EXCHANGE GUARANTEE AGREEMENT
between
HSB GROUP, INC.,
as Guarantor
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Guarantee Trustee
Relating to
HSB Capital I
---------------------------
Dated as of _____, 1997
---------------------------
EXCHANGE CAPITAL SECURITIES GUARANTEE AGREEMENT ("Exchange
Guarantee Agreement"), dated as of _____, 1997, between HSB GROUP, INC., a
Connecticut corporation (the "Guarantor"), having its principal office at
Xxx Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000 and The First National Bank
of Chicago, a national banking association, as trustee (the "Guarantee
Trustee"), for the benefit of the Holders (as defined herein) from time to
time of the Exchange Capital Securities (as defined herein) of HSB Capital
I, a Delaware statutory business trust (the "Issuer Trust").
RECITALS OF THE CORPORATION
WHEREAS, pursuant to an Amended and Restated Trust Agreement,
dated as of July 15, 1997 (the "Trust Agreement"), among HSB Group, Inc.,
as Depositor, The First National Bank of Chicago, as Property Trustee,
First Chicago Delaware Inc. as Delaware Trustee, and the Administrative
Trustees named therein, the Issuer Trust is issuing $110,000,000 aggregate
Liquidation Amount (as defined in the Trust Agreement) of its Global
Floating Rate Capital Securities, Series B (liquidation amount $1,000 per
capital security) (the "Exchange Capital Securities"), representing
preferred undivided beneficial interests in the assets of the Issuer Trust
and having the terms set forth in the Trust Agreement; and
WHEREAS, as incentive for the Holders to exchange their respective
beneficial interests in the Global Floating Rate Captial Securities, Series
A (the "Series A Capital Securities") for Exchange Capital Securities, the
Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Exchange Guarantee Agreement, to pay to the Holders of
the Exchange Capital Securities the Guarantee Payments (as defined below).
The Guarantor agrees to make certain other payments on the terms and
conditions set forth herein; and
WHEREAS, the Guarantor has executed and delivered a guarantee
agreement (the "Common Securities Guarantee"), with substantially identical
terms to this Exchange Guarantee Agreement, for the benefit of the holders
of the Common Securities (as defined herein), except that if an Event of
Default (as defined in the Declaration) has occurred and is continuing, the
rights of holders of the Common Securities to receive Guarantee Payments
under the Common Securities Guarantee are subordinated, to the extent and
in the manner set forth in the Common Securities Guarantee, to the rights
of holders of Exchange Capital Securities and the Exchange Capital
Securities to receive Guarantee Payments under this Exchange Guarantee
Agreement and the Exchange Guarantee, as the case may be.
NOW, THEREFORE, in consideration of the exchange by each Holder,
which exchange the Guarantor hereby acknowledges will benefit the
Guarantor, the Guarantor executes and delivers this Exchange Guarantee
Agreement for the benefit of the Holders from time to time.
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.
For all purposes of this Exchange Guarantee Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) The terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the singular;
(b) All other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation";
(d) All accounting terms used but not defined herein have the
meanings assigned to them in accordance with United States generally
accepted accounting principles;
(e) Unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may
be, of this Exchange Guarantee Agreement; and
(f) The words "hereby", "herein", "hereof" and "hereunder" and
other words of similar import refer to this Exchange Guarantee Agreement as
a whole and not to any particular Article, Section or other subdivision.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control", when used with respect to any specified Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Board of Directors" means the board of directors of the Guarantor
or the Executive Committee of the board of directors of the Guarantor (or
any other committee of the board of directors of the Guarantor performing
similar functions) or a committee designated by the board of directors of
the Guarantor (or such committee), comprised of two or more members of the
board of directors of the Guarantor or officers of the Guarantor, or both.
"Capital Securities" means the Initial Capital Securities together
with the Exchange Capital Securities.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer Trust.
"Event of Default" means (i) a default by the Guarantor in any of
its payment obligations under this Exchange Guarantee Agreement or (ii) a
default by the Guarantor in any other obligation hereunder that remains
unremedied for 90 days.
"Exchange Capital Securities" has the meaning specified in the
Recitals to this Exchange Guarantee Agreement.
