in effect until the end of the deferral
period; and
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we will not pay any deferred interest on the Debentures
(including compounded interest thereon) from any source other
than eligible proceeds prior to the final maturity date, except
at any time that the principal amount has been accelerated and
such acceleration has not been rescinded or, in the case of a
business combination, to the extent described below.
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Although our failure to comply with the foregoing with respect
to the alternative payment mechanism and payment of interest
during a deferral period will be a breach of the junior
subordinated indenture, it will not constitute an event of
default under the junior subordinated indenture or give rise to
a right of acceleration or similar remedy under the terms of the
junior subordinated indenture.
If we are involved in a business combination where immediately
after its consummation more than 50% of the voting stock of the
surviving or resulting entity of the business combination or the
person to whom all or substantially all of our property or
assets are conveyed, transferred or leased in such business
combination is owned by the shareholders of the other party to
the business combination or person to whom all or substantially
all of our property or assets are conveyed, transferred or
leased, or continuing directors cease for any reason to
constitute a
S-14
majority of the directors of the surviving or resulting entity
or person to whom all or substantially all of our property or
assets are conveyed, transferred or leased, then the foregoing
with respect to the alternative payment mechanism will not apply
to any payment of interest for the 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 ours at the time the
definite agreement relating to the transaction was approved by
our board of directors.
If we have paid all deferred interest (including compounded
interest thereon) on the Debentures, we can again defer interest
payments on the Debentures as described above.
We will give the holders of the Debentures and the trustee
written notice of our election to commence or continue a
deferral period at least one and not more than sixty business
days before the next interest payment date.
We have no present intention of exercising our right to defer
payments of interest.
Dividend and Other Payment Stoppages during Interest Deferral
and under Certain Other Circumstances
We will agree that, so long as any Debentures remain
outstanding, if we have given notice of our election to defer
interest payments on the Debentures but the related deferral
period has not yet commenced or a deferral period is continuing,
then we will not, nor will we permit our subsidiaries to:
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declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to
any shares of our capital stock;
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make any payment of principal of, or interest or premium, if
any, on, or repay, purchase or redeem any of our debt securities
that rank upon our liquidation, dissolution or winding up on a
parity with or junior to the Debentures; or
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make any guarantee payments regarding any guarantee issued by us
of securities of any of our subsidiaries if the guarantee ranks
upon our liquidation, dissolution or winding up on a parity with
or junior to the Debentures.
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The restrictions listed above do not apply to:
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any purchase, redemption or other acquisition of shares of our
capital stock in connection with:
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any employment contract, benefit plan or other similar
arrangement with or for the benefit of any one or more
employees, officers, directors, consultants or independent
contractors;
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the satisfaction of our obligations pursuant to any contract
entered into in the ordinary course of business prior to the
beginning of the deferral period;
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a dividend reinvestment or shareholder purchase plan; or
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the issuance of our capital stock, or securities convertible
into or exercisable for such capital stock, as consideration in
an acquisition transaction entered into prior to the applicable
deferral period;
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any exchange, redemption or conversion of any class or series of
our capital stock, or the capital stock of one of our
subsidiaries, for any other class or series of our capital
stock, or of any class or series of our indebtedness for any
class or series of our capital stock;
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any purchase of fractional interests in shares of our capital
stock pursuant to the conversion or exchange provisions of such
capital stock or the securities being converted or exchanged;
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any declaration of a dividend in connection with any shareholder
rights plan, or the issuance of rights, stock or other property
under any shareholder rights plan, or the redemption or purchase
of rights pursuant thereto;
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any dividend in the form of stock, warrants, options or other
rights where the dividend stock or stock issuable upon exercise
of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks equally with
or junior to such stock;
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any payment of current or deferred interest on debt securities
that rank in right of payment upon our liquidation, dissolution
or winding up on a parity with the Debentures (including the
Debentures, pari passu
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S-15
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securities) that is made pro rata to the amounts due on such
pari passu securities (including the Debentures);
provided that such payments are made in accordance with
the last paragraph under Alternative Payment
Mechanism to the extent it applies, and any payments of
deferred interest on pari passu securities that, if not
made, would cause us to breach the terms of the instrument
governing such pari passu securities;
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any payment of principal in respect of pari passu
securities having the same scheduled maturity date as the
Debentures, as required under a provision of such pari passu
securities that is substantially the same as the provision
described in Repayment of Principal, and
that is made on a pro rata basis among one or more series of
pari passu securities having such a provision and the
Debentures; or
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any repayment or redemption of a security necessary to avoid a
breach of the instrument governing the same.
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In addition, if any deferral period lasts longer than one year,
the limitation on our ability to redeem or purchase our APM
qualifying securities or any of our securities that upon our
bankruptcy or liquidation rank pari passu or junior, as
applicable, to such APM qualifying securities will continue
until the first anniversary of the date on which all deferred
interest has been paid, subject to the exceptions listed above.
If we are involved in a business combination where immediately
after its consummation more than 50% of the voting stock of the
surviving or resulting entity of the business combination or the
person to whom all or substantially all of our property or
assets are conveyed, transferred or leased in such business
combination is owned by the shareholders of the other party to
the business combination or person to whom all or substantially
all of our property or assets are conveyed, transferred or
leased, or continuing directors cease for any reason to
constitute a majority of the directors of the surviving or
resulting entity or person to whom all or substantially all of
our property or assets are conveyed, transferred or leased, then
the immediately preceding paragraph will not apply during the
deferral period that is terminated on the next interest payment
date following the date of consummation of the business
combination.
Alternative
Payment Mechanism
Subject to the conditions described in Option
to Defer Interest Payments above and to the exclusions
described in this section and in Market
Disruption Events below, if we defer interest on the
Debentures, we will be required, commencing on the earlier of
(i) the first interest payment date on which we pay current
interest on the Debentures (which we may do from any source of
funds) or (ii) the fifth anniversary of the commencement of
the deferral period, if on such date such deferral period has
not ended, to use our commercially reasonable efforts to sell
APM qualifying securities, until we have raised an amount of
eligible proceeds at least equal to the aggregate amount of
accrued and unpaid deferred interest, including compounded
interest thereon, on the Debentures. We refer to this method of
funding the payment of accrued and unpaid interest as the
alternative payment mechanism.
We have agreed to apply eligible proceeds raised during any
deferral period pursuant to the alternative payment mechanism to
first pay deferred interest (including compounded interest
thereon) on the Debentures.
Notwithstanding (and as a qualification to) the foregoing, under
the alternative payment mechanism:
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we are not required to pay interest on the Debentures (and
therefore we are not required to issue APM qualifying securities
to raise proceeds to pay such interest) at a time when the
payment of such interest would violate the terms of any
securities issued by us or one of our subsidiaries senior to the
Debentures in right of payment upon our liquidation, dissolution
or winding up;
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we are not required to issue common stock prior to the fifth
anniversary of the commencement of a deferral period if the
number of shares of common stock issued plus the number of
shares of common stock previously issued or issuable upon the
exercise of previously issued qualifying warrants during such
deferral period would exceed an amount equal to 2% of the total
number of issued and outstanding shares of our common stock as
of the date of our most recent publicly available consolidated
financial statements immediately prior to the date of such
issuance (this limitation being referred to as the common equity
issuance cap);
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we are not permitted to issue qualifying preferred stock and
mandatorily convertible preferred stock to the extent that the
net proceeds of any issuance of qualifying preferred stock and
mandatorily convertible
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S-16
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preferred stock applied, together with the net proceeds of all
prior issuances of qualifying preferred stock and any
still-outstanding mandatorily convertible preferred stock
applied during the current and all prior deferral periods, to
pay interest on the Debentures pursuant to the alternative
payment mechanism, would exceed 25% of the aggregate principal
amount of the Debentures (this limitation being referred to as
the preferred stock issuance cap); and
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the sale of qualifying warrants to pay deferred interest is an
option that may be exercised at our sole discretion, subject to
the common equity issuance cap and the share cap, as defined
below, and we will not be obligated to sell qualifying warrants
or to apply the proceeds of any such sale to pay deferred
interest on the Debentures, and no class of investors of our
securities, or any other party, may require us to issue
qualifying warrants.
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Once we reach the common equity issuance cap for a deferral
period, although we will not be obligated to issue more common
stock, pursuant to the alternative payment mechanism prior to
the fifth anniversary of the commencement of that deferral
period even if the number of outstanding shares of our common
stock subsequently increases, we will have the right to do so.
The common equity issuance cap will cease to apply with respect
to a deferral period following the fifth anniversary of the
commencement of that deferral period, at which point we must pay
any deferred interest, regardless of the time at which it was
deferred, using the alternative payment mechanism, subject to
any market disruption event and the share cap. In addition, if
the common equity issuance cap is reached during a deferral
period and we subsequently pay all deferred interest, the common
equity issuance cap will cease to apply with respect to such
deferral period at the termination of such deferral period and
will not apply again unless and until we start a new deferral
period.
APM qualifying securities means our common stock, qualifying
preferred stock, qualifying warrants and mandatorily convertible
preferred stock.
Eligible proceeds means, for each relevant interest payment
date, the net proceeds (after underwriters or placement
agents fees, commissions or discounts and other expenses
relating to the issuance or sale) we have received during the
180-day
period prior to that interest payment date from the issuance or
sale of APM qualifying securities (excluding sales of qualifying
preferred stock and mandatorily convertible preferred stock in
excess of the preferred stock issuance cap) to persons that are
not our subsidiaries.
Notwithstanding the common equity issuance cap and the preferred
stock issuance cap described above, for purposes of paying
deferred interest, we are not permitted, subject to the
provisions below, to sell shares of our common stock, qualifying
warrants or mandatorily convertible preferred stock such that
the common stock to be issued (or which would be issuable upon
exercise or conversion thereof) would be in excess
of million shares (as
adjusted for any stock split, stock dividend, reclassification,
recapitalization,
split-up,
combination, exchange of shares or similar transaction) (this
limitation being referred to as the share cap), provided
that at any time deferred interest is outstanding under the
Debentures we will be required to use commercially reasonable
efforts to (i) raise the share cap such that it is at least
equal to three times the number of shares of common stock that
we would need to issue to raise sufficient proceeds to pay
(assuming a price per share equal to the average trading price
of shares of our common stock over the ten-trading day period
preceding such date) then outstanding deferred interest on the
Debentures (including compounded interest thereon) up to a
maximum of ten years of interest (including compounded interest)
and (ii) if we cannot increase the share cap as
contemplated in the preceding clause, to obtain shareholder
consent at the next annual meeting of our shareholders to
increase the number of shares of our authorized common stock for
purposes of satisfying our obligations to pay deferred interest.
For purposes of determining the amounts accruing during a
floating rate period, the interest will be computed by reference
to spot three-month LIBOR on the calculation date plus a margin
equal to %.
Commercially reasonable efforts to sell our APM qualifying
securities means commercially reasonable efforts to complete the
offer and sale of our APM qualifying securities to third parties
that are not subsidiaries of ours in public offerings or private
placements. We will not be considered to have made commercially
reasonable efforts to effect a sale of APM qualifying securities
if we determine to not pursue or complete such sale due to
pricing, coupon, dividend rate or dilution considerations.
S-17
Common stock means our common stock (including treasury shares
of common stock), common stock issued pursuant to any dividend
reinvestment plan or our employee benefit plans, a security of
ours, ranking upon our liquidation, dissolution or winding up
junior to our qualifying preferred stock and pari passu
with our common stock, that tracks the performance of, or
relates to the results of, a business, unit or division of us,
and any securities issued in exchange therefor in connection
with a merger, consolidation, binding share exchange, business
combination, recapitalization or other similar event.
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 the preferred stock converts
into our common stock 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.
Qualifying preferred stock means our non-cumulative perpetual
preferred stock that ranks pari passu with or junior to
all of our other preferred stock, other than preferred stock
that is issued or issuable pursuant to a stockholders
rights plan or similar plan or arrangement, is perpetual and
(a) is subject to a qualifying capital replacement
covenant, as such term is defined in Description of
Replacement Capital Covenant, or (b) is subject to
both (i) mandatory suspension of dividends in the event we
breach certain financial metrics specified within the offering
documents, and (ii) intent-based replacement
disclosure, as defined in Description of the
Replacement Capital Covenant. 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, as defined in
Description of the Replacement Capital Covenant.
Qualifying warrants means any net share settled warrants to
purchase our common stock that (1) have an exercise price
greater than the current stock market price of our common stock,
and (2) we are not entitled to redeem for cash and the
holders of which are not entitled to require us to purchase for
cash in any circumstances. We will be required to use
commercially reasonable efforts, subject to the common equity
issuance cap, to set the terms of the qualifying warrants so as
to raise sufficient proceeds from their issuance to pay all
deferred interest on the Debentures in accordance with the
alternative payment mechanism. We intend that any qualifying
warrants issued in accordance with the alternative payment
mechanism will have exercise prices at least 10% above the
current stock market price of our common stock on the date of
issuance. The current stock market price of our common stock on
any date shall be the closing sale price per share (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
our common stock is not then listed on the New York Stock
Exchange, as reported by the principal U.S. securities
exchange on which our common stock is traded or quoted. If our
common stock is not listed on any U.S. securities exchange
on the relevant date, the current stock market price shall be
the last quoted bid price for our common stock in the
over-the-counter
market on the relevant date as reported by the National
Quotation Bureau or similar organization. If our common stock is
not so quoted, the current stock market price shall be the
average of the mid-point of the last bid and ask prices for our
common stock on the relevant date from each of at least three
nationally recognized independent investment banking firms
selected by us for this purpose.
Although our failure to comply with our obligations with respect
to the alternative payment mechanism will breach the junior
subordinated indenture, it will not constitute an event of
default thereunder or give rise to a right of acceleration or
similar remedy under the terms thereof. The remedies of holders
of the Debentures will be limited in such circumstances as
described in Risk Factors Risks Relating to
the Debentures Holders of the Debentures will have
only limited rights of acceleration above.
If, due to a market disruption event or otherwise, we were able
to raise some, but not all, eligible proceeds necessary to pay
all deferred interest (including compounded interest thereon) on
any interest payment date, we will apply any available eligible
proceeds to pay accrued and unpaid interest on the applicable
interest payment date in chronological order based on the date
each payment was first deferred, subject to the common equity
issuance cap, the preferred stock issuance cap, and the share
cap, and you will be entitled to receive your pro rata share of
any amounts received on the Debentures. If we have outstanding
pari passu securities under which we are obligated to
sell securities that are APM qualifying securities and apply the
net proceeds to the payment of deferred interest or
distributions, then on any date and for any period the amount of
net proceeds received by us from those sales and
S-18
available for payment of the deferred interest and distributions
shall be applied to the Debentures and those other pari passu
securities on a pro rata basis up to the common equity
issuance cap or the preferred stock issuance cap and the share
cap (or comparable provisions in the instruments governing those
pari passu securities) in proportion to the total amounts
that are due on the Debentures and such securities.
Market
Disruption Events
A market disruption event means the occurrence or existence of
any of the following events or sets of circumstances:
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trading in securities generally, or shares of our securities
specifically, on the New York Stock Exchange or any other
national securities exchange, or in the
over-the-counter
market on which our common stock or qualifying capital
securities (as defined in Description of the Replacement
Capital Covenant), as the case may be, is then listed or
traded is suspended or the settlement of such trading generally
is materially disrupted or minimum prices are established on any
such exchange or market by the SEC, the relevant exchange or by
any other regulatory body or governmental agency having
jurisdiction and such suspension, disruption, or the
establishment of such minimum price, has a material adverse
effect on trading in, and the issuance and sale of, our common
stock or qualifying capital securities, as the case may be;
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we would be required to obtain the consent or approval of our
stockholders or a regulatory body (including, without
limitation, any securities exchange) or governmental authority
to issue or sell APM qualifying securities pursuant to the
alternative payment mechanism or to issue qualifying capital
securities pursuant to our repayment obligations described in
Repayment of Principal below, as the
case may be, and that consent or approval has not yet been
obtained notwithstanding our commercially reasonable efforts to
obtain that consent or approval;
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a banking moratorium occurs or shall have been declared by the
federal or state authorities of the United States such that
market trading in the APM qualifying securities or the
qualifying capital securities, as applicable, is disrupted or
has ceased;
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a material disruption shall have occurred in commercial banking
or securities settlement or clearance services in the United
States such that market trading in the APM qualifying securities
or the qualifying capital securities, as applicable, is
disrupted or has ceased;
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the United States shall have become engaged in hostilities,
there shall have been an escalation in hostilities involving the
United States, there shall have been a declaration of a national
emergency or war by the United States or there shall have
occurred any other national or international calamity or crisis
such that market trading in the APM qualifying securities or the
qualifying capital securities, as applicable, is disrupted or
has ceased;
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there shall have occurred such a material adverse change in
general domestic or international economic, political or
financial conditions, including without limitation as a result
of terrorist activities, or the effect of international
conditions on the financial markets in the United States shall
be such that trading in the APM qualifying securities or
qualifying capital securities, as applicable, is materially
disrupted or has ceased;
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an event occurs and is continuing as a result of which the
offering document for the offer and sale of APM qualifying
securities or qualifying capital securities, as the case may be,
would, in our reasonable judgment, contain an untrue statement
of a material fact or omit to state a material fact required to
be stated in that offering document or necessary to make the
statements in that offering document not misleading and either
(a) the disclosure of that event at such time, in our
reasonable judgment, is not otherwise required by law and would
have a material adverse effect on our business or (b) the
disclosure relates to a previously undisclosed proposed or
pending material business transaction, provided that no
single suspension period described in this bullet shall exceed
90 consecutive days and multiple suspension periods described in
this bullet shall not exceed an aggregate of 180 days in
any 360-day
period; or
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we reasonably believe that the offering document for the offer
and the sale of APM qualifying securities or qualifying capital
securities, as the case may be, would not be in compliance with
a rule or regulation of the
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SEC (for reasons other than those described in the immediately
preceding bullet) and we determine that we are unable to comply
with such rule or regulation or such compliance is unduly
burdensome, provided that no single suspension period
described in this bullet shall exceed 90 consecutive days and
multiple suspension periods described in this bullet shall not
exceed an aggregate of 180 days in any
360-day
period.
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We will be excused from our obligations under the alternative
payment mechanism in respect of any interest payment date if we
provide written certification to the trustee (which the trustee
will promptly forward upon receipt to each holder of record of
Debentures) no more than 15 and no less than 10 business days in
advance of that interest payment date certifying that:
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a market disruption event was existing after the immediately
preceding interest payment date; and
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either (a) the market disruption event continued for the
entire period from the business day immediately following the
preceding interest payment date to the business day immediately
preceding the date on which that certification is provided, or
(b) the market disruption event continued for only part of
this period, but we were unable after commercially reasonable
efforts to raise sufficient eligible proceeds during the rest of
that period to pay all accrued and unpaid interest.
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We will not be excused from our obligations under the
alternative payment mechanism if we determine not to pursue or
complete the sale of APM qualifying securities due to pricing,
coupon, dividend rate or dilution considerations.
Repayment
of Principal
Scheduled
Maturity
We must repay the principal amount of the Debentures, together
with accrued and unpaid interest,
on ,
2037, or if that date is not a business day, the following
business day (the scheduled maturity date), subject to the
limitations described below.
Our obligation to repay the Debentures on the scheduled maturity
date is limited. We are required to repay the Debentures on the
scheduled maturity date only to the extent that we have raised
sufficient net proceeds from the issuance of qualifying capital
securities, as described in Description of the Replacement
Capital Covenant below, within a
180-day
period ending on a notice date not more than 15 and not less
than 10 business days prior to the scheduled maturity date. If
we have not raised sufficient proceeds to permit repayment of
all principal and accrued and unpaid interest on the Debentures
on the scheduled maturity date, the unpaid amount will remain
outstanding until we have raised sufficient proceeds to permit
repayment in full in accordance with the replacement capital
covenant, we redeem the Debentures, acceleration following an
event of default occurs on the final maturity date of the
Debentures.
We will agree in the junior subordinated indenture to use our
commercially reasonable efforts (except as described below) to
raise sufficient net proceeds from the issuance of qualifying
capital securities in a
180-day
period ending on a notice date not more than 15 and not less
than 10 business days prior to the scheduled maturity date to
permit repayment of the Debentures in full on this date in
accordance with the replacement capital covenant. We will
further agree in the junior subordinated indenture that if we
are unable for any reason to raise sufficient proceeds to permit
payment in full on the scheduled maturity date, we will use our
commercially reasonable efforts (except as described below) to
raise sufficient proceeds from the issuance of qualifying
capital securities to permit repayment on the next quarterly
interest payment date, and on each quarterly interest payment
date thereafter until the Debentures are paid in full. Our
failure to use our commercially reasonable efforts to raise
these proceeds would be (except as described below) a breach of
covenant under the junior subordinated indenture. However, in no
event will such failure be an event of default thereunder.
Although under the replacement capital covenant the principal
amount of Debentures that we may redeem or repay at any time may
be based on the net cash proceeds from certain issuances during
the applicable measurement period of common stock, qualifying
warrants, mandatorily convertible preferred stock, debt
exchangeable for common equity, debt exchangeable for preferred
equity and certain qualifying capital securities (as described
in Description of the Replacement Capital Covenant),
we have no obligation under the junior subordinated
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indenture or the Debentures to use commercially reasonable
efforts to issue any securities other than qualifying capital
securities or to use the proceeds of the issuance of any other
securities to repay the Debentures on the scheduled maturity
date or at any time thereafter.
We may amend or supplement the replacement capital covenant from
time to time with the consent of the holders of the specified
series of indebtedness benefiting from the replacement capital
covenant, provided that no such consent shall be required
under certain circumstances described in Description of
the Replacement Capital Covenant.
Under certain circumstances described in Description of
the Replacement Capital Covenant we generally may amend or
supplement the replacement capital covenant without the consent
of the holders of the Debentures. We have agreed in the junior
subordinated indenture for the Debentures that we will not amend
the replacement capital covenant to impose additional
restrictions on the type or amount of qualifying capital
securities that we may include for purposes of determining
whether or to what extent repayment, redemption or purchase of
the Debentures is permitted, except with the consent of holders
of at least a majority in principal amount of the Debentures.
If any principal amount of Debentures remains outstanding after
the scheduled maturity date, the principal amount of the
outstanding Debentures will continue to bear interest at the
floating rate of interest described above under
Interest Rate and Interest Payment
Dates, until paid.
Commercially reasonable efforts to sell our qualifying capital
securities means commercially reasonable efforts to complete the
offer and sale of our qualifying capital securities to third
parties that are not subsidiaries of ours in public offerings or
private placements. We will not be considered to have made
commercially reasonable efforts to effect a sale of qualifying
capital securities if we determine to not pursue or complete
such sale due to pricing coupon, dividend rate or dilution
considerations.
We will be excused from our obligation under the junior
subordinated indenture to use commercially reasonable efforts to
sell qualifying capital securities to permit repayment of the
Debentures under the terms of the replacement capital covenant
if we provide written certification to the trustee (which
certification will be forwarded to each holder of record of the
Debentures) no more than 15 and no less than 10 business days in
advance of the required repayment date certifying that:
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a market disruption event was existing during the
180-day
period preceding the date of the certificate or, in the case of
any required repayment date following the scheduled maturity
date, the
90-day
period preceding the date of the certificate; and
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either (a) the market disruption event continued for the
entire
180-day
period or
90-day
period, as the case may be, or (b) the market disruption
event continued for only part of the period, but we were unable
after commercially reasonable efforts to raise sufficient net
proceeds during the rest of that period to permit repayment of
the Debentures in full.
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Net proceeds that we are permitted to apply to the repayment of
the Debentures on and after the scheduled maturity date will be
applied, first, to pay deferred interest (including compounded
interest thereon) to the extent of eligible proceeds under the
alternative payment mechanism, second, to pay current interest
that we are not paying from other sources and, third, to repay
the principal of the Debentures; provided that if we are
obligated to sell qualifying capital securities and apply the
net proceeds to payments of principal of or interest on any
outstanding securities in addition to the Debentures, then on
any date and for any period the amount of net proceeds received
by us from those sales and available for such payments shall be
applied to the Debentures and those other securities having the
same scheduled maturity date as the Debentures pro rata in
accordance with their respective outstanding principal amounts
and none of such net proceeds shall be applied to any other
securities having a later scheduled maturity date until the
principal of and all accrued and unpaid interest on the
Debentures has been paid in full. If we raise less than
$5 million of net proceeds from the sale of qualifying
capital securities during the relevant
180-day or
90-day
period, we will not be required to repay any Debentures on the
scheduled maturity date or the next quarterly interest payment
date, as applicable, but we will use those net proceeds to repay
the Debentures on the next quarterly interest payment date as of
which we have raised at least $5 million of net proceeds.
