PREFERRED SECURITIES GUARANTEE AGREEMENT HSBC Finance Corporation Dated as of , 2005
CROSS-REFERENCE TABLE*
| Section of Trust Indenture | Section of | |
| Act of 1939, as amended | Guarantee Agreement | |
310(a) |
4.1(a) | |
310(b) |
4.1(c) | |
310(c) |
Inapplicable | |
311(a) |
2.2(b) | |
311(b) |
2.2(b) | |
311(c) |
Inapplicable | |
312(a) |
2.2(a) | |
312(b) |
2.2(b) | |
313 |
2.3 | |
314(a) |
2.4 | |
314(b) |
Inapplicable | |
314(c) |
2.5 | |
314(d) |
Inapplicable | |
314(f) |
Inapplicable | |
315(a) |
3.1(b) | |
315(b) |
2.7 | |
315(c) |
3.1(a) | |
315(d) |
3.1(a) | |
316(a) |
5.4(a), 2.6 |
| * | This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. |
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This GUARANTEE AGREEMENT (“Guarantee Agreement”), dated as of , 2005, is executed
and delivered by HSBC Finance Corporation, a Delaware corporation (the “Guarantor”), and BNY
Midwest Trust Company, as trustee (the “Preferred Guarantee Trustee”), for the benefit of the
Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of
Household Capital Trust IX, a Delaware statutory business trust (the “Issuer”).
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the “Declaration”), dated
as of , 2005 among the trustees of the Issuer named therein, the Guarantor as Sponsor
and the holders from time to time of undivided beneficial interests in the assets of the Issuer,
the Issuer is issuing on the date hereof $ aggregate stated liquidation amount of
Preferred Securities designated the % Trust Preferred Securities (the “Preferred
Securities”);
WHEREAS, as incentive for the Holders to purchase the Preferred Securities, the Guarantor
desires to irrevocably and unconditionally agree, to the extent set forth in this Guarantee
Agreement, to pay to the Holders of the Preferred Securities the Guarantee Payments (as defined
herein) and to make certain other payments on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which
purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and
delivers this Guarantee Agreement for the benefit of the Holders.
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ARTICLE I
Definitions and Interpretation
Section 1.1 Definitions and Interpretation.
In this Guarantee Agreement, unless the context otherwise requires:
| (a) | Capitalized terms used in this Guarantee Agreement but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; | ||
| (b) | a term defined anywhere in this Guarantee Agreement has the same meaning throughout; | ||
| (c) | all references to “the Guarantee Agreement” or “this Guarantee Agreement” are to this Guarantee Agreement as modified, supplemented or amended from time to time; | ||
| (d) | all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; | ||
| (e) | a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires; and | ||
| (f) | a reference to the singular includes the plural and vice versa. |
“Affiliate” has the same meaning as given to that term in Rule 405 of the Securities Act of
1933 as amended or any successor rule thereunder.
“Common Securities” means the securities representing common undivided beneficial interests in
the assets of the Issuer.
“Covered Person” means any Holder of Preferred Securities.
“Distributions” means a distribution payable to holders of the Preferred Securities or the
Common Securities in accordance with Section 6.1 of the Declaration.
“Event of Default” means a default by the Guarantor on any of its payment or other obligations
under this Guarantee Agreement.
“Guarantee Payments” means the following payments or distributions, without duplication, with
respect to the Preferred Securities, to the extent not paid or made by the Issuer: (i) any accrued
and unpaid Distributions which are required to be paid on such Preferred Securities to the extent
the Issuer shall have funds available therefore, (ii) the redemption price, including all accrued
and unpaid Distributions to the date of redemption (the “Redemption Price”) to the extent the
Issuer has funds available therefor, with respect to any Preferred Securities called for redemption
by the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of
the Issuer (other than in connection with the distribution of Notes to the Holders in exchange for
Preferred Securities as provided in the Declaration), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid Distributions on the Preferred Securities to the date
of payment, and (b) the amount of assets of the Issuer remaining available for distribution to
Holders in liquidation of the Issuer (in either case, the “Liquidation Distribution”).
“Holder” shall mean any holder, as registered on the books and records of the Issuer, of any
Preferred Securities; provided, however, that in determining whether the holders of the requisite
percentage of Preferred Securities have given any request, notice, consent or waiver hereunder,
“Holder” shall not include the Guarantor or any entity directly or indirectly controlling or
controlled by or under direct or indirect common control with the Guarantor.
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“Indemnified Person” means the Preferred Guarantee Trustee, any Affiliate of the Preferred
Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees,
representatives or agents of the Preferred Guarantee Trustee.
“Indenture” means the Indenture dated as of May 15, 1995 among X. X. Xxxxxx Trust Company,
National Association (as successor in interest to Bank One, National Association, formerly known as
The First National Bank of Chicago) as trustee and HSBC Finance Corporation (as “Debt Issuer”) and
any indenture supplemental thereto pursuant to which certain subordinated debt securities of the
Debt Issuer are to be issued to the Property Trustee of the Issuer.
“Majority in liquidation amount of the Preferred Securities” means, except as provided by the
Trust Indenture Act, Holder(s) of Preferred Securities voting separately as a class, who vote
Preferred Securities and the aggregate liquidation amount (including the stated amount that would
be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the
date upon which the voting percentages are determined) of the Preferred Securities voted by such
Holders represents more than 50% of the above stated liquidation amount of all Preferred
Securities.
“Notes” means a series of debt securities issued by the Debt Issuer pursuant to the Indenture
to be known as % Junior Subordinated Deferrable Interest Notes due , 2035.
“Officers’ Certificate” means, with respect to any Person, a certificate signed by two
Authorized Officers of such Person. Any Officers’ Certificate delivered with respect to compliance
with a condition or covenant provided for in this Guarantee Agreement shall include:
| (a) | a statement that each officer signing the Certificate 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 each officer in rendering the Certificate; | ||
| (c) | a statement that each 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 each 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, limited liability company, trust, unincorporated
association, or government or any agency or political subdivision thereof, or any other entity of
whatever nature.
“Preferred Guarantee Trustee” means BNY Midwest Trust Company until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of
this Guarantee Agreement and thereafter means each such Successor Preferred Guarantee Trustee.
“Responsible Officer” means, with respect to the Preferred Guarantee Trustee, any officer
within the corporate trust department, including 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 Preferred Guarantee Trustee customarily
performing functions similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to whom such matter
is referred because of that officer’s knowledge of and familiarity with the particular subject and
who shall have direct responsibility for the administration of this Guarantee Agreement.
“Successor Preferred Guarantee Trustee” means a successor Preferred Guarantee Trustee
possessing the qualifications to act as Preferred Guarantee Trustee under Section 4.1.
“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended.
ARTICLE II
Trust Indenture Act
Section 2.1 Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are
required to be a part of this Guarantee Agreement and shall, to the extent applicable, be governed
by such provisions.
(b) If and to the extent that any provision of this 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 Lists of Holders of Securities.
(a) To the extent the Preferred Securities Trustee shall not also be acting as Property
Trustee at the time action is called for under (i) or (ii) below, the Guarantor shall provide the
Preferred Securities Trustee (i) within 14 days after January 1 and June 30 of each year, a list,
in such form as the Preferred Guarantee Trustee may reasonably require, of the names and addresses
of the Holders of the Preferred Securities (“List of Holders”) as of such date, provided that the
Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders
does not differ from the most recent List of Holders given to the Preferred Guarantee Trustee by
the Guarantor, and (ii) at any other time, within 30 days of receipt by the Guarantor of a written
request for a List of Holders as of a date no more than 14 days before such List of Holders is
given to the Preferred Guarantee Trustee. The Preferred Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations under Section 311(a),
Section 311(b) and Section 312(b) of the Trust Indenture Act.
Section 2.3 Reports By The Preferred Guarantee Trustee.
Within 60 days after May 15 of each year, the Preferred Guarantee Trustee shall provide to the
Holders of the Preferred Securities 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. The Preferred Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
Section 2.4 Periodic Reports To Preferred Guarantee Trustee.
The Guarantor shall provide to the Preferred Guarantee Trustee such documents, reports and
information as required by Section 314 (if any) 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.
Section 2.5 Evidence of Compliance With Conditions Precedent.
The Guarantor shall provide to the Preferred Guarantee Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Guarantee Agreement which 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 pursuant to Section 314(c)(1) may be given in the form of an
Officer’s Certificate.
Section 2.6 Event of Default; Waiver.
The Holders of a Majority in liquidation amount of Preferred Securities may, by vote, on
behalf of the Holders of all of the Preferred Securities, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose of this 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 Preferred Guarantee Trustee shall, within 90 days after the occurrence of an Event of
Default, transmit by mail, first class postage prepaid, to the Holders of the Preferred Securities,
notices of all Events of Default known to the Preferred Guarantee Trustee, unless such defaults
have been cured before the giving of such notice, provided that, the Preferred 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
Preferred Guarantee Trustee in good faith determine that the withholding of such notice is in the
interests of the Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have knowledge of any Event of
Default except any Event of Default as to which the Preferred Guarantee Trustee shall have received
written notice or a Responsible Officer charged with the administration of the Declaration shall
have obtained written notice of.
Section 2.8 Conflicting Interests.
The Declaration shall be deemed to be specifically described in this 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
Preferred Guarantee Trustee
Preferred Guarantee Trustee
Section 3.1 Powers and Duties of The Preferred Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Preferred Guarantee Trustee for the benefit
of the Holders of the Preferred Securities and the Preferred Guarantee Trustee shall not transfer
this Guarantee Agreement to any Person except a Holder of Preferred Securities exercising his or
her rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee Trustee on acceptance
by such Successor Preferred Guarantee Trustee of its appointment to act as Preferred Guarantee
Trustee. The right, title and interest of the Preferred Guarantee Trustee shall automatically vest
in any Successor Preferred Guarantee Trustee and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and delivered.
(b) If an Event of Default has occurred and is continuing, the Preferred Guarantee Trustee
shall enforce this Guarantee Agreement for the benefit of the Holders of the Preferred Securities.
(c) The Preferred 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 Guarantee Agreement, and no implied covenants shall be
read into this Guarantee Agreement against the Preferred Guarantee Trustee. In case an Event of
Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Preferred
Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee
Agreement, and use the same degree of care and skill in their exercise, 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 Guarantee Agreement shall be construed to relieve the Preferred
Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or
its own willful 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 Preferred Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Preferred Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement, and no implied covenants or obligations shall be read into this Guarantee Agreement against the Preferred Guarantee Trustee; and | ||
| (B) | in the absence of bad faith on the part of the Preferred Guarantee Trustee, the Preferred 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 Preferred Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of the Declaration; |
| (ii) | the Preferred Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Preferred Guarantee Trustee, unless it shall be proved that the Preferred Guarantee Trustee was negligent in ascertaining the pertinent facts; | ||
| (iii) | the Preferred 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 Preferred Securities at the time outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee, or exercising any trust or power conferred upon the Preferred Guarantee Trustee under this Guarantee Agreement; and | ||
| (iv) | no provision of this Guarantee Agreement shall require the Preferred 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 it shall have reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. |
Section 3.2 Certain Rights of Preferred Guarantee Trustee.
| (a) | Subject to the provisions of Section 3.1: | ||
| (i) | the Preferred Guarantee Trustee may conclusively 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 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 Guarantee Agreement shall be sufficiently evidenced by an Officers’ Certificate; |
| (iii) | whenever in the administration of this Guarantee Agreement, the Preferred Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Preferred 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, shall be promptly delivered by the Guarantor; | ||
| (iv) | the Preferred Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or registration thereof); | ||
| (v) | the Preferred Guarantee Trustee may consult with counsel of its selection and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates, and may include any of its employees. The Preferred Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction; | ||
| (vi) | the Preferred Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall have provided to the Preferred Guarantee Trustee security and indemnity reasonably satisfactory to the Preferred 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 Preferred Guarantee Trustee provided, that, nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Preferred Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee Agreement; | ||
| (vii) | the Preferred 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 Preferred Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; | ||
| (viii) | the Preferred Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Preferred Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; | ||
| (ix) | any action taken by the Preferred Guarantee Trustee or its agents hereunder shall bind the Holders of the Preferred Securities and the signature of the Preferred Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as to the authority of the Preferred Guarantee Trustee to so act, or as to its compliance with any of the terms and provisions of this Guarantee Agreement, both of which shall be conclusively evidenced by the Preferred Guarantee Trustee’s or its agent’s taking such action; and | ||
| (x) | whenever in the administration of this Guarantee Agreement the Preferred Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Preferred Guarantee Trustee (i) may request instructions from the Holders of the Preferred Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be fully protected in acting in accordance with such instructions; and |
(b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation
on the Preferred 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 Preferred 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 Preferred Guarantee Trustee shall be construed to be a duty.
Section 3.3 Not Responsible For Recitals or Issuance of Guarantee.
The recitals contained in this Guarantee shall be taken as the statements of the Guarantor and
the Preferred Guarantee Trustee does not assume any responsibility for their correctness. The
Preferred Guarantee Trustee makes no representations as to the validity or sufficiency of this
Guarantee Agreement.
