As filed with the Securities and Exchange Commission on October 9, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HSB GROUP, INC. HSB CAPITAL I
(EXACT NAME OF REGISTRANT (EXACT NAME OF REGISTRANT
AS SPECIFIED IN ITS CHARTER) AS SPECIFIED IN ITS TRUST AGREEMENT)
CONNECTICUT DELAWARE
(STATE OR OTHER JURISDICTION (STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION) OF INCORPORATION OR ORGANIZATION)
- -------------------------------- ----------------------------------
6719 6159
(PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER) CLASSIFICATION CODE NUMBER)
06-1475343 06-6452634
(I.R.S. EMPLOYER IDENTIFICATION (I.R.S. EMPLOYER IDENTIFICATION
NUMBER) NUMBER)
ONE STATE STREET
P.O. BOX 5024
HARTFORD, CONNECTICUT 06102-5024
(860) 722-1866
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
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R. KEVIN PRICE
HSB GROUP, INC.
P.O. BOX 5024
HARTFORD, CONNECTICUT
06102-5024
(860) 722-1866
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENTS FOR SERVICE)
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COPY TO:
STACY J. KANTER, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS
SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED
IN CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS
COMPLIANCE WITH GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX. ( )
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CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM AMOUNT
CLASS OF AMOUNT OFFERING AGGREGATE OF
SECURITIES TO TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED UNIT (1) PRICE (1) FEE
EXCHANGE CAPITAL
SECURITIES OF HSB
CAPITAL I . . . $110,000,000 100% $110,000,000 $33,333
EXCHANGE JUNIOR
SUBORDINATED
DEFERRABLE INTEREST
DEBENTURES, SERIES
B OF HSB GROUP,
INC.(2) . . . . .
HSB GROUP, INC.
EXCHANGE GUARANTEE
WITH RESPECT TO
EXCHANGE CAPITAL
SECURITIES(3) . . .
TOTAL . . . . . . $110,000,000 100% $110,000,000 $33,333
(1) Estimated solely for the purpose of computing the registration fee.
(2) No separate consideration will be received for the Exchange
Junior Subordinated Deferrable Interest Debentures of HSB Group,
INC. (the "Exchange Junior Subordinated Debentures") distributed
upon any liquidation of HSB Capital I.
(3) NO separate consideration will be received for the HSB Group,
Inc. Exchange Guarantee.
(4) This Registration Statement is deemed to cover rights of holders
of Exchange Junior Subordinated Debentures under the Indenture,
the rights of holders of Exchange Capital Securities of HSB
Capital I under an Amended and Restated Trust Agreement, the
rights of holders of such Capital Securities under the Exchange
Guarantee and certain backup undertakings as described herein.
(5) Such amount represents the liquidation amount of HSB Capital I
Exchange Capital Securities to be exchanged hereunder and the
principal amount of Exchange Junior Subordinated Debentures that
may be distributed to holders of such Capital Securities upon
any liquidation of HSB Capital I.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES
THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
HSB CAPITAL I
OFFER TO EXCHANGE ITS
GLOBAL FLOATING RATE CAPITAL SECURITIES, SERIES B
(LIQUIDATION AMOUNT $1,000 PER EXCHANGE CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
GLOBAL FLOATING RATE CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER ORIGINAL CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, TO THE EXTENT DESCRIBED
HEREIN, BY
HSB GROUP, INC.
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THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED
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HSB Capital I, a trust formed under the laws of the State of
Delaware (the "Issuer Trust"), hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus (as the
same may be amended or supplemented from time to time, the
"Prospectus") and in the accompanying Letter of Transmittal
(which together constitute the "Exchange Offer"), to exchange up
to $110,000,000 aggregate Liquidation Amount of its Global
Floating Rate Capital Securities, Series B (the "Exchange Capital
Securities") which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for a like Liquidation Amount of
its outstanding Global Floating Rate Capital Securities, Series A
(the "Original Capital Securities"), of which $110,000,000
aggregate Liquidation Amount are issued and outstanding.
Pursuant to the Exchange Offer, HSB Group, Inc., a Connecticut
corporation (the "Company" or "HSB"), is also offering to
exchange (i) its guarantee of payments of cash distributions and
payments on liquidation of the Issuer Trust or redemption of the
Original Capital Securities (the "Original Guarantee") for a like
guarantee in respect of the Exchange Capital Securities (the
"Exchange Guarantee") and (ii) $110,000,000 aggregate principal
amount of its Global Floating Rate Junior Subordinated Deferrable
Interest Debentures, Series A due July 15, 2027 (the "Original
Junior Subordinated Debentures") for a like aggregate principal
amount of its Global Floating Rate Junior Subordinated Deferrable
Interest Debentures, Series B due July 15, 2027 (the "Exchange
Junior Subordinated Debentures"), which Exchange Guarantee and
Exchange Junior Subordinated Debentures also have been registered
under the Securities Act. The Original Capital Securities, the
Original Guarantee and the Original Junior Subordinated
Debentures are collectively referred to herein as the "Original
Securities" and the Exchange Capital Securities, the Exchange
Guarantee and the Exchange Junior Subordinated Debentures are
collectively referred to herein as the "Exchange Securities."
The terms of the Exchange Securities are identical in all
material respects to the respective terms of the Original
Securities, except that (i) the Exchange Securities have been
registered under the Securities Act and therefore will not be
subject to certain restrictions on transfer applicable to the
Original Securities, (ii) the Exchange Capital Securities
initially sold to institutional accredited investors will not
contain the $100,000 minimum Liquidation Amount transfer
restriction, (iii) the Exchange Capital Securities will not
provide for any increase in the Distribution rate thereon, and
(iv) the Exchange Junior Subordinated Debentures will not provide
for any increase in the interest rate thereon. See "Description
of Exchange Securities" and "Description of Original Securities."