S-21
Final
Maturity Date
Any principal amount of the Debentures, together with accrued
and unpaid interest, will be due and payable on the final
maturity date of the Debentures, regardless of the amount of
qualifying capital securities we have issued and sold by that
time. The final maturity date will
be ,
2067 or, if that date is not a business day, the following
business day.
Redemption
The Debentures:
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are repayable on the scheduled maturity date or thereafter as
described in Repayment of Principal
above;
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are redeemable, in whole or in part, at our option at any time
at the redemption price set forth below;
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are redeemable, in whole but not in part, after the occurrence
of a tax event or a rating agency event,
as described below; and
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are not subject to any sinking fund or similar provisions.
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Any redemption of the Debentures prior
to ,
2047, will be subject to the restrictions described in
Description of the Replacement Capital Covenant
below.
After ,
2047, we may redeem the Debentures using cash from any source.
In the case of any optional redemption or redemption within
90 days after the occurrence of a tax event or
a rating agency event, each as defined below, the
redemption price will be equal to (1) in the case of any
redemption on or
after ,
2017, 100% of the principal amount of the Debentures being
redeemed or (2) in the case of any redemption prior
to ,
2017, the greater of (i) 100% of the principal amount of
the Debentures being redeemed and (ii) the present value of
a principal payment
on ,
2017 and scheduled payments of interest that would have accrued
from the redemption date
to ,
2017 on the Debentures being redeemed, discounted to the
redemption date on a semi-annual basis (assuming a
360-day year
consisting of twelve
30-day
months) at a discount rate equal to the treasury rate plus the
applicable spread, in each case plus accrued and unpaid interest
to the redemption date. If in the case of an optional
redemption, the Debentures are not redeemed in whole, we may not
effect such redemption unless at least $25 million
aggregate principal amount of the Debentures, excluding any
Debentures held by us or any of our affiliates, remains
outstanding after giving effect to such redemption.
Tax event means the receipt by us of an opinion of counsel
experienced in such matters to the effect that, as a result of
any:
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amendment to or change (including any prospective change) in the
laws or regulations of the United States or any political
subdivision or taxing authority of or in the United States that
is effective on or after the date of issuance of the
Debentures; or
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official administrative decision or judicial decision or
administrative action or other official pronouncement (including
a private letter ruling, technical advice memorandum or other
similar pronouncement) by any court, government agency or
regulatory authority interpreting or applying those laws or
regulations that is announced on or after the date of issuance
of the Debentures; or
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threatened challenge asserted in connection with an audit of us
or our subsidiaries, or a threatened challenge asserted in
writing against any tax payer that has raised capital through
the issuance of securities that are substantially similar to the
Debentures and which securities were rated investment grade at
the time of issue of such securities;
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there is more than an insubstantial risk that interest payable
by us on the Debentures is not, or within 90 days of the
date of such opinion will not be, wholly deductible by us for
United States federal income tax purposes.
Rating agency event means a change by any nationally recognized
statistical rating organization within the meaning of
Rule 15c3-1
under the Exchange Act that currently publishes a rating for us
(a rating agency) to its
S-22
equity credit criteria for securities such as the Debentures, as
such criteria is in effect on the date of this prospectus
supplement (the current criteria), which change results in
(i) the length of time for which such current criteria is
scheduled to be in effect is shortened with respect to the
Debentures, or (ii) a lower equity credit being given to
the Debentures as of the date of such change than the equity
credit that would have been assigned to the Debentures as of the
date of such change by such rating agency pursuant to its
current criteria.
For the purposes of clause (2) in the third preceding
paragraph:
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treasury rate means the semi-annual equivalent yield to maturity
of the treasury security that corresponds to the
treasury price (calculated in accordance with
standard market practice and computed as of the second trading
day preceding the redemption date);
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treasury security means the United States Treasury security that
the treasury dealer determines would be appropriate
to use, at the time of determination and in accordance with
standard market practice, in pricing the Debentures being
redeemed in a tender offer based on a spread to United States
Treasury yields;
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treasury price means the bid-side price for the treasury
security as of the third trading day preceding the redemption
date, as set forth in the daily statistical release (or any
successor release) published by the Federal Reserve Bank of New
York on that trading day and designated Composite
3:30 p.m. Quotations for U.S. Government
Securities, except that: (i) if that release (or any
successor release) is not published or does not contain that
price information on that trading day; or (ii) if the
treasury dealer determines that the price information is not
reasonably reflective of the actual bid-side price of the
treasury security prevailing at 3:30 p.m., New York City
time, on that trading day, then treasury price will instead mean
the bid-side price for the treasury security at or around
3:30 p.m., New York City time, on that trading day
(expressed on a next trading day settlement basis) as determined
by the treasury dealer through such alternative means as are
commercially reasonable under the circumstances;
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treasury dealer means Citigroup Global Markets Inc. (or its
successor) or, if Citigroup Global Markets Inc. (or its
successor) refuses to act as treasury dealer for this purpose or
ceases to be a primary U.S. Government securities dealer,
another nationally recognized investment banking firm that is a
primary U.S. Government securities dealer specified by us
for these purposes; and
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applicable spread means % in the case of a tax
event, % in the case of a rating agency event
and % in all other cases.
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Notice of any redemption will be mailed at least 30 days
but not more than 60 days before the redemption date to
each holder of Debentures to be redeemed at its registered
address. Unless we default in payment of the redemption price,
on and after the redemption date, interest will cease to accrue
on the Debentures or portions thereof called for redemption.
We may not redeem the Debentures in part if the principal amount
has been accelerated and such acceleration has not been
rescinded or unless all accrued and unpaid interest, including
deferred interest, has been paid in full on all outstanding
Debentures for all interest periods terminating on or before the
redemption date.
In the event of any redemption, neither we nor the trustee will
be required to:
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issue, register the transfer of, or exchange, Debentures during
a period beginning at the opening of business 15 days
before the day of selection for redemption of Debentures and
ending at the close of business on the day of mailing of notice
of redemption; or
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transfer or exchange any Debentures so selected for redemption,
except, in the case of any Debentures being redeemed in part,
any portion thereof not to be redeemed.
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The provisions relating to satisfaction and discharge and
defeasance in the accompanying prospectus shall apply to the
Debentures.
S-23
Subordination
The payment of the principal of and interest on the Debentures
is expressly subordinated, to the extent and in the manner set
forth in the junior subordinated indenture, in right of payment
to the prior payment in full of all of our senior indebtedness.
Subject to the qualifications described below, the term senior
indebtedness is defined in the junior subordinated indenture to
include principal of, premium, if any, and interest on, and any
other payment due pursuant to any of the following, whether
incurred prior to, on or after the date of this prospectus
supplement:
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all of our obligations (other than obligations pursuant to the
junior subordinated indenture and the Debentures) for money
borrowed;
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all of our obligations evidenced by notes, debentures, bonds or
other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or
businesses and including all other debt securities issued by us
to any trust or a trustee of such trust, or to a partnership or
other affiliate that acts as a financing vehicle for us, in
connection with the issuance of securities by such vehicles;
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all of our obligations under leases required or permitted to be
capitalized under generally accepted accounting principles;
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all of our reimbursement obligations with respect to letters of
credit, bankers acceptances or similar facilities issued
for our account;
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all of our obligations issued or assumed as the deferred
purchase price of property or services, including all
obligations under master lease transactions pursuant to which we
or any of our subsidiaries have agreed to be treated as owner of
the subject property for federal income tax purposes (but
excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business);
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all of our payment obligations under interest rate swap or
similar agreements or foreign currency hedge, exchange or
similar agreements at the time of determination, including any
such obligations we incurred solely to act as a hedge against
increases in interest rates that may occur under the terms of
other outstanding variable or floating rate indebtedness of ours;
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all obligations of the types referred to in the preceding bullet
points of another person and all dividends of another person the
payment of which, in either case, we have assumed or guaranteed
or for which we are responsible or liable, directly or
indirectly, jointly or severally, as obligor, guarantor or
otherwise;
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all compensation, reimbursement and indemnification obligations
of ours to the trustee pursuant to the junior subordinated
indenture; and
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all amendments, modifications, renewals, extensions,
refinancings, replacements and refundings of any of the above
types of indebtedness.
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The Debentures will rank senior to all of our equity securities.
The senior indebtedness will continue to be senior indebtedness
and entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any
term of the senior indebtedness or extension or renewal of the
senior indebtedness. Notwithstanding anything to the contrary in
the foregoing, senior indebtedness will not include
(1) indebtedness incurred for the purchase of goods,
materials or property, or for services obtained in the ordinary
course of business or for other liabilities arising in the
ordinary course of business, (2) any indebtedness which by
its terms expressly provides that it is not senior in right of
payment to the Debentures or (3) any of our indebtedness
owed to a person who is our subsidiary or employee which, in
each case, will (unless it is by its terms subordinated to the
Debentures) rank equally in right of payment and upon
liquidation, dissolution or winding up with the Debentures.
All liabilities of our subsidiaries including trade accounts
payable and accrued liabilities arising in the ordinary course
of business are effectively senior to the Debentures to the
extent of the assets of such subsidiaries, as we are a holding
company. As a result, we rely primarily on dividends and other
payments from our direct and indirect subsidiaries, which are
generally regulated insurance companies, to pay interest on our
outstanding debt
S-24
obligations. Regulatory rules may restrict our ability to
withdraw capital from our subsidiaries by dividends, loans or
other means.
If certain events in bankruptcy, insolvency or reorganization
occur, we will first pay all senior indebtedness, including any
interest accrued after the events occur, in full before we make
any payment or distribution, whether in cash, securities or
other property, on account of the principal of or interest on
the Debentures. In such an event, we will pay or deliver
directly to the holders of senior indebtedness, any payment or
distribution otherwise payable or deliverable to holders of the
Debentures. We will make the payments to the holders of senior
indebtedness according to priorities existing among those
holders until we have paid all senior indebtedness, including
accrued interest, in full.
If such events of bankruptcy, insolvency or reorganization
occur, after we have paid in full all amounts owed on senior
indebtedness, the holders of Debentures together with the
holders of any of our other pari passu securities will be
entitled to receive from our remaining assets any principal,
premium or interest due at that time on the Debentures and such
other obligations, subject to the limitation on payments of
deferred and unpaid interest described in
Limitation on Claims in the Event of Our
Bankruptcy, Insolvency or Receivership, before we make any
payment or other distribution on account of any of our capital
stock or obligations ranking junior to the Debentures.
If we violate the junior subordinated indenture by making a
payment or distribution to holders of the Debentures before we
have paid all the senior indebtedness in full, then such holders
of the Debentures will have to pay or transfer the payments or
distributions to the trustee in bankruptcy, receiver,
liquidating trustee or other person distributing our assets for
payment of the senior indebtedness.
Because of the subordination provisions, if we become insolvent,
holders of senior indebtedness may receive more, ratably, and
holders of the Debentures having a claim pursuant to those
securities may receive less, ratably, than our other creditors.
This type of subordination will not prevent an event of default
from occurring under the junior subordinated indenture in
connection with the Debentures.
The junior subordinated indenture places no limitation on the
amount of senior indebtedness that we may incur. We expect from
time to time to incur additional indebtedness and other
obligations constituting senior indebtedness.
Limitation
on Claims in the Event of Our Bankruptcy, Insolvency or
Receivership
The junior subordinated indenture provides that each holder of
Debentures, by that holders acceptance of the Debentures,
agrees that in certain events of our bankruptcy, insolvency or
receivership prior to the redemption or repayment of its
Debentures, that holder of Debentures will have no claim for,
and thus no right to receive, deferred and unpaid interest
(including compounded interest thereon) that has not been
settled through the application of the alternative payment
mechanism to the extent the amount of such interest exceeds two
years of accumulated and unpaid interest (including compounded
interest thereon) on such holders Debentures.
Denominations
The Debentures will be issued only in registered form, without
coupons, in denominations of $1,000 each or multiples of $1,000.
We expect that the Debentures will be held in book-entry form
only, as described below under Book-Entry System,
and will be held in the name of DTC or its nominee.
Limitation
on Mergers and Sales of Assets
The junior subordinated indenture generally permits a
consolidation or merger between us and another entity. It also
permits the sale, transfer or lease by us of all or
substantially all of our property and assets to another person
or entity. These transactions are permitted if:
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the resulting or acquiring entity, if other than us, is
organized and existing under the laws of a domestic jurisdiction
and assumes all of our responsibilities and liabilities under
the junior subordinated indenture,
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S-25
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including the payment of all amounts due on the debt securities
and performance of the covenants in the junior subordinated
indenture;
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immediately after the transaction, and giving effect to the
transaction, no event of default under the junior subordinated
indenture exists; and
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certain other conditions as prescribed in the junior
subordinated indenture are met.
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If we consolidate or merge with or into any other entity or
sell, transfer or lease all or substantially all of our assets
according to the terms and conditions of the junior subordinated
indenture, the resulting or acquiring entity will be substituted
for us in such junior subordinated indenture with the same
effect as if it had been an original party to the junior
subordinated indenture. As a result, such successor entity may
exercise our rights and powers under the junior subordinated
indenture, in our name and we will be released from all our
liabilities and obligations under the junior subordinated
indenture and under the Debentures.
Events of
Default; Waiver and Notice
The following events are events of default with respect to the
Debentures:
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default in the payment of interest, including compounded
interest, in full on any Debentures for a period of 30 days
after the conclusion of a
10-year
period following the commencement of any deferral period if at
such time such deferral period has not ended or on the final
maturity date;
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default in the payment of principal on the Debentures when due,
whether at stated maturity, upon redemption, upon a declaration
of acceleration or otherwise, subject to the limitations
described in Repayment of Principal; or
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certain events of bankruptcy, insolvency or receivership of
Chubb.
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An event of default does not include a failure to comply with
covenants under the junior subordinated indenture, including our
obligations under the alternative payment mechanism. Although
the failure to comply with such covenants will not constitute an
event of default, it will otherwise constitute a breach of our
contractual obligations under the junior subordinated indenture
and could give rise to a claim against us relating to the
specific breach; however, the remedy of the holders of the
Debentures may be limited to direct monetary damages (if any).
The junior subordinated indenture provides that the trustee must
give holders notice of all defaults or events of default within
90 days after it becomes actually known to a responsible
officer of the trustee unless the default or event of default
has been cured or waived. However, except in the cases of a
default or an event of default in payment on the Debentures, the
trustee will be protected in withholding the notice if its
responsible officers determine that withholding of the notice is
in the interest of such holders.
If an event of default under the junior subordinated indenture
occurs and continues, the trustee or the holders of at least 25%
in aggregate principal amount of the outstanding Debentures may
declare the entire principal amount of and all accrued but
unpaid interest on all Debentures to be due and payable
immediately.
If such a declaration occurs, the holders of a majority of the
aggregate principal amount of the outstanding Debentures can,
subject to certain conditions, rescind the declaration.
The holders of a majority in aggregate principal amount of the
outstanding Debentures may waive any past default under the
junior subordinated indenture or the Debentures, except:
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a default in payment of principal or interest on the
Debentures; or
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a default under any provision of the junior subordinated
indenture that itself cannot be modified or amended without the
consent of the holder of each outstanding Debentures.
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The holders of a majority in principal amount of the Debentures
shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the
trustee, subject to the provisions of the junior subordinated
indenture.
S-26
We are required to file an officers certificate with the
trustee each year that states, to the knowledge of the
certifying officer, whether or not any defaults exist under the
terms of the junior subordinated indenture.
Actions
Not Restricted by Junior Subordinated Indenture
The junior subordinated indenture does not contain restrictions
on our ability to:
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incur, assume or become liable for any type of debt or other
obligation;
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create liens on our property for any purpose; or
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pay dividends or make distributions on our capital stock or
purchase or redeem our capital stock, except as set forth under
Dividend and Other Payment Stoppages During
Interest Deferral and Under Certain Other Circumstances
above.
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The junior subordinated indenture does not require the
maintenance of any financial ratios or specified levels of net
worth or liquidity. In addition, the junior subordinated
indenture does not contain any provisions that would require us
to purchase or redeem or modify the terms of any of the
Debentures upon a change of control or other event involving us
that may adversely affect the creditworthiness of the Debentures.
Modification
of Junior Subordinated Indenture
Under the junior subordinated indenture, certain of our rights
and obligations and certain of the rights of holders of the
Debentures may be modified or amended with the consent of the
holders of at least a majority of the aggregate principal amount
of the outstanding Debentures. However, the following
modifications and amendments will not be effective against any
holder without its consent:
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a change in the stated maturity date of any payment of principal
or interest (including any additional interest thereon),
including the scheduled maturity date and the final maturity
date;
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a change in the manner of calculating payments due on the
Debentures in a manner adverse to holders of Debentures;
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a change in the place of payment for any payment on the
Debentures that is adverse to holders of the Debentures or a
change in the currency in which any payment on the Debentures is
payable;
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an impairment of the right of any holder of Debentures to
institute suit for payments on the Debentures;
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a reduction in the percentage of outstanding Debentures required
to consent to a modification or amendment of the junior
subordinated indenture or required to consent to a waiver of
compliance with certain provisions of the junior subordinated
indenture or certain defaults under the junior subordinated
indenture; and
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a reduction in the requirements contained in the junior
subordinated indenture for quorum or voting.
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Under the junior subordinated indenture, the holders of at least
a majority of the aggregate principal amount of the outstanding
Debentures may, on behalf of all holders of the Debentures,
waive compliance by us with any covenant or condition contained
in the junior subordinated indenture.
We and the trustee may execute, without the consent of any
holder of Debentures, any supplemental indenture for the
purposes of:
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evidencing the succession of another corporation to us, and the
assumption by any such successor of our covenants contained in
the junior subordinated indenture and the Debentures;
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adding or modifying covenants of us for the benefit of the
holders of the Debentures or surrendering any of our rights or
powers under the junior subordinated indenture; provided
that such addition, modification or surrender may not add
events of default or acceleration events with respect to the
Debentures;
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evidencing and providing for the acceptance of appointment under
the junior subordinated indenture by a successor trustee with
respect to the Debentures;
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S-27
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curing any ambiguity, correcting or supplementing any provision
in the junior subordinated indenture that may be defective or
inconsistent with any other provision therein or in any
supplemental indenture or making any other provisions with
respect to matters or questions arising under the junior
subordinated indenture, provided that such other
provisions shall not adversely affect the interests of the
holders of the Debentures in any material respect; or
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making any changes to the junior subordinated indenture in order
for the junior subordinated indenture to conform to the final
prospectus supplement.
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Book-Entry
System
The Depository Trust Company, which we refer to as DTC and,
along with its successors in this capacity, as the depositary,
will act as securities depositary for the Debentures. The
Debentures will be issued only as fully registered securities
registered in the name of Cede & Co., the
depositarys nominee. One or more fully registered global
security certificates, representing the total aggregate
principal amount of the Debentures, will be issued and will be
deposited with the depositary or its custodian and will bear a
legend regarding the restrictions on exchanges and registration
of transfer referred to below.
The laws of some jurisdictions may require that some purchasers
of securities take physical delivery of securities in definitive
form. These laws may impair the ability to transfer beneficial
interests in the Debentures so long as the Debentures are
represented by global security certificates.
Investors may elect to hold interests in the Debentures in
global form through either DTC in the United States or
Clearstream Banking, société anonyme, which we refer
to as Clearstream, Luxembourg, or Euroclear Bank S.A./N.V, which
we refer to as Euroclear, if they are participants in those
systems, or indirectly through organizations which are
participants in those systems. Clearstream, Luxembourg and
Euroclear will hold interests on behalf of their participants
through customers securities accounts in Clearstream,
Luxembourgs and Euroclears names on the books of
their respective depositaries, which in turn will hold such
interests in customers securities accounts in the
depositaries names on the books of DTC. Citibank, N.A.
will act as depositary for Clearstream, Luxembourg, and JPMorgan
Chase Bank will act as depositary for Euroclear, and we refer to
them in such capacities as the U.S. Depositaries.
DTC advises that it is a limited-purpose trust company organized
under the New York Banking Law, a banking
organization within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a clearing
corporation within the meaning of the New York Uniform
Commercial Code and a clearing agency registered
pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. The depositary holds securities that its
participants, which we refer to as the DTC Participants, deposit
with the depositary. The depositary also facilitates the
settlement among participants of securities transactions,
including transfers and pledges, in deposited securities through
electronic computerized book-entry changes in participants
accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants include securities
brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. The depositary is
owned by a number of its direct participants and by the New York
Stock Exchange, the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the
depositarys system is also available to others, including
securities brokers and dealers, banks and trust companies that
clear transactions through or maintain a direct or indirect
custodial relationship with a direct participant either
directly, or indirectly. The rules applicable to the depositary
and its participants are on file with the SEC.
Clearstream, Luxembourg advises that it is incorporated under
the laws of Luxembourg as a professional depositary.
Clearstream, Luxembourg holds securities for its participating
organizations, which we refer to as the Clearstream
Participants, and facilitates the clearance and settlement of
securities transactions between Clearstream Participants through
electronic book-entry changes in accounts of Clearstream
Participants, thereby eliminating the need for physical movement
of certificates. Clearstream, Luxembourg provides to Clearstream
Participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally
traded securities and securities lending and borrowing.
Clearstream, Luxembourg interfaces with domestic markets in
several countries. As a professional depositary, Clearstream,
Luxembourg is subject to regulation by the Luxembourg Commission
for the Supervision of the Financial Sector (Commission de
Surveillance du Secteur Financier).
S-28
Clearstream Participants are recognized financial institutions
around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and
certain other organizations and may include the underwriters.
Indirect access to Clearstream, Luxembourg is also available to
others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a
Clearstream Participant, either directly or indirectly.
Distributions with respect to interests in the Debentures held
beneficially through Clearstream, Luxembourg will be credited to
cash accounts of Clearstream Participants in accordance with its
rules and procedures, to the extent received by the
U.S. Depositary for Clearstream, Luxembourg.
Euroclear advises that it was created in 1968 to hold securities
for participants of Euroclear, which we refer to as the
Euroclear Participants, and to clear and settle transactions
between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the
need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Euroclear
includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several
countries. Euroclear is operated by Euroclear Bank S.A./N.V,
which we refer to as the Euroclear Operator. All operations are
conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator. Euroclear Participants
include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may
include the underwriters. Indirect access to Euroclear is also
available to other firms that clear through or maintain a
custodial relationship with a Euroclear Participant, either
directly or indirectly.
Securities clearance accounts and cash accounts with the
Euroclear Operator are governed by the Terms and Conditions
Governing Use of Euroclear and the related Operating Procedures
of the Euroclear System, and applicable Belgian law, which we
refer to collectively as the Terms and Conditions. The Terms and
Conditions govern transfers of securities and cash within the
Euroclear System, withdrawals of securities and cash from the
Euroclear System, and receipts of payments with respect to
securities in the Euroclear System. All securities in the
Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms
and Conditions only on behalf of Euroclear Participants, and has
no records of or relationship with persons holding through
Euroclear Participants.
Distributions with respect to the Debentures held beneficially
through the Euroclear System will be credited to the cash
accounts of Euroclear Participants in accordance with the Terms
and Conditions, to the extent received by the
U.S. Depositary for the Euroclear System.
We will issue the Debentures in definitive certificated form if
the depositary notifies us that it is unwilling or unable to
continue as depositary or the depositary ceases to be a clearing
agency registered under the Securities Exchange Act of 1934, as
amended, and a successor depositary is not appointed by us
within 90 days. In addition, beneficial interests in a
global security certificate may be exchanged for definitive
certificated Debentures upon request by or on behalf of the
depositary in accordance with customary procedures following the
request of a beneficial owner seeking to exercise or enforce its
rights under such Debentures. If we determine at any time that
the Debentures shall no longer be represented by global security
certificates, we will inform the depositary of such
determination who will, in turn, notify participants of their
right to withdraw their beneficial interest from the global
security certificates, and if such participants elect to
withdraw their beneficial interests, we will issue certificates
in definitive form in exchange for such beneficial interests in
the global security certificates. Any global note, or portion
thereof, that is exchangeable pursuant to this paragraph will be
exchangeable for note certificates, as the case may be,
registered in the names directed by the depositary. We expect
that these instructions will be based upon directions received
by the depositary from its participants with respect to
ownership of beneficial interests in the global security
certificates.
