CAPITAL 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. |
-2-
CAPITAL SECURITIES GUARANTEE AGREEMENT
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 “Capital Securities Guarantee Trustee”), for the benefit of
the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of
HSBC Finance 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 $1,000,000,000 aggregate stated liquidation amount of
Capital Securities designated the Capital Securities (the “Capital Securities”);
WHEREAS, as incentive for the Holders to purchase the Capital 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 Capital 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 Capital 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.
-3-
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.
“Capital Securities Guarantee Trustee” means BNY Midwest Trust Company until a Successor
Capital Securities Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement and thereafter means each such Successor Capital
Securities Guarantee Trustee.
“Common Securities” means the securities representing common undivided beneficial interests in
the assets of the Issuer.
“Covered Person” means any Holder of Capital Securities.
“Distributions” means a distribution payable to holders of the Capital 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 Capital 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 Capital 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 Capital 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
Capital Securities as provided in the Declaration), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid Distributions on the Capital 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”).
-4-
“Holder” shall mean any holder, as registered on the books and records of the Issuer, of any
Capital Securities; provided, however, that in determining whether the holders of the requisite
percentage of Capital 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.
“Indemnified Person” means the Capital Securities Guarantee Trustee, any Affiliate of the
Capital Securities Guarantee Trustee, or any officers, directors, shareholders, members, partners,
employees, representatives or agents of the Capital Securities 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 Capital Securities” means, except as provided by the
Trust Indenture Act, Holder(s) of Capital Securities voting separately as a class, who vote Capital
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 Capital 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.
“Responsible Officer” means, with respect to the Capital Securities 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.
-5-
“Successor Capital Securities Guarantee Trustee” means a successor Capital Securities
Guarantee Trustee possessing the qualifications to act as Capital Securities 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 Capital 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 Capital
Securities Trustee (i) within 14 days after January 1 and June 30 of each year, a list, in such
form as the Capital Securities Guarantee Trustee may reasonably require, of the names and addresses
of the Holders of the Capital 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 Capital Securities 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 Capital Securities 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 Capital Securities 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 Capital Securities Guarantee Trustee.
Within 60 days after May 15 of each year, the Capital Securities Guarantee Trustee shall
provide to the Holders of the Capital 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 Capital Securities Guarantee Trustee shall also comply with the requirements of
Section 313(d) of the Trust Indenture Act.
Section 2.4 Periodic Reports To Capital Securities Guarantee Trustee.
The Guarantor shall provide to the Capital Securities 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 Capital Securities 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
-6-
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 Capital Securities may, by vote, on behalf
of the Holders of all of the Capital 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 Capital Securities 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 Capital
Securities, notices of all Events of Default known to the Capital Securities Guarantee Trustee,
unless such defaults have been cured before the giving of such notice, provided that, the Capital
Securities 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 Capital Securities Guarantee Trustee in good faith determine that the withholding
of such notice is in the interests of the Holders of the Capital Securities.
(b) The Capital Securities Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default except any Event of Default as to which the Capital Securities 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
Capital Securities Guarantee Trustee
Capital Securities Guarantee Trustee
Section 3.1 Powers and Duties of The Capital Securities Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Capital Securities Guarantee Trustee for the
benefit of the Holders of the Capital Securities and the Capital Securities Guarantee Trustee shall
not transfer this Guarantee Agreement to any Person except a Holder of Capital Securities
exercising his or her rights pursuant to Section 5.4(b) or to a Successor Capital Securities
Guarantee Trustee on acceptance by such Successor Capital Securities Guarantee Trustee of its
appointment to act as Capital Securities Guarantee Trustee. The right, title and interest of the
Capital Securities Guarantee Trustee shall automatically vest in any Successor Capital Securities
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 Capital Securities Guarantee
Trustee shall enforce this Guarantee Agreement for the benefit of the Holders of the Capital
Securities.