"Exchange Capital Securities Guarantee" means this Exchange
Guarantee Agreement, as modified, amended or supplemented from time to
time.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Exchange Capital
Securities, to the extent not paid or made by or on behalf of the Issuer
Trust: (i) any accrued and unpaid Distributions required to be paid on the
Exchange Capital Securities, to the extent the Issuer Trust has funds on
hand available therefor at such time, (ii) the Redemption Price with
respect to any Exchange Capital Securities called for redemption, to the
extent the Issuer Trust has funds on hand available therefor at such time,
and (iii) upon a voluntary or involuntary termination, winding up or
liquidation of the Issuer Trust (unless the Exchange Junior Subordinated
Debentures are distributed to the Holders) the lesser of (a) the
Liquidation Distribution (as defined in the Trust Agreement) with respect
to the Exchange Capital Securities, and (b) the amount of assets of the
Issuer Trust remaining available for distribution to Holders on liquidation
of the Issuer Trust.
"Guarantee Trustee" means The First National Bank of Chicago,
solely in its capacity as Guarantee Trustee and not in its individual
capacity, until a Successor Guarantee Trustee has been appointed and has
accepted such appointment pursuant to the terms of this Exchange Guarantee
Agreement, and thereafter means each such Successor Guarantee Trustee.
"Guarantor" has the meaning specified in the first paragraph of
this Exchange Guarantee Agreement.
"Holder" means any Holder (as defined in the Trust Agreement) of
any Exchange Capital Securities; provided, however, that in determining
whether the holders of the requisite percentage of Exchange Capital
Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor, the Guarantee Trustee, or any
Affiliate of the Guarantor or the Guarantee Trustee.
"Indenture" means the Junior Subordinated Indenture, dated as of
July 15, 1997, between HSB Group, Inc. and The First National Bank of
Chicago, as trustee, as the same may be modified, amended or supplemented
from time to time.
"Initial Capital Securities" has the meaning specified in the
Recitals to the Exchange Guarantee Agreement.
"Issuer Trust" has the meaning specified in the first paragraph of
this Exchange Guarantee Agreement.
"List of Holders" has the meaning specified in Section 2.2(a).
"Majority in Liquidation Amount of the Exchange Capital
Securities" means, except as provided by the Trust Indenture Act, Exchange
Capital Securities representing more than 50% of the aggregate Liquidation
Amount (as defined in the Trust Agreement) of all Exchange Capital
Securities then Outstanding (as defined in the Trust Agreement).
"Officers' Certificate" means a certificate signed by one of the
Senior Vice Presidents or Chief Executive Officer or the President or Vice
Presidents of the Guarantor, and by the Treasurer, an Assistant Treasurer,
the Corporate Secretary or an Assistant Secretary of the Guarantor, and
delivered to the Guarantee Trustee. Any Officers' Certificate delivered
with respect to compliance with a condition or covenant provided for in
this Exchange Guarantee Agreement shall include:
(a) a statement by each officer signing the Officers'
Certificate that such officer has read the covenant or condition
and the definitions relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by such officer in
rendering the Officers' Certificate;
(c) a statement that such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as
to whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether, in the opinion of such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint-stock
company, company, limited liability company, trust, business trust,
unincorporated association, or government or any agency or political
subdivision thereof, or any other entity of whatever nature.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of July 15, 1997, by and among the Guarantor, the
Issuer Trust and the Initial Purchasers named therein as such agreement may
be amended, modified or supplemented from time to time.
"Responsible Officer" means, with respect to the Guarantee
Trustee, any Senior Vice President, any Vice President, any Assistant Vice
President, the Secretary, any Assistant Secretary, the Treasurer, any
Assistant Treasurer, any Trust Officer or Assistant Trust Officer or any
other officer of the Corporate Trust Department of the Guarantee Trustee
and also means, with respect to a particular matter, any other officer to
whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section
4.1.
"Trust Agreement" means the Amended and Restated Trust Agreement
of the Issuer Trust referred to in the recitals to this Exchange Guarantee
Agreement, as modified, amended or supplemented from time to time.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this Exchange Guarantee Agreement was
executed; provided, however, that if the Trust Indenture Act of 1939 is
amended after such date, "Trust Indenture Act" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939 as so
amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application.