As long as the depositary or its nominee is the registered owner
of the global security certificates, the depositary or its
nominee, as the case may be, will be considered the sole owner
and holder of the global security certificates and all
Debentures represented by these certificates for all purposes
under the Debentures and the junior
S-29
subordinated indenture governing the Debentures. Except in the
limited circumstances referred to above, owners of beneficial
interests in global security certificates:
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will not be entitled to have the Debentures represented by these
global security certificates registered in their names; and
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will not be considered to be owners or holders of the global
security certificates or any Debentures represented by these
certificates for any purpose under the Debentures or the junior
subordinated indenture governing the Debentures.
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All payments on the Debentures represented by the global
security certificates and all transfers and deliveries of
related Debentures will be made to the depositary or its
nominee, as the case may be, as the holder of the securities.
Ownership of beneficial interests in the global security
certificates will be limited to participants or persons that may
hold beneficial interests through institutions that have
accounts with the depositary or its nominee. Ownership of
beneficial interests in global security certificates will be
shown only on, and the transfer of those ownership interests
will be effected only through, records maintained by the
depositary or its nominee, with respect to participants
interests, or any participant, with respect to interests of
persons held by the participant on their behalf. Payments,
transfers, deliveries, exchanges and other matters relating to
beneficial interests in global security certificates may be
subject to various policies and procedures adopted by the
depositary from time to time. Neither we nor the trustee will
have any responsibility or liability for any aspect of the
depositarys or any participants records relating to,
or for payments made on account of, beneficial interests in
global security certificates, or for maintaining, supervising or
reviewing any of the depositarys records or any
participants records relating to these beneficial
ownership interests.
Although the depositary has agreed to the foregoing procedures
in order to facilitate transfers of interests in the global
security certificates among participants, the depositary is
under no obligation to perform or continue to perform these
procedures, and these procedures may be discontinued at any
time. We will not have any responsibility for the performance by
the depositary or its direct participants or indirect
participants under the rules and procedures governing the
depositary.
The information in this section concerning the depositary, its
book-entry system, Clearstream, Luxembourg and the Euroclear
System has been obtained from sources that we believe to be
reliable, but we have not attempted to verify the accuracy of
this information.
Global
Clearance and Settlement Procedures
Initial settlement for the Debentures will be made in
immediately available funds. Secondary market trading between
DTC Participants will occur in the ordinary way in accordance
with DTC rules and will be settled in immediately available
funds using DTCs
Same-Day
Funds Settlement System. Secondary market trading between
Clearstream Participants
and/or
Euroclear Participants will occur in the ordinary way in
accordance with the applicable rules and operating procedures of
Clearstream, Luxembourg and the Euroclear System, as applicable.
Cross-market transfers between persons holding directly or
indirectly through DTC on the one hand, and directly or
indirectly through Clearstream Participants or Euroclear
Participants, on the other, will be effected through DTC in
accordance with DTC rules on behalf of the relevant European
international clearing system by its U.S. Depositary;
however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines
(European time). The relevant European international clearing
system will, if the transaction meets its settlement
requirements, deliver instructions to its U.S. Depositary
to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or
receiving payment in accordance with normal procedures for
same-day
funds settlement applicable to DTC. Clearstream Participants and
Euroclear Participants may not deliver instructions directly to
their respective U.S. Depositaries.
Because of time-zone differences, credits of Debentures received
in Clearstream, Luxembourg or the Euroclear System as a result
of a transaction with a DTC Participant will be made during
subsequent securities
S-30
settlement processing and dated the business day following the
DTC settlement date. Such credits or any transactions in such
Debentures settled during such processing will be reported to
the relevant Euroclear Participant or Clearstream Participant on
such business day. Cash received in Clearstream, Luxembourg or
the Euroclear System as a result of sales of the Debentures by
or through a Clearstream Participant or a Euroclear Participant
to a DTC Participant will be received with value on the DTC
settlement date but will be available in the relevant
Clearstream, Luxembourg or the Euroclear System cash account
only as of the business day following settlement in DTC.
Although DTC, Clearstream, Luxembourg and the Euroclear System
have agreed to the foregoing procedures in order to facilitate
transfers of Debentures among participants of DTC, Clearstream,
Luxembourg and the Euroclear System, they are under no
obligation to perform or continue to perform such procedures and
such procedures may be discontinued or changed at any time.
Governing
Law
The junior subordinated indenture and the Debentures will be
governed by, and construed in accordance with, the laws of the
State of New York.
The
Trustee
The trustee will have all of the duties and responsibilities
specified under the Trust Indenture Act. Other than its duties
in a case of default, the trustee is under no obligation to
exercise any of the powers under the junior subordinated
indenture at the request, order or direction of any holders of
Debentures unless offered reasonable indemnification. The
trustee acts as trustee for our 4.934% notes due 2007,
71/8% notes
due December 15, 2007, 3.95% notes due 2008,
5.472% notes due 2008, 6% notes due 2011,
5.2% notes due 2013, 6.6% notes due 2018 and
6.8% debentures due 2031.
Miscellaneous
We or our affiliates may from time to time purchase any of the
Debentures that are then outstanding by tender, in the open
market or by private agreement.
S-31
DESCRIPTION
OF THE REPLACEMENT CAPITAL COVENANT
The following is a brief description of the terms of the
replacement capital covenant. It does not purport to be complete
in all respects. This description is subject to and qualified in
its entirely by the terms and provisions of the full document, a
copy of which will be filed with the SEC as an exhibit to a
current report on
Form 8-K.
References to we, us and our
in the following description refer only to The Chubb Corporation
and not any of its subsidiaries.
We will covenant in a replacement capital covenant for the
benefit of persons that buy, hold or sell a specified series of
our long-term indebtedness that ranks senior to the Debentures
that we will not repay, redeem, defease or purchase, and will
cause our subsidiaries not to purchase, as applicable, the
Debentures on or
before ,
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:
(a) the applicable percentage (as defined below) of the
aggregate amount of (i) the net cash proceeds received by
us and our subsidiaries from the sale of our common stock and
rights to purchase common stock to persons other than us and our
subsidiaries, (ii) the market value of any common stock and
rights to purchase common stock we and our subsidiaries have
delivered as consideration for property or assets in an
arms length transaction and (iii) the market value of
any common stock that we and our subsidiaries have issued to
persons other than us and our subsidiaries in connection with
the conversion of any convertible or exchangeable securities,
other than securities for which we or any of our subsidiaries
have received equity credit from any NRSRO (as defined below),
in each case within a measurement period (as defined below)
(without double counting proceeds received in any prior
measurement period); plus
(b) the aggregate amount of net cash proceeds received by
us and our subsidiaries within a measurement period (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 (each, as
defined below and being collectively with our common stock and
rights to purchase common stock referred to as the replacement
capital securities) to persons other than us and our
subsidiaries.
For the avoidance of doubt, any reference in this section to any
repayment of our securities will be deemed to include a
reference to defeasance of our obligations under such securities.
Our covenants in the replacement capital covenant run only to
the benefit of persons that buy, hold or sell the covered debt
(as defined below). The replacement capital covenant is not
intended for the benefit of holders of the Debentures and may
not be enforced by them, and the replacement capital covenant is
not a term of the junior subordinated indenture or the
Debentures, except that we have agreed in the junior
subordinated indenture that we will not amend the replacement
capital covenant to impose additional restrictions on the type
or amount of qualifying capital securities that we may include
for purposes of determining whether or to what extent repayment,
redemption or purchase of the Debentures is permitted, except
with the consent of the holders of at least a majority in
principal amount of the Debentures. The initial series of
covered debt is our 6.8% debentures due November 15,
2031 (CUSIP: 171232AE1) (being referred to as the initial
covered debt). The replacement capital covenant includes
provisions requiring us to redesignate a new series of
indebtedness if, among other things, the covered debt approaches
maturity, becomes subject to a redemption notice or is reduced
to less than $100 million in outstanding principal amount,
subject to additional procedures. We expect that, at all times
prior
to ,
2047, we will be subject to the replacement capital covenant
and, accordingly, will be restricted in our ability to repay,
redeem, defease or purchase the Debentures.
Our ability to raise proceeds from the replacement capital
securities during the applicable measurement period with respect
to any proposed repayment, redemption, defeasance or purchase of
the Debentures will depend on, among other things, market
conditions at that time as well as the acceptability to
prospective investors of the terms of those replacement capital
securities.
We may amend or supplement the replacement capital covenant from
time to time with the consent of the holders of at least a
majority in principal amount of the then-effective series of
covered debt. We may, acting alone and without the consent of
the covered debtholders (as defined below), amend or supplement
the replacement
S-32
capital covenant if (i) the effect of such amendment or
supplement is solely to impose additional restrictions on, or to
eliminate certain of, the types of securities qualifying as
replacement capital securities, and one of our officers 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 amendment
or supplement is not adverse to the covered debtholders and one
of our officers 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
and/or
mandatorily convertible preferred stock as replacement capital
securities if, in the case of this clause (iii), 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, which, as a
result, causes us to believe that there is more than an
insubstantial risk that failure to do so would result in a
reduction in our earnings per share as calculated for financial
reporting purposes.
The replacement capital covenant will terminate upon the
earliest to occur of
(i) ,
2047, or, if earlier, the date on which the Debentures are
otherwise repaid, redeemed, defeased, satisfied and discharged
or purchased in full in accordance with the terms of the
replacement capital covenant, (ii) the date, if any, on
which the holders of at least a majority in principal amount of
the then-effective specified series of covered debt consent or
agree to the termination of the replacement capital covenant and
our obligations thereunder, (iii) the date on which we
cease 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 provided
below) and (iv) the date on which an event of default under
the junior subordinated indenture resulting in an acceleration
of the Debentures occurs.
If we are obligated to sell replacement capital securities and
apply the net proceeds to payments of principal of or interest
on any outstanding securities in addition to the Debentures,
then on any date and for any period the amount of net proceeds
received by us from those sales and available for such payments
shall be applied to the Debentures and those other securities
having the same scheduled repayment date or scheduled redemption
date as the Debentures pro rata in accordance with their
respective outstanding principal amounts (but taking into
account any other payments made on such other securities from
other sources of funds) and none of such net proceeds shall be
applied to any other securities having a later scheduled
repayment date or scheduled redemption date until the principal
of and all deferred interest on the Debentures has been paid in
full.
Applicable percentage means 1 divided by (a) 75% with
respect to any repayment, redemption, defeasance or purchase
prior
to ,
2017, (b) 50% with respect to any repayment, redemption,
defeasance or purchase on or
after ,
2017 and prior
to ,
2037 and (c) 25% with respect to any repayment, redemption,
defeasance or purchase on or
after ,
2037.
Common stock means our common stock (including treasury shares
of common stock), common stock issued pursuant to any dividend
reinvestment plan or our employee benefit plans, a security of
ours, ranking upon our liquidation, dissolution or winding up
junior to our qualifying preferred stock and pari passu
with our common stock, that tracks the performance of, or
relates to the results of, a business, unit or division of ours,
and any securities issued in exchange therefore in connection
with a merger, consolidation, binding share exchange, business
combination, recapitalization or other similar event.
Covered debt means (a) at the date of the replacement
capital covenant and continuing to but not including the first
redesignation date (as defined below), the initial covered debt
and (b) thereafter, commencing with each redesignation date
and continuing to but not including the next succeeding
redesignation date, indebtedness, other than the Debentures and
other pari passu securities, which is eligible
subordinated debt or, if no eligible subordinated debt is then
outstanding, eligible senior debt, identified pursuant to the
replacement capital covenant as the covered debt for such period.
S-33
Debt exchangeable for common equity means a security or
combination of securities (together being referred in this
definition as such securities) that:
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gives the holder a beneficial interest in (i) debt
securities of ours that are not redeemable prior to settlement
of the stock purchase contract referred in subclause (ii)
and (ii) a fractional interest in a stock purchase contract
for a share of our common stock 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;
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provides that the investors directly or indirectly grant us 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 our common stock pursuant to
such stock purchase contracts;
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includes a remarketing feature pursuant to which our debt
securities are remarketed to new investors commencing not later
than the settlement date of the purchase contract; and
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provides for the proceeds raised in the remarketing to be used
to purchase our common stock 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 us acquiring our
debt securities or other collateral directly or indirectly
pledged by investors in the debt exchangeable for common equity.
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Debt exchangeable for preferred equity means a security or
combination of securities (together being referred to in this
definition as such securities) that:
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gives the holder a beneficial interest in (a) debt
securities of Chubb or Chubbs subsidiaries (which we refer
to in this definition as the issuer) that include a provision
requiring the issuer 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 debt securities commencing not later than two years after
the issuer first defers distributions on such debt securities
and that are the issuers most junior subordinated debt (or
rank pari passu with its most junior subordinated debt)
and (b) a fractional interest in a stock purchase contract
for qualifying preferred stock;
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provides that the holders directly or indirectly grant to the
issuer 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;
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includes a remarketing feature pursuant to which such debt
securities are remarketed to new holders commencing within five
years from the date of issuance of the securities or earlier in
the event of an early settlement event based on (i) one or
more financial tests set forth in the terms of the instrument
governing such debt exchangeable for preferred equity or
(ii) our dissolution or the dissolution of the issuer.
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provides for the proceeds raised in the remarketing to be used
to purchase qualifying 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 securities, provides that the stock purchase
contracts will be settled by the issuer 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 preferred equity;
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includes a qualifying replacement capital covenant,
provided that such replacement capital covenant will
apply to such securities and to the qualifying preferred stock
and will not include debt exchangeable for preferred equity as a
replacement security for such securities or the qualifying
preferred stock; and
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after the issuance of such qualifying preferred stock, provides
the holder of the security with a beneficial interest in such
qualifying preferred stock.
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Mandatorily convertible preferred stock means preferred stock
with (a) no prepayment obligation of the liquidation
preference 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 our common stock 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.
S-34
Measurement date means: with respect to any repayment,
redemption, defeasance or purchase of the Debentures (i) on
or prior to the scheduled maturity date, the date 180 days
prior to delivery of notice of such repayment, defeasance or
redemption or the date of such purchase and (ii) after the
scheduled maturity date, 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 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.
Qualifying capital securities means securities (other than our
common stock, rights to acquire common stock or securities
exchangeable for or convertible into common stock) that, in the
determination of our board of directors or a duly authorized
committee thereof reasonably construing the definitions and
other terms of the replacement capital covenant, meet one of the
following criteria:
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in connection with any repayment, redemption, defeasance or
purchase of Debentures prior
to , 2017:
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securities issued by us or our subsidiaries that (1) rank
pari passu with or junior to the Debentures upon our
liquidation, dissolution or winding up, (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 (as such
terms are defined below) and are subject to intent-based
replacement disclosure; or
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securities issued by us or our subsidiaries that (a) rank
pari passu with or junior upon our liquidation,
dissolution or winding up to the Debentures, (b) have no
maturity or a maturity of at least 40 years, (c) are
subject to a qualifying replacement capital covenant and
(d) have a mandatory trigger provision and an optional
deferral provision; or
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in connection with any repayment, redemption, defeasance or
purchase of Debentures on or
after , 2017 and
prior to , 2037:
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all types of securities that would be qualifying capital
securities prior
to , 2017;
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securities issued by us or our subsidiaries that (1) rank
pari passu with or junior to the Debentures upon our
liquidation, dissolution or winding up, (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;
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securities issued by us or our subsidiaries that (1) rank
pari passu with or junior to the Debentures upon our
liquidation, dissolution or winding up, (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;
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securities issued by us or our subsidiaries that (1) rank
pari passu with or junior to the Debentures upon our
liquidation, dissolution or winding up, (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;
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securities issued by us or our subsidiaries that (1) rank
junior upon our liquidation, dissolution or winding up to all of
our senior and subordinated debt other than the Debentures and
the 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 60 years;
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cumulative preferred stock issued by us or our subsidiaries that
(1) has no prepayment obligation on the part of the issuer
thereof, whether at the election of the holders or otherwise,
(2) has no maturity or a maturity of at least 60 years
and (3) is subject to a qualifying replacement capital
covenant; or
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S-35
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other securities issued by us or our subsidiaries that
(1) rank upon our liquidation, dissolution or winding up
either (a) pari passu with or junior to the
Debentures upon our liquidation, dissolution or winding up or
(b) pari passu with the claims of our trade
creditors and junior to all of our long-term indebtedness for
money borrowed upon our liquidation, dissolution or winding up
(other than our long-term indebtedness for money borrowed from
time to time outstanding that by its terms ranks pari passu
with such securities on our liquidation, dissolution or
winding up) and (2) either (x) have no maturity or a
maturity of at least 40 years, 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 30 years, are subject to a
qualifying replacement capital covenant and have a mandatory
trigger provision and an optional deferral provision; or
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in connection with any repayment, redemption, defeasance or
purchase of Debentures at any time
after , 2037:
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all types of securities that would be qualifying capital
securities prior
to , 2037;
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securities issued by us or our subsidiaries that (1) rank
pari passu with or junior to the Debentures upon our
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;
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securities issued by us or our subsidiaries that (1) rank
junior to all of our senior and subordinated debt other than the
Debentures and any other pari passu securities upon our
liquidation, dissolution or winding up, (2) have a
mandatory trigger provision, an optional deferral provision and
intent-based replacement disclosure and (3) have no
maturity or a maturity of at least 30 years; or
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preferred stock issued by us or our 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.
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For purposes of the definitions provided above, the following
terms shall have the following meanings:
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 us 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 deferred distributions on such securities, commencing on
the earlier of (x) the first distribution date after
commencement of a deferral period on which we pay current
distributions on such securities and (y) the fifth
anniversary of the commencement of such deferral period if on
such date such deferral period has not ended, 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 we have
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 ours up to the preferred
cap (as defined below) in the case of APM qualifying securities
that are qualifying preferred stock or mandatorily convertible
preferred stock;
(b) permit us to pay current distributions on any
distribution date out of any source of funds but
(x) require us to pay deferred distributions only out of
eligible proceeds and (y) prohibit us from paying deferred
distributions out of any source of funds other than eligible
proceeds unless an event of default has occurred and is
continuing;
(c) if deferral of distributions continues for more than
one year, require us not to redeem or purchase any of our
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 in circumstances substantially similar to those listed in
Description of the Debentures Dividend and
Other Payment Stoppages during Interest Deferral and under
Certain Other Circumstances in this prospectus supplement,
which we refer to as a repurchase restriction;
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(d) limit our obligation 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 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 our most recently published financial
statements (which limitation is being referred to as the common
cap); and
(ii) in the case of APM qualifying securities that are
qualifying preferred stock or mandatorily convertible preferred
stock, an amount from the issuance of such qualifying preferred
stock and then still-outstanding mandatorily convertible
preferred stock pursuant to the related alternative payment
mechanism (including, in the case of qualifying preferred stock,
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 (which
limitation is being referred to as the preferred cap);
(e) permit us, at our option, to impose a limitation on the
issuance of APM qualifying securities consisting of common stock
and rights to purchase common stock to a maximum issuance cap to
be set at our discretion and otherwise substantially similar to
the share cap as defined above, provided that such share
cap will be subject to our agreement to use commercially
reasonable efforts (i) to increase the share cap when
reached to enable it to simultaneously satisfy our future fixed
or contingent obligations under such securities and other
securities and derivative instruments that provide for
settlement or payment in shares of common stock or (ii) if
we cannot increase the share cap as contemplated in the
preceding clause, by requesting our board of directors to adopt
a resolution for shareholder vote at the next annual meeting of
our shareholders to increase the number of our shares of
authorized common stock for purposes of satisfying our
obligations to pay deferred distributions;
(f) in the case of securities other than qualifying
preferred stock, include a bankruptcy claim limitation
provision; and
(g) permit us, at our option, to provide that if we are
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 (being referred to as a business combination) where
immediately after the consummation of the business combination
more than 50% of the voting stock of the surviving or resulting
entity or the person to whom all or substantially all of our
property or assets are conveyed, transferred or leased in such
business combination is owned by the shareholders of the other
party to the business combination or person to whom all or
substantially all of the corporations property or assets
are conveyed, transferred or leased, or continuing directors
cease for any reason to constitute a majority of the directors
of the surviving or resulting entity or person to whom all or
substantially all of the corporations property or assets
are conveyed, transferred or leased, 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;
provided (and it being understood) that:
(i) we 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;
(ii) if, due to a market disruption event or otherwise, we
are able to raise and apply some, but not all, of the eligible
proceeds necessary to pay all deferred distributions on any
distribution date, we will apply any available eligible proceeds
to pay accrued and deferred distributions on the applicable
distribution date in chronological order subject to the common
cap, preferred cap and share cap (if any), as
applicable; and
(iii) if we have outstanding more than one class or series
of securities under which we are 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 us from those
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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 share
cap referred to above, as applicable, in proportion to the total
amounts that are due on such securities.
APM qualifying securities means:
(a) common stock;
(b) rights to purchase common stock;
(c) qualifying preferred stock; and
(d) mandatorily convertible preferred stock.
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 (being
referred to together in this definition as the securities),
provisions in the terms thereof or of the related transaction
agreements 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 we fail 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
preferred stock or mandatorily convertible preferred stock, 25%
of the stated or principal amount of such securities then
outstanding; and
(ii) in the case of any other securities, the amount of
accumulated and deferred 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;
provided, however, that holders of such securities may have an
additional claim that is senior to our common stock and is or
would be pari passu with any qualifying preferred stock
in respect of deferred 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, up to the amount equal to their
pro rata shares of any unused portion of the preferred cap.
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 our long-term indebtedness for
money borrowed during the period that such long-term
indebtedness for money borrowed is covered debt, provided that,
except under certain circumstances, a person who has sold all of
their right, title and interest in covered debt shall cease to
be a covered debtholder at the time of such sale if, at such
time, we have not breached or repudiated, or threatened to
breach or repudiate, our obligations under the replacement
capital covenant.
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 payments or other income
distributions to the holders or beneficial owners thereof that
are not our subsidiaries.
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 issuers then
outstanding series 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) of this definition 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
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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
issuers 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 issuers 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 issuers then
outstanding series of unsecured indebtedness for money borrowed
that ranks most senior upon our liquidation, dissolution or
winding up, (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 issuers long-term
indebtedness for money borrowed that is separate from each other
series of such indebtedness.
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 us with respect to such covered
debt.
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 SEC made by the issuer under the
Securities Exchange Act prior to or contemporaneously with the
issuance of such securities, that the issuer will redeem,
purchase or defease such securities only with the proceeds of
replacement capital securities that have terms and provisions at
the time of redemption, purchase or defeasance that are as or
more equity-like than the securities then being redeemed,
purchased or defeased and which proceeds were raised within
180 days prior to the applicable redemption, purchase or
defeasance date.
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 deferred 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
deferred distributions on those 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 preferred
stock and then still-outstanding mandatorily convertible
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;
(ii) if the provisions described in clause (i)
immediately above do not require such issuance and sale within
one year of such failure, include a repurchase restriction;
(iii) other than in the case of
non-cumulative
perpetual preferred stock, prohibit the issuer of such
securities from redeeming or purchasing an of its securities
ranking junior to or pari passu with an APM qualifying
securities upon our liquidation, dissolution or winding up the
proceeds of which were used to settle
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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) immediately above to pay
such deferred distributions in full; and
(iv) 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 issuers
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 junior subordinated 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 us for this purpose, and
(ii) in the case of rights to acquire common stock, a value
determined by a nationally recognized independent investment
banking firm or other third party valuation firm selected by us
for this purpose.
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 the purposes of the definitions
of APM qualifying securities and qualifying 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 SEC.
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;
provided that bankruptcy claim limitation provision does not
apply.
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 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 deferred distributions, remain unpaid.
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Qualifying preferred stock means our or our subsidiaries
non-cumulative perpetual preferred stock 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 than permitted remedies and either (i) is
subject to intent-based replacement disclosure and has a
provision that prohibits the issuer from making any
distributions thereon upon our failure to satisfy one or more
financial tests set forth therein or (ii) is subject to a
qualifying replacement capital covenant.
Qualifying replacement capital covenant means (a) a
replacement capital covenant substantially similar to the
replacement capital covenant applicable to the Debentures or
(b) a replacement capital covenant, as identified by our
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 the
replacement capital covenant applicable to the Debentures,
(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 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.
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 we elect to redeem, or we or one of our subsidiaries
elects to purchase, such covered debt either in whole or in part
with the consequence that after giving effect to such redemption
or purchase the outstanding principal amount of such covered
debt is less than $100,000,000, the applicable redemption or
purchase date and (c) if such covered debt is not eligible
subordinated debt, the date on which we issue long-term
indebtedness for money borrowed that is eligible subordinated
debt.
