Guarantee Agreement
between
USF&G CORPORATION
(as Guarantor)
and
THE BANK OF NEW YORK
(as Trustee)
Dated as of
_______________, 1996
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions........................................... 1
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application..................... 4
SECTION 2.02. Lists of Holders..................................... 4
SECTION 2.03. Reports by the Guarantee Trustee..................... 5
SECTION 2.04. Periodic Reports to Guarantee Trustee................ 5
SECTION 2.05. Evidence of Compliance with Conditions Precedent..... 5
SECTION 2.06. Events of Default; Waiver............................ 5
SECTION 2.07. Event of Default; Notice............................. 5
SECTION 2.08. Conflicting Interests................................ 6
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.01. Powers and Duties of the Guarantee Trustee........... 7
SECTION 3.02. Certain Rights of Guarantee Trustee.................. 8
SECTION 3.03. Indemnity............................................ 10
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.01. Guarantee Trustee; Eligibility....................... 10
SECTION 4.02. Appointment, Removal and Resignation of the
Guarantee Trustee................................... 11
ARTICLE V
GUARANTEE
SECTION 5.01. Guarantee........................................... 11
SECTION 5.02. Waiver of Notice and Demand......................... 11
SECTION 5.03. Obligations Not Affected............................ 12
SECTION 5.04. Rights of Holders................................... 12
SECTION 5.05. Guarantee of Payment................................ 13
SECTION 5.06. Subrogation......................................... 13
SECTION 5.07. Independent Obligations............................. 13
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.01. Subordination....................................... 13
SECTION 6.02. Pari Passu Guarantees............................... 13
ARTICLE VII
TERMINATION
SECTION 7.01. Termination......................................... 14
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Successors and Assigns.............................. 14
SECTION 8.02. Amendments.......................................... 14
SECTION 8.03. Notices............................................. 14
SECTION 8.04. Benefit............................................. 15
SECTION 8.05. Interpretation...................................... 15
SECTION 8.06. Governing Law....................................... 16
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of _______________, 1996, is executed
and delivered by USF&G Corporation, a Maryland corporation (the "Guarantor"),
and The Bank of New York, a New York banking corporation, as trustee (the
"Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred Securities (as defined herein) of USF&G Capital
II, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (as amended
from time to time in accordance with its terms, the "Trust Agreement"), dated as
of _______________, 1996 among the Trustees named therein, the Guarantor, as
Depositor, and the Holders from time to time of undivided beneficial interests
in the assets of the Issuer, the Issuer is issuing up to $_________ aggregate
Liquidation Amount of its ___% Cumulative Quarterly Income Preferred Securities,
Series A (Liquidation Amount $25 per preferred security) (the "Preferred
Securities") (including up to $_____ aggregate Liquidation Amount of its
Preferred Securities subject to an over-allotment option) representing preferred
undivided beneficial interests in the assets of the Issuer and having the terms
set forth in the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Issuer and the
proceeds thereof will be used to purchase the Debentures (as defined in the
Trust Agreement) of the Guarantor which will be deposited with The Bank of New
York, as Property Trustee under the Trust Agreement, as trust assets; and
WHEREAS, as incentive for the Holders to purchase Preferred Securities the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth herein, 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 will benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders from time to time of the Preferred Securities.
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. As used in this Guarantee Agreement, the terms
set forth below shall, unless the context otherwise requires, have the following
meanings. Capitalized or otherwise defined terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the Trust Agreement as
in effect on the date hereof.
"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.
"Common Securities" means the securities representing common beneficial
interests in the assets of the Issuer.
"Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Guarantee Agreement; provided, however, that,
except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by or on behalf of the Issuer: (i) any accrued and unpaid Distributions
required to be paid on the Preferred Securities, to the extent the Issuer shall
have funds on hand available therefor, (ii) the redemption price, including all
accrued and unpaid Distributions to the date of redemption (the "Redemption
Price"), with respect to the Preferred Securities called for redemption by the
Issuer, to the extent the Issuer shall have funds on hand available therefor,
and (iii) upon a voluntary or involuntary termination, winding-up or liquidation
of the Issuer, unless Debentures are distributed to the Holders, (a) the
aggregate of the Liquidation Amount of $25 per Preferred Security plus accrued
and unpaid Distributions on the Preferred Securities to the date of payment, to
the extent the Issuer shall have funds on hand available to make such payment
or, if different, (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").
"Guarantee Trustee" means The Bank of New York, until a Successor Guarantee
Trustee has been appointed and has accepted such appointment pursuant to the
terms of this Guarantee Agreement and thereafter means each such Successor
Guarantee Trustee.
"Holder" means a Person in whose name a Preferred Security or Securities is
registered in the Securities Register; 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 Affiliate of the Guarantor.
"Indenture" means the Indenture dated as of _______________, 1996, as
supplemented and amended from time to time in accordance with its terms between
the Guarantor (the "Debenture Issuer") and The Bank of New York, as trustee.
"List of Holders" has the meaning specified in Section 2.02(a).