Except as otherwise expressly provided herein, the Trust Indenture
Act shall apply as a matter of contract to this Exchange Guarantee
Agreement for purposes of interpretation, construction and defining the
rights and obligations hereunder, and this Exchange Guarantee Agreement,
the Guarantor and the Guarantee Trustee shall be deemed for all purposes
hereof to be subject to and governed by the Trust Indenture Act to the same
extent as would be the case if this Exchange Guarantee Agreement were
qualified under that Act on the date hereof. Except as otherwise expressly
provided herein, if and to the extent that any provision of this Exchange
Guarantee Agreement limits, qualifies or conflicts with the duties imposed
by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
SECTION 2.2. List of Holders.
(a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) quarterly, on or before January 1, April 1, July 1
and October 1 of each year, a list, in such form as the Guarantee Trustee
may reasonably require, of the names and addresses of the Holders (a "List
of Holders") as of a date not more than 15 days prior to the delivery
thereof, and (b) at such other times as the Guarantee Trustee may request
in writing, within 30 days after the receipt by the Guarantor of any such
request, a List of Holders as of a date not more than 15 days prior to the
time such list is furnished, in each case to the extent such information is
in the possession or control of the Guarantor and has not otherwise been
received by the Guarantee Trustee in its capacity as such. The Guarantee
Trustee may destroy any List of Holders previously given to it on receipt
of a new List of Holders.
(b) The Guarantee Trustee shall comply with the requirements of
Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture
Act.
SECTION 2.3. Reports by the Guarantee Trustee.
Not later than 60 days following May 15 of each year, commencing
May 15, 1998, the Guarantee Trustee shall provide to the Holders such
reports as are required by Section 313 of the Trust Indenture Act, if any,
in the form and in the manner provided by Section 313 of the Trust
Indenture Act. If this Exchange Guarantee Agreement shall have been
qualified under the Trust Indenture Act, the Guarantee Trustee shall also
comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4. Periodic Reports to the Guarantee Trustee.
The Guarantor shall provide to the Guarantee Trustee and the
Holders such documents, reports and information, if any, as required by
Section 314 of the Trust Indenture Act and the compliance certificate
required by Section 314 of the Trust Indenture Act, in the form, in the
manner and at the times required by Section 314 of the Trust Indenture Act,
provided that such documents, reports and information shall not be required
to be provided to the Securities and Exchange Commission unless this
Exchange Guarantee Agreement shall have been qualified under the Trust
Indenture Act.
SECTION 2.5. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Guarantee Trustee such evidence
of compliance with such conditions precedent, if any, provided for in this
Exchange Guarantee Agreement that relate to any of the matters set forth in
Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer of the Guarantor pursuant to Section
314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.6. Events of Default; Waiver.
The Holders of at least a Majority in Liquidation Amount of the
Exchange Capital Securities may, by vote, on behalf of the Holders of all
the Exchange Capital Securities, waive any past default or Event of Default
and its consequences. Upon such waiver, any such default or Event of
Default shall cease to exist, and any default or Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Exchange Guarantee Agreement, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right
consequent thereon.
SECTION 2.7. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default known to it, transmit by mail, first
class postage prepaid, to the Holders, notice of any such Event of Default,
unless such Event of Default has been cured before the giving of such
notice, provided that, except in the case of a default in the payment of a
Guarantee Payment, the Guarantee Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of
the Guarantee Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge of
any Event of Default unless the Guarantee Trustee shall have received
written notice, or a Responsible Officer charged with the administration of
this Exchange Guarantee Agreement shall have obtained actual knowledge, of
such Event of Default.
SECTION 2.8. Conflicting Interests.
The Trust Agreement and the Indenture shall be deemed to be
specifically described in this Exchange Guarantee Agreement for the
purposes of clause (i) of the first proviso contained in Section 310(b) of
the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Guarantee Trustee.