S-41
MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the material
U.S. federal income tax considerations relating to the
purchase, ownership and disposition of the Debentures. This
discussion is based upon the provisions of the
U.S. Internal Revenue Code of 1986, as amended, or the
Code, Treasury regulations promulgated thereunder and
administrative and judicial interpretations thereof, all as in
effect on the date hereof, and all of which are subject to
change, possibly with retroactive effect, or to different
interpretation. This discussion only applies to Debentures that
are held as capital assets, within the meaning of
the Code, by a holder (as defined below) who purchases
Debentures in the initial offering at their issue
price (i.e., the first price at which a substantial amount
of the Debentures are sold to the public).
This discussion is for general information only and does not
address all of the material tax considerations that may be
relevant to a holder in light of its particular circumstances or
to holders subject to special treatment under U.S. federal
income tax laws (such as banks, insurance companies, tax-exempt
entities, retirement plans, dealers in securities, real estate
investment trusts, regulated investment companies, persons
holding the Debentures as part of a straddle,
hedge, conversion or other integrated
transaction, United States holders (as defined below) whose
functional currency is not the U.S. dollar, former citizens
or residents of the United States and holders who mark
securities to market for U.S. federal income tax purposes).
This discussion does not address any state, local or foreign tax
consequences or any U.S. federal estate, gift or
alternative minimum tax consequences.
For purposes of this discussion, a United States holder is a
beneficial owner of a Debenture that is, for U.S. federal
income tax purposes:
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an individual who is a citizen or resident of the United States;
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a corporation created or organized in or under the laws of the
United States, any state thereof or the District of Columbia;
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an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
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a trust if either (1) a United States court can exercise
primary supervision over its administration and one or more
United States persons have the authority to control all of its
substantial decisions, or (2) the trust was in existence on
August 20, 1996, was treated as a United States person
prior to such date, and has made a valid election to continue to
be treated as a United States person.
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For purposes of this discussion, a
non-United
States holder is a beneficial owner of a Debenture that is
neither a United States holder nor an entity treated as a
partnership for U.S. federal income tax purposes, and
holders refers to United States holders and
non-United
States holders.
If an entity treated as a partnership for U.S. federal
income tax purposes holds the Debentures, the tax treatment of
the partnership and its partners will generally depend on the
status and activities of the partnership and its partners. A
prospective purchaser of Debentures that is treated as a
partnership for U.S. federal income tax purposes, or a
partner in any such partnership, should consult its own tax
adviser regarding the U.S. federal income tax
considerations relating to the purchase, ownership and
disposition of the Debentures.
Persons considering the purchase of the Debentures should
consult their own tax advisers with respect to the
U.S. federal income tax considerations relating to the
purchase, ownership and disposition of the Debentures in light
of their own particular circumstances, as well as the effect of
any state, local, foreign and other tax laws.
Classification
of the Debentures
The determination of whether a security should be classified as
indebtedness or equity for U.S. federal income tax purposes
requires a judgment based on all relevant facts and
circumstances. There is no statutory, judicial or administrative
authority that directly addresses the U.S. federal income
tax treatment of securities similar to the Debentures. Based
upon an analysis of the relevant facts and circumstances,
including certain assumptions and certain representations made
by us, Debevoise & Plimpton LLP, our special tax
counsel, will render its opinion generally to the effect that,
although the matter is not free from doubt, under then
applicable law the Debentures will be treated as indebtedness
for U.S. federal income tax purposes. Such opinion is not
binding on the IRS or any court and there can be no assurance
that the IRS or a court will agree with such opinion. No ruling
is being sought from the IRS on any of the issues discussed
herein.
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We agree, and by acquiring an interest in a Debenture each
beneficial owner of a Debenture agrees, to treat the Debentures
as indebtedness for U.S. federal income tax purposes, and
the remainder of this discussion assumes such treatment, except
where specified.
United
States Holders
Interest
Income and Original Issue Discount
It is expected, and assumed for purposes of this discussion
that, subject to the discussion below, the Debentures will not
be issued with OID for U.S. federal income tax purposes.
Treasury regulations provide that the possibility that interest
on the Debentures might be deferred could result in the
Debentures being treated as issued with OID, unless the
likelihood of such deferral is remote. We believe that the
likelihood of interest deferral is remote and therefore that the
possibility of such deferral will not result in the Debentures
being treated as issued with OID. Accordingly, interest paid on
the Debentures should be taxable to a United States holder as
ordinary interest income at the time it accrues or is received
in accordance with each United States holders method of
accounting for U.S. federal income tax purposes. However,
no rulings or other interpretations have been issued by the IRS
that address the meaning of the term remote, as used
in the applicable Treasury regulations, and there can be no
assurance that the IRS or a court will agree with our position.
If the possibility of interest deferral were determined not to
be remote, or if interest were in fact deferred, the Debentures
would be treated as issued with OID at the time of issuance, or
at the time of such deferral, as the case may be, and all stated
interest, or if interest is in fact deferred all stated interest
due after such deferral, would be treated as OID. In such case,
a United States holder would be required to include such stated
interest in income as it accrued, regardless of the
holders regular method of accounting, using the
constant-yield-to-maturity
method of accrual described in section 1272 of the Code,
before such United States holder received any payment
attributable to such income, and would not separately report the
actual cash payments of interest on the Debentures as taxable
income.
Sale,
Exchange, Redemption or Other Disposition of
Debentures
Upon the sale, exchange, redemption or other disposition of a
Debenture, a United States holder will generally recognize gain
or loss equal to the difference between the amount realized
(less any accrued interest not previously included in the United
States holders income, which will be taxable as ordinary
income) on the sale, exchange, redemption or other disposition
and such United States holders adjusted tax basis in the
Debenture. Assuming that interest payments on the Debentures are
not deferred and that the Debentures are not treated as issued
with OID, a United States holders adjusted tax basis in a
Debenture generally will be its initial purchase price. If the
Debentures are treated as issued with OID, a United States
holders adjusted tax basis in a Debenture generally will
be its initial purchase price, increased by OID previously
includible in such United States holders gross income to
the date of disposition and decreased by payments received on
the Debenture since and including the date that the Debenture
was treated as issued with OID. That gain or loss generally will
be capital gain or loss and generally will be long-term capital
gain or loss if the Debenture had been held for more than one
year. A United States holder that is an individual is generally
entitled to preferential treatment for net long-term capital
gains. The ability of a United States holder to deduct capital
losses is limited.
Non-United
States Holders
Special rules may apply to certain
non-United
States holders, such as controlled foreign
corporations, passive foreign investment
companies, corporations that accumulate earnings to avoid
U.S. federal income tax and certain expatriates, among
others that are subject to special treatment under the Code.
Such
non-United
States holders should consult their own tax advisors to
determine the U.S. federal, state, local and other tax
consequences that may be relevant to them.
As stated above, this discussion assumes that the Debentures
will be respected as our indebtedness under current law. In such
case, under present U.S. federal income tax law, and
subject to the discussion below concerning backup withholding,
the following is a discussion of U.S. federal income tax
and withholding tax considerations generally applicable to
non-United
States holders:
a) payments of principal and interest (including OID, if
applicable) with respect to a Debenture held by or for a
non-United
States holder will not be subject to U.S. federal
withholding tax, provided that, in the case
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of interest, (i) such
non-United
States holder does not own, actually or constructively, 10% or
more of the total combined voting power of all classes of our
stock entitled to vote, (ii) such
non-United
States holder is not a controlled foreign corporation, within
the meaning of section 957(a) of the Code, that is related,
directly or indirectly, to us through stock ownership, and
(iii) the statement requirement set forth in
section 871(h) or section 881(c) of the Code
(described below) has been fulfilled with respect to such
non-United
States holder; and
b) a
non-United
States holder will generally not be subject to U.S. federal
income or withholding tax on gain realized on the sale,
exchange, redemption or other disposition of a Debenture, unless
(i) such
non-United
States holder is an individual who is present in the
U.S. for 183 days or more in the taxable year of such
sale, exchange, redemption or other disposition and certain
other conditions are met or (ii) such gain is effectively
connected with the conduct by such
non-United
States holder of a trade or business in the U.S. (in each
case, subject to the provisions of an income tax treaty).
In general, sections 871(h) and 881(c) of the Code require
that, in order to obtain the exemption from U.S. federal
withholding tax described in paragraph (a) above, the
non-United
States holder must provide a statement to the withholding agent
to the effect that the
non-United
States holder is not a United States person. Such requirement
generally will be fulfilled if the
non-United
States holder certifies on IRS
Form W-8BEN,
under penalties of perjury, that it is not a United States
person and provides its name and address. In the case of
Debentures held by a foreign intermediary (other than a
qualified intermediary) or a foreign partnership
(other than a withholding foreign partnership), the
foreign intermediary or partnership, as the case may be,
generally must provide IRS
Form W-8IMY
to the withholding agent with the required attachments,
including an appropriate certification by each beneficial owner.
If, contrary to the opinion of our special tax counsel, the
Debentures were treated as equity for U.S. federal income
tax purposes, payments of interest on the Debentures would
generally be subject to U.S. withholding tax imposed at a
rate of 30% or such lower rate as might be provided for by an
applicable income tax treaty.
If a
non-United
States holder is engaged in a trade or business in the United
States, and if amounts (including OID, if applicable) treated as
interest for U.S. federal income tax purposes on a
Debenture or gain realized on the sale, exchange, redemption or
other disposition of a Debenture are effectively connected with
the conduct of such trade or business, the
non-United
States holder, although generally exempt from U.S. federal
withholding tax described in paragraph (a) above, will
generally be subject to regular U.S. federal income tax on
such effectively connected income or gain in the same manner as
if it were a United States holder (subject to the provisions of
an applicable income tax treaty). In lieu of the IRS forms
described above, such
non-United
States holder will be required to provide IRS
Form W-8ECI
to the withholding agent in order to claim an exemption from
U.S. federal withholding tax. In addition, if such
non-United
States holder is a corporation, it may be subject to a branch
profits tax equal to 30% (or such lower rate provided by an
applicable tax treaty) of its effectively connected earnings and
profits for the taxable year, subject to certain adjustments.
Backup
Withholding and Information Reporting
Backup withholding and information reporting requirements
generally apply to interest (including OID, if applicable) and
principal payments made to, and to the proceeds of sales by,
certain non-corporate United States holders. A United States
holder not otherwise exempt from backup withholding generally
can avoid backup withholding by providing IRS
Form W-9.
In the case of a
non-United
States holder, backup withholding and information reporting will
not apply to payments on, or proceeds from the sale, exchange,
redemption or other disposition of, a Debenture if the statement
referred to in clause (a)(iii) of the first paragraph under
the heading
Non-United
States Holder has been received. Withholding agents must
nevertheless report to the IRS and to each
non-United
States holder the amount of interest (including OID, if
applicable) paid with respect to the Debentures held by such
non-United
States holder and the rate of withholding (if any) applicable to
such
non-United
States holder. Any amounts withheld under the backup withholding
rules will be allowed as a refund or a credit against the
holders U.S. federal income tax liability, provided
the required information is furnished to the IRS.
S-44
CERTAIN
ERISA CONSIDERATIONS
The following is a summary of certain considerations associated
with the purchase of the Debentures by employee benefit plans
that are subject to Title I of the U.S. Employee
Retirement Income Security Act of 1974, as amended, or ERISA,
plans, individual retirement accounts and other arrangements
that are subject to the Code or provisions under any federal,
state, local,
non-U.S. or
other laws or regulations that are similar to such provisions of
ERISA or the Code (being referred to collectively as the Similar
Laws), and entities whose underlying assets are considered to
include plan assets of any such plan, account or
arrangement, each a Plan.
General
Fiduciary Matters
ERISA and the Code impose certain duties on persons who are
fiduciaries of a Plan subject to Title I of ERISA or
Section 4975 of the Code, or an ERISA Plan, and prohibit
certain transactions involving the assets of an ERISA Plan and
its fiduciaries or other interested parties. Under ERISA and the
Code, any person who exercises any discretionary authority or
control over the administration of such an ERISA Plan or the
management or disposition of the assets of such an ERISA Plan,
or who renders investment advice for a fee or other compensation
to such an ERISA Plan, is generally considered to be a fiduciary
of the ERISA Plan.
In considering an investment in the Debentures of a portion of
the assets of any Plan, a fiduciary should determine whether the
investment is in accordance with the documents and instruments
governing the Plan and the applicable provisions of ERISA, the
Code or any Similar Law relating to a fiduciarys duties to
the Plan including, without limitation, the prudence,
diversification, delegation of control and prohibited
transaction provisions of ERISA, the Code and any other
applicable Similar Laws.
Prohibited
Transaction Issues
Section 406 of ERISA and Section 4975 of the Code
prohibit ERISA Plans from engaging in specified transactions
involving plan assets with persons or entities who are
parties in interest, within the meaning of ERISA, or
disqualified persons, within the meaning of
Section 4975 of the Code, unless an exemption is available.
A party in interest or disqualified person who engaged in a
non-exempt prohibited transaction may be subject to excise taxes
and other penalties and liabilities under ERISA and the Code. In
addition, the fiduciary of the ERISA Plan that engaged in such a
non-exempt prohibited transaction may be subject to penalties
and liabilities under ERISA and the Code. The acquisition
and/or
holding of Debentures by an ERISA Plan with respect to which we
are considered a party in interest or a disqualified person may
constitute or result in a direct or indirect prohibited
transaction under Section 406 of ERISA
and/or
Section 4975 of the Code, unless the investment is acquired
and is held in accordance with an applicable statutory, class or
individual prohibited transaction exemption. In this regard, the
U.S. Department of Labor, or the DOL, has issued prohibited
transaction class exemptions, or PTCEs, that may
apply to the acquisition and holding of the Debentures. These
class exemptions include, without limitation,
PTCE 84-14
respecting transactions determined by independent qualified
professional asset managers,
PTCE 90-1
respecting insurance company pooled separate accounts,
PTCE 91-38
respecting bank collective investment funds,
PTCE 95-60
respecting life insurance company general accounts and
PTCE 96-23
respecting transactions determined by in-house asset managers,
although there can be no assurance that all of the conditions of
any such exemptions will be satisfied. In addition, ERISA
Section 408(b)(17) provides a limited exemption for the
purchase and sale of securities and related lending
transactions, provided that neither the issuer of the securities
nor any of its affiliates have or exercise any discretionary
authority or control or render any investment advice with
respect to the assets of any ERISA Plan involved in the
transaction and provided further that the ERISA Plan pays no
more than adequate consideration in connection with the
transaction (the so-called service provider exemption).
Because of the foregoing, the Debentures should not be purchased
or held by any person investing plan assets of any
Plan, unless such purchase and holding will not constitute a
non-exempt prohibited transaction under ERISA and the Code or
similar violation of any applicable Similar Laws.
Representation
Accordingly, by acceptance of a Debenture, each purchaser and
subsequent transferee of a Debenture will be deemed to have
represented and warranted that either (i) no portion of the
assets used by such purchaser or transferee to acquire and hold
the Debentures constitutes assets of any Plan or (ii) the
purchase and holding of the
S-45
Debentures by such purchaser or transferee will not constitute a
non-exempt prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code or similar violation
under any applicable Similar Laws.
The foregoing discussion is general in nature and is not
intended to be all inclusive. Due to the complexity of these
rules and the penalties that may be imposed upon persons
involved in non-exempt prohibited transactions, it is
particularly important that fiduciaries, or other persons
considering purchasing the Debentures on behalf of, or with the
assets of, any Plan, consult with their counsel regarding the
potential applicability of ERISA, Section 4975 of the Code
and any Similar Laws to such investment and whether an exemption
would be applicable to the purchase and holding of the
Debentures. Purchasers of the Debentures have exclusive
responsibility for ensuring that their purchase and holding of
the Debentures do not violate the fiduciary or prohibited
transaction rules of ERISA, the Code or any Similar Laws. The
sale of any Debentures to a Plan is in no respect a
representation by us or any of our affiliates or representatives
that such investment meets all relevant legal requirements with
respect to investments by any such Plan generally or any
particular Plan, or that such investment is appropriate for such
Plans generally or any particular Plan.
S-46
UNDERWRITING
Citigroup Global Markets Inc., Credit Suisse Securities (USA)
LLC, Lehman Brothers Inc. and Goldman, Sachs & Co.
are acting as representatives of the underwriters named below.
Subject to the terms and conditions stated in the underwriting
agreement dated the date of this prospectus supplement, each
underwriter named below has severally agreed to purchase, and we
have agreed to sell to that underwriter, the principal amount of
Debentures set forth opposite the underwriters name.
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Principal Amount
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Underwriters
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of Debentures
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Citigroup Global Markets Inc.
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$
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Credit Suisse Securities (USA)
LLC
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Lehman Brothers Inc.
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Goldman, Sachs & Co.
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Total
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$
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The underwriting agreement provides that the obligations of the
underwriters to purchase the Debentures included in this
offering are subject to approval of legal matters by counsel and
to other conditions. The underwriters are obligated to purchase
all the Debentures if they purchase any of the Debentures.
The underwriters propose to offer some of the Debentures
directly to the public at the public offering price set forth on
the cover page of this prospectus supplement and may offer some
of the Debentures to dealers at the public offering price less a
concession not to exceed 0. % of the principal amount
of the Debentures. The underwriters may allow, and dealers may
reallow, a concession not to exceed 0. % of the
principal amount of the Debentures on sales to other dealers.
After the initial offering of the Debentures to the public, the
representatives may change the public offering price and
concessions.
The following table shows the underwriting discounts and
commissions that we are to pay to the underwriters in connection
with this offering (expressed as a percentage of the principal
amount of the Debentures).
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Paid by Chubb
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Per Debenture
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%
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We estimate that our total expenses for the offering will be
approximately $ .
In connection with the offering, the representatives may
purchase and sell Debentures in the open market. These
transactions may include over-allotment, syndicate covering
transactions and stabilizing transactions. Over-allotment
involves syndicate sales of Debentures in excess of the
principal amount of Debentures to be purchased by the
underwriters in the offering, which creates a syndicate short
position. Syndicate covering transactions involve purchases of
the Debentures in the open market after the distribution has
been completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of
Debentures made for the purpose of preventing or retarding a
decline in the market price of the Debentures while the offering
is in progress.
In connection with this offering, for a limited period after the
issue date the underwriters may over-allot or effect
transactions with a view to supporting the market price of the
Debentures at a level higher than that which might otherwise
prevail. However, there may be no obligation on the underwriters
to do this. Such stabilizing, if commenced, may be discontinued
at any time, and must be brought to an end after a limited
period.
The underwriters also may impose a penalty bid. Penalty bids
permit the underwriters to reclaim a selling concession from a
syndicate member when an underwriter, in covering syndicate
short positions or making stabilizing purchases, repurchases
Debentures originally sold by that syndicate member.
Any of these activities may have the effect of preventing or
retarding a decline in the market price of the Debentures. They
may also cause the price of the Debentures to be higher than the
price that otherwise would exist in the open market in the
absence of these transactions.
The underwriters have performed investment banking and advisory
services for us and our subsidiaries from time to time for which
they have received customary fees and expenses. In addition,
affiliates of certain of the underwriters are lenders under, and
perform certain roles with respect to, certain of our credit
facilities. The underwriters may, from time to time, engage in
transactions with and perform services for us and our
subsidiaries in
S-47
the ordinary course of their business, which may include
assistance in future share repurchases, including repurchases
made with proceeds from this offering for which they will
receive customary fees and expenses.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of
1933, as amended, or to contribute to payments the underwriters
may be required to make because of any of those liabilities.
Notice to
Prospective Investors in the European Economic Area
In relation to each member state of the European Economic Area
that has implemented the Prospectus Directive (each, a
relevant member state), with effect from and
including the date on which the Prospectus Directive is
implemented in that relevant member state (the relevant
implementation date), an offer of the Debentures described
in this prospectus supplement may not be made to the public in
that relevant member state prior to the publication of a
prospectus in relation to the Debentures that has been approved
by the competent authority in that relevant member state or,
where appropriate, approved in another relevant member state and
notified to the competent authority in that relevant member
state, all in accordance with the Prospectus Directive, except
that, with effect from and including the relevant implementation
date, an offer of securities may be offered to the public in
that relevant member state at any time:
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to any legal entity that is authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities or
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to any legal entity that has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts or
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in any other circumstances that do not require the publication
of a prospectus pursuant to Article 3 of the Prospectus
Directive.
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Each purchaser of Debentures described in this prospectus
supplement located within a relevant member state will be deemed
to have represented, acknowledged and agreed that it is a
qualified investor within the meaning of
Article 2(1)(e) of the Prospectus Directive, or Qualified
Investors.
For purposes of this provision, the expression an offer to
the public in any relevant member state means the
communication in any form and by any means of sufficient
information on the terms of the offer and the securities to be
offered so as to enable an investor to decide to purchase or
subscribe the securities, as the expression may be varied in
that member state by any measure implementing the Prospectus
Directive in that member state, and the expression
Prospectus Directive means Directive
2003/71/EC
and includes any relevant implementing measure in each relevant
member state.
The sellers of the Debentures have not authorized and do not
authorize the making of any offer of the Debentures through any
financial intermediary on their behalf, other than offers made
by the underwriters with a view to the final placement of the
Debentures as contemplated in this prospectus supplement.
Accordingly, no purchaser of the Debentures, other than the
underwriters, is authorized to make any further offer of the
Debentures on behalf of the sellers or the underwriters.
Notice to
Prospective Investors in the United Kingdom
This prospectus supplement and its contents is only being
distributed to, and is only directed at, persons in the United
Kingdom that are Qualified Investors that are also
(i) investment professionals falling within
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005, or the Order, or
(ii) high net worth entities, and other persons to whom it
may lawfully be communicated, falling within
Article 49(2)(a) to (d) of the Order (all such persons
together being referred to as relevant persons).
This prospectus supplement and its contents are confidential and
should not be distributed, published or reproduced (in whole or
in part) or disclosed by recipients to any other persons in the
United Kingdom. Any person in the United Kingdom that is not a
relevant persons should not act or rely on this document or any
of its contents.
Notice to
Prospective Investors in Hong Kong
The Debentures may not be offered or sold by means of any
document other than (i) in circumstances which do not
constitute an offer to the public within the meaning of the
Companies Ordinance (Cap. 32, Laws of Hong Kong),
S-48
or (ii) to professional investors within the
meaning of the Securities and Futures Ordinance (Cap. 571, Laws
of Hong Kong) and any rules made thereunder, or (iii) in
other circumstances which do not result in the document being a
prospectus within the meaning of the Companies
Ordinance (Cap. 32, Laws of Hong Kong), and no advertisement,
invitation or document relating to the Debentures may be issued
or may be in the possession of any person for the purpose of
issue (in each case whether in Hong Kong or elsewhere), which is
directed at, or the contents of which are likely to be accessed
or read by, the public in Hong Kong (except if permitted to do
so under the laws of Hong Kong) other than with respect to
Debentures which are or are intended to be disposed of only to
persons outside Hong Kong or only to professional
investors within the meaning of the Securities and Futures
Ordinance (Cap. 571, Laws of Hong Kong) and any rules made
thereunder.
Notice to
Prospective Investors in Japan
The Debentures have not been registered under the Securities and
Exchange Law of Japan (the Securities and Exchange Law) and may
not be offered or sold, directly or indirectly, in Japan or to,
or for the benefit of, any resident of Japan, except pursuant to
an exemption from the registration requirements of, and
otherwise in compliance with, the Securities and Exchange Law
and any other applicable laws, regulations and ministerial
guidelines of Japan.
Notice to
Prospective Investors in Singapore
This prospectus supplement and the accompanying prospectus has
not been registered as a prospectus with the Monetary Authority
of Singapore. Accordingly, this prospectus supplement and the
accompanying prospectus and any other document or material in
connection with the offer or sale, or invitation for
subscription or purchase, of the Debentures may not be
circulated or distributed, nor may the Debentures be offered or
sold, or be made the subject of an invitation for subscription
or purchase, whether directly or indirectly, to persons in
Singapore other than (i) to an institutional investor under
Section 274 of the Securities and Futures Act,
Chapter 289 of Singapore, or the SFA, (ii) to a
relevant person, or any person pursuant to Section 275(1A),
and in accordance with the conditions, specified in
Section 275 of the SFA or (iii) otherwise pursuant to,
and in accordance with the conditions of, any other applicable
provision of the SFA.
Where the Debentures are subscribed or purchased under
Section 275 of the SFA by a relevant person which is:
(a) a corporation (which is not an accredited investor) the
sole business of which is to hold investments and the entire
share capital of which is owned by one or more individuals, each
of whom is an accredited investor; or (b) a trust (where
the trustee is not an accredited investor) whose sole purpose is
to hold investments and each beneficiary is an accredited
investor, shares, debentures and units of shares and debentures
of that corporation or the beneficiaries rights and
interest in that trust shall not be transferable for
6 months after that corporation or that trust has acquired
the Debentures under Section 275 except: (1) to an
institutional investor under Section 274 of the SFA or to a
relevant person, or any person pursuant to Section 275(1A),
and in accordance with the conditions, specified in
Section 275 of the SFA; (2) where no consideration is
given for the transfer; or (3) by operation of law.