The Exchange Capital Securities are being offered for exchange in
order to satisfy certain obligations of the Company and the
Issuer Trust under the Registration Rights Agreement dated as of
July 10, 1997 (the "Registration Rights Agreement") among the
Company, the Issuer Trust and the Initial Purchasers (as defined
herein). In the event that the Exchange Offer is consummated,
any Original Capital Securities which remain outstanding after
consummation of the Exchange Offer and the Exchange Capital
Securities issued in the Exchange Offer will vote together as a
single class for purposes of determining whether holders of the
requisite percentage in outstanding Liquidation Amount thereof
have taken certain actions or exercised certain rights under the
Trust Agreement.
(continued on the
following page)
This Prospectus and the Letter of Transmittal are first being
mailed to all holders of Original Capital Securities on ,
1997.
SEE "RISK FACTORS" COMMENCING ON PAGE 17 FOR CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED BY HOLDERS IN DECIDING
WHETHER TO TENDER ORIGINAL CAPITAL SECURITIES IN THE EXCHANGE
OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is October , 1997.
The Exchange Capital Securities and the Original Capital
Securities (collectively, the "Capital Securities") represent
beneficial interests in the assets of the Issuer Trust. The
Company is the owner of all of the beneficial interests
represented by common securities of the Issuer Trust (the "Common
Securities," and together with the Capital Securities, the "Trust
Securities"). The First National Bank of Chicago is the Property
Trustee (the "Property Trustee") of the Issuer Trust. The Issuer
Trust exists for the sole purpose of issuing the Trust Securities
and investing the proceeds thereof in the Junior Subordinated
Debentures (as defined herein). The Junior Subordinated
Debentures will mature on July 15, 2027 (the "Stated Maturity").
The Capital Securities will have a preference over the Common
Securities under certain circumstances with respect to cash
distributions and amounts payable on liquidation, redemption or
otherwise. See "Description of Exchange Securities--Description
of Exchange Capital Securities--Subordination of Common
Securities."
As used herein, (i) the "Indenture" means the Junior
Subordinated Indenture, dated as of July 15, 1997, as amended and
supplemented from time to time, between the Company and The First
National Bank of Chicago, as trustee (the "Debenture Trustee"),
relating to the Junior Subordinated Debentures, (ii) the "Trust
Agreement" means the Amended and Restated Trust Agreement
relating to the Trust among the Company, as Sponsor, The First
National Bank of Chicago, as Property Trustee, First Chicago
Delaware Inc., an affiliate of the Property Trustee, as Delaware
Trustee (the "Delaware Trustee"), and the Administrative Trustees
named therein (collectively, with the Property Trustee and
Delaware Trustee, the "Issuer Trustees"), (iii) the "Guarantee"
means the Guarantee Agreement relating to the Capital Securities
between the Company and The First National Bank of Chicago, as
trustee (the "Guarantee Trustee") and (iv) the "Common Guarantee"
means the Guarantee Agreement relating to the Common Securities
between the Company and The First National Bank of Chicago, as
trustee. In addition, as the context may require, (i) "Junior
Subordinated Debentures" includes the Original Junior
Subordinated Debentures and the Exchange Junior Subordinated
Debentures and (ii) "Guarantee" includes the Original Guarantee
and the Exchange Guarantee.
Holders of the Capital Securities will be entitled to
receive preferential cumulative cash distributions accumulating
from the date of original issuance and payable quarterly in
arrears on January 15, April 15, July 15, and October 15, of each
year, commencing October 15, 1997, at a variable annual rate
equal to LIBOR (as defined herein) plus .91% on the Liquidation
Amount (as defined herein) of $1,000 per Capital Security
("Distributions"). The Company has the right to defer payment of
interest on the Junior Subordinated Debentures at any time or
from time to time for a period not exceeding 20 consecutive
quarterly periods with respect to each deferral period (each, an
"Extension Period"), provided that no Extension Period may extend
beyond the Stated Maturity (as defined herein) of the Junior
Subordinated Debentures. Upon the termination of any such
Extension Period and the payment of all amounts then due, the
Company may elect to begin a new Extension Period subject to the
requirements set forth herein. If interest payments on the
Junior Subordinated Debentures are so deferred, Distributions on
the Capital Securities will also be deferred and the Company will
not be permitted, subject to certain exceptions described herein,
to declare or pay any cash distributions with respect to the
Company's capital stock or debt securities of the Company that
rank pari passu in all respects with or junior to the Junior
Subordinated Debentures. During an Extension Period, interest on
the Junior Subordinated Debentures will continue to accrue (and
the amount of Distributions to which holders of the Capital
Securities are entitled will accumulate) at a variable annual
rate equal to LIBOR plus .91%, compounded quarterly from the
relevant payment date for interest and holders of Capital
Securities will be required to recognize interest income for
United States federal income tax purposes. See "Description of
Exchange Securities--Description of Exchange Junior Subordinated
Debentures--Option To Extend Interest Payment Period" and "Certain
Federal Income Tax Consequences--Interest Income and original
Issue Discount."
The Company has, through the Guarantee, the Trust Agreement,
the Junior Subordinated Debentures and the Junior Subordinated
Indenture (each as defined herein), taken together, fully,
irrevocably and unconditionally guaranteed all of the Issuer
Trust's obligations under the Capital Securities. See
"Relationship Among the Exchange Capital Securities, the Exchange
Junior Subordinated Debentures and the Exchange Guarantee--Full
and Unconditional Guarantee." The Guarantee of the Company
guarantees the payment of Distributions and payments on
liquidation or redemption of the Capital Securities, but only in
each case to the extent of funds held by the Issuer Trust, as
described herein (the "Guarantee"). See "Description of Exchange
Securities--Description of Exchange Guarantee." If the Company
does not make interest payments on the Junior Subordinated
Debentures held by the Issuer Trust, the Issuer Trust will have
insufficient funds to pay Distributions on the Capital
Securities. The Guarantee does not cover payment of
Distributions when the Issuer Trust does not have sufficient
funds to pay such Distributions. In such event, a holder of
Capital Securities may institute a legal proceeding directly
against the Company to enforce payment of such Distributions to
such holder. See "Description of Exchange Securities--Description
of Junior Exchange Subordinated Debentures--Enforcement of Certain
Rights by Holders of Capital Securities." The obligations of the
Company under the Guarantee and the Junior Subordinated
Debentures are subordinate and junior in right of payment to all
Senior Indebtedness (as defined in "Description of Exchange
Securities--Description of Exchange Junior Subordinated
Debentures--Subordination") of the Company. In addition, because
the Company is a holding company, the right of the Company to
participate in any distribution of assets of any subsidiary
including its insurance subsidiaries, upon any such subsidiary's
liquidation or reorganization or otherwise is subject to the
prior claims of creditors of that subsidiary except to the extent
that the Company may itself be recognized as a creditor of that
subsidiary. Accordingly, the Junior Subordinated Debentures (and
therefore the Capital Securities) will be effectively
subordinated to all existing and future liabilities of the
Company's subsidiaries under generally accepted accounting
principals ("GAAP"), and holders thereof should look only to the
assets of the Company for payments on the Junior Subordinated
Debentures. See "Risk Factors--Holding Company Structure;
Structural Subordination; Dividend Restrictions."