(a) This Exchange Guarantee Agreement shall be held by the
Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee
shall not transfer this Exchange Guarantee Agreement to any Person except
to a Successor Guarantee Trustee on acceptance by such Successor Guarantee
Trustee of its appointment to act as Guarantee Trustee hereunder. The
right, title and interest of the Guarantee Trustee, as such, hereunder
shall automatically vest in any Successor Guarantee Trustee, upon
acceptance by such Successor Guarantee Trustee of its appointment
hereunder, and such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered
pursuant to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Exchange Guarantee Agreement for the
benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically
set forth in this Exchange Guarantee Agreement (including pursuant to
Section 2.1), and no implied covenants shall be read into this Exchange
Guarantee Agreement against the Guarantee Trustee. If an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6),
the Guarantee Trustee shall exercise such of the rights and powers vested
in it by this Exchange Guarantee Agreement, and use the same degree of care
and skill in its exercise thereof, as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Exchange Guarantee Agreement shall be
construed to relieve the Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(i) Prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express
provisions of this Exchange Guarantee Agreement
(including pursuant to Section 2.1), and the Guarantee
Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth
in this Exchange Guarantee Agreement (including pursuant
to Section 2.1); and
(B) in the absence of bad faith on the part of
the Guarantee Trustee, the Guarantee Trustee may
conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the Guarantee
Trustee and conforming to the requirements of this
Exchange Guarantee Agreement; but in the case of any such
certificates or opinions that by any provision hereof or
of the Trust Indenture Act are specifically required to
be furnished to the Guarantee Trustee, the Guarantee
Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements
of this Exchange Guarantee Agreement.
(ii) The Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of
the Guarantee Trustee, unless it shall be proved that the
Guarantee Trustee was negligent in ascertaining the pertinent
facts upon which such judgment was made.
(iii) The Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not less
than a Majority in Liquidation Amount of the Exchange Capital
Securities relating to the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee,
or exercising any trust or power conferred upon the Guarantee
Trustee, under this Exchange Guarantee Agreement.
(iv) Subject to Sections 3.1(b) and 3.1(d), no provision
of this Exchange Guarantee Agreement shall require the Guarantee
Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if the
Guarantee Trustee shall have reasonable grounds for believing that
the repayment of such funds or liability is not reasonably assured
to it under the terms of this Exchange Guarantee Agreement or
adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 3.2. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document reasonably
believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated
by this Exchange Guarantee Agreement shall be sufficiently
evidenced by an Officers' Certificate unless otherwise prescribed
herein.
(iii) Whenever, in the administration of this Exchange
Guarantee Agreement, the Guarantee Trustee shall deem it desirable
that a matter be proved or established before taking, suffering or
omitting to take any action hereunder, the Guarantee Trustee
(unless other evidence is herein specifically prescribed) may, in
the absence of bad faith on its part, request and rely upon an
Officers' Certificate which, upon receipt of such request from the
Guarantee Trustee, shall be promptly delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal
counsel, and the written advice or opinion of such legal counsel
with respect to legal matters shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted to be taken by it hereunder in good faith and
in accordance with such advice or opinion. Such legal counsel may
be legal counsel to the Guarantor or any of its Affiliates and may
be one of its or their employees. The Guarantee Trustee shall have
the right at any time to seek instructions concerning the
administration of this Exchange Guarantee Agreement from any court
of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Exchange
Guarantee Agreement at the request or direction of any Holder
unless such Holder shall have provided to the Guarantee Trustee
such adequate security and indemnity as would satisfy a reasonable
person in the position of the Guarantee Trustee against the costs,
expenses (including attorneys' fees and expenses) and liabilities
that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested
by the Guarantee Trustee; provided that nothing contained in this
Section 3.2(a)(v) shall be taken to relieve the Guarantee Trustee,
upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Exchange
Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the
Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see
fit.
(vii) The Guarantee Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either
directly or by or through its agents or attorneys, and the
Guarantee Trustee shall not be responsible for any misconduct or
negligence on the part of any such agent or attorney appointed by
it with due care hereunder.
(viii) Whenever in the administration of this Exchange
Guarantee Agreement the Guarantee Trustee shall deem it desirable
to receive instructions with respect to enforcing any remedy or
right or taking any other action hereunder, the Guarantee Trustee
(A) may request instructions from the Holders, (B) may refrain
from enforcing such remedy or right or taking such other action
until such instructions are received, and (C) shall be protected
in acting in accordance with such instructions.
(b) No provision of this Exchange Guarantee Agreement shall be
deemed to impose any duty or obligation on the Guarantee Trustee to perform
any act or acts or exercise any right, power, duty or obligation conferred
or imposed on it in any jurisdiction in which it shall be illegal, or in
which the Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to
exercise any such right, power, duty or obligation. No permissive power or
authority available to the Guarantee Trustee shall be construed to be a
duty to act in accordance with such power and authority.