S-49
LEGAL
OPINIONS
W. Andrew Macan, Vice President, Corporate Counsel and
Secretary of The Chubb Corporation, 15 Mountain View Road, P.O.
Box 1615, Warren, New Jersey
07061-1615,
will pass upon certain legal matters relating to the Debentures
on behalf of Chubb and on matters of New Jersey law. Paul,
Weiss, Rifkind, Wharton & Garrison LLP, New York, New
York 10019 will also pass upon certain legal matters relating to
the Debentures on behalf of Chubb. Debevoise & Plimpton LLP,
New York, New York 10022 will pass upon certain tax matters
relating to the Debentures on behalf of Chubb. Certain legal
matters in connection with this offering will be passed upon for
the underwriters by Cleary Gottlieb Steen & Hamilton
LLP, New York, New York 10006. Paul, Weiss, Rifkind,
Wharton & Garrison LLP and Cleary Gottlieb
Steen & Hamilton LLP will rely for matters of New
Jersey law on the opinion of W. Andrew Macan.
EXPERTS
Ernst & Young LLP, independent registered public
accounting firm, has audited our consolidated financial
statements and schedules included in our Annual Report on
Form 10-K
for the year ended December 31, 2006, and managements
assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2006, as set forth
in their reports, which are incorporated by reference in this
prospectus supplement and elsewhere in the registration
statement. Our financial statements and schedules and
managements assessment are incorporated by reference in
reliance on Ernst & Young LLPs reports, given on
their authority as experts in accounting and auditing.
S-50
PROSPECTUS
The Chubb Corporation
DEBT SECURITIES
JUNIOR
SUBORDINATED DEBT
SECURITIES
COMMON STOCK
PREFERRED STOCK
DEPOSITARY SHARES
WARRANTS
STOCK PURCHASE
CONTRACTS
STOCK PURCHASE UNITS
By this prospectus, The Chubb Corporation may offer from time to
time any combination of the securities described in this
prospectus.
We will provide specific terms of the securities in supplements
to this prospectus. You should read this prospectus and any
supplement carefully before you invest. A supplement may also
change or update information contained in this prospectus.
We will not use this prospectus to confirm sales of any of our
securities unless it is attached to a prospectus supplement.
Our common stock is listed on the New York Stock Exchange (the
NYSE) under the symbol CB. Unless we
state otherwise in a prospectus supplement, we will not list any
of the securities described in this prospectus on any securities
exchange.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is March 26, 2007
TABLE OF
CONTENTS
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15
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26
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37
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37
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37
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37
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i
ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission, or the SEC,
using a shelf registration process. Under this shelf
process, we may sell any combination of the securities described
in this prospectus from time to time in one or more offerings.
This prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will
provide a prospectus supplement that contains specific
information about the terms of such securities. We may also add,
update or change information contained in this prospectus
through one or more supplements to this prospectus. Any
statement that we make in this prospectus will be modified or
superseded by any statement made by us in a prospectus
supplement and in the event the information set forth in a
prospectus supplement differs in any way from the information
set forth in this prospectus, you should rely on the information
set forth in the prospectus supplement. The rules of the SEC
allow us to incorporate by reference information into this
prospectus. The information incorporated by reference is
considered to be a part of this prospectus, and information that
we file later with the SEC will automatically update and
supersede this information. See Incorporation by
Reference.
You should read both this prospectus and any prospectus
supplement together with additional information described under
the heading Where You Can Find More Information.
No person has been authorized to give any information or to make
any representations, other than those contained or incorporated
by reference in this prospectus and, if given or made, such
information or representation must not be relied upon as having
been authorized by Chubb, or any underwriter, agent, dealer or
remarketing firm. Neither the delivery of this prospectus nor
any sale made hereunder shall under any circumstances create any
implication that there has been no change in the affairs of
Chubb since the date hereof or that the information contained or
incorporated by reference herein is correct as of any time
subsequent to the date of such information. This prospectus does
not constitute an offer to sell or a solicitation of an offer to
buy any securities by anyone in any jurisdiction in which such
offer or solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to do so or
to any person to whom it is unlawful to make such offer or
solicitation.
References to Chubb, we, us
and our in this prospectus are references to The
Chubb Corporation.
1
FORWARD-LOOKING
STATEMENTS
This prospectus, any prospectus supplement and information
incorporated by reference in them contain forward looking
statements as that term is defined in the Private Securities
Litigation Reform Act of 1995, or PSLRA. These forward-looking
statements are made pursuant to the safe harbor provisions of
the PSLRA. They include statements relating to trends in, or
representing managements beliefs about, our future
strategies, operations and financial results. Forward-looking
statements are made based upon managements current
expectations and beliefs concerning trends and future
developments and their potential effects on us. These statements
are not guarantees of future performance. Actual results may
differ materially from those suggested by forward-looking
statements as a result of risks and uncertainties, which
include, among others, those discussed or identified from time
to time in our public filings with the SEC and those associated
with:
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global political conditions and the occurrence of terrorist
attacks, including any nuclear, biological, chemical or
radiological events;
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the effects of the outbreak or escalation of war or hostilities;
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premium pricing and profitability or growth estimates overall or
by lines of business or geographic area, and related
expectations with respect to the timing and terms of any
required regulatory approvals;
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adverse changes in loss cost trends;
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the ability to retain existing business;
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our expectations with respect to cash flow projections and
investment income and with respect to other income;
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the adequacy of loss reserves, including:
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our expectations relating to reinsurance recoverables;
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the willingness of parties, including us, to settle disputes;
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developments in judicial decisions or regulatory or legislative
actions relating to coverage and liability, in particular, for
asbestos, toxic waste and other mass tort claims;
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development of new theories of liability;
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our estimates relating to ultimate asbestos liabilities;
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the impact from the bankruptcy protection sought by various
asbestos producers and other related businesses;
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the effects of proposed asbestos liability legislation,
including the impact of claims patterns arising from the
possibility of legislation and those that may arise if
legislation is not passed;
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the availability of reinsurance coverage;
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the occurrence of significant weather-related or other natural
or human-made disasters, particularly in locations where we have
concentrations of risk;
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the impact of economic factors on companies on whose behalf we
have issued surety bonds, and in particular, on those companies
that have filed for bankruptcy or otherwise experienced
deterioration in creditworthiness;
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the effects of disclosures by, and investigations of, public
companies relating to possible accounting irregularities,
practices in the financial services industry and other corporate
governance issues, including:
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claims and litigation arising out of stock option
backdating, spring loading and other
option grant practices by public companies;
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the effects on the capital markets and the markets for directors
and officers and errors and omissions insurance;
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claims and litigation arising out of actual or alleged
accounting or other corporate malfeasance by other companies;
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claims and litigation arising out of practices in the financial
services industry;
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legislative or regulatory proposals or changes;
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the effects of investigations into market practices, in
particular contingent commissions and loss mitigation and finite
reinsurance arrangements, in the property and casualty insurance
industry together with any legal or regulatory proceedings,
related settlements and industry reform or other changes with
respect to contingent commissions or otherwise arising therefrom;
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the impact of legislative and regulatory developments on our
business, including those relating to terrorism and catastrophes;
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any downgrade in our claims-paying, financial strength or other
credit ratings;
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the ability of our subsidiaries to pay us dividends;
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general economic and market conditions including:
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changes in interest rates, market credit spreads and the
performance of the financial markets;
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the effects of inflation;
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changes in domestic and foreign laws, regulations and taxes;
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changes in competition and pricing environments;
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regional or general changes in asset valuations;
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the inability to reinsure certain risks economically;
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changes in the litigation environment; and
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our ability to implement managements strategic plans and
initiatives.
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Any forward-looking statement made by us in this prospectus, any
prospectus supplement, in our filings with the SEC which are
incorporated by reference into this prospectus, or elsewhere
speaks only as of the date on which we make it. New risks and
uncertainties arise from time to time, and it is impossible for
us to predict these events or how they may affect us. In light
of these risks and uncertainties, you should keep in mind that
any forward-looking statement made in this prospectus, in any
prospectus supplement, in our filings with the SEC which are
incorporated by reference into this prospectus, or elsewhere
might not occur. We assume no obligation to update any
forward-looking information set forth in this prospectus, any
prospectus supplement, any of our filings with the SEC that are
incorporated by reference into this prospectus or elsewhere,
which speak as of their date, except as required by federal
securities laws.
3
THE CHUBB
CORPORATION
The Chubb Corporation was incorporated as a business corporation
under the laws of the State of New Jersey in June 1967. The
Chubb Corporation is a holding company for a family of property
and casualty insurance companies known informally as the Chubb
Group of Insurance Companies and referred to in this prospectus
as the P&C Group. Since 1882, the P&C Group has provided
property and casualty insurance to businesses and individuals
around the world.
The P&C Group provides insurance coverage principally in the
United States, Canada, Europe, Australia, and parts of Latin
America and Asia.
The P&C Group is divided into three strategic business units:
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commercial;
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specialty; and
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personal.
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Chubb Commercial Insurance offers a full range of commercial
customer insurance products, including coverage for multiple
peril, casualty, workers compensation and property and
marine. Chubb Commercial Insurance is known for writing niche
business, where our expertise can add value for our agents,
brokers and policyholders. Chubb Specialty Insurance offers a
wide variety of specialized professional liability products for
privately and publicly owned companies, financial institutions,
professional firms and healthcare organizations. Chubb Specialty
Insurance also includes our surety business. Chubb Personal
Insurance offers products for individuals with fine homes and
possessions who require more coverage choices and higher limits
than standard insurance policies.
In December 2005, we transferred our ongoing reinsurance assumed
business to Harbor Point Limited. Other than pursuant to certain
arrangements entered into with Harbor Point, the P&C Group
generally no longer engages directly in the reinsurance assumed
business. Harbor Point has the right for a transition period of
up to two years to underwrite specific reinsurance business on
the P&C Groups behalf. The P&C Group retains a
portion of any such business and cedes the balance to Harbor
Point.
Our principal executive offices are located at 15 Mountain View
Road, Warren, New Jersey
07061-1615,
and our telephone number is
(908) 903-2000.
4
USE OF
PROCEEDS
Unless we state otherwise in a prospectus supplement, we intend
to use the proceeds from the sale of the securities offered by
this prospectus for general corporate purposes.
RATIO OF
CONSOLIDATED EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of consolidated
earnings to fixed charges for each of the years in the five year
period ended December 31, 2006. We currently have no shares
of preferred stock issued and outstanding and we do not have any
preferred stock obligation. Accordingly, our ratio of
consolidated earnings to combined fixed charges and preference
dividends is equal to our ratio of consolidated earnings to
fixed charges and is not disclosed separately.
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For the Years Ended December 31,
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2006
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2005
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2004
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2003
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2002
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Ratio of Consolidated Earnings to
Fixed Charges
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21.26
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15.28
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12.36
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6.25
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2.59
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For the purpose of computing the above ratios of consolidated
earnings to fixed charges, consolidated earnings consist of
income from continuing operations before income taxes excluding
income or loss from equity investees, plus those fixed charges
that were charged against income and distributions from equity
investees. Fixed charges consist of interest expense before
reduction for capitalized interest and the portion of rental
expense (net of rental income from subleased properties) that is
considered to be representative of the interest factors in the
leases.
5
DESCRIPTION
OF DEBT SECURITIES
We may offer senior debt securities or subordinated debt
securities. We refer to the senior debt securities and the
subordinated debt securities together in this prospectus as the
debt securities. We will issue the senior debt securities in one
or more series under an indenture, which we refer to as the
senior indenture, as supplemented from time to time, between us
and The Bank of New York Trust Company, N.A., as trustee. We
will issue the subordinated debt securities in one or more
series under an indenture, which we refer to as the subordinated
indenture, as supplemented from time to time between us and The
Bank of New York Trust Company, N.A., as trustee. We refer to
the senior indenture and the subordinated indenture together as
the indentures.
The following description of the terms and provisions of the
debt securities and the indentures is a summary. It summarizes
only those terms of the debt securities and portions of the
indentures which we believe will be most important to your
decision to invest in our debt securities. You should keep in
mind, however, that it is the indentures, and not this summary,
which define your rights as a debtholder. There may be other
provisions in the indentures which are also important to you.
You should read the indentures for a full description of the
terms of the debt. The senior indenture and the subordinated
indenture are filed as exhibits to the registration statement
that includes this prospectus. See Where You Can Find More
Information for information on how to obtain copies of the
senior indenture and the subordinated indenture.
Ranking
Unless otherwise indicated in a prospectus supplement, our
senior debt securities will be unsecured and will rank equally
with all of our other unsecured and unsubordinated obligations.
Our subordinated debt securities will be unsecured and will be
subordinate and junior in right of payment to all of our senior
debt as described in the subordinated indenture. See
Subordination Under the Subordinated
Indenture.
Since we are a non-operating holding company, most of our
operating assets are owned by our subsidiaries. We rely
primarily on dividends from these subsidiaries to meet our
obligations for payment of principal and interest on our
outstanding debt obligations and corporate expenses.
Accordingly, the debt securities will be effectively
subordinated to all existing and future liabilities of our
subsidiaries, and you should rely only on our assets for
payments on the debt securities. Most of our subsidiaries are in
the property and casualty insurance business. The amount of
dividend distributions to us from our insurance subsidiaries may
be restricted by state insurance laws and regulations as
administered by state insurance departments.
Unless we state otherwise in the applicable prospectus
supplement, the indentures do not limit us from incurring or
issuing other secured or unsecured debt under either of the
indentures or any other indenture that we may have entered into
or enter into in the future. See Subordination
Under the Subordinated Indenture and the prospectus
supplement relating to any offering of subordinated debt
securities.
Terms of
the Debt Securities
We may issue debt securities in one or more series, through an
indenture that supplements the senior indenture or the
subordinated indenture, as the case may be, or through a
resolution of our board of directors or an authorized committee
of our board of directors.
You should refer to the applicable prospectus supplement for the
specific terms of the series of debt securities being issued.
These may include the following:
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classification as senior or subordinated debt securities;
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the title, designation and purchase price;
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any limit upon the aggregate principal amount;
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maturity date(s) or the method of determining maturity date(s);
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the interest rate(s), if any, and the method for calculating the
interest rate(s), if any;
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the interest payment dates and the record dates for the interest
payments;
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dates from which interest will accrue and the method of
determining those dates;
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dates on which premium, if any, will be paid;
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place(s) where we will pay principal, premium, if any, and
interest and where you may present the debt securities of that
series for registration of transfer or exchange;
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place(s) where notices and demands relating to the debt
securities of that series and the indentures may be made;
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authorized denominations, if other than denominations of $1,000;
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the currency or currencies, if other than the currency of the
United States, in which principal, premium, if any, and interest
will be paid or in which the debt securities of that series will
be denominated;
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if the amount of payments of principal, premium, if any, and
interest on the debt securities of that series may be determined
with reference to an index and how such amounts will be
determined;
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any special United States federal income tax consequences of the
debt securities of that series;
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any special accounting considerations applicable to the debt
securities of that series;
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any mandatory or optional redemption terms or prepayment or
sinking fund provisions;
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any additions, in the events of default or covenants specified
in the indenture relating to the debt securities of that series;
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if other than the principal amount of debt securities, the
portion of the principal amount of the debt securities of that
series that is payable upon declaration of acceleration of
maturity;
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whether the debt securities of that series will be issued in
whole or in part in the form of one or more global securities;
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whether a temporary global security shall be issued and the
terms upon which temporary global debt securities of that series
may be exchanged for definitive debt securities of that series;
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the appointment of any trustees, authenticating or paying
agent(s), transfer agent(s) or any other agents with respect to
that series of debt securities;
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in the case of the senior debt securities, the terms and
conditions of any right we would have or any option you would
have to convert or exchange the debt securities of that series
into other securities, cash or property of Chubb;
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in the case of the subordinated debt securities, any provisions
regarding subordination; and
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other specific terms, not inconsistent with the provisions of
the indentures.
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Debt securities may also be issued under the indentures upon
exercise of warrants, exchange, conversion or settlement of
other securities. See Description of Warrants.
Special
Payment Terms of the Debt Securities
We may issue one or more series of debt securities at a
substantial discount below their stated principal amount, to the
extent provided in the applicable prospectus supplement. These
debt securities may bear no interest or interest at a rate which
at the time of issuance is below market rates. We will describe
United States federal income tax consequences and special
considerations relating to any series in the applicable
prospectus supplement.
The purchase price of any of the debt securities may be payable
in one or more foreign currencies or currency units. The debt
securities may be denominated in one or more foreign currencies
or currency units, or the principal of, premium, if any, or
interest on any debt securities may be payable in one or more
foreign currencies or currency units. We will describe the
restrictions, elections, United States federal income tax
considerations, specific terms and other information relating to
the debt securities of any series and any foreign currencies or
foreign currency units in the applicable prospectus supplement.
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If we use any index to determine the amount of payments of
principal of, premium, if any, or interest on any series of debt
securities, we will also describe in the applicable prospectus
supplement the special United States federal income tax,
accounting and other considerations applicable to the debt
securities.
Denominations,
Registration and Transfer
Unless we state otherwise in the applicable prospectus
supplement, we will issue the debt securities in fully
registered form without coupons and in denominations of $1,000
and integral multiples of $1,000.
Except as we may describe in the applicable prospectus
supplement, debt securities of any series will be exchangeable
for other debt securities of the same series, in any authorized
denominations, of a like aggregate principal amount and bearing
the same interest rate. You may present debt securities for
exchange as described above, or for registration of transfer, at
the office of the securities registrar or at the office of any
transfer agent we designate for that purpose. You will not incur
a service charge but you will be required to pay any taxes and
other governmental charges as described in the indentures. We
will appoint the trustees as securities registrar under the
indentures. We will specify the transfer agent in the applicable
prospectus supplement. We may at any time designate additional
transfer agents.
Sinking
Funds and Redemption
Unless we state otherwise in the applicable prospectus
supplement, debt securities will not be subject to any sinking
fund.
If a series of debt securities is redeemable, we will specify
the terms of redemption with respect to the series in the
applicable prospectus supplement. Unless we state otherwise in
the applicable prospectus supplement, we may redeem debt
securities in denominations larger than $1,000 but only in
integral multiples of $1,000 (or such other authorized
denomination thereof).
We will mail notice of any redemption of your debt securities at
least 30 days but not more than 60 days before the
redemption date to you at your registered address. Unless we
default in payment of the redemption price, on and after the
redemption date interest will cease to accrue on the debt
securities or the portions called for redemption.
Consolidation,
Merger and Sale of Assets
We may not consolidate with, merge into or sell, convey or lease
all or substantially all of our assets to any individual,
corporation, partnership, joint venture, association, joint
stock company, trust, unincorporated organization or government
or any agency or political subdivision thereof, nor permit any
such entity to consolidate with, merge into or sell, convey or
lease all or substantially all of its assets to us unless:
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we are the surviving corporation or the successor corporation is
a corporation organized under the laws of any domestic
jurisdiction and assumes our obligations on the debt securities
and under the indentures;
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after giving effect to such transaction, no Event of Default,
and no event which, after notice or lapse of time or both, would
become an Event of Default will have occurred and be
continuing; and
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Chubb or the surviving entity will have delivered to the trustee
an officers certificate and opinion of counsel stating
that the transaction or series of transactions and a
supplemental indenture, if any, complies with this covenant and
that all conditions precedent in the indenture relating to the
transaction or series of transactions have been satisfied.
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This covenant would not apply to any recapitalization
transaction, a change of control of Chubb or a highly leveraged
transaction unless such transaction or change of control were
structured to include a merger or consolidation by us or the
sale, conveyance, transfer or lease of all or substantially all
of our assets.
Events of
Default
These are Events of Default under the indentures
with respect to each series of debt securities:
(1) failure to pay principal, or premium, if any, when due;
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(2) failure to pay any interest when due, continued for
30 days;
(3) default in the payment of any sinking fund installment
when due and payable;
(4) failure to perform, or breach of, any covenant or
warranty of Chubb contained in the applicable indentures or
terms of such series of debt securities for 60 days under
the senior indenture, and 90 days under the subordinated
indenture, after written notice from the trustee or the holders
of at least 25% in aggregate principal amount of the relevant
series of outstanding debt securities;
(5) certain events of bankruptcy, insolvency or
reorganization of Chubb; and
(6) any other event of default described in the applicable
board resolution or supplemental indenture under which the
series of debt securities is issued.
If an Event of Default occurs and is continuing, the trustee
may, and at the written request of holders of a majority in
aggregate principal amount of the securities of each series
affected by the Event of Default and upon the trustees
receipt of indemnification to its satisfaction will, proceed to
protect and enforce its rights and those of the holders of such
securities.
If an Event of Default, other than an Event of Default specified
in clause (5) above or an event of default specified in
clause (4) above with respect to less than all series of
debt securities then outstanding, occurs and is continuing, with
respect to the debt securities of any series, then the trustee
or the holders of at least 25% in aggregate principal amount of
the outstanding debt securities of that series (each series
acting as a separate class) may require us to repay immediately
the entire principal amount of the outstanding debt securities
of that series, or such lesser amount as may be provided in the
terms of the securities, together with all accrued and unpaid
interest and premium, if any.
If an Event of Default specified in clause (4) above occurs
and is continuing with respect to all series of debt securities
then outstanding under the relevant indenture or an Event of
Default specified in clause (5) above occurs and is
continuing, then the trustee or the holders of at least 25% in
aggregate principal amount of all of the debt securities of all
series then outstanding under the relevant indenture (treated as
one class) may require us to repay immediately the entire
principal amount of the outstanding debt securities, or such
lesser amount as may be provided in the terms of the securities,
together with all accrued and unpaid interest, if any.
Any Event of Default with respect to a particular series of debt
securities under the relevant indenture may be waived by the
holders of a majority of the aggregate principal amount of the
outstanding debt securities of such series, and in any Event of
Default specified in clause (4) above with respect to all
series of debt securities under the relevant indenture or
specified in clause (5) above may be waived by the holders
of a majority in aggregate principal amount of all the
outstanding debt securities of all series under the relevant
indenture, as the case may be, except, in each case, a failure
to pay principal of, or premium, if any, or interest on such
debt security.
The trustee will, within 90 days of the occurrence of any
event which, after notice or lapse of time or both, would become
an Event of Default that has not been cured or waived, provide
notice to the holders of any series of debt securities effected.
The trustee may withhold notice to the holders of any such
event, except a default relating to the payment of principal of,
premium, if any, or interest on, or sinking fund payment in
respect of, the securities, if the trustee considers it in the
interest of the holders to do so.
We are required to furnish to the trustee an annual statement as
to compliance with all conditions and covenants under the
indenture.
Modification
of the Indentures
We may generally amend the indenture with the consent of the
holders of not less than a majority in aggregate principal
amount of the outstanding debt securities of each series
affected by the amendment. However, we may not amend the
indentures without the consent of each holder affected, in order
to, among other things:
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extend the final maturity of any debt security;
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reduce the principal amount of any debt security;
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reduce the rate or extend the time of payment of interest on any
debt security;
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reduce the amount payable on redemption of any debt security, or
reduce the amount of principal of an original issue discount
debt security that would be due and payable on an acceleration
of the maturity of such debt security or the amount of such debt
security provable in bankruptcy;
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change the currency of payment of principal of or interest on
any debt security;
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extend the time or reduce the amount of any payment to any
sinking fund or analogous obligation relating to any debt
security;
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impair or affect the right of any security holder to institute
suit for payment on such security or any right of repayment at
the option of the security holder;
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reduce the percentage of debt securities of any series the
holders of which must consent to an amendment to an indenture;
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reduce the percentage of debt securities of any series necessary
to consent to waive any past default under an indenture to less
than a majority; or
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modify any of the provisions of the sections of such indenture
relating to supplemental indentures with the consent of the
holders of debt securities, except to increase the percentage of
holders or to provide that provisions of the indenture cannot be
modified or waived without the consent of the holder of each
affected debt security.
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A supplemental indenture which changes or eliminates any
covenant or other provision of an indenture which has expressly
been included solely for the benefit of one or more particular
series of debt securities, or which modifies the rights of the
holders of debt securities of such series with respect to such
covenant or other provision, will not affect the rights under
the indenture of the holders of the debt securities of any other
series.