The Capital Securities are subject to mandatory redemption,
in whole or in part, upon repayment of the Junior Subordinated
Debentures at Stated Maturity or their earlier redemption. The
Junior Subordinated Debentures are redeemable prior to maturity
at the option of the Company (i) on or after July 15, 2007, in
whole at any time or in part from time to time, or (ii) in whole
(but not in part) prior to July 15, 2007 and within 90 days
following the occurrence of a Tax Event at a redemption price set
forth herein plus the accrued and unpaid interest on the Junior
Subordinated Debentures so redeemed to the date fixed for
redemption. See "Description of Exchange Securities--Description
of Exchange Junior Subordinated Debentures--Redemption."
The Company, as the holder of the outstanding Common
Securities, has the right at any time to terminate the Issuer
Trust and, after satisfaction of the liabilities of creditors of
the Issuer Trust as provided by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of the
Capital Securities and Common Securities in liquidation of the
Issuer Trust, subject to the Property Trustee having received an
opinion of counsel to the effect that such distribution will not
be a taxable event to holders of Capital Securities. See
"Description of Exchange Securities--Description of Exchange
Capital Securities--Liquidation Distribution Upon Termination."
In the event of the termination of the Issuer Trust, after
satisfaction of liabilities to creditors of the Issuer Trust as
required by applicable law, the holders of the Capital Securities
will be entitled to receive a Liquidation Amount of $1,000 per
Capital Security plus accumulated and unpaid Distributions
thereon to the date of payment, which may be in the form of a
distribution of such amount in Junior Subordinated Debentures,
subject to certain exceptions. See "Description of Exchange
Securities--Exchange Capital Securities--Liquidation Distribution
Upon Termination".
The Issuer Trust is making the Exchange Offer of the
Exchange Capital Securities in reliance on the position of the
staff of the Division of Corporation Finance of the Securities
and Exchange Commission (the "Commission") as set forth in
certain interpretive letters addressed to third parties in other
transactions. However, neither the Company nor the Issuer Trust
has sought its own interpretive letter and there can be no
assurance that the staff of the Division of Corporation Finance
of the Commission would make a similar determination with respect
to the Exchange Offer as it has in such interpretive letters to
third parties. Based on these interpretations by the staff of
the Division of Corporation Finance of the Commission, and
subject to the two immediately following sentences, the Company
and the Issuer Trust believe that Exchange Capital Securities
issued pursuant to this Exchange Offer in exchange for Original
Capital Securities may be offered for resale, resold and
otherwise transferred by a holder thereof (other than a holder
who is a broker-dealer) without further compliance with the
registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Capital Securities
are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such Exchange
Capital Securities. However, any holder of Original Capital
Securities who is an "affiliate" of the Company or the Issuer
Trust or who intends to participate in the Exchange Offer for the
purpose of distributing Exchange Capital Securities, or any
broker-dealer who purchased Original Capital Securities from the
Issuer Trust to resell pursuant to Rule 144A under the Securities
Act ("Rule 144A") or any other available exemption under the
Securities Act, (a) will not be able to rely on the
interpretations of the staff of the Division of Corporation
Finance of the Commission set forth in the above-mentioned
interpretive letters, (b) will not be permitted or entitled to
tender such Original Capital Securities in the Exchange Offer and
(c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or
other transfer of such Original Capital Securities unless such
sale is made pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer holds Original
Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such
Original Capital Securities for Exchange Capital Securities, then
such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales
of such Exchange Capital Securities.
Each holder of Original Capital Securities who wishes to
exchange Original Capital Securities for Exchange Capital
Securities in the Exchange Offer will be required to represent
that (i) it is not an "affiliate" of the Company or the Issuer
Trust, (ii) any Exchange Capital Securities to be received by it
are being acquired in the ordinary course of its business, (iii)
it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities, and (iv) if
such holder is not a broker-dealer, such holder is not engaged
in, and does not intend to engage in, a distribution (within the
meaning of the Securities Act) of such Exchange Capital
Securities. In addition, the Company and the Issuer Trust may
require such holder, as a condition to such holder's eligibility
to participate in the Exchange Offer, to furnish to the Company
and the Issuer Trust (or an agent thereof) in writing information
as to the number of "beneficial owners" (within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) on behalf of whom such holder holds the
Capital Securities to be exchanged in the Exchange Offer. Each
broker-dealer that receives Exchange Capital Securities for its
own account pursuant to the Exchange Offer must acknowledge that
it acquired the Original Capital Securities for its own account
as the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with
any resale of such Exchange Capital Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of
Corporation Finance of the Commission in the interpretive letters
referred to above, the Company and the Issuer Trust believe that
broker-dealers who acquired Original Capital Securities for their
own accounts, as a result of market-making activities or other
trading activities ("Participating Broker-Dealers"), may fulfill
their prospectus delivery requirements with respect to the
Exchange Capital Securities received upon exchange of such
Original Capital Securities (other than Original Capital
Securities which represent an unsold allotment from the initial
sale of the Original Capital Securities) with a prospectus
meeting the requirements of the Securities Act, which may be the
prospectus prepared for an exchange offer so long as it contains
a description of the plan of distribution with respect to the
resale of such Exchange Capital Securities. Each broker-dealer
that receives Exchange Capital Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such
Exchange Capital Securities. The Letter of Transmittal states
that by so acknowledging and by delivery of a prospectus, a
broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales
of Exchange Capital Securities received in exchange for Original
Capital Securities acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Issuer
Trust and the Company have agreed that, ending on the close of
business on the 180th day following the Expiration Date (as
defined herein), it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See
"Plan of Distribution." However, a Participating Broker-Dealer
who intends to use this Prospectus in connection with the resale
of Exchange Capital Securities received in exchange for Original
Capital Securities pursuant to the Exchange Offer must notify the
Company or the Issuer Trust, or cause the Company or the Issuer
Trust to be notified, on or prior to the Expiration Date, that is
a Participating Broker-Dealer. Such notice may be given in the
space provided for that purpose in the Letter of Transmittal or
may be delivered to the Exchange Agent at one of the addresses
set forth herein under "The Exchange Offer-Exchange Agent." Any
Participating Broker-Dealer who is an "affiliate" of the Company
or the Issuer Trust may not rely on such interpretive letters and
must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction. See "The Exchange Offer--Resales of Exchange Capital
Securities."