SECTION 3.3. Compensation; Fees.
The Guarantor agrees:
(a) to pay to the Guarantee Trustee from time to time
such reasonable compensation for all services rendered by it
hereunder as may be agreed by the Guarantor and the Guarantee
Trustee from time to time (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee
of an express trust); and
(b) except as otherwise expressly provided herein, to
reimburse the Guarantee Trustee upon request for all reasonable
expenses, disbursements and advances incurred or made by the
Guarantee Trustee in accordance with any provision of this
Exchange Guarantee Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may
be attributable to its negligence or bad faith; and
(c) to the fullest extent permitted by applicable law, to
indemnify and hold harmless (i) the Guarantee Trustee, (ii) any
Affiliate of the Guarantee Trustee, and (iii) any officer,
director, shareholder, employee, representative or agent of the
Guarantee Trustee (referred to herein as an "Indemnified Person"),
from and a any loss, damage, liability, tax, penalty, expense or
claim of any kind or nature whatsoever incurred by such
Indemnified Person in connection with this Exchange Guarantee
Agreement or any act or omission performed or omitted by such
Indemnified Person in good faith and in manner such Indemnified
Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by this Exchange Guarantee
Agreement, except that no Indemnified Person shall be entitled to
be indemnified in respect of any loss, damage or claim incurred by
such Indemnified Person by reason of negligence or willful
misconduct with respect to such acts or omissions.
The Guarantee Trustee will not claim or exact any lien or charge
on any Guarantee Payments as a result of any amount due to it under this
Exchange Guarantee Agreement.
The provisions of this Section 3.3 shall survive the termination
of this Exchange Guarantee Agreement or the resignation or removal of the
Guarantee Trustee.
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.1. Guarantee Trustee; Eligibility.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is a national or state chartered
bank and eligible pursuant to the Trust Indenture Act to act as
such, and that has at the time of such appointment securities
rated in one of the three highest rating categories by a
nationally recognized statistical rating organization and a
combined capital and surplus of at least $50,000,000, and shall be
a corporation meeting the requirements of Section 310(a) of the
Trust Indenture Act. If such corporation publishes reports of
condition at least annually, pursuant to law or to the
requirements of its supervising or examining authority, then, for
the purposes of this Section 4.1 and to the extent permitted by
the Trust Indenture Act, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus
as set forth in its most recent report of condition so published.
(b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section
4.2.
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act,
the Guarantee Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.2. Appointment, Removal and Resignation of the Guarantee
Trustee.
(a) Subject to Section 4.2(c), the Guarantee Trustee may be
appointed or removed at any time by the Guarantor.
(b) Subject to Section 4.2(c), the Guarantee Trustee may resign
from office (without need for prior or subsequent accounting) by giving
written notice thereof to the Holders and the Guarantor and by appointing a
successor Guarantee Trustee.
(c) The Guarantee Trustee appointed hereunder shall hold office
until a Successor Guarantee Trustee shall have been appointed and shall
have accepted such appointment. No removal or resignation of a Guarantee
Trustee shall be effective until a Successor Guarantee Trustee has been
appointed and has accepted such appointment by written instrument executed
by such Successor Guarantee Trustee and delivered to the Guarantor and, in
the case of any resignation, the resigning Guarantee Trustee.
(d) If the Guarantee Trustee shall resign, be removed or become
incapable of acting as Guarantee Trustee and a replacement shall not be
appointed prior to such resignation or removal, or if a vacancy shall occur
in the office of Guarantee Trustee for any reason, and no Successor
Guarantee Trustee shall have been appointed and accepted appointment as
provided in this Section 4.2 within 60 days after delivery to the Holders
and the Guarantor of a notice of resignation, the resigning Guarantee
Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for appointment of a Successor Guarantee Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may
deem proper, appoint a Successor Guarantee Trustee.
ARTICLE V
GUARANTEE
SECTION 5.1. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by or on behalf of the Issuer Trust), as and when due,
regardless of any defense, right of set-off or counterclaim that the Issuer
Trust may have or assert, except the defense of payment. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment
of the required amounts by the Guarantor to the Holders or by causing the
Issuer Trust to pay such amounts to the Holders.