We and the trustee may amend the indentures without the consent
of any holder of debt securities in order to:
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secure any debt securities issued under such indenture;
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evidence the succession of another corporation and assumption of
our obligations in the case of a merger or consolidation;
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add to the covenants of Chubb or add additional events of
default;
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cure ambiguities, defects or inconsistencies, provided that such
action does not adversely affect any holders of debt securities
issued under such indenture;
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establish the form and terms of debt securities of any series;
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provide for a successor trustee with respect to one or more
series of securities issued under such indenture or to provide
for or facilitate the administration of the trusts under the
indenture by more than one trustee;
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permit or facilitate the issuance of securities in bearer form
or provide for uncertificated securities to be issued under such
indenture; or
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change or eliminate any provision of such indenture, provided
that any such change or elimination will become effective only
when there is no security outstanding of any series created
prior to the execution of such supplemental indenture which is
entitled to the benefit of such provision.
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Satisfaction
and Discharge
Each indenture provides that when, among other things, all debt
securities of any outstanding series not previously delivered to
the trustee for cancellation:
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have become due and payable; or
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will become due and payable at their stated maturity within one
year; or
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are to be called for redemption within one year under
arrangements satisfactory to the trustee for the giving of
notice of redemption by the trustee;
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and we deposit or cause to be deposited with the trustee, in
trust, an amount in cash or United States government obligations
sufficient to pay and discharge the entire indebtedness on the
debt securities of that series not previously delivered to the
trustee for cancellation, for the principal, premium, if any,
and interest to the date of the deposit or to the stated
maturity, as the case may be, then the indenture will cease to
be of further effect with respect to all debt securities of that
series, other than as to certain transfers and exchanges and
other rights identified in the indenture, and we will be deemed
to have satisfied and discharged the indenture with respect to
all debt securities of that series. However, we will continue to
be obligated to pay all other sums due under the indenture and
to provide the officers certificates and opinions of
counsel described in the indenture.
Defeasance
Unless we state otherwise in the applicable prospectus
supplement, the senior indenture provides that we will be deemed
to have paid and discharged the entire indebtedness with respect
to all outstanding debt securities of any series, other than as
to certain transfers and exchanges, if, among other things:
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we irrevocably deposit with the trustee cash or United States
government obligations, or a combination thereof, as trust funds
in an amount certified to be sufficient to pay on each date that
they become due and payable, the principal of and interest on,
all outstanding debt securities of such series;
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if specified in the applicable prospectus supplement, we deliver
to the trustee an opinion of counsel to the effect that we have
received from, or there has been published by, the Internal
Revenue Service, a ruling to the effect that (or in lieu
thereof, if specified in the applicable prospectus supplement,
an opinion of counsel to the same effect):
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the holders of the senior debt securities of such series will
not recognize income, gain or loss for United States
federal income tax purposes as a result of the
defeasance; and
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the defeasance will not otherwise alter those holders
United States federal income tax treatment of principal and
interest payments on the senior debt securities of such series;
this opinion must be based on a ruling of the Internal Revenue
Service or a change in United States federal income tax law
occurring after the date of this prospectus, since that result
would not occur under current tax law;
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no event of default under the senior indenture with respect to
the debt securities of such series has occurred and is
continuing or shall have occurred and be continuing on the
123rd day
after the date of deposit;
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the deposit will not result in a default under, or a violation
of, the senior indenture or any other agreement to which we are
party; and
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we deliver to the trustee an officers certificate and an
opinion of counsel to the effect that all conditions precedent
in the senior indenture relating to the defeasance of the entire
indebtedness on the outstanding senior debt securities of such
series have been complied with.
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Global
Securities
The debt securities of a series may be issued in whole or in
part in the form of one or more global certificates that will be
deposited with a depositary identified in a prospectus
supplement. Unless it is exchanged for debt securities in
definitive form, a global certificate may generally be
transferred only to certain nominees of the depositary. Unless
otherwise stated in the prospectus supplement, The Depository
Trust Company, New York, New York, or DTC, will act as
depositary.
We will describe the specific terms of the depositary
arrangement in the applicable prospectus supplement. We expect
that the following provisions will generally apply to these
depositary arrangements.
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Beneficial
Interests in a Global Security
Ownership of beneficial interests in a registered global
security will be limited to persons, called participants, that
have accounts with the depositary or persons that may hold
interests through participants. Upon the issuance of a
registered global security, the depositary will credit, on its
book-entry registration and transfer system, the
participants accounts with the respective principal or
face amounts of the securities beneficially owned by the
participants. Any dealers, underwriters or agents participating
in the distribution of the securities will designate the
accounts to be credited. Ownership of beneficial interests in a
registered global security will be shown on, and the transfer of
ownership interests will be effected only through, records
maintained by the depositary, with respect to interests of
participants, and on the records of participants, with respect
to interests of persons holding through participants. The laws
of some states may require that some purchasers of securities
take physical delivery of the debt securities in definitive
form. These laws may impair your ability to own, transfer or
pledge beneficial interests in registered global securities.
So long as the depositary, or its nominee, is the registered
owner of a global security, the depositary or its nominee, as
the case may be, will be considered the sole owner or holder of
the debt securities represented by the registered global
security for all purposes under the applicable indenture. Except
as described below, you:
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will not be entitled to have any of the debt securities
represented by the registered global security registered in your
names;
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will not receive or be entitled to receive physical delivery of
any debt securities in definitive form; and
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will not be considered the owners or holders of the debt
securities under the indenture.
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Payments
of Principal, Premium and Interest
We will make principal, premium, if any, and interest payments
on a registered global security to the depositary that is the
registered holder of the global security or its nominee. The
depositary for the global security will be solely responsible
and liable for all payments made on account of your beneficial
ownership interests in the registered global security and for
maintaining, supervising and reviewing any records relating to
your beneficial ownership interests.
We expect that the depositary or its nominee, upon receipt of
principal, premium, if any, or interest payment in respect of a
global security, immediately will credit participants
accounts with amounts in proportion to their respective
beneficial interests in the principal amount of the global
security as shown on the records of the depositary or its
nominee. We also expect that payments by participants to you, as
an owner of a beneficial interest in a registered global
security held through those participants, will be governed by
standing instructions and customary practices, as is now the
case with securities held for the accounts of customers in
bearer form or registered in street name. These
payments will be the responsibility of those participants.
Payment
and Paying Agents
Unless we state otherwise in an applicable prospectus
supplement, we will pay principal of, premium, if any, and
interest on your debt securities at the office of the trustee in
the City of New York or at the office of any paying agent that
we may designate.
Unless we state otherwise in the applicable prospectus
supplement, we will pay any interest on debt securities to the
registered owner of the debt security at the close of business
on the regular record date for the interest, except in the case
of defaulted interest. We may at any time designate additional
paying agents or rescind the designation of any paying agent. We
must maintain a paying agent in each place of payment for the
debt securities.
Any moneys or government obligations deposited with, or paid to,
the trustee or any paying agent, or then held by us in trust,
for the payment of the principal of, premium, if any, and
interest on any debt security that remain unclaimed for three
years after the principal or interest has become due and payable
will, at our request, be repaid to us. After repayment to us,
you are entitled to seek payment only from us as a general
unsecured creditor.
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Conversion
or Exchange
The subordinated indenture permits us to issue debt securities
that we may convert or exchange into common stock or other
securities of Chubb. We will describe the specific terms on
which any series of the subordinated debt securities may be
converted or exchanged in the applicable prospectus supplement.
The conversion or exchange may be mandatory, at your option or
at our option, as specified in the applicable prospectus
supplement. The applicable prospectus supplement will describe
the manner in which the shares of common stock or other
securities you would receive would be converted or exchanged.
Subordination
Under the Subordinated Indenture
The debt securities we issue under the subordinated indenture
will constitute part of the subordinated debt of Chubb. These
subordinated debt securities will be subordinate and junior in
right of payment, to the extent and in the manner set forth in
the subordinated indenture, to all senior
indebtedness of Chubb. The subordinated indenture defines
senior indebtedness as the principal of, premium, if
any, and unpaid interest on the following, whether outstanding
at the date of the subordinated indenture or later incurred or
created:
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indebtedness of Chubb for money borrowed, including purchase
money obligations, evidenced by notes or other written
obligations;
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indebtedness of Chubb evidenced by notes, debentures, bonds or
other securities issued under the provisions of an indenture or
similar instrument;
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obligations of Chubb as lessee under capitalized leases and
leases of property made as part of any sale and leaseback
transactions;
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indebtedness of others of any of the kinds described in the
preceding clauses assumed or guaranteed by Chubb; and
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renewals, extensions and refundings of, and indebtedness and
obligations of a successor corporation issued in exchange for,
or in replacement of, indebtedness and obligations described in
the preceding clauses unless such indebtedness, obligation,
renewal, extension or refunding expressly provides that it is
not superior in right of payment to the subordinated debt
securities;
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provided that senior indebtedness does not include any
indebtedness issued under the subordinated indenture or any
indebtedness or obligation if the terms of such indebtedness or
obligation expressly provide that such indebtedness or
obligation is not senior in right of payment to the debt
securities issued under the subordinated indenture or expressly
provide that such indebtedness or obligation is pari passu with
or junior to the debt securities issued under the subordinated
indenture.
The subordinated indenture does not limit the amount of senior
indebtedness that we may incur. However, under the subordinated
indenture, we have agreed that we will not incur any
subordinated indebtedness (other than the junior subordinated
debt) unless it is subordinated to our senior indebtedness at
least to the same extent that the subordinated debt securities
are subordinate to senior indebtedness.
No payment of the principal or interest on the indebtedness
evidenced by the subordinated debt securities may be made if, at
the time of such payment or immediately after giving effect
thereto, there exists any default with respect to any senior
indebtedness and the default is the subject of judicial
proceedings or if Chubb receives notice of the default from any
holder of senior indebtedness or a trustee for such senior
indebtedness.
Upon any acceleration of the maturity of any series of
subordinated debt securities resulting from an event of default,
Chubb must give notice of the acceleration to holders of the
senior indebtedness and may not pay holders of such series of
subordinated debt securities until 120 days after the
acceleration and then only if all principal of, premium, if any,
and interest on senior indebtedness due at that time (whether by
acceleration or otherwise) is first paid in full. In the event
of any payment or distribution of assets or securities upon any
dissolution, winding up, total or partial liquidation or
reorganization or similar proceeding relating to Chubb, all
principal of, premium, if any, and interest due on all senior
indebtedness must be paid in full before holders of the
subordinated debt securities are entitled to receive or retain
any payment. As a result of such subordination, in the event of
insolvency, creditors of
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Chubb who are holders of senior indebtedness and general
creditors of Chubb, may recover more, ratably, than holders of
the subordinated debt securities.
If this prospectus is being delivered in connection with a
series of subordinated debt securities, the accompanying
prospectus supplement or the information incorporated in this
prospectus by reference will set forth the approximate amount of
senior indebtedness outstanding as of the end of the most recent
fiscal quarter.
Governing
Law
The debt securities and each indenture will be governed by and
construed in accordance with the laws of the State of New York.
Information
Concerning the Trustees
The trustee under each indenture will have all the duties and
responsibilities of an indenture trustee specified in the Trust
Indenture Act. Neither trustee is required to expend or risk its
own funds or otherwise incur personal financial liability in
performing its duties or exercising its rights and powers if it
reasonably believes that it is not reasonably assured of
repayment or adequate indemnity.
The Bank of New York Trust Company, N.A. is the trustee under
the senior indenture and under the subordinated indenture and
will be the trustee under the junior subordinated indenture
referred to below. The trustee under each indenture may have
other relationships with us subject to the Trust Indenture Act.
The trustees current address is 2 North LaSalle Street,
Suite 1020, Global Corporate Trust, Chicago, Illinois 60602.
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DESCRIPTION
OF JUNIOR SUBORDINATED DEBT SECURITIES
We may offer unsecured junior subordinated debt securities. We
will issue the junior subordinated debt securities in one or
more series under an indenture, which we refer to as the junior
subordinated indenture, as supplemented from time to time,
between us and The Bank of New York Trust Company, N.A., as
trustee.
The following description of the terms and provisions of the
junior subordinated debt securities and the junior subordinated
indenture is a summary. It summarizes only those terms of the
junior subordinated debt securities and portions of the junior
subordinated indenture which we believe will be most important
to your decision to invest in our junior subordinated debt
securities. You should keep in mind, however, that it is the
junior subordinated indenture, and not this summary, which
defines your rights as a holder of our junior subordinated debt
securities. There may be other provisions in the junior
subordinated indenture which are also important to you. You
should read the junior subordinated indenture for a full
description of the terms of the junior subordinated debt
securities. The junior subordinated indenture is filed as an
exhibit to the registration statement that includes this
prospectus. See Where You Can Find More Information
for information on how to obtain a copy of the junior
subordinated indenture.
Ranking
Our junior subordinated debt securities will be unsecured
obligations. Each series of junior subordinated debt securities
will rank equally with all other series of junior subordinated
debt securities unless we state otherwise in the applicable
prospectus supplement. The junior subordinated debt securities
of any series will be subordinate and junior in right of
payment, as described in the junior subordinated indenture and
the applicable prospectus supplement, to all of our indebtedness
other than debt which ranks equally with or junior to the junior
subordinated debt securities. See
Subordination under the Junior Subordinated
Indenture.
Since we are a non-operating holding company, most of our
operating assets are owned by our subsidiaries. We rely
primarily on dividends from these subsidiaries to meet our
obligations for payment of principal and interest on our
outstanding debt obligations and corporate expenses.
Accordingly, the junior subordinated debt securities will be
effectively subordinated to all existing and future liabilities
of our subsidiaries, and you should rely only on our assets for
payments on the junior subordinated debt securities. Most of our
subsidiaries are in the property and casualty insurance
business. The amount of dividend distributions to us from our
insurance subsidiaries may be restricted by state insurance laws
and regulations as administered by state insurance departments.
Unless we state otherwise in the applicable prospectus
supplement, the junior subordinated indenture does not limit us
from incurring or issuing other secured or unsecured debt under
the junior subordinated indenture or any other indenture that we
may have entered into or enter into in the future. See
Subordination under the Junior Subordinated
Indenture and the prospectus supplement relating to any
offering of junior subordinated debt securities.
Terms of
the Junior Subordinated Debt Securities
We may issue the junior subordinated debt securities in one or
more series, through an indenture that supplements the junior
subordinated indenture or through a resolution of our board of
directors or an authorized committee of our board of directors.
You should refer to the applicable prospectus supplement for the
specific terms of the series of junior subordinated debt
securities being issued. These may include the following:
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the title, designation and purchase price;
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any limit upon the aggregate principal amount;
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the maturity date(s) or the method of determining such maturity
date(s);
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the interest rate(s), if any, and the method for calculating the
interest rate(s), if any;
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the interest payment dates, interest payment record dates and
any other specific covenants for the payment of interest;
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the circumstances, if any, in which interest may be deferred and
the terms of any such deferral, including applicable restrictive
covenants during any interest deferral period;
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dates from which interest will accrue and the method of
determining those dates;
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the circumstances and dates on which premium, if any, will be
paid;
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place(s) where we may pay principal, premium, if any, and
interest and where you may present the junior subordinated debt
securities of that series for registration of transfer or
exchange;
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place(s) where notices and demands relating to the junior
subordinated debt securities of that series and the junior
subordinated indenture may be made;
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authorized denominations, if other than denominations of $1,000;
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the currency or currencies, if other than the currency of the
United States, in which principal, premium, if any, and interest
will be paid or in which the junior subordinated debt securities
of that series will be denominated;
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any index or indices used to determine the amount of payments of
principal of and premium, if any, on the junior subordinated
debt securities of that series or the manner in which such
amounts will be determined;
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any special United States federal income tax consequences of the
junior subordinated debt securities of that series;
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any special accounting considerations applicable to the junior
subordinated debt securities of that series;
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any mandatory or optional redemption terms, or prepayment or
sinking fund provisions;
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any additions, modifications or deletions in the events of
default or related provisions, including acceleration
mechanisms, or in the covenants specified in the junior
subordinated indenture;
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any financial ratios covenants applicable to the junior
subordinated debt securities of that series;
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if other than the principal amount of the junior subordinated
debt securities of that series, the portion of the principal
amount of junior subordinated debt securities of that series
that is payable upon declaration of acceleration of maturity;
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whether the junior subordinated debt securities of that series
will be issued in whole or in part in the form of one or more
global securities and the terms and conditions upon which
interests in such global securities may be exchanged for
certificates;
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whether a temporary global security will be issued and the terms
upon which temporary global junior subordinated debt securities
of that series may be exchanged for definitive junior
subordinated debt securities;
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any additions, modifications or deletions to the requirements
for consent by holders to any amendment or waiver of the terms
or conditions of the junior subordinated indenture or the junior
subordinated debt securities of that series;
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the appointment of any trustees, authenticating or paying
agent(s), transfer agent(s) or any other agents with respect to
that series of junior subordinated debt securities;
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the terms and conditions of any right we would have or any
option you would have to convert or exchange the junior
subordinated debt securities of that series into any other
securities or property of Chubb;
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any additions, modifications or deletions in the subordination
provisions, including the definition of senior indebtedness;
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the relative degree, if any, to which the junior subordinated
debt securities of that series will be senior to or be
subordinated to other series of junior subordinated debt
securities in right of payment; and
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other specific terms, not inconsistent with the provisions of
the junior subordinated indenture.
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Junior subordinated debt securities may also be issued under the
junior subordinated indenture upon the exercise of warrants or
upon conversion, exchange and settlement of other securities.
See Descriptions of Warrants.
Special
Payment Terms of the Junior Subordinated Debt
Securities
We may issue one or more series of junior subordinated debt
securities at a substantial discount below their stated
principal amount, to the extent provided in the applicable
prospectus supplement. These junior subordinated debt securities
may bear no interest or interest at a rate which at the time of
issuance is below market rates. We will describe United States
federal income tax consequences and special considerations
relating to any series in the applicable prospectus supplement.
The purchase price of any of the junior subordinated debt
securities may be payable in one or more foreign currencies or
currency units. The junior subordinated debt securities may be
denominated in one or more foreign currencies or currency units,
or the principal of, premium, if any, or interest on any junior
subordinated debt securities may be payable in one or more
foreign currencies or currency units. We will describe the
restrictions, elections, United States federal income tax
considerations, specific terms and other information relating to
the junior subordinated debt securities of any series and any
foreign currencies or foreign currency units in the applicable
prospectus supplement.
If we use any index to determine the amount of payments of
principal of, premium, if any, or interest on any series of
junior subordinated debt securities, we will also describe in
the applicable prospectus supplement the special United States
federal income tax, accounting and other considerations
applicable to the junior subordinated debt securities.
Denominations,
Registration and Transfer
Unless we state otherwise in the applicable prospectus
supplement, we will issue the junior subordinated debt
securities in fully registered form without coupons in
denominations of $1,000 and integral multiples of $l,000.
Except as we may describe in the applicable prospectus
supplement, junior subordinated debt securities of any series
will be exchangeable for other junior subordinated debt
securities of the same series, in any authorized denominations,
of a like aggregate principal amount, of the same original issue
date and stated maturity and having the same terms. You may
present junior subordinated debt securities for exchange as
described above, or for registration of transfer, at the office
of the securities registrar or at the office of any transfer
agent we designate for that purpose. You will not incur a
service charge but you will be required to pay any taxes and
other governmental charges as described in the junior
subordinated indenture. We will appoint the trustee as
securities registrar under the junior subordinated indenture
unless we state otherwise in the applicable prospectus
supplement. We will specify the transfer agent in the applicable
prospectus supplement. We may at any time designate additional
transfer agents.
Unless we state otherwise in the applicable prospectus
supplement, if we redeem any junior subordinated debt securities
of any series, neither we nor the trustee will be required to:
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issue, transfer, or exchange junior subordinated debt securities
of such series during a period beginning at the opening of
business 15 days before the day of selection for redemption
of the junior subordinated debt securities of such series and
ending at the close of business on the day of mailing of the
relevant notice of redemption; or
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transfer or exchange any junior subordinated debt securities of
such series selected for redemption in whole or in part, except
for any portion not redeemed of any junior subordinated debt
securities of such series that is being redeemed in part.
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Sinking
Funds and Redemption
Unless we state otherwise in the applicable prospectus
supplement, junior subordinated debt securities will not be
subject to any sinking fund.
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Unless we state otherwise in the applicable prospectus
supplement, we may, at our option and at any time, redeem any
series of junior subordinated debt securities, in whole or in
part at a redemption price equal to 100% of the principal amount
plus accrued and unpaid interest to the redemption date. We may
redeem the junior subordinated debt securities of any series in
part only in the amount of $1,000 or integral multiples of
$1,000 (or such other authorized denomination thereof).
Unless we state otherwise in the applicable prospectus
supplement, we will mail notice of any redemption of your junior
subordinated debt securities not less than 30, nor more
than 60 days before the redemption date to you at your
registered address. Unless we default in payment of the
redemption price, on and after the redemption date interest will
cease to accrue on the junior subordinated debt securities or
the portions called for redemption.
Option to
Extend Interest Payment Date
If provided in the applicable prospectus supplement, we will
have the right during the term of any series of junior
subordinated debt securities to extend the interest payment
period for a specified number of interest payment periods,
subject to the terms, conditions and covenants specified in the
applicable prospectus supplement. However, we may not extend
these interest payments beyond the final maturity of the junior
subordinated debt securities.
If we exercise this right, during the extension period we and
our subsidiaries may not, unless we state otherwise in the
applicable prospectus supplement:
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declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment on, any of our
capital stock;
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make any payment of principal of, premium, if any, or interest
on, or repay, repurchase or redeem any debt securities that rank
equally with or junior in interest to the junior subordinated
debt securities; or
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make any guarantee payments with respect to the foregoing;
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in each case other than:
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any purchase, redemption or other acquisition of shares of our
capital stock in connection with:
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any employment contract, benefit plan or other similar
arrangement with or for the benefit of any one or more
employees, officers, directors, consultants or independent
contractors;
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the satisfaction of our obligations pursuant to any contract
entered into in the ordinary course of business prior to the
beginning of the deferral period;
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a dividend reinvestment or shareholder purchase plan; or
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the issuance of our capital stock, or securities convertible
into or exercisable for such capital stock, as consideration in
an acquisition transaction entered into prior to the applicable
deferral period;
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any exchange, redemption or conversion of any class or series of
our capital stock, or the capital stock of one of our
subsidiaries, for any other class or series of our capital
stock, or of any class or series of our indebtedness for any
class or series of our capital stock;
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any purchase of fractional interests in shares of our capital
stock pursuant to the conversion or exchange provisions of such
capital stock or the securities being converted or exchanged;
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any declaration of a dividend in connection with any shareholder
rights plan, or the issuance of rights, stock or other property
under any shareholder rights plan, or the redemption or purchase
of rights pursuant thereto;
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any dividend in the form of stock, warrants, options or other
rights where the dividend stock or stock issuable upon exercise
of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks equally with
or junior to such stock;
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any payment of current or deferred interest on debt securities
that rank in right of payment upon our liquidation on a parity
with the junior subordinated debt securities of any series that
is made pro rata to the amounts due on such part passu
securities (including the junior subordinated debt
securities of any series)
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and any payments of deferred interest on part passu
securities that, if not made, would cause us to breach the
terms of the instrument governing such part passu
securities;
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any payment of principal in respect of pari passu
securities having the same scheduled maturity date as the
junior subordinated debt securities of any series, as required
under a provision of such pari passu securities that is
substantially the same as the provision for repayment of
principal of the junior subordinated debt securities of any
series and that is made on a pro rata basis among one or
more series of pari passu securities having such a
provision and the junior subordinated debt securities of any
series; or
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any repayment or redemption of a security necessary to avoid a
breach of the instrument governing the same.
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We will describe the United States federal income tax
consequences and special considerations relating to the
extension of any interest payment period of any junior
subordinated debt securities in the applicable prospectus
supplement.
Consolidation,
Merger and Sale of Assets
Unless we state otherwise in the applicable prospectus
supplement, we may not consolidate with, merge into or sell,
convey, transfer or lease all or substantially all of our
properties and assets to any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency
or political subdivision thereof, nor permit any such entity to
consolidate with, merge into or sell, convey, transfer or lease
all or substantially all of its properties and assets to us
unless:
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we are the surviving entity or the successor entity is an entity
organized under the laws of any domestic jurisdiction and
assumes our obligations on the junior subordinated debt
securities and under the junior subordinated indenture;
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after giving effect to such transaction, no Event of Default,
and no event which, after notice or lapse of time or both, would
become an Event of Default will have occurred and be
continuing; and
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Chubb or the surviving entity will have delivered to the trustee
an officers certificate and opinion of counsel stating
that the transaction or series of transactions and a
supplemental indenture, if any, complies with this covenant and
that all conditions precedent in the junior subordinated
indenture relating to the transaction or series of transactions
have been satisfied.