(c) The Capital Securities 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 Capital Securities Guarantee
Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to
Section 2.6), the
-7-
Capital Securities 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 Capital
Securities 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 Capital Securities Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Capital Securities 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 Capital Securities 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 Capital Securities 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 Capital Securities Guarantee Trustee, the Capital Securities 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 Capital Securities Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Capital Securities Guarantee Trustee, unless it shall be proved that the Capital Securities Guarantee Trustee was negligent in ascertaining the pertinent facts; | ||
| (iii) | the Capital Securities 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 Capital 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 Capital Securities Guarantee Trustee under this Guarantee Agreement; and | ||
| (iv) | no provision of this Guarantee Agreement shall require the Capital Securities 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 Capital Securities Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
| (i) | the Capital Securities 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; |
-8-
| (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 Capital Securities Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Capital Securities 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 Capital Securities 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 Capital Securities 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 Capital Securities 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 Capital Securities 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 Capital Securities Guarantee Trustee security and indemnity reasonably satisfactory to the Capital Securities 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 Capital Securities Guarantee Trustee provided, that, nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Capital Securities 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 Capital Securities 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 Capital Securities Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; | ||
| (viii) | the Capital Securities 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 Capital Securities 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 Capital Securities Guarantee Trustee or its agents hereunder shall bind the Holders of the Capital Securities and the signature of the Capital Securities 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 Capital Securities 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 Capital Securities Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other |
-9-
action hereunder the Capital Securities Guarantee Trustee (i) may request
instructions from the Holders of the Capital 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 Capital Securities 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 Capital Securities 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 Capital Securities
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 Capital Securities Guarantee Trustee does not assume any responsibility for their correctness.
The Capital Securities Guarantee Trustee makes no representations as to the validity or sufficiency
of this Guarantee Agreement.
ARTICLE IV
Capital Securities Guarantee Trustee
Section 4.1 Capital Securities Guarantee Trustee; Eligibility.
(a) There shall at all times be a Capital Securities 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 Capital Securities Guarantee Trustee shall cease to be eligible to so
act under Section 4.1(a), the Capital Securities Guarantee Trustee shall immediately resign in the
manner and with the effect set out in Section 4.2(c).
(c) If the Capital Securities Guarantee Trustee has or shall acquire any “conflicting
interest” within the meaning of Section 310(b) of the Trust Indenture Act, the Capital Securities
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 Capital Securities Guarantee Trustee.
(a) Subject to Section 4.2(b), the Capital Securities Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor.
-10-
(b) The Capital Securities Guarantee Trustee shall not be removed in accordance with this
Section 4.2 until a Successor Capital Securities Guarantee Trustee has been appointed and has
accepted such appointment by written instrument executed by such Successor Capital Securities
Guarantee Trustee and delivered to the Guarantor.
(c) The Capital Securities Guarantee Trustee appointed to office shall hold office until a
Successor Capital Securities Guarantee Trustee shall have been appointed or until its removal or
resignation. The Capital Securities Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the Capital Securities
Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a
Successor Capital Securities Guarantee Trustee has been appointed and has accepted such appointment
by instrument in writing executed by such Successor Capital Securities Guarantee Trustee and
delivered to the Guarantor and the resigning Capital Securities Guarantee Trustee.
(d) If no Successor Capital Securities 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
Capital Securities Guarantee Trustee, at the expense of the Guarantor, may petition any court of
competent jurisdiction for appointment of a Successor Capital Securities Guarantee Trustee. Such
court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a
Successor Capital Securities 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 Capital 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 Capital Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Capital Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation |
-11-
| 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 Capital 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 Capital 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 Capital Securities have the right
to direct the time, method and place of conducting any proceeding for any remedy available to the
Capital Securities Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust
or power conferred upon Capital Securities Guarantee Trustee under this Guarantee Agreement.
(b) If the Capital Securities Guarantee Trustee fails to enforce this Guarantee Agreement, any
Holder of Capital 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 Capital Securities 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 Capital 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.
-12-
Section 5.7 Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are independent of the obligations
of the Issuer with respect to the 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
Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.
-13-
ARTICLE VI
Limitation of Transactions; Subordination
Section 6.1 Limitation of Transactions.
So long as any Capital 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 Capital Securities and Common Securities upon the distribution of the Notes to the Holder’s of
all of the Capital 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 Capital Securities must restore payment of any sums paid under the Capital Securities or under
this Capital 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.
-14-
(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 Capital 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 Capital 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 Capital Securities. The provisions of Section 12.2 of the Declaration with respect to
meetings of Holders of the Capital 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:
-15-
| (a) | if given to the Capital Securities Guarantee Trustee at the Capital Securities Guarantee Trustee’s mailing address set forth below(or such other address as the Capital Securities Guarantee Trustee may give notice of to the Holders of the Capital Securities): |
BNY Midwest Trust Company
0 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
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 Capital 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 Capital 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 Capital Securities
and subject to Section 3.1(a) is not separately transferable from the Capital 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.
-16-
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 Capital Securities Guarantee Trustee |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
-17-