SECTION 5.2. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Exchange
Guarantee Agreement and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first
against the Guarantee Trustee, the Issuer Trust or any other Person before
proceeding against the Guarantor, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
SECTION 5.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor
under this Exchange Guarantee Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the
following:
(a) the release or waiver, by operation of law or
otherwise (other than by Act (as defined in the Trust Agreement)
of the Holders), of the performance or observance by the Issuer
Trust of any express or implied agreement, covenant, term or
condition relating to the Exchange Capital Securities to be
performed or observed by the Issuer Trust;
(b) the extension of time for the payment by the Issuer
Trust of all or any portion of the Distributions (other than an
extension of time for payment of Distributions that results from
the extension of any interest payment period on the Debentures as
provided in the Indenture), Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the
Exchange Capital Securities or the extension of time for the
performance of any other obligation under, arising out of, or in
connection with, the Exchange Capital Securities;
(c) any failure, omission, delay or lack of diligence on
the part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to
the terms of the Exchange Capital Securities, or any action on the
part of the Issuer Trust granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation,
dissolution, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement, composition
or readjustment of debt of, or other similar proceedings
affecting, the Issuer Trust or any of the assets of the Issuer
Trust;
(e) any invalidity of, or defect or deficiency in, the
Exchange Capital Securities;
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or
(g) the consummation of the Exchange Offer; or
(h) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of
a guarantor (other than payment of the underlying obligation), it
being the intent of this Section 5.3 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any
and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
the consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4. Rights of Holders.
The Guarantor expressly acknowledges that: (i) this Exchange
Guarantee Agreement will be deposited with the Guarantee Trustee to be held
for the benefit of the Holders; (ii) the Guarantee Trustee has the right to
enforce this Exchange Guarantee Agreement on behalf of the Holders; (iii)
the Holders of a Majority in Liquidation Amount of the Exchange Capital
Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of this Exchange Guarantee Agreement or exercising any trust or
power conferred upon the Guarantee Trustee under this Exchange Guarantee
Agreement; and (iv) any Holder may institute a legal proceeding directly
against the Guarantor to enforce its rights under this Exchange Guarantee
Agreement without first instituting a legal proceeding against the
Guarantee Trustee, the Issuer Trust or any other Person.
SECTION 5.5. Guarantee of Payment.
This Exchange Guarantee Agreement creates a guarantee of payment
and not of collection. This Exchange Guarantee Agreement will not be
discharged except by payment of the Guarantee Payments in full (without
duplication of amounts theretofore paid by the Issuer Trust) or upon the
distribution of Debentures to Holders as provided in the Trust Agreement.
SECTION 5.6. Subrogation.
The Guarantor shall be subrogated to all rights (if any) of the
Holders against the Issuer Trust in respect of any amounts paid to the
Holders by the Guarantor under this Exchange Guarantee Agreement; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights
which it may acquire by way of subrogation or any indemnity, reimbursement
or other agreement, in all cases as a result of payment under this Exchange
Guarantee Agreement, if, at the time of any such payment, any amounts are
due and unpaid under this Exchange Guarantee Agreement. If any amount shall
be paid to the Guarantor in violation of the preceding sentence, the
Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
SECTION 5.7. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer Trust with respect to the
Exchange Capital Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to
the terms of this Exchange Guarantee Agreement notwithstanding the
occurrence of any event referred to in subsections (a) through (g),
inclusive, of Section 5.3 hereof.
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.1. Subordination.
The obligations of the Guarantor under this Exchange Capital
Securities Guarantee Agreement will constitute unsecured obligations of the
Guarantor and will rank subordinate and junior in right of payment to all
Senior Indebtedness (as defined in the Indenture) of the Guarantor to the
extent and in the manner set forth in the Indenture with respect to the
Debentures, and the provisions of Article XIII of the Indenture will apply,
mutatis mutandis, to the obligations of the Guarantor hereunder. The
obligations of the Guarantor hereunder do not constitute Senior
Indebtedness (as defined in the Indenture) of the Guarantor.
SECTION 6.2. Pari Passu Guarantees.