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This covenant would not apply to the direct or indirect sale,
conveyance, transfer or lease of all or any portion of the
stock, assets or liabilities of any of our wholly owned
subsidiaries to us or to our other wholly owned subsidiaries.
This covenant also would not apply to any recapitalization
transaction, a change of control of Chubb or a highly leveraged
transaction unless such transaction or change of control were
structured to include a merger or consolidation by us or the
sale, conveyance, transfer or lease of all or substantially all
of our properties and assets.
Junior
Subordinated Debt Securities Events of Default
Unless we state otherwise in the applicable prospectus
supplement, these are Events of Default under the
junior subordinated indenture with respect to each series of
junior subordinated debt securities:
(1) failure to pay principal, or premium, if any, when due;
(2) failure to pay any interest when due, continued for
30 days;
(3) default in the payment of any sinking fund installment
when due and payable;
(4) failure to perform, or breach, of specified covenants
or warranties of Chubb contained in the junior subordinated
indenture for 90 days, after written notice from the
trustee or the holders of at least 25% in aggregate principal
amount of the relevant series of outstanding junior subordinated
debt securities;
(5) certain events of bankruptcy, insolvency or
receivership of Chubb; and
(6) any other event of default described in the applicable
board resolution or supplemental indenture under which the
series of junior subordinated debt securities is issued.
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Unless we state otherwise in the applicable prospectus
supplement, if an Event of Default occurs and is continuing, the
trustee may, and at the written request of holders of a majority
in aggregate principal amount of the securities of each series
affected by the Event of Default and upon the trustees
receipt of indemnification to its satisfaction will, proceed to
protect and enforce its rights and those of the holders of such
junior subordinated debt securities.
Unless we state otherwise in the applicable prospectus
supplement, if an Event of Default, other than an Event of
Default specified in clause (5) above or an event of
default specified in clause (4) above with respect to less
than all series of junior subordinated debt securities then
outstanding, occurs and is continuing, with respect to the
junior subordinated debt securities of any series, then the
trustee or the holders of at least 25% in aggregate principal
amount of the outstanding junior subordinated debt securities of
that series (each series acting as a separate class) may require
us to repay immediately the entire principal amount of the
outstanding junior subordinated debt securities of that series,
or such lesser amount as may be provided in the terms of the
junior subordinated debt securities, together with all accrued
and unpaid interest and premium, if any.
Unless we state otherwise in the applicable prospectus
supplement, if an Event of Default specified in clause (4)
above occurs and is continuing with respect to all series of
junior subordinated debt securities then outstanding under the
junior subordinated indenture or an Event of Default specified
in clause (5) above occurs and is continuing, then the
trustee or the holders of at least 25% in aggregate principal
amount of all of the junior subordinated debt securities of all
series then outstanding under the junior subordinated indenture
(treated as one class) may require us to repay immediately the
entire principal amount of the outstanding junior subordinated
debt securities, or such lesser amount as may be provided in the
terms of the junior subordinated debt securities, together with
all accrued and unpaid interest, if any.
Any Event of Default with respect to a particular series of
junior subordinated debt securities under the junior
subordinated indenture may be waived by the holders of a
majority of the aggregate principal amount of the outstanding
junior subordinated debt securities of such series, and any
Event of Default specified in clause (4) above with respect
to all series of junior subordinated debt securities or
specified in clause (5) above may be waived by the holders
of a majority in aggregate principal amount of all the
outstanding junior subordinated debt securities of all series
under the junior subordinated indenture, as the case may be,
except, in each case, a failure to pay principal of, or premium,
if any, or interest on such junior subordinated debt securities
unless we state otherwise in the applicable prospectus
supplement.
The trustee will, within 90 days after actual knowledge of
the trustee of the occurrence of any event which, after notice
or lapse of time or both, would become an Event of Default under
the junior subordinated indenture or the junior subordinated
debt securities of a series that has not been cured or waived,
provide notice to the holders of such series of junior
subordinated debt securities affected. The trustee may withhold
notice to the holders of any such event, except a default
relating to the payment of principal of, premium if any, on,
interest or sinking fund in respect of, the junior subordinated
debt securities, if the trustee considers it in the interest of
the holders to do so.
We are required to furnish to the trustee an annual statement as
to compliance with all conditions and covenants under the junior
subordinated indenture.
Modification
of the Junior Subordinated Indenture
Unless we state otherwise in the applicable prospectus
supplement, we and the trustee may, without the consent of the
holders of junior subordinated debt securities of any series,
amend, waive or supplement the junior subordinated indenture in
order to:
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evidence the succession of another person and assumption by any
such successor of our covenants under the junior subordinated
indenture and the junior subordinated debt securities;
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convey, transfer, assign, mortgage or pledge any property to or
with the trustee a security for the junior subordinated debt
securities or to surrender any right or power conferred upon us
under the junior subordinated indenture;
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establish the form or terms of the junior subordinated debt
securities of any series;
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add to the covenants of Chubb, to surrender any right or power
conferred upon the Company by the junior subordinated indenture
or add additional events of default;
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change or eliminate any provision of the junior subordinated
indenture; provided that any such change or elimination will
become effective only when there is no junior subordinated debt
securities of any series outstanding created prior to the
execution of such supplemental indenture or waiver which is
entitled to the benefit of such provision;
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cure ambiguities or defects, correct or supplement any
inconsistencies or make any other provisions with respect to
matters or questions under the junior subordinated indenture;
provided that such action does not materially adversely affect
the interest of any holder of junior subordinated debt
securities of any series outstanding;
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provide for a successor trustee with respect to junior
subordinated debt securities of any series; or
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comply with the requirements of the Commission in order to
effect or maintain the qualification of the junior subordinated
indenture under the Trust Indenture Act.
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We and the trustee may modify and amend the junior subordinated
indenture in a manner affecting the rights of the holders of
junior subordinated debt securities with the consent of the
holders of not less than a majority in aggregate principal
amount of the outstanding junior subordinated debt securities of
each series affected. However, unless we state otherwise in the
applicable prospectus supplement, no modification or amendment
may, without the consent of the holder of each outstanding
junior subordinated debt securities affected:
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change the stated maturity of the principal or interest on the
junior subordinated debt securities of any series;
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reduce the principal amount of the junior subordinated debt
securities of any series;
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reduce the rate of interest or, except as permitted by the
junior subordinated indenture and the terms of the series of
junior subordinated debt securities, extend the time of payment
of interest on the junior subordinated debt securities;
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reduce the amount payable on redemption of the junior
subordinated debt securities of any series, or reduce the amount
of principal of an original issue discount junior subordinated
debt security of any series that would be due and payable upon
an acceleration of the maturity of such security;
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change the place of payment or the currency of payment of
principal of or interest on the junior subordinated debt
securities of any series;
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impair the right of any security holder to institute suit for
the enforcement of payment on the junior subordinated debt
securities of any series on or after their stated maturity or
redemption date;
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modify any of the provisions of the sections of the junior
subordinated indenture relating to amendments with consents of
holders and waivers, except to increase the percentage of
holders or to provide that certain other provisions of the
junior subordinated indenture cannot be modified or waived
without the consent of the holder of each junior subordinated
debt securities of any series; and
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modify any provisions of the junior subordinated indenture
relating to the subordination of the junior subordinated debt
securities of any series in a manner adverse to the holders
thereof.
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In addition, we and the trustee may execute, without your
consent, any supplemental indenture for the purpose of creating
any new series of junior subordinated debt securities.
Satisfaction
and Discharge
Unless we state otherwise in the applicable prospectus
supplement, when, among other things, all junior subordinated
debt securities of any series not previously delivered to the
trustee for cancellation:
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have become due and payable; or
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will become due and payable at their stated maturity within one
year of the date of deposit; or
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are to be called for redemption within one year under
arrangements satisfactory to the trustee for the giving of
notice of redemption by the trustee;
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and we deposit or cause to be deposited with the trustee, in
trust, an amount in cash or United States government obligations
sufficient to pay and discharge the entire indebtedness on the
junior subordinated debt securities of such series not
previously delivered to the trustee for cancellation, for the
principal, premium, if any, and interest to the date of the
deposit or to the stated maturity, as the case may be, and we
pay or cause to be paid all other sums payable with respect to
the junior subordinated debt securities of such series and
deliver certain officers certificate and legal opinions to
the trustee, then the junior subordinated indenture will cease
to be of further effect with respect to the junior subordinated
debt securities of that series and we will be deemed to have
satisfied and discharged the junior subordinated indenture with
respect to the junior subordinated debt securities of such
series other than as to certain transfers and exchange, the
right of holders to receive payment and the rights and
obligations of the trustee under the junior subordinated
indenture.
Defeasance
Unless we state otherwise in the applicable prospectus
supplement, the junior subordinated indenture provides that we
will be deemed to have paid and discharged the entire
indebtedness with respect to all outstanding junior subordinated
debt securities of any series, other than as to certain
transfers and exchanges, if, among other things:
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we irrevocably deposit with the trustee, in trust, cash or
United States government obligations or a combination thereof,
in an amount sufficient to pay on each date that they become due
and payable, the principal of, premium, if any, and interest on,
all outstanding junior subordinated debt securities of such
series;
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we pay all other sums payable with respect to the outstanding
junior subordinated debt securities of such series; and
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we deliver to the trustee an officers certificate and an
opinion of counsel to the effect that all conditions precedent
in the junior subordinated indenture relating to the defeasance
of the entire indebtedness on the outstanding junior
subordinated debt securities of such series have been complied
with.
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Global
Junior Subordinated Debt Securities
The junior subordinated debt securities of a series may be
issued in whole or in part in the form of one or more global
junior subordinated debt securities that will be deposited with
a depositary identified in a prospectus supplement. Unless it is
exchanged for junior subordinated debt securities in definitive
form, a global junior subordinated debt securities may not be
transferred unless it is being transferred to certain nominees
of the depositary. Unless otherwise stated in the prospectus
supplement, DTC will act as depositary. We will issue global
junior subordinated debt securities only in registered form and
in either temporary or permanent form.
We will describe the specific terms of the depositary
arrangement in the applicable prospectus supplement. We expect
that the following provisions will generally apply to these
depositary arrangements.
Beneficial
Interests in a Global Junior Subordinated Debt
Securities
Ownership of beneficial interests in a registered global junior
subordinated debt securities will be limited to persons, called
participants, that have accounts with the depositary or persons
that may hold interests through participants. Upon the issuance
of a registered global junior subordinated debt securities, the
depositary will credit, on its book-entry registration and
transfer system, the participants accounts with the
respective principal or face amounts of the junior subordinated
debt securities beneficially owned by the participants. Any
dealers, underwriters or agents participating in the
distribution of the junior subordinated debt securities will
designate the accounts to be credited, or we will designate such
accounts if the junior subordinated debt securities are issued
directly by us. Ownership of beneficial interests in a
registered global junior subordinated debt securities will be
shown on, and the transfer of ownership interests will be
effected only through, records maintained by the depositary,
with respect to interests of participants, and on the records of
participants, with respect to interests of persons holding
through participants. The laws of some states may require that
some purchasers of debentures take physical delivery of the
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junior subordinated debentures in definitive form. These laws
may impair your ability to own, transfer or pledge beneficial
interests in registered global junior subordinated debt
securities.
So long as the depositary or its nominee is the registered owner
of a global junior subordinated debt securities, the depositary
or its nominee, as the case may be, will be considered the sole
owner or holder of the junior subordinated debt securities
represented by the global junior subordinated debt securities
for all purposes under the junior subordinated indenture. Except
as provided below or as otherwise stated in the applicable
prospectus supplement, you
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will not be entitled to have any of the junior subordinated debt
securities represented by the global junior subordinated debt
securities registered in your name;
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will not receive or be entitled to receive physical delivery of
any junior subordinated debt securities in definitive
form; and
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will not be considered the owner or holder of the junior
subordinated debt securities under the junior subordinated
indenture.
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Payments
of Principal, Premium and Interest
We will make principal, premium, if any, and interest payments
on a registered global junior subordinated debt securities to
the depositary that is the registered holder of the global
junior subordinated debt securities or its nominee. The
depositary for the global junior subordinated debt securities
will be solely responsible and liable for all payments made on
account of your beneficial ownership interests in the registered
global junior subordinated debt securities and for maintaining,
supervising and reviewing any records relating to your
beneficial ownership interests.
We expect that the depositary or its nominee, upon receipt of
principal, premium, if any, or interest payment in respect of a
global junior subordinated debt securities, immediately will
credit participants accounts with amounts in proportion to
their respective beneficial interests in the principal amount of
the global junior subordinated debt securities as shown on the
records of the depositary or its nominee. We also expect that
payments by participants to you, as an owner of a beneficial
interest in a registered global junior subordinated debt
securities held through those participants, will be governed by
standing instructions and customary practices, as is now the
case with securities held for the accounts of customers in
bearer form or registered in street name. These
payments will be the responsibility of those participants.
Payment
and Paying Agents
Unless we state otherwise in the applicable prospectus
supplement, we will pay principal of, premium, if any, and
interest on your junior subordinated debt securities at the
office of the trustee in the City of New York or at the office
of any paying agent that we may designate.
Unless we state otherwise in the applicable prospectus
supplement, we will pay any interest on junior subordinated debt
securities to the registered owner of the junior subordinated
debt securities at the close of business on the regular record
date for the interest, except in the case of defaulted interest.
We may at any time designate additional paying agents or rescind
the designation of any paying agent. We must maintain a paying
agent in each place of payment for the junior subordinated debt
securities.
Any moneys deposited with the trustee or any paying agent, or
then held by us in trust, for the payment of the principal of,
premium, if any, and interest on any junior subordinated debt
securities that remain unclaimed for two years after the
principal, premium, if any, or interest has become due and
payable will, at our request, be repaid to us. After repayment
to us, you are entitled to seek payment only from us as a
general unsecured creditor.
Conversion
or Exchange
The junior subordinated indenture permits us to issue junior
subordinated debt securities that we may convert or exchange
into other securities or property of Chubb. We will describe the
specific terms on which any series of junior subordinated debt
securities may be converted or exchanged in the applicable
prospectus supplement. The
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conversion or exchange may be mandatory, at your option or at
our option, as specified in the applicable prospectus
supplement. The applicable prospectus supplement will describe
the manner in which the other securities you would receive would
be converted or exchanged.
Subordination
Under the Junior Subordinated Indenture
The junior subordinated debt securities we issue under the
junior subordinated indenture will constitute part of the
subordinated debt of Chubb. These junior subordinated debt
securities will be subordinate and junior in right of payment,
to the extent and in the manner set forth in the junior
subordinated indenture and in any applicable prospectus
supplement to all senior indebtedness of Chubb.
Unless we state otherwise in the applicable prospectus
supplement, senior indebtedness means the principal
of, premium, if any, and unpaid interest on the following,
whether outstanding at the date of the junior subordinated
indenture or later incurred or created:
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all of Chubbs obligations (other than obligations pursuant
to the junior subordinated indenture and the junior subordinated
debt securities of any series) for money borrowed;
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all of Chubbs obligations evidenced by notes, debentures,
bonds or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets
or businesses and including all other debt securities issued by
Chubb to any trust or a trustee of such trust, or to a
partnership or other affiliate that acts as a financing vehicle
for Chubb, in connection with the issuance of securities by such
vehicles;
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all of Chubbs obligations under leases required or
permitted to be capitalized under generally accepted accounting
principles;
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all of Chubbs reimbursement obligations with respect to
letters of credit, bankers acceptances or similar
facilities issued for Chubbs account;
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all of Chubbs obligations issued or assumed as the
deferred purchase price of property or services, including all
obligations under master lease transactions pursuant to which
Chubb or any of its subsidiaries have agreed to be treated as
owner of the subject property for federal income tax purposes
(but excluding trade accounts payable or accrued liabilities
arising in the ordinary course of business);
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all of Chubbs payment obligations under interest rate swap
or similar agreements or foreign currency hedge, exchange or
similar agreements at the time of determination, including any
such obligations incurred solely to act as a hedge against
increases in interest rates that may occur under the terms of
other outstanding variable or floating rate indebtedness of
Chubb;
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all obligations of the types referred to in the preceding bullet
points of another person and all dividends of another person the
payment of which, in either case, Chubb has assumed or
guaranteed or for which Chubb is responsible or liable, directly
or indirectly, jointly or severally, as obligor, guarantor or
otherwise;
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all compensation, reimbursement and indemnification obligations
of Chubb to the trustee pursuant to the junior subordinated
indenture; and
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all amendments, modifications, renewals, extensions,
refinancings, replacements and refundings of any of the above
types of indebtedness.
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The junior subordinated debt securities will rank senior to all
of Chubbs equity securities.
The senior indebtedness will continue to be senior indebtedness
and entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any
term of the senior indebtedness or extension or renewal of the
senior indebtedness. Notwithstanding anything to the contrary in
the foregoing, senior indebtedness will not include
(1) indebtedness incurred for the purchase of goods,
materials or property, or for services obtained in the ordinary
course of business or for other liabilities arising in the
ordinary course of business, (2) any indebtedness which by
its terms expressly provides that it is not superior in right of
payment to the junior subordinated debt securities or
(3) any of Chubbs indebtedness owed to a person who
is a subsidiary or employee.
The junior subordinated indenture does not limit the amount of
senior indebtedness that we may incur.
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In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceeding relative to
us, the holders of senior indebtedness will first be entitled to
receive payment in full of principal of, premium, if any, and
interest on the senior indebtedness before the holders of junior
subordinated debt securities will be entitled to receive or
retain any payment of the principal, premium, if any, or
interest on the junior subordinated debt securities.
If the maturity of any series of junior subordinated debt
securities is accelerated, the holders of all senior
indebtedness outstanding at the time of the acceleration will
first be entitled to receive payment in full of all amounts due,
including any amounts due upon acceleration, before you will be
entitled to receive any payment of the principal of, premium, if
any, or interest on the junior subordinated debt securities of
such series.
Unless we state otherwise in the applicable prospectus
supplement, no payment of the principal or interest on the
indebtedness evidenced by the junior subordinated debt
securities may be made if, at the time of such payment or
immediately after giving effect thereto, there exists any
default with respect to any senior indebtedness and the default
is the subject of judicial proceedings or if Chubb receives
notice of the default from any holder of senior indebtedness or
a trustee for such senior indebtedness.
Governing
Law
The junior subordinated indenture and the junior subordinated
debt securities will be governed by and construed in accordance
with the laws of the State of New York.
Information
Concerning the Trustee
The trustee under the junior subordinated indenture will have
all the duties and responsibilities of an indenture trustee
specified in the Trust Indenture Act. The trustee is not
required to expend or risk its own funds or otherwise incur
personal financial liability in performing its duties or
exercising its rights and powers if it reasonably believes that
it is not reasonably assured of repayment or adequate indemnity.
The Bank of New York Trust Company, N.A. is the trustee under
the senior indenture and the subordinated indenture and will be
the trustee under the junior subordinated indenture. The trustee
under each indenture may have other relationships with us
subject to the Trust Indenture Act. The trustees current
address is 2 North LaSalle Street, Suite 1020, Global
Corporate Trust, Chicago, Illinois 60602.
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DESCRIPTION
OF CAPITAL STOCK
General
Our restated certificate of incorporation, as amended,
authorizes us to issue 1,200,000,000 shares of common
stock, par value $1.00 per share, and 8,000,000 shares
of preferred stock, par value $1.00 per share. As of
February 15, 2007 there were 408,589,297 shares of
common stock issued and outstanding and no shares of preferred
stock issued or outstanding. Holders of common stock have
received a right entitling them, when the right becomes
exercisable, to purchase shares of our Series B
Participating Cumulative Preferred Stock. See
Shareholders Rights Plan.
The following description of our capital stock is a summary. It
summarizes only those aspects of our capital stock which we
believe will be most important for your decision to invest in
our capital stock. You should keep in mind, however, that it is
our restated certificate of incorporation, as amended, our
bylaws, as amended, and the New Jersey Business Corporation Act,
and not this summary, which define your rights as a holder of
our capital stock. There may be other provisions in these
documents which are also important to you. You should read these
documents for a full description of the terms of our capital
stock. Our restated certificate of incorporation, as amended,
and our bylaws, as amended, are filed as exhibits to the
registration statement that includes this prospectus. See
Where You Can Find More Information for information
on how to obtain copies of these documents.
Common
Stock
The holders of common stock, subject to the provisions of New
Jersey law and the preferential rights of the holders of any
shares of preferred stock, are entitled to dividends when and as
declared by the board of directors. The holders of common stock
have one vote per share on all matters submitted to a vote of
the shareholders, and the right to the net assets of Chubb in
liquidation after payment of any amounts due to creditors and in
respect of our preferred stock. Holders of shares of common
stock are not entitled as a matter of right to any preemptive or
subscription rights and are not entitled to cumulative voting
for directors. All outstanding shares of common stock are, and
the shares of common stock issued under this prospectus, will
be, fully paid and non-assessable.
Our common stock is listed on the New York Stock Exchange under
the symbol CB.
Under New Jersey law, the affirmative vote of two-thirds of the
votes cast is required for shareholder approval of any merger or
any plan of consolidation as well as for any sale, lease,
exchange or other disposition of all, or substantially all, of
the assets of Chubb, if not in the usual and regular course of
its business, and for any liquidation, dissolution or amendment
of the certificate of incorporation. All other shareholder
action is decided by a majority of the votes cast at a meeting
of shareholders.
Our bylaws, as amended, provide that the annual meeting of
shareholders will be held on such date and at such time as shall
be designated by the board of directors and as stated in a
written notice which is mailed or delivered to each shareholder
at least ten days, but not more than sixty days, prior to any
shareholder meeting. Our bylaws, as amended, provide that
shareholder meetings may be held in the State of New Jersey or
at such other place as may be designated by the board of
directors and stated in the written notice of meeting.
Our restated certificate of incorporation, as amended, further
provides that the board of directors has the power, except as
provided by statute, in its discretion, to use or apply any
funds of Chubb lawfully available for that purpose to purchase
or acquisition of shares of the capital stock or bonds or other
securities of Chubb:
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in the market or otherwise, at such price as may be fixed by the
board;
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to such extent and in such manner and for such purposes and upon
such terms as the board may deem expedient; and
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as may be permitted by law.
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The transfer agent and registrar for the common stock is
Computershare Investor Services, N.A., 525 Washington
Boulevard, Jersey City, New Jersey 07210.
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Preferred
Stock
Under our restated certificate of incorporation, as amended, we
are authorized to issue up to 8,000,000 shares of preferred
stock. The authorized but unissued shares of preferred stock may
be issued pursuant to a resolution of our board of directors or
an authorized committee of our board of directors without the
vote of the holders of capital stock of Chubb.
Shares of preferred stock of Chubb may be issued in one or more
series and the shares of all series will rank pari passu and be
identical in all respects, except that with respect to each
series the board of directors may fix, among other things:
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the rate of dividends payable on the preferred stock;
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the time and prices of redemption;
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the amount payable upon voluntary redemption;
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the retirement or sinking fund, if any;
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the conversion rights, if any;
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the voting rights, if any (in addition to the voting right
described below);
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the restrictions, if any, on:
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the creation of indebtedness of Chubb or any subsidiary of
Chubb; or
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the issuance of stock ranking on a parity with or senior to the
shares of preferred stock either as to dividends or on
liquidation;
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the restrictions, if any, on:
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the payment of dividends on common stock;
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the acquisition of common stock; or
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any other class or classes of stock of Chubb, other than
preferred stock, ranking on a parity with or junior to the
shares of preferred stock either as to dividends or on
liquidation; and
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the number of shares to comprise such series.
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Each series of preferred stock will be entitled to receive an
amount payable on liquidation, dissolution or winding up, fixed
for each series, plus all dividends accumulated to the date of
final distribution, before any payment or distribution of assets
of Chubb is made on common stock. Shares of preferred stock that
have been issued and reacquired in any manner by Chubb,
including shares redeemed, shares purchased and retired and
shares that have been converted into shares of another series or
class, may be reissued as part of the same or another series of
preferred stock.
Shareholders
Rights Plan
We have a shareholder rights agreement under which each
shareholder has one-half of a right for each share of common
stock held. Each right entitles the registered holder to
purchase from Chubb a unit consisting of one one-thousandth of a
share of Series B Participating Cumulative Preferred Stock,
par value $1.00 per share, at a purchase price of
$240 per unit. The rights are subject to adjustment to
prevent dilution of the interests represented by each right. The
description and terms of the rights are set forth in a rights
agreement between Chubb and First Chicago Trust Company of New
York, as rights agent. The following description of the
provisions of the rights agreement is a summary. It summarizes
only those portions of the rights agreement which we believe
will be most important to your decision to invest in our
securities. You should keep in mind, however, that it is the
rights agreement, and not this summary, which define your rights
under the rights agreement. There may be other provisions in the
rights agreement which are also important to you. You should
read the rights agreement for a full description of its terms.