In that regard, each Participating Broker-Dealer who
surrenders Original Capital Securities pursuant to the Exchange
Offer will be deemed to have agreed, by execution of the Letter
of Transmittal, that upon receipt of notice from the Company or
the Issuer Trust of the occurrence of any event or the discovery
of any fact which makes any statement contained or incorporated
by reference in this Prospectus untrue in any material respect or
which causes this Prospectus to omit to state a material fact
necessary in order to make the statements contained or
incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence
of certain other events specified in the Registration Rights
Agreement, such Participating Broker-Dealer will suspend the sale
of Exchange Capital Securities (or the Exchange Guarantee or the
Exchange Junior Subordinated Debentures, as applicable) pursuant
to this Prospectus until the Company or the Issuer Trust has
amended or supplemented this Prospectus to correct such
misstatement or omission and has furnished copies of the amended
or supplemented Prospectus to such Participating Broker-Dealer,
or the Company or the Issuer Trust has given notice that the sale
of the Exchange Capital Securities (or the Exchange Guarantee or
the Exchange Junior Subordinated Debentures, as applicable) may
be resumed, as the case may be. If the Company or the Issuer
Trust gives such notice to suspend the sale of the Exchange
Capital Securities (or the Exchange Guarantee or the Exchange
Junior Subordinated Debentures, as applicable), it shall extend
the 180-day period referred to above during which Participating
Broker-Dealers are entitled to use this Prospectus in connection
with the resale of Exchange Capital Securities by the number of
days during the period from and including the date of the giving
of such notice to and including the date when Participating
Broker-Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the
Exchange Capital Securities or to and including the date on which
the Company or the Issuer Trust has given notice that the sale of
Exchange Capital Securities (or the Exchange Guarantee or the
Exchange Junior Subordinated Debentures, as applicable) may be
resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited
secondary market and no public market for the Original Capital
Securities. The Exchange Capital Securities will be a new issue
of securities for which there currently is no market. Although
Goldman Sachs & Co. and Conning & Co., the initial purchasers of
the Original Capital Securities (the "Initial Purchasers"), have
informed the Company and the Issuer Trust that they each
currently intend to make a market in the Exchange Capital
Securities, they are not obligated to do so, and any such market
making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or
liquidity of any market for the Exchange Capital Securities. The
Company and the Issuer Trust currently do not intend to apply for
listing of the Exchange Capital Securities on any securities
exchange or for quotation through the NASD Automated Quotation
System.
Any Original Capital Securities not tendered and accepted in
the Exchange Offer will remain outstanding and will be entitled
to all the same rights and will be subject to the same
limitations applicable thereto under the Declaration (except for
those rights which terminate upon consummation of the Exchange
Offer). Following consummation of the Exchange Offer, the
holders of Original Capital Securities will continue to be
subject to all of the existing restrictions upon transfer thereof
and neither the Company nor the Issuer Trust will have any
further obligation to such holders (other than under certain
limited circumstances) to provide for registration under the
Securities Act of the Original Capital Securities held by them.
To the extent that Original Capital Securities are tendered and
accepted in the Exchange Offer, a holder's ability to sell
untendered Original Capital Securities could be adversely
affected. See "Risk Factors--Consequences of a Failure to
Exchange Original Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL
CONTAIN IMPORTANT INFORMATION. HOLDERS OF ORIGINAL CAPITAL
SECURITIES ARE URGED TO READ THIS PROSPECTUS AND THE RELATED
LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER
THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Original Capital Securities may be tendered for exchange on
or prior to 5:00 p.m., New York City time, on ______, 1997 (such
time on such date being hereinafter called the "Expiration
Date"), unless the Exchange Offer is extended by the Company or
the Issuer Trust (in which case the term "Expiration Date" shall
mean the latest date and time to which the Exchange Offer is
extended). Tenders of Original Capital Securities may be
withdrawn at any time on or prior to the Expiration Date. The
Exchange Offer is not conditioned upon any minimum Liquidation
Amount of Original Capital Securities being tendered for
exchange. However, the Exchange Offer is subject to certain
events and conditions which may be waived by the Company or the
Issuer Trust and to the terms and provisions of the Registration
Rights Agreement. Original Capital Securities may be tendered in
whole or in part having an aggregate Liquidation Amount of not
less than $1,000 (one Capital Security). The Company has agreed
to pay all expenses of the Exchange Offer. See "The Exchange
Offer--Fees and Expenses." Holders of the Original Capital
Securities whose Original Capital Securities are accepted for
exchange will not receive Distributions on such Original Capital
Securities and will be deemed to have waived the right to receive
any Distributions on such Original Capital Securities accumulated
from and after October 15, 1997. Accordingly, holders of
Exchange Capital Securities as of the record date for the payment
of Distributions on January 15, 1998 will be entitled to receive
Distributions accumulated from and after October 15, 1997. See
"The Exchange Offer--Distributions on Exchange Capital
Securities."
Neither the Company nor the Issuer Trust will receive any
cash proceeds from the issuance of the Exchange Capital
Securities offered hereby. No dealer-manager is being used in
connection with this Exchange Offer. See "Use of Proceeds" and
"Plan of Distribution."
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Exchange Act and in accordance therewith, files reports,
proxy statements and other information with the Commission. Such
reports, proxy statements and other information may be inspected
and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices
at 7 World Trade Center, 13th Floor, Suite 1300, New York, New
York 10048 and Suite 1400, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material may
also be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Such information may also be accessed
electronically by means of the Commission's home page on the
Internet (http://www.sec.gov). In addition, such reports, proxy
statements and other information concerning the Company may be
inspected at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005 on which exchange certain
securities of the Company are listed.
No separate financial statements of the Issuer Trust have
been included herein. The Company and the Issuer Trust do not
consider that such financial statements would be material to
holders of the Capital Securities because the Issuer Trust is a
newly formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose
to engage in any activity other than holding as trust assets the
Junior Subordinated Debentures, issuing the Trust Securities and
engaging in incidental activities. See "HSB Capital I,"
"Description of Exchange Securities." In addition, the Company
does not expect that the Trust will file reports, proxy
statements and other information under the Exchange Act with the
Commission.
This Prospectus constitutes a part of a registration
statement on Form S-4 (the "Registration Statement") filed by the
Company and the Issuer Trust with the Commission under the
Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and
regulations of the Commission, and reference is hereby made to
the Registration Statement and to the exhibits relating thereto
for further information with respect to the Company, the Issuer
Trust and the Exchange Securities. Any statements contained
herein concerning the provisions of any document are not
necessarily complete, and, in each instance, reference is made to
the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the
Commission are incorporated into this Prospectus by reference
(File No. 0-13300):
(i) The Annual Report of Hartford Steam Boiler on Form 10-
K/A for the year ended December 31, 1996;
(ii) The Quarterly Report of Hartford Steam Boiler on Form
10-Q for the Quarter ended March 31, 1997;
(iii) The Quarterly Report of the Company on Form 10-Q
for the Quarter ended June 30, 1997; and
(iv) The Company's Current Report on Form 8-K filed on July
10, 1997 and July 28, 1997.
All documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date hereof and prior to the termination of the offering of the
Capital Securities offered hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part
of this Prospectus from the date of filing of such document. Any
statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein, or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean
this Prospectus, including the documents incorporated or deemed
to be incorporated herein by reference, as the same may be
amended, supplemented or otherwise modified from time to time.
Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to
be complete, and where reference is made to the particular
provisions of such contract or other document, such provisions
are qualified in all respects by reference to all of the
provisions of such contract or other document. The Company will
provide without charge to any person to whom this Prospectus is
delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by
reference herein (other than exhibits not specifically
incorporated by reference into the texts of such documents).
Requests for such documents should be directed to R. Kevin Price,
Corporate Secretary, HSB Group, Inc. One State Street, P.O. Box
5024, Hartford, Connecticut, 06102-5024.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the
more detailed information appearing elsewhere in this Prospectus.
HSB GROUP, INC.
HSB Group, Inc. ("the Company" and together with its
subsidiaries "HSB Group") is a newly formed holding company which
owns directly or indirectly, a number of insurance and
engineering service subsidiaries which specialize in insuring
against losses from accidents to boilers, pressure vessels and
mechanical and electrical machinery and equipment, and in
providing related engineering services. HSB Group's operations
are divided into three industry segments insurance, engineering
services and investments.
The most significant subsidiary of the Company is The
Hartford Steam Boiler Inspection and Insurance Company ("Hartford
Steam Boiler"), an insurance company chartered under the laws of
the State of Connecticut in 1866. Hartford Steam Boiler is the
largest writer of equipment breakdown insurance in North America
and is establishing a presence in the engineering insurance
market outside of North America. In 1996, earned premiums for
HSB Group's insurance products were $448.6 million, approximately
81.7 percent of the revenues of HSB Group.
The Company's principal executive offices are located at One
State Street, Hartford, Connecticut 06102. The Company's
telephone number is (860) 722-1866.
HSB CAPITAL I
The Issuer Trust is a statutory business trust created under
Delaware law pursuant to (i) the Trust Agreement executed by the
Company, as Depositor, First Chicago, as Property Trustee and
First Chicago Delaware Inc., as Delaware Trustee ("First Chicago
(Delaware)"), and (ii) the filing of a certificate of trust with
the Delaware Secretary of State. The Issuer Trust's business and
affairs are conducted by its trustees: First Chicago, as Property
Trustee, and First Chicago (Delaware) as Delaware Trustee. The
Issuer Trust exists for the exclusive purposes of (i) issuing and
selling the Trust Securities, (ii) using the proceeds from the
sale of Trust Securities to acquire Junior Subordinated
Debentures issued by the Company and (iii) engaging in only those
other activities necessary or incidental thereto (such as
registering the transfer of the Trust Securities). Accordingly,
the Junior Subordinated Debentures and the right to reimbursement
of expenses under the related Expense Agreement will be the sole
assets of the Issuer Trust, and payments under the Junior
Subordinated Debentures and the related Expense Agreement will be
the sole sources of revenue of the Issuer Trust.
THE EXCHANGE OFFER
The Exchange Offer . Up to $110,000,000 aggregate
Liquidation Amount of Exchange Capital
Securities are being offered in
exchange for a like aggregate
Liquidation Amount of Original Capital
Securities. Original Capital
Securities may be tendered for
exchange in whole or in part having
Liquidation Amount of $1,000 (one
Capital Security). The Company and
the Issuer Trust are making the
Exchange Offer in order to satisfy
their obligations under the
Registration Rights Agreement relating
to the Original Capital Securities.
For a description of the procedures
for tendering Original Capital
Securities, see "The Exchange
Offer--Procedures for Tendering
Original Capital Securities."
Expiration Date . . . 5:00 p.m., New York City time, on
______, 1997, unless the Exchange
Offer is extended by the Company or
the Issuer Trust (in which case the
Expiration Date will be the latest
date and time to which the Exchange
Offer is extended). See "The Exchange
Offer--Terms of the Exchange Offer" and
"The Exchange Offer--Conditions to the
Exchange Offer."
Conditions to the
Exchange Offer . . . The Exchange Offer is subject to certain
conditions, which may be waived by the
Company and the Issuer Trust in their
sole discretion. The Exchange Offer is
not conditioned upon any minimum
Liquidation Amount of Original Capital
Securities being tendered. See "The
Exchange Offer--Conditions to the Exchange
Offer."
Offer . . . . . . . . The Company and the Issuer Trust
reserve the right in their sole and
absolute discretion, subject to
applicable law, at any time and from
time to time, (i) to delay the
acceptance of the Original Capital
Securities for exchange, (ii) to
terminate the Exchange Offer if
certain specified conditions have not
been satisfied, (iii) to extend the
Expiration Date of the Exchange Offer
and retain all Original Capital
Securities tendered pursuant to the
Exchange Offer, subject, however, to
the right of holders of Original
Capital Securities to withdraw their
tendered Original Capital Securities,
or (iv) to waive any condition or
otherwise amend the terms of the
Exchange Offer in any respect. See
"The Exchange Offer--Terms of the
Exchange Offer."
Withdrawal Rights . . Tenders of Original Capital Securities
may be withdrawn at any time on or
prior to the Expiration Date by
delivering a written notice of such
withdrawal to the Exchange Agent in
conformity with certain procedures set
forth below under "The Exchange Offer--
Withdrawal Rights."
Procedures for Tendering
Original Capital
Securities . . . . . Brokers, dealers, commercial banks,
trust companies and other nominees who
hold Original Capital Securities
through The Depository Trust Company
("DTC") may effect tenders by
book-entry transfer in accordance with
DTC's Automated Tender Offer Program
("ATOP"). Holders of such Original
Capital Securities registered in the
name of a broker, dealer, commercial
bank, trust company or other nominee
are urged to contact such person
promptly if they wish to tender
Original Capital Securities. In order
for Original Capital Securities to be
tendered by a means other than by
book-entry transfer, a Letter of
Transmittal must be completed and
signed in accordance with the
instructions contained therein. The
Letter of Transmittal and any other
documents required by the Letter of
Transmittal must be delivered to The
First National Bank of Chicago (the
"Exchange Agent") by mail, facsimile,
hand delivery or overnight courier and
either such Original Capital
Securities must be delivered to the
Exchange Agent or specified procedures
for guaranteed delivery must be
complied with. See "The Exchange
Offer--Procedures for Tendering
Original Capital Securities."
Letters of Transmittal and
certificates representing Original
Capital Securities should not be sent
to the Company or the Issuer Trust.
Such documents should only be sent to
the Exchange Agent.
Resales of Exchange
Capital Securities . The Company and the Issuer Trust are
making the Exchange Offer in reliance
on the position of the staff of the
Division of Corporation Finance of the
Commission as set forth in certain
interpretive letters addressed to
third parties in other transactions.
However, neither the Company nor the
Issuer Trust has sought its own
interpretive letter and there can be
no assurance that the staff of the
Division of Corporation Finance of the
Commission would make a similar
determination with respect to the
Exchange Offer as it has in such
interpretive letters to third parties.
Based on these interpretations by the
staff of the Division of Corporation
Finance of the Commission, and subject
to the two immediately following
sentences, the Company and the Issuer
Trust believe that Exchange Capital
Securities issued pursuant to this
Exchange Offer in exchange for
Original Capital Securities may be
offered for resale, resold and
otherwise transferred by a holder
thereof (other than a holder who is a
broker-dealer) without further
compliance with the registration and
prospectus delivery requirements of
the Securities Act, provided that such
Exchange Capital Securities are
acquired in the ordinary course of
such holder's business and that such
holder is not participating, and has
no arrangement or understanding with
any person to participate, in a
distribution (within the meaning of
the Securities Act) of such Exchange
Capital Securities. However, any
holder of Original Capital Securities
who is an "affiliate" of the Company
or the Issuer Trust or who intends to
participate in the Exchange Offer for
the purpose of distributing the
Exchange Capital Securities, or any
broker-dealer who purchased the
Original Capital Securities from the
Issuer Trust to resell pursuant to
Rule 144A or any other available
exemption under the Securities Act,
(a) will not be able to rely on the
interpretations of the staff of the
Division of Corporation Finance of the
Commission set forth in the
above-mentioned interpretive letters,
(b) will not be permitted or entitled
to tender such Original Capital
Securities in the Exchange Offer and
(c) must comply with the registration
and prospectus delivery requirements
of the Securities Act in connection
with any sale or other transfer of
such Original Capital Securities
unless such sale is made pursuant to
an exemption from such requirements.
In addition, as described below, if
any broker-dealer holds Original
Capital Securities acquired for its
own account as a result of
market-making or other trading
activities and exchanges such Original
Capital Securities for Exchange
Capital Securities, then such
broker-dealer must deliver a
prospectus meeting the requirements of
the Securities Act in connection with
any resales of such Exchange Capital
Securities.