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"Majority in Liquidation Amount of the Securities" means, except as
provided by the Trust Indenture Act, a vote by the Holder(s), voting separately
as a class, of more than 50% of the Liquidation Amount of all then outstanding
Preferred Securities issued by the Issuer.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by (i) any two of the following individuals: the Chairman of the Board,
the President, any Executive Vice President or any Vice President, or (ii) by
one of the foregoing individuals and by any other Vice President, the Treasurer,
an Assistant Treasurer, the Corporate Secretary or an Assistant Corporate
Secretary of such Person, and delivered to the Guarantee Trustee. 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 Officers'Certificate has
read the covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate and upon which the statements contained therein are based;
(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.
"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 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.
"Senior Indebtedness" means Senior Indebtedness as defined in the
Indenture.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.01.
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"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended and
as in force at the date of which this instrument was executed; provided,
however, that in the event 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 2.01. Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be 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 Section 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
SECTION 2.02. Lists of Holders.
(a) The Guarantor shall furnish or cause to be furnished to the Guarantee
Trustee (a) semiannually, on or before January 15 and July 15 of each year, a
list, in such form as the Guarantee Trustee may reasonably require, of the names
and addresses of the Holders ("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 is not
identical to a previously supplied list of Holders or has not otherwise been
received by the Guarantee Trustee in its capacity as such and in each case
provided that no such list need be furnished if the Guarantee Trustee shall be
the registrar for the Preferred Securities. 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 its obligations under Section
311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.03. Reports by the Guarantee Trustee. Within 60 days after May 15
of each year, 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. The Guarantee
Trustee shall also comply with the requirements of Section 313(d) of the Trust
Indenture Act.
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SECTION 2.04. Periodic Reports to Guarantee Trustee. The Guarantor shall
provide to the Guarantee Trustee, the Securities and Exchange Commission 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.
Delivery of such reports, information and documents to the Trustee is for
inormational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 2.05. 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 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
pursuant to Section 314(c)(1) may be given in the form of an Officers'
Certificate.
SECTION 2.06. Events of Default; Waiver. The Holders of a Majority in
Liquidation Amount of the Preferred Securities may, by vote, on behalf of the
Holders, waive any past Event of Default and its consequences except with
respect to a default in payment of any Guarantee Payments. 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 therefrom.
SECTION 2.07. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the occurrence of an
Event of Default, transmit by mail, first class postage prepaid, to the Holders,
notices of all Events of Default known to the Guarantee Trustee, unless such
defaults have 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 the Trust
Agreement shall have obtained written notice, of such Event of Default.
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SECTION 2.08. Conflicting Interests. The Trust Agreement 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.
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ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE
GUARANTEE TRUSTEE
SECTION 3.01. Powers and Duties of the Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Guarantee Trustee for the
benefit of the Holders, and the Guarantee Trustee shall not transfer this
Guarantee Agreement to any Person except a Holder exercising his or her rights
pursuant to Section 5.04(iv) or to a Successor Guarantee Trustee on acceptance
by such Successor Guarantee Trustee of its appointment to act as Successor
Guarantee Trustee. The right, title and interest of the Guarantee Trustee 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 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
Guarantee Agreement, and no implied covenants shall be read into this Guarantee
Agreement against the Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.06), the
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 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 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 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 Guarantee Trustee shall be
determined solely by the express provisions of this Guarantee Agreement, and the
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
(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
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certificates or opinions furnished to the 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 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 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 a Majority in Liquidation Amount of the Preferred
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 Guarantee Agreement; and
(iv) no provision of this 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 Guarantee Agreement or adequate
indemnity against such risk or liability is not reasonably assured to it.
SECTION 3.02. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.01:
(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
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
unless otherwise prescribed herein.
(iii) Whenever, in the administration of this 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.
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(iv) The Guarantee Trustee may consult with legal counsel of its
selection, and the 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
employees. The 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.
(v) The 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
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 3.02(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 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
with due care by it hereunder.
(viii) Whenever in the administration of this 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 from a majority in Liquidation Amount of the Preferred
Securities, and (C) shall be protected in acting in accordance with such
instructions.
(b) No provision of this 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.
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SECTION 3.03. Indemnity. The Guarantor agrees to indemnify each of the
Guarantee Trustee and any successor Guarantee Trustee for, and to hold it
harmless against, any and all loss, damage, claim, liability or expense,
including taxes (other than taxes based on the income of the Guarantee Trustee),
incurred without negligence or bad faith on the part of the Guarantee Trustee,
arising out of or in connection with the acceptance or administration of this
Guarantee Agreement, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder. 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 Guarantee Agreement. The provisions of this Section shall
survive the termination of this Guarantee Agreement.
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.01. 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 eligible pursuant to the Trust Indenture Act
to act as such and has a combined capital and surplus of at least 50 million
U.S. dollars ($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 the supervising or examining authority, then, for the purposes of this
Section 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 4.01(a), the Guarantee Trustee shall immediately resign in the
manner and with the effect set out in Section 4.02(c).
(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.
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SECTION 4.02. Appointment, Removal and Resignation of the Guarantee
Trustee.