The rights agreement is filed as an exhibit to the registration
statement that includes this prospectus. See Where You Can
Find More Information for information on how to obtain
copies of the rights agreement.
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The shareholder rights plan is reviewed and evaluated at least
once each year by a committee of independent directors to
determine if the maintenance of the shareholder rights plan
continues to be in the best interest of Chubb, its shareholders
and any other relevant constituencies of Chubb. Following a
review, the committee of independent directors will communicate
its conclusions to the full board of directors, including any
recommendation as to whether the shareholder rights plan should
be modified or the rights should be redeemed.
Distribution
Date
The rights are attached to all outstanding shares of common
stock and trade with the common stock until the rights become
exercisable, and no separate rights certificates will be
distributed. The rights will separate from the common stock and
a distribution date will occur upon the earlier of either of the
following:
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10 days following the date of any public announcement that
a person or group of affiliated or associated persons, referred
to in this prospectus as an acquiring person, has acquired
beneficial ownership of 20% or more of the outstanding shares of
common stock; or
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10 business days following the commencement of a tender offer or
exchange offer that would result in a person or group becoming
an acquiring person.
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The rights are not exercisable until the distribution date and
will expire at the close of business on March 12, 2009
unless previously redeemed by Chubb as described below.
Evidence
of Rights
Until the distribution date, or earlier redemption or expiration
of the rights:
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the rights will be evidenced by the common stock certificates
and will be transferred with and only with such common stock
certificates;
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new common stock certificates issued after March 31, 1999
will contain a notation incorporating the rights agreement by
reference; and
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the surrender for transfer of any certificates for common stock
will also constitute the transfer of the rights associated with
the common stock represented by such certificates.
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As soon as practicable after the distribution date, rights
certificates will be mailed to holders of record of common stock
as of the close of business on the distribution date and,
thereafter the separate rights certificates alone will represent
the rights. Except as otherwise determined by the board of
directors, only shares of common stock issued prior to the
distribution date will be issued with rights.
Triggering
Event and Effect of Triggering Event
If any person becomes an acquiring person:
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proper provision will be made so that each holder of a right,
other than rights that are, or (under the circumstances
specified in the rights agreement) were, beneficially owned by
an acquiring person (which will thereafter be void), will have
the right to receive upon exercise the number of shares of
common stock having a market value of two times the exercise
price of the right; or
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at the option of our board of directors, at any time until such
acquiring person becomes the beneficial owner of 50% or more of
the shares of common stock, Chubb may exchange the rights, other
than rights that are, or (under the circumstances specified in
the rights agreement) were, beneficially owned by an acquiring
person (which will thereafter be void), for shares of common
stock at an exchange ratio of one share of common stock per
right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction. If, at any time following the
date of any public announcement that an acquiring person has
acquired beneficial ownership of 20% or more of the outstanding
shares of common stock, Chubb is acquired in a merger or other
business combination transaction, or 50% or more of Chubbs
assets or earning power is sold, each holder of a right shall
thereafter have the right to receive, upon exercise, common
stock of the acquiring company having a value equal to two times
the exercise price of the right. The events described in this
paragraph are referred to as triggering events.
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Adjustments
The purchase price payable, and the number of units of preferred
stock or other securities or property issuable, upon exercise of
the rights are subject to adjustment from time to time to
prevent dilution upon the occurrence of one of the following:
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in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the preferred stock;
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if holders of the preferred stock are granted rights or warrants
to subscribe for preferred stock, or convertible securities at
less than the current market price of the preferred
stock; or
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upon the distribution to holders of the preferred stock of
evidences of indebtedness or assets (excluding regular quarterly
cash dividends) or of subscription rights or warrants (other
than those referred to above).
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No adjustment in the purchase price will be required until
cumulative adjustments amount to at least 1% of the purchase
price. No fractional units will be issued and, in lieu of
fractional units, an adjustment in cash will be made based on
the market price of the preferred stock on the last trading date
prior to the date of exercise.
Redemption
The rights may be redeemed in whole, but not in part, at a price
of $.01 per right by the board of directors at any time
prior to the earlier of:
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a person or group of persons becoming an acquiring
person; and
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March 12, 2009.
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Immediately upon the action of the board of directors ordering
redemption of the rights, the rights will terminate and
thereafter the only right of the holders of rights will be to
receive the redemption price.
Until a right is exercised, the holder will have no rights as a
shareholder of Chubb (beyond those as an existing shareholder),
including the right to vote or to receive dividends. As long as
the rights are attached to the common stock, Chubb will issue
one right with each new share of common stock issued.
29
DESCRIPTION
OF DEPOSITARY SHARES
We may elect to offer depositary shares representing receipts
for fractional interests in debt securities, junior subordinated
debt securities or preferred stock. In this case, we will issue
receipts for depositary shares, each of which will represent a
fraction of a debt security, junior subordinated debt security
or share of a particular series of preferred stock, as the case
may be.
We will deposit the debt securities, junior subordinated debt
securities or shares of any series of preferred stock
represented by depositary shares under a deposit agreement
between us and a depositary which we will name in the applicable
prospectus supplement. Subject to the terms of the deposit
agreement, as an owner of a depositary share you will be
entitled, in proportion to the applicable fraction of a debt
security, junior subordinated debt security or share of
preferred stock represented by the depositary share, to all the
rights and preferences of the debt security, junior subordinated
debt security or preferred stock, as the case may be,
represented by the depositary share, including, as the case may
be, interest, dividend, voting, redemption, sinking fund,
repayment at maturity, subscription and liquidation rights.
The following description of the terms of the deposit agreement
is a summary. It summarizes only those terms of the deposit
agreement which we believe will be most important to your
decision to invest in our depositary shares. You should keep in
mind, however, that it is the deposit agreement, and not this
summary, which defines your rights as a holder of depositary
shares. There may be other provisions in the deposit agreement
which are also important to you. You should read the deposit
agreement for a full description of the terms of the depositary
shares. The form of the deposit agreement is filed as an exhibit
to the registration statement that includes this prospectus. See
Where You Can Find More Information for information
on how to obtain a copy of the deposit agreement.
Interest,
Dividends and Other Distributions
The depositary will distribute all payments of interest, cash
dividends or other cash distributions received on the debt
securities, junior subordinated debt securities or preferred
stock, as the case may be, to you in proportion to the number of
depositary shares that you own.
In the event of a payment of interest or distribution other than
in cash, the depositary will distribute property received by it
to you in an equitable manner, unless the depositary determines
that it is not feasible to make a distribution. In that case the
depositary may sell the property and distribute the net proceeds
from the sale to you.
Redemption
of Depositary Shares
If we redeem a series of debt securities, junior subordinated
debt securities or preferred stock represented by depositary
shares, the depositary will redeem your depositary shares from
the proceeds received by the depositary resulting from the
redemption. The redemption price per depositary share will be
equal to the applicable fraction of the redemption price per
debt security, junior subordinated debt security or share of
preferred stock, as the case may be, payable in relation to the
redeemed series of debt securities, junior subordinated debt
securities or preferred stock. Whenever we redeem debt
securities, junior subordinated debt securities or shares of
preferred stock held by the depositary, the depositary will
redeem as of the same redemption date the number of depositary
shares representing, as the case may be, the debt securities,
junior subordinated debt securities or shares of preferred stock
redeemed. If fewer than all the depositary shares are to be
redeemed, the depositary shares to be redeemed will be selected
by lot, proportionately or by any other equitable method as the
depositary may determine.
Voting
the Preferred Stock or Exercise of Rights Under the Indentures
or the Junior Subordinated Indenture
Upon receipt of notice of any meeting at which you are entitled
to vote, or of any request for instructions or directions from
you as holder of debt securities, junior subordinated debt
securities or preferred stock, the depositary will mail to you
the information contained in that notice. Each record holder of
the depositary shares on the record date will be entitled to
instruct the depositary how to vote the amount of the preferred
stock represented by that holders depositary shares or how
to give instructions or directions with respect to the debt
securities, junior subordinated debt securities or preferred
stock, as the case may be, represented by that holders
depository shares.
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The record date for the depositary shares will be the same date
as the record date for the debt securities, junior subordinated
debt securities or preferred stock, as the case may be. The
depositary will endeavor, to the extent practicable, to vote the
amount of the preferred stock, or to give instructions or
directions with respect to the debt securities or junior
subordinated debt securities, as the case may be, represented by
the depositary shares in accordance with those instructions. We
will agree to take all reasonable action which the depositary
may deem necessary to enable the depositary to do so. The
depositary will abstain from voting shares of the preferred
stock or giving instructions or directions with respect to the
debt securities or junior subordinated debt securities, as the
case may be, if it does not receive specific instructions from
you.
Amendment
and Termination of the Deposit Agreement
We and the depositary may amend the form of depositary receipt
evidencing the depositary shares and any provision of the
deposit agreement at any time. However, any amendment which
materially and adversely alters the rights of the holders of the
depositary shares will not be effective unless the amendment has
been approved by the holders of at least a majority of the
depositary shares then outstanding.
The deposit agreement will terminate if:
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all outstanding depositary shares have been redeemed; or
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there has been a final distribution in respect of the preferred
stock, including in connection with our liquidation, dissolution
or winding up, or a complete repayment or redemption of the debt
securities or junior subordinated debt securities and the
distribution, repayment or redemption proceeds, as the case may
be, have been distributed to you.
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Resignation
and Removal of Depositary
The depositary may resign at any time by delivering to us notice
of its election to do so. We also may, at any time, remove the
depositary. Any resignation or removal will take effect upon the
appointment of a successor depositary and its acceptance of such
appointment. We must appoint the successor depositary within
60 days after delivery of the notice of resignation or
removal. The successor depositary must be a bank or trust
company having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000.
Charges
of Depositary
We will pay all transfer and other taxes and governmental
charges arising solely from the existence of the depositary
arrangements. We will pay charges of the depositary in
connection with the initial deposit of the debt securities,
junior subordinated debt securities or preferred stock, as the
case may be, and issuance of depositary receipts, all
withdrawals of shares of debt securities, junior subordinated
debt securities or preferred stock, as the case may be, by you
and any repayment or redemption of the debt securities, junior
subordinated debt securities or preferred stock, as the case may
be. You will pay other transfer and other taxes and governmental
charges, as well as the other charges that are expressly
provided in the deposit agreement to be for your account.
Miscellaneous
The depositary will forward all reports and communications from
us which are delivered to the depositary and which we are
required or otherwise determine to furnish to holders of debt
securities, junior subordinated debt securities or preferred
stock, as the case may be.
Neither we nor the depositary will be liable under the deposit
agreement to you other than for the depositarys gross
negligence, willful misconduct or bad faith. Neither we nor the
depositary will be obligated to prosecute or defend any legal
proceedings relating to any depositary shares, debt securities,
junior subordinated debt securities or preferred stock unless
satisfactory indemnity is furnished. We and the depositary may
rely upon written advice of counsel or accountants, or upon
information provided by persons presenting debt securities,
junior subordinated debt securities or preferred stock for
deposit, you or other persons believed to be competent and on
documents which we and the depositary believe to be genuine.
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DESCRIPTION
OF WARRANTS
We may issue warrants, including warrants to purchase debt
securities, preferred stock or common stock. We may issue
warrants independently or together with any other securities,
and they may be attached to or separate from those securities.
We will issue the warrants under warrant agreements between us
and a bank or trust company, as warrant agent, that we will
describe in the prospectus supplement relating to the warrants
that we offer.
The following description of the terms of the warrants is a
summary. It summarizes only those terms of the warrants and the
warrant agreement which we believe will be most important to
your decision to invest in our warrants. You should keep in
mind, however, that it is the warrant agreement and the warrant
certificate relating to the warrants, and not this summary,
which defines your rights as a warrantholder. There may be other
provisions in the warrant agreement and the warrant certificate
relating to the warrants which are also important to you. You
should read these documents for a full description of the terms
of the warrants. Forms of these documents are filed as exhibits
to the registration statement that includes this prospectus. See
Where You Can Find More Information for information
on how to obtain copies of these documents.
Debt
Warrants
We will describe in the applicable prospectus supplement the
specific terms of warrants to purchase debt securities that we
may offer, the warrant agreement relating to the debt warrants
and the warrant certificates representing the debt warrants.
You should refer to the applicable prospectus supplement for the
specific terms of the warrants. These may include the following:
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the title of the debt warrants;
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the debt securities for which the debt warrants are exercisable;
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the aggregate number of the debt warrants;
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the principal amount of debt securities that you may purchase
upon exercise of each debt warrant, and the price or prices at
which we will issue the debt warrants;
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the procedures and conditions relating to the exercise of the
debt warrants;
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the designation and terms of any related debt securities issued
with the debt warrants, and the number of debt warrants issued
with each debt security;
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the date, if any, from which you may separately transfer the
debt warrants and the related securities;
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the date on which your right to exercise the debt warrants
commences, and the date on which your right expires;
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the maximum or minimum number of the debt warrants which you may
exercise at any time;
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any special United States federal income tax consequences of the
debt warrants;
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any special accounting considerations applicable to the debt
warrants;
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any terms providing for the mandatory exercise of the debt
warrants;
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any other terms of the debt warrants and terms, procedures and
limitations relating to your exercise of the debt
warrants; and
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the terms of the securities you may purchase upon exercise of
the debt warrants.
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We will also describe in the applicable prospectus supplement
any provisions for a change in the exercise price or expiration
date of the debt warrants and the kind, frequency and timing of
any notice to be given. You may exchange debt warrant
certificates for new debt warrant certificates of different
denominations and may exercise debt warrants at the corporate
trust office of the warrant agent or any other office that we
indicate in the applicable prospectus supplement. Prior to
exercise, you will not have any of the rights of holders of the
debt securities
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purchasable upon that exercise and will not be entitled to
payments of principal, premium, if any, or interest on the debt
securities purchasable upon the exercise.
Other
Warrants
We may issue other warrants. You should refer to the applicable
prospectus supplement for the specific terms of those warrants.
These may include the following:
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the title of the warrants;
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the securities, which may include preferred stock or common
stock, for which you may exercise the warrants;
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the aggregate number of the warrants;
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the number of securities that you may purchase upon exercise of
each warrant, and the price or prices at which we will issue the
warrants;
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the procedures and conditions relating to the exercise of the
warrants;
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the designation and terms of any related securities issued with
the warrants, and the number of warrants issued with each
security;
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the date, if any, from which you may separately transfer the
warrants and the related securities;
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the date on which your right to exercise the warrants commences,
and the date on which your right expires;
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the maximum or minimum number of the warrants which you may
exercise at any time;
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any special United States federal income tax consequences of the
warrants;
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any special accounting considerations applicable to the warrants;
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any other terms of the warrants and terms, procedures and
limitations relating to your exercise of the warrants; and
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the designation and terms of the common stock, preferred stock
or other securities you may purchase upon exercise of the
warrants.
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We will also describe in the applicable prospectus supplement
any provisions for a change in the exercise price or expiration
date of the warrants and the kind, frequency and timing of any
notice to be given. You may exchange warrant certificates for
new warrant certificates of different denominations and may
exercise warrants at the corporate trust office of the warrant
agent or any other office that we indicate in the applicable
prospectus supplement. Prior to the exercise of your warrants,
you will not have any of the rights of holders of the preferred
stock, common stock or other securities purchasable upon that
exercise and will not be entitled to dividend payments, if any,
or voting rights of the preferred stock, common stock or other
securities purchasable upon the exercise.
Exercise
of Warrants
We will describe in the applicable prospectus supplement the
principal amount or the number of our securities that you may
purchase for cash upon exercise of a warrant, and the exercise
price. You may exercise a warrant as described in the applicable
prospectus supplement at any time up to the close of business on
the expiration date stated in the prospectus supplement.
Unexercised warrants will become void after the close of
business on the expiration date, or any later expiration date
that we determine.
We will forward the securities purchasable upon the exercise as
soon as practicable after receipt of payment and the properly
completed and executed warrant certificate at the corporate
trust office of the warrant agent or other office stated in the
applicable prospectus supplement. If you exercise less than all
of the warrants represented by the warrant certificate, we will
issue you a new warrant certificate for the remaining warrants.
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DESCRIPTION
OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
We may issue stock purchase contracts, including contracts
obligating you to purchase from us, and us to sell to you, a
specific number of shares of preferred stock or common stock at
a future date or dates. The price per share of preferred stock
or common stock may be fixed at the time the stock purchase
contracts are issued or may be determined by reference to a
specific formula described in the stock purchase contracts. We
may issue stock purchase contracts separately or as a part of
units each consisting of a stock purchase contract and debt
securities or debt obligations of third parties, including
United States Treasury securities, securing your obligations to
purchase the preferred stock or the common stock under the stock
purchase contract. The stock purchase contracts may require us
to make periodic payments to you or vice versa and the payments
may be unsecured or prefunded on some basis. The stock purchase
contracts may require you to secure your obligations in a
specified manner. We will describe in the applicable prospectus
supplement the terms of any stock purchase contracts or stock
purchase units.
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PLAN OF
DISTRIBUTION
We may sell the securities offered by this prospectus through
agents, underwriters or dealers, or directly to one or more
purchasers or through a combination of any of these methods of
sale.
We may use agents who we designate to solicit offers to purchase
the securities.
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We will name any agent involved in offering or selling
securities, and disclose any commissions that we will pay to the
agent, in the applicable prospectus supplement.
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Unless we indicate otherwise in the applicable prospectus
supplement, our agents will act on a best efforts basis for the
period of their appointment.
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Our agents may be deemed to be underwriters under the Securities
Act of 1933, as amended, of any of the securities that they
offer or sell.
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We may use an underwriter or underwriters in the offer or sale
of our securities.
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If we use an underwriter or underwriters, we will execute an
underwriting agreement with the underwriter or underwriters at
the time that we reach an agreement for the sale of the
securities.
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We will include the names of the specific managing underwriter
or underwriters, as well as the names of any other underwriters,
and the terms of the transactions, including the compensation
the underwriters and dealers will receive, in the applicable
prospectus supplement.
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The underwriters will use the applicable prospectus supplement
to sell the securities.
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We may use a dealer to sell the securities.
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If we use a dealer, we, as principal, will sell the securities
to the dealer.
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The dealer will then sell the securities to the public at
varying prices that the dealer will determine at the time it
sells our securities.
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We will include the name of the dealer and the terms of our
transactions with the dealer, including the compensation the
dealer will receive, in the applicable prospectus supplement.
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We may solicit directly offers to purchase the securities, and
we may directly sell the securities to institutional or other
investors. We will describe the terms of our direct sales in the
applicable prospectus supplement.
Sales of shares of common stock and other securities offered
under this prospectus also may be effected from time to time in
one or more types of transactions (which may include block
transactions, special offerings, exchange distributions,
secondary distributions or purchases by a broker or dealer) on
the New York Stock Exchange or any other national securities
exchange or automated trading and quotation system on which the
common stock or other securities are listed, in the
over-the-counter
market, in hedging or derivatives transactions, negotiated
transactions, through options transactions relating to the
securities (whether these options are listed on an options
exchange or otherwise), through the settlement of short sales or
a combination of such methods of sale, at market prices
prevailing at the time of sale, at negotiated prices or at fixed
prices. Such transactions may or may not involve brokers or
dealers. Any shares of common stock offered under this
prospectus will be listed on the New York Stock Exchange (or
such other stock exchange or automated quotation system on which
the common stock is listed at the time of the offering), subject
to official notice of issuance.
We may also offer and sell securities, if so indicated in the
applicable prospectus supplement, in connection with a
remarketing upon their purchase, in accordance with a redemption
or repayment pursuant to their terms, or otherwise, by one or
more firms referred to as remarketing firms, acting as
principals for their own accounts or as our agents. Any
remarketing firm will be identified and the terms of its
agreement, if any, with us, and its compensation will be
described in the applicable prospectus supplement. Remarketing
firms may be deemed to be underwriters under the Securities Act
in connection with the securities they remarket.
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We may indemnify agents, underwriters, dealers and remarketing
firms against certain liabilities, including liabilities under
the Securities Act. Our agents, underwriters, and dealers, or
their affiliates, may be customers of, engage in transactions
with or perform services for us, in the ordinary course of
business.
We may authorize our agents and underwriters to solicit offers
by certain institutions to purchase the securities at the public
offering price under delayed delivery contracts.
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If we use delayed delivery contracts, we will disclose that we
are using them in the applicable prospectus supplement and will
tell you when we will demand payment and delivery of the
securities under the delayed delivery contracts.
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These delayed delivery contracts will be subject only to the
conditions that we describe in the applicable prospectus
supplement.
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We will describe in the applicable prospectus supplement the
commission that underwriters and agents soliciting purchases of
the securities under delayed contracts will be entitled to
receive.
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LEGAL
MATTERS
Unless we state otherwise in the applicable prospectus
supplement, Paul, Weiss, Rifkind, Wharton & Garrison
LLP has passed upon the validity of any securities offered by us
under this prospectus other than the common stock and the
preferred stock and W. Andrew Macan has passed upon the validity
of any common stock and preferred stock offered by us under this
prospectus and all matters with respect to New Jersey law. The
validity of any securities will be passed upon for any
underwriters or agents by counsel that we will name in the
applicable prospectus supplement.
EXPERTS
Ernst & Young LLP, independent registered public
accounting firm, has audited our consolidated financial
statements and schedules included in our Annual Report on
Form 10-K
for the year ended December 31, 2006, and managements
assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2006, as set forth
in the reports, which are incorporated by reference in this
prospectus and elsewhere in the registration statement. Our
financial statements and schedules and managements
assessment are incorporated by reference in reliance on
Ernst & Young LLPs reports, given on their
authority as experts in accounting and auditing.
WHERE YOU
CAN FIND MORE INFORMATION
This prospectus is part of a registration statement that we
filed with the SEC. The registration statement, including the
attached exhibits, contains additional relevant information
about us. The rules of the SEC allow us to omit from this
prospectus some of the information included in the registration
statement. This information may be inspected and copied at, or
obtained at prescribed rates from the Public Reference Room of
the SEC at 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the operation of the Public Reference
Room. In addition, the SEC maintains an Internet site,
http://www.sec.gov, that contains reports, proxy and information
statements and other information regarding issuers that file
electronically with the SEC. This URL is intended to be an
inactive textual reference only. It is not intended to be an
active hyperlink to the SECs website. The information on
the SECs website, which might be accessible through a
hyperlink resulting from this URL, is not and is not intended to
be part of this prospectus and is not incorporated into this
prospectus by reference.
We are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended. We fulfill our
obligations with respect to such requirements by filing periodic
reports and other information with the SEC. These reports and
other information are available as provided above and may also
be inspected at the offices of the NYSE at 20 Broad Street,
New York, New York 10005.
INCORPORATION
BY REFERENCE
The rules of the SEC allow us to incorporate by reference
information into this prospectus. The information incorporated
by reference is considered to be a part of this prospectus, and
information that we file later with the SEC will automatically
update and supersede this information. This prospectus
incorporates by reference the documents listed below:
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our Annual Report on
Form 10-K
for the year ended December 31, 2006;
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our definitive Proxy Statement on Schedule 14A filed on
March 23, 2007;
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all documents filed by us pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934 since
December 31, 2006; and
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the description of our common stock contained in our
registration statement on
Form 8-A
filed by us on February 2, 1984, including any amendments
or supplements thereto.
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We will provide without charge to each person, including any
beneficial owner, to whom a copy of this prospectus is
delivered, upon written or oral request of such person, a copy
of any or all of the documents referred to above which have been
or may be incorporated by reference in this prospectus. You
should direct requests for those documents to The Chubb
Corporation, 15 Mountain View Road, P.O. Box 1615, Warren,
New Jersey
07061-1615,
Attention: Secretary (telephone:
908-903-2000).
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The Chubb Corporation
Debt Securities
Junior Subordinated Debt
Securities
Common Stock
Preferred Stock
Depositary Shares
Warrants
Stock Purchase
Contracts
Stock Purchase Units
PROSPECTUS
March 26, 2007
$
The Chubb Corporation
% Directly-Issued Subordinated
Capital Securities
(DISCSsm)
due 2067
PROSPECTUS SUPPLEMENT
, 2007
Joint Book-Running Managers
Citigroup
Sole Structuring
Advisor
Credit Suisse
Lehman Brothers
Goldman, Sachs & Co.