The obligations of the Guarantor under this Exchange Guarantee
Agreement shall rank pari passu with the obligations of the Guarantor under
(i) any similar guarantee agreements issued by the Guarantor on behalf of
the holders of preferred or capital securities issued by any Issuer Trust
(as defined in the Indenture) including the Guarantee Agreement, dated as
of July 15, 1997 in respect of the Series A Capital Securities; (ii) the
Indenture and the Securities (as defined therein) issued thereunder; and
(iii) any other security, guarantee or other agreement or obligation that
is expressly stated to rank pari passu with the obligations of the
Guarantor under this Exchange Guarantee Agreement or with any obligation
that ranks pari passu with the obligations of the Guarantor under this
Exchange Guarantee Agreement.
ARTICLE VII
TERMINATION
SECTION 7.1. Termination.
This Exchange Guarantee Agreement shall terminate and be of no
further force and effect upon (i) full payment of the Redemption Price (as
defined in the Trust Agreement) of all Exchange Capital Securities, (ii)
the distribution of Debentures to the Holders in exchange for all of the
Exchange Capital Securities, or (iii) full payment of the amounts payable
in accordance with Article IX of the Trust Agreement upon liquidation of
the Issuer Trust. Notwithstanding the foregoing, this Exchange Guarantee
Agreement will continue to be effective or will be reinstated, as the case
may be, if at any time any Holder is required to repay any sums paid with
respect to Exchange Capital Securities or this Exchange Guarantee
Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Successors and Assigns.
All guarantees and agreements contained in this Exchange Guarantee
Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the
Holders of the Exchange Capital Securities then outstanding. Except in
connection with a consolidation, merger or sale involving the Guarantor
that is permitted under Article VIII of the Indenture and pursuant to which
the successor or assignee agrees in writing to perform the Guarantor's
obligations hereunder, the Guarantor shall not assign its obligations
hereunder, and any purported assignment other than in accordance with this
provision shall be void.
SECTION 8.2. Amendments.
Except with respect to any changes that do not adversely affect
the rights of the Holders in any material respect (in which case no consent
of the Holders will be required), this Exchange Guarantee Agreement may
only be amended with the prior approval of the Holders of not less than a
Majority in Liquidation Amount of the Exchange Capital Securities. The
provisions of Article VI of the Trust Agreement concerning meetings of the
Holders shall apply to the giving of such approval.
SECTION 8.3. Notices.
(a) Any notice, request or other communication required or
permitted to be given hereunder shall be in writing, duly signed by the
party giving such notice, and delivered, by facsimile or first class mail
as follows:
(i) if given to the Guarantor, to the address or facsimile number
set forth below or such other address or facsimile number as the Guarantor
may give notice to the Guarantee Trustee and the Holders:
HSB Group, Inc.
Xxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
General Counsel
Facsimile: (000) 000-0000
(ii) if given to the Guarantee Trustee, at the address or
facsimile number set forth below or such other address or facsimile number
as the Guarantee Trustee may give notice to the Guarantor and the Holders:
The First National Bank of Chicago
Xxx Xxxxx Xxxxxxxx Xxxxx, Xxxxx #0000
Xxxxxxx, Xxxxxxxx 00000-0000
Corporate Trust Division
Facsimile: (000) 000-0000
(iii) if given to any Holder, in the manner set forth in Section
10.8 of the Trust Agreement.
(b) All notices hereunder shall be deemed to have been given when
received in person, by facsimile with receipt confirmed, or mailed by first
class mail, postage prepaid, except that if a notice or other document is
refused delivery or cannot be delivered because of a changed address of
which no notice was given, such notice or other document shall be deemed to
have been delivered on the date of such refusal or inability to deliver,
provided that any notice given as provided in Section 8.3(a)(iii) shall be
deemed to have been given at the time specified in Section 10.8 of the
Trust Agreement.
SECTION 8.4. Benefit.
This Exchange Guarantee Agreement is solely for the benefit of the
Holders and is not separately transferable from the Exchange Capital
Securities.
SECTION 8.5. Governing Law.
THIS EXCHANGE GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 8.6. Counterparts.
This Exchange Guarantee Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Exchange
Guarantee Agreement to be duly executed, and their respective corporate
seals to be hereunto affixed, all as of the day and year first above
written.
HSB GROUP, INC.
By:
Name: Xxxx X. Xxxxx
Title: President, Treasurer and
Chief Financial Officer
THE FIRST NATIONAL BANK OF CHICAGO,
as Guarantee Trustee
By:
Name: Xxxxxxx Xxxxxxx
Title: Vice President