Each holder of Original Capital
Securities who wishes to exchange
Original Capital Securities for
Exchange Capital Securities in the
Exchange Offer will be required to
represent that (i) it is not an
"affiliate" of the Company or the
Issuer Trust, (ii) any Exchange
Capital Securities to be received by
it are being acquired in the ordinary
course of its business, (iii) it has
no arrangement or understanding with
any person to participate in a
distribution (within the meaning of
the Securities Act) of such Exchange
Capital Securities, and (iv) if such
holder is not a broker-dealer, such
holder is not engaged in, and does not
intend to engage in, a distribution
(within the meaning of the Securities
Act) of such Exchange Capital
Securities. Each broker-dealer that
receives Exchange Capital Securities
for its own account in exchange for
Original Capital Securities, where
such Original Capital Securities were
acquired by such broker-dealer as a
result of market-making activities or
other trading activities, must
acknowledge that it will deliver a
prospectus in connection with any
resale of such Exchange Capital
Securities. See "Plan of
Distribution." The Letter of
Transmittal states that, by so
acknowledging and by delivering a
prospectus, a broker-dealer will not
be deemed to admit that it is an
"underwriter" within the meaning of
the Securities Act. Based on the
position taken by the staff of the
Division of Corporation Finance of the
Commission in the interpretive letters
referred to above, the Company and the
Issuer Trust believe that
Participating Broker-Dealers who
acquired Original Capital Securities
for their own accounts as a result of
market-making activities or other
trading activities may fulfill their
prospectus delivery requirements with
respect to the Exchange Capital
Securities received upon exchange of
such Original Capital Securities
(other than Original Capital
Securities which represent an unsold
allotment from the initial sale of the
Original Capital Securities) with a
prospectus meeting the requirements of
the Securities Act, which may be the
prospectus prepared for an exchange
offer so long as it contains a
description of the plan of
distribution with respect to the
resale of such Exchange Capital
Securities. Accordingly, this
Prospectus, as it may be amended or
supplemented from time to time, may be
used by a Participating Broker-Dealer
in connection with resales of Exchange
Capital Securities received in
exchange for Original Capital
Securities where such Original Capital
Securities were acquired by such
Participating Broker-Dealer for its
own account as a result of
market-making or other trading
activities. Subject to certain
provisions set forth in the
Registration Rights Agreement and to
the limitations described below under
"The Exchange Offer--Resales of
Exchange Capital Securities," the
Company and the Issuer Trust have
agreed that this Prospectus, as it may
be amended or supplemented from time
to time, may be used by a
Participating Broker-Dealer in
connection with resales of such
Exchange Capital Securities for a
period ending 180 days after the
Expiration Date (subject to extension
under certain limited circumstances)
or, if earlier, when all such Exchange
Capital Securities have been disposed
of by such Participating
Broker-Dealer. See "Plan of
Distribution." Any Participating
Broker-Dealer who is an "affiliate" of
the Company or the Issuer Trust may
not rely on such interpretive letters
and must comply with the registration
and prospectus delivery requirements
of the Securities Act in connection
with any resale transaction. See "The
Exchange Offer--Resales of Exchange
Capital Securities."
Exchange Agent . . . The exchange agent with respect to the
Exchange Offer is The First National
Bank of Chicago (the "Exchange
Agent"). The addresses, and telephone
and facsimile numbers, of the Exchange
Agent are set forth in "The Exchange
Offer--Exchange Agent" and in the
Letter of Transmittal.
Use of Proceeds . . . Neither the Company nor the Issuer
Trust will receive any cash proceeds
from the issuance of the Exchange
Capital Securities offered hereby.
See "Use of Proceeds."
Certain United States
Federal Income Tax
Consequences; ERISA
Considerations . . The exchange of Original Capital
Securities for Exchange Capital
Securities and Original Junior
Subordinated Debentures for Exchange
Junior Subordinated Debentures
pursuant to the Exchange Offer should
have no federal income tax
consequences to holders. Holders of
Original Capital Securities should
review the information set forth under
"Certain Federal Income Tax
Consequences" and "Certain ERISA
Considerations" prior to tendering
Original Capital Securities in the
Exchange Offer.
THE EXCHANGE CAPITAL SECURITIES
Securities Offered . Up to $110,000,000 aggregate
Liquidation Amount of the Issuer
Trust's Exchange Capital Securities
which have been registered under the
Securities Act (Liquidation Amount
$1,000 per Exchange Capital Security).
The Exchange Capital Securities will
be issued and the Original Capital
Securities were issued under the Trust
Agreement. The Exchange Capital
Securities and any Original Capital
Securities which remain outstanding
after consummation of the Exchange
Offer will vote together as a single
class for purposes of determining
whether holders of the requisite
percentage in outstanding Liquidation
Amount thereof have taken certain
actions or exercised certain rights
under the Declaration. See
"Description of Exchange Securities--
Description of Exchange Capital
Securities--Voting Rights; Amendment of
the Declaration." The terms of the
Exchange Capital Securities are
identical in all material respects to
the terms of the Original Capital
Securities, except that the Exchange
Capital Securities have been
registered under the Securities Act
and will not be subject to certain
restrictions on transfer applicable to
the Original Capital Securities and
will not provide for any increase in
the Distribution rate thereon. See
"The Exchange Offer--Purpose of the
Exchange Offer," "Description of
Exchange Securities" and "Description
of Original Securities."
Distribution Dates . January 15, April 15, July 15 and
October 15 of each year, commencing
October 15, 1997.
Stated Maturity . . . July 15, 2027.
Extension Periods . . Distributions on Exchange Capital
Securities will be deferred for the
duration of any Extension Period
elected by the Company with respect to
the payment of interest on the
Exchange Junior Subordinated
Debentures. No Extension Period will
exceed 20 consecutive quarterly
periods or extend beyond the Stated
Maturity Date. See "Description of
Exchange Securities--Description of
Exchange Junior Subordinated
Debentures--Option to Extend Interest
Payment Date" and "Certain Federal
Income Tax Consequences--Interest
Income and Original Issue Discount."
Ranking . . . . . . . The Capital Securities will rank
pari passu, and payments thereon
will be made pro rata, with the
Original Capital Securities and the
Common Securities except as described
under "Description of Exchange
Securities--Description of Exchange
Capital Securities--Subordination of
Common Securities." The Exchange
Junior Subordinated Debentures will
rank pari passu with the Original
Junior Subordinated Debentures and all
other junior subordinated debentures
to be issued by the Company ("Other
Debentures"), which will be issued and
sold (if at all) to other trusts to be
established by the Company (if any),
in each case similar to the Issuer
Trust ("Other Trusts"), and will be
unsecured and subordinate and junior
in right of payment to all Senior
Indebtedness to the extent and in the
manner set forth in the Indenture.
See "Description of Exchange
Securities--Description of Exchange
Junior Subordinated Debentures." The
Exchange Guarantee will rank pari
passu with the Original Guarantee and
all other guarantees (if any) to be
issued by the Company with respect to
capital or preferred securities (if
any) issued by Other Trusts ("Other
Guarantees") and will constitute an
unsecured obligation of the Company
and will rank subordinate and junior
in right of payment to all Senior
Indebtedness to the extent and in the
manner set forth in the Guarantee
Agreement. See "Description of
Exchange Securities--Description of
Exchange Guarantee."