ARTICLE IV
Preferred Guarantee Trustee
Section 4.1 Preferred Guarantee Trustee; Eligibility.
(a) There shall at all times be a Preferred Guarantee Trustee which shall:
| (i) | not be an Affiliate of the Guarantor; | ||
| (ii) | be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 4.1(a)(ii), 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 Preferred Guarantee Trustee shall cease to be eligible to so act under
Section 4.1(a), the Preferred Guarantee Trustee shall immediately resign in the manner and with the
effect set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any “conflicting interest” within
the meaning of Section 310(b) of the Trust Indenture Act, the Preferred 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 Preferred Guarantee Trustee.
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be appointed or removed
without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in accordance with this Section 4.2
until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment
by written instrument executed by such Successor Preferred Guarantee Trustee and delivered to the
Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall hold office until a Successor
Preferred Guarantee Trustee shall have been appointed or until its removal or resignation. The
Preferred Guarantee Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing executed by the Preferred Guarantee Trustee and delivered
to the Guarantor, which resignation shall not take effect until a Successor Preferred Guarantee
Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor Preferred Guarantee
Trustee and delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have been appointed and accepted
appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an
instrument of resignation or to the Preferred Guarantee of a notice of removal, the retiring
Preferred Guarantee Trustee, at the expense of the Guarantor, may petition any court of competent
jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such court may thereupon
after such notice, if any, as it may deem proper and prescribe, appoint a Successor Preferred
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 the Issuer), as and when
due, regardless of any defense, right of set-off or counterclaim which the Issuer may have or
assert. The Guarantor’s obligation to make a Guarantee Payment may be satisfied by direct payment
of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.
Section 5.2 Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this 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 Issuer or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
Section 5.3 Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor under this 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, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; | ||
| (b) | the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Notes or any extension of the maturity date of the Notes permitted by the Indenture); | ||
| (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 Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; | ||
| (d) | the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; |
| (e) | any invalidity of, or defect or deficiency in the Preferred Securities; | ||
| (f) | the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or | ||
| (g) | any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. |
There shall be no obligation on the Holders or any other Person to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.
Section 5.4 Rights of Holders.
(a) The Holders of a Majority in liquidation amount of the Preferred Securities have the right
to direct the time, method and place of conducting any proceeding for any remedy available to the
Preferred Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust or power
conferred upon Preferred Guarantee Trustee under this Guarantee Agreement.
(b) If the Preferred Guarantee Trustee fails to enforce this Guarantee Agreement, any Holder
of Preferred Securities may institute a legal proceeding directly against the Guarantor to enforce
its rights under this Guarantee Agreement, without first instituting a legal proceeding against the
Issuer, the Preferred Guarantee Trustee or any other Person.
Section 5.5 Guarantee of Payment.
This Guarantee Agreement creates a guarantee of payment and not of collection.
Section 5.6 Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the Holders of Preferred
Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under
this 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 Guarantee Agreement, if, at the time of any such payment, any
amounts are due and unpaid under this 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 with respect to the Preferred Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this
Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI
Limitation of Transactions; Subordination
Section 6.1 Limitation of Transactions.
So long as any Preferred Securities remain outstanding, if there shall have occurred and is
continuing any event that would constitute an Event of Default or an Event of Default under the
Declaration, then (a) the Guarantor shall not declare or pay any dividends on, or purchase, acquire
or make a distribution or liquidation payment with respect to any of its capital stock (other than
(i) repurchases, redemptions or other acquisitions of shares of capital stock of the Guarantor in
connection with any employment contract, benefit plan or other similar arrangement with or for the
benefit of employees, officers, directors or consultants, (ii) as a result of an exchange or
conversion of any class or series of the Guarantor’s capital stock for any other class or series of
the Guarantor’s capital stock, or (iii) the purchase of fractional interests in shares of the
Guarantor’s capital stock pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged), and (b) the Guarantor shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Guarantor which rank pari passu with or junior to the Notes.
The foregoing, however, will not apply to any stock dividends paid by the Guarantor where the
dividend stock is the same stock as that on which the dividend is being paid.
Section 6.2 Ranking.
This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will
rank (i) subordinate and junior in right of payment to all other liabilities of the Guarantor,
including the Notes, except those made pari passu or subordinate by their terms, (ii) pari passu
with the most senior preferred or preference stock now or hereafter issued by the Guarantor and
with any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or
preference stock of any Affiliate of the Guarantor and (iii) senior to the Guarantor’s common
stock.
ARTICLE VII
Termination
Section 7.1 Termination.