(a) Subject to Section 4.02(b), the Guarantee Trustee may be (i) appointed
or removed without cause at any time by the Guarantor and (ii) removed at any
time by the Holders of a Majority in Liquidation Amount of the Preferred
Securities.
(b) The Guarantee Trustee shall not be removed 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.
(c) The Guarantee Trustee appointed hereunder shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.02 within 60 days after
delivery of an instrument of resignation or removal, the Guarantee Trustee
resigning or being removed 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 5.01. 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), 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 5.02. Waiver of Notice and Demand. The Guarantor hereby waives
notice of acceptance of the 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, 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.
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SECTION 5.03. 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;
(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 5.03 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 5.04. Rights of Holders. The Guarantor expressly acknowledges that:
(i) this 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 Guarantee Agreement on behalf of the Holders; (iii) 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 Guarantee Trustee in respect of this Guarantee Agreement or
exercising any trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and (iv any Holder may enforce this Guarantee Agreement,
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institute a legal proceeding directly against the Guarantor to enforce its
rights under this Guarantee Agreement, without first instituting a legal
proceeding against the Guarantee Trustee, the Issuer or any other Person.
SECTION 5.05. Guarantee of Payment. This Guarantee Agreement creates a
guarantee of payment and not of collection. This Guarantee Agreement will not be
discharged except by payment of the Guarantee Payments in full (without
duplication of amounts theretofore paid by the Issuer) or upon distribution of
Debentures to Holders as provided in the Trust Agreement.
SECTION 5.06. Subrogation. The Guarantor shall be subrogated to all (if
any) rights of the Holders against the Issuer in respect of any amounts paid to
the Holders by the Guarantor under this Guarantee Agreement and shall have the
right to waive payment by the Issuer pursuant to Section 5.01; 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 5.07. 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 5.03 hereof.
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.01. Subordination. This Guarantee Agreement will constitute an
unsecured obligation of the Guarantor and will rank subordinate and junior in
right of payment to all liabilities of the Guarantor, including the Debentures,
except those made pari passu or subordinate to the Guarantee expressly by their
terms.
SECTION 6.02. Pari Passu Guarantees. This Guarantee Agreement shall rank
pari passu with any similar Guarantee Agreements issued by the Guarantor on
behalf of the holders of Preferred Securities issued by USF&G Capital II.
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ARTICLE VII
TERMINATION
SECTION 7.01. Termination. This Guarantee Agreement shall terminate and be
of no further force and effect upon (i) full payment of the Redemption Price of
all Preferred Securities, (ii) the distribution of Debentures to the Holders in
exchange for all of the Preferred Securities in accordance with the Trust
Agreement or (iii) full payment of the amounts payable in accordance with the
Trust Agreement 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 must restore payment of any sums paid
with respect to Preferred Securities or this Guarantee Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. 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. Except in
connection with a consolidation, merger or sale involving the Guarantor that is
permitted under Article Eight of the Indenture and pursuant to which the
assignee agrees in writing to perform the Guarantor's obligations hereunder, the
Guarantor shall not assign its obligations hereunder.
SECTION 8.02. Amendments. Except with respect to any changes which 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 Guarantee Agreement may
only be amended with the prior approval of the Holders of not less than a
Majority in Liquidation Amount of all the outstanding Preferred Securities. The
provisions of Article VI of the Trust Agreement concerning meetings of the
Holders shall apply to the giving of such approval.
SECTION 8.03. Notices. 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, telecopied or mailed by first class mail as
follows:
(a) if given to the Guarantor, to the address set forth below or such other
address as the Guarantor may give notice of to the Holders:
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USF&G Corporation
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Facsimile No: (410) 547-____
Attention:
(b) if given to the Issuer, in care of the Guarantee Trustee, at the
Issuer's (and the Guarantee Trustee's) address set forth below or such other
address as the Guarantee Trustee on behalf of the Issuer may give notice to the
Holders:
USF&G Capital II
c/o USF&G Corporation
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Facsimile No: (410) 547-_____
Attention:
with a copy to:
The Bank of New York
000 Xxxxxxx Xxxxxx, 00X
Xxx Xxxx, Xxx Xxxx 10
Facsimile No: (000) 000-0000
Attention: Corporate Trust Trustee Administration
(c) if given to any Holder, at the address set forth on the books and
records of the Issuer.
All notices hereunder 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 8.04. Benefit. This Guarantee Agreement is solely for the benefit
of the Holders and is not separately transferable from the Preferred Securities.
SECTION 8.05. Interpretation. In this Guarantee Agreement, unless the
context otherwise requires:
(a) Capitalized terms used in this Guarantee Agreement but not defined in
the preamble hereto have the respective meanings assigned to them in Section
1.01;
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(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;
(f) a reference to the singular includes the plural and vice versa; and
(g) the masculine, feminine or neuter genders used herein shall include the
masculine, feminine and neuter genders.
SECTION 8.06. GOVERNING LAW. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
This instrument 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.
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
USF&G CORPORATION
By:
----------------------------
Name:----------------------------
Title:----------------------------
THE BANK OF NEW YORK, as Guarantee Trustee
By:
----------------------------
Name:----------------------------
Title:----------------------------