Redemption . . . . . The Trust Securities are subject to
mandatory redemption (i) at the Stated
Maturity upon repayment of the Junior
Subordinated Debentures, (ii) in whole
but not in part, prior to July 15,
2007, and contemporaneously with the
optional prepayment by the Company of
the Junior Subordinated Debentures
upon the occurrence and continuation
of a Tax Event and (iii) in whole or
in part, at any time on or after July
15, 2007 contemporaneously with the
optional prepayment by the Company of
the Junior Subordinated Debentures, in
each case at the applicable Redemption
Price. See "Description of Exchange
Securities--Description of Exchange
Capital Securities--Redemption."
Shorten Maturity . . Under certain circumstances upon the
occurrence of a Tax Event, the Company
has the right to shorten the maturity
of the Junior Subordinated Debentures.
See "Description of Capital
Securities--Conditional Right to
Shorten Maturity or Redeem upon a Tax
Event" and "Description of Junior
Subordinated Debentures--Conditional
Right to Shorten Maturity upon Tax
Event."
Ratings . . . . . . . The Capital Securities have been
assigned a rating of "A-" by
Standard & Poor's Ratings Services and
"A-" by Duff & Phelps Credit Rating
Co.
Transfer Restrictions The Exchange Capital Securities will
be issued, and may be transferred,
only in minimum denominations of not
less than $1,000. See "Description of
Exchange Securities--Description of
Exchange Capital Securities--Restrictions
on Transfer." Any such transfer of Exchange
Capital Securities in denominations of less
than $1,000 shall be deemed to be void
and of no legal effect whatsoever.
ERISA Considerations Prospective purchasers must carefully
consider the restrictions on purchase
set forth under "Notice to Investors"
and "Certain ERISA Considerations."
Absence of Market for
the Capital
Securities . . . . The Exchange Capital Securities will
be a new issue of securities for which
there currently is no market.
Although the Initial Purchasers have
informed the Issuer Trust and the
Company that they each currently
intend to make a market in the Capital
Securities, the Initial Purchasers are
not obligated to do so, and any such
market making may be discontinued at
any time without notice. Accordingly,
there can be no assurance as to the
development or liquidity of any market
for the Capital Securities. The
Issuer Trust and the Company do not
intend to apply for listing of the
Capital Securities on any securities
exchange or for quotation through the
NASD Automated Quotation System. See
"Plan of Distribution."
As used herein (i) the "Junior Subordinated Indenture" means
the Junior Subordinated Indenture, as amended and supplemented
from time to time, between the Company and First Chicago, as
trustee (the "Debenture Trustee"), and (ii) the "Trust Agreement"
means the Amended and Restated Trust Agreement relating to the
Issuer Trust among the Company, as Depositor, the Property
Trustee, and First Chicago (Delaware), as Delaware Trustee (the
"Delaware Trustee") (collectively, the "Issuer Trustees").
RISK FACTORS
Prospective investors in the Capital Securities should
carefully review all of the information set forth in this
Prospectus and, in particular, should consider the risk factors
listed below. Prospective investors are also cautioned that, in
addition to the historical information included herein with
respect to the Company, this Prospectus includes certain forward-
looking statements and information that are based on the
Company's beliefs as well as on assumptions made by and
information currently available to management of the Company.
When used in this Prospectus, the words "expect," "anticipate,"
"intend," " plan," " believe," "estimate" and similar expressions
are intended to identify such forward-looking statements.
However, this Prospectus also contains other forward-looking
statements. Such statements are not guarantees of future
performance and involve certain risks, uncertainties and
assumptions, including but not limited to the factors discussed
below, which could cause the Company's future results to differ
materially from those expressed in any forward-looking statements
made by or on behalf of the Company. Many of such factors are
beyond the Company's ability to control or predict. Readers are
cautioned not to put undue reliance on forward-looking
statements. The Company disclaims any intent or obligation to
update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE
JUNIOR SUBORDINATED DEBENTURES
The obligations of the Company under the Guarantee issued by
the Company for the benefit of the holders of Capital Securities
and under the Junior Subordinated Debentures are subordinate and
junior in right of payment to all Senior Indebtedness of the
Company. Because the Company is a holding company, the right of
the Company to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization
or otherwise (and thus the ability of holders of the Capital
Securities to benefit indirectly from such distribution) is
subject to the prior claims of creditors of that subsidiary,
except to the extent that the Company may itself be recognized as
a creditor of that subsidiary. In addition, there are various
legal limitations on the extent to which the Company's
subsidiaries may extend credit, pay dividends or otherwise supply
funds to the Company or various of its affiliates. Accordingly,
the Junior Subordinated Debentures and Guarantee will be
effectively subordinated to all existing and future liabilities
of the Company's subsidiaries, and holders of Junior Subordinated
Debentures and the Guarantee should look only to the assets of
the Company for payments on the Junior Subordinated Debentures
and the Guarantee. See "HSB Group, Inc." None of the Junior
Subordinated Indenture, the Guarantee or the Trust Agreement
places any limitation on the amounts of secured or unsecured
debt, including Senior Indebtedness, that may be incurred by the
Company. See "Description of Exchange Securities--Description of
Exchange Guarantee--Status of the Guarantee" and "Description of
Exchange Securities--Description of Exchange Junior Subordinated
Debentures--Subordination."
The ability of the Issuer Trust to pay amounts due on the
Capital Securities is solely dependent upon the Company making
payments on the Junior Subordinated Debentures as and when
required.
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION; DIVIDEND
RESTRICTIONS
Effective June 24, 1997, the Company was organized as a
holding company with all of its operations being conducted by
subsidiaries. The Company, however, has, or in the future may
have, continuing expenditures for administrative expenses,
corporate services, the payment of principal and interest on
borrowings, including the Junior Subordinated Debentures, and
dividends on preferred stock. In addition, Hartford Steam
Boiler, the Company's most significant subsidiary, has
historically paid dividends on its common shares, and it is
anticipated that the Company will likewise pay dividends on its
common stock at a rate which equals or exceeds the rate paid by
Hartford Steam Boiler prior to the holding company formation.
The Company expects to rely primarily on dividends and tax
payments from its subsidiaries for funds to meet its obligations.
Payments of dividends by the insurance subsidiaries of the
Company