This Guarantee Agreement shall terminate upon full payment of the Redemption Price of all of
the Preferred Securities and Common Securities upon the distribution of the Notes to the Holder’s
of all of the Preferred Securities or upon full payment of the amounts payable in accordance with
the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee
Agreement will continue to be effective or will be reinstated, as the case may be, if at any time
any Holder of Preferred Securities must restore payment of any sums paid under the Preferred
Securities or under this Preferred Securities Guarantee.
ARTICLE VIII
Indemnification
Section 8.1 Exculpation.
(a) No indemnified Person shall be liable, responsible or accountable in damages or otherwise
to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act
or omission performed or omitted by such Indemnified Person in good faith in accordance with this
Guarantee Agreement and in a manner such Indemnified Person reasonably believed to be within the
scope of the authority conferred on such Indemnified Person by this Guarantee Agreement or by law,
except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by
reason of such Indemnified Person’s negligence or willful misconduct with respect to such acts or
omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith upon the records
of the Guarantor and upon such information, opinions, reports or statements presented to the
Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such
other Person’s professional or expert competence and who has been selected with reasonable care by
or on behalf of the Guarantor, including information, opinions, reports or statements as to the
value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the
existence and amount of assets from which Distributions to Holders of Preferred Securities might
properly be paid.
Section 8.2 Indemnification.
(a) To the fullest extent permitted by applicable law, the Guarantor shall indemnify and hold
harmless each Indemnified Person from and against any loss, expense, damage or claim incurred by
such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified
Person in good faith in accordance with this Guarantee Agreement and in a manner such Indemnified
Person reasonably believed to be within the scope of authority conferred on such Indemnified Person
by this Guarantee Agreement, except that no Indemnified Person shall be entitled to be indemnified
in respect of any loss, expense, damage or claim incurred by such Indemnified Person by reason of
negligence or willful misconduct with respect to such acts or omissions.
(b) To the fullest extent permitted by applicable law, expenses (including legal fees and
expenses) incurred by an Indemnified Person in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by the Guarantor prior to the final disposition of
such claim, demand, action, suit or proceeding upon receipt by the Guarantor of an undertaking by
or on behalf of the Indemnified Person to repay such amount if it shall be determined that the
Indemnified Person is not entitled to be indemnified as authorized in Section 8.2(a).
ARTICLE IX
Miscellaneous
Section 9.1 Successors and Assigns.
All guarantees and agreements contained in this 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 Preferred Securities then outstanding.
Section 9.2 Amendments.
Except with respect to any changes which do not adversely affect the rights of Holders (in
which case no consent of Holders will be required), this Guarantee Agreement may only be amended
with the prior approval of the Holders of at least 66-2/3% in liquidation amount of all the
outstanding Preferred Securities. The provisions of Section 12.2 of the Declaration with respect to
meetings of Holders of the Preferred Securities and Common Securities apply to the giving of such
approval.
Section 9.3 Notices.
All notices provided for in this Guarantee Agreement shall be in writing, duly signed by the
party giving such notice, and shall be delivered, telecopied or mailed by registered or certified
mail, as follows:
| (a) | if given to the Preferred Guarantee Trustee at the Preferred Guarantee Trustee’s mailing address set forth below(or such other address as the Preferred Guarantee Trustee may give notice of to the Holders of the Preferred Securities): | ||
| BNY Midwest Trust Company |
| 0 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000 Xxxxxxx, Xxxxxxxx 00000 |
|||
| Attn: Corporate Trust Administration | |||
| (b) | if given to the Guarantor, at the Guarantor’s mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Preferred Securities): |
HSBC Finance Corporation
0000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000
0000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000
Attn: Treasurer
| (c) | if given to any holder of Preferred Securities, at the address set forth on the books and records of the Issuer. |
All such notices shall be deemed to have been given when received in person, telecopied with
receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other
document is refused delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered on the date of such
refusal or inability to deliver.
Section 9.4 Benefit.
This Guarantee Agreement is solely for the benefit of the Holders of the Preferred Securities
and subject to Section 3.1(a) is not separately transferable from the Preferred Securities.
Section 9.5 Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS.
THIS GUARANTEE AGREEMENT is executed as of the day and year first above written.
| HSBC FINANCE CORPORATION |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| BNY MIDWEST TRUST COMPANY, not in its individual capacity but solely as Preferred Guarantee Trustee |
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| By: | ||||
| Name: | ||||
| Title: | ||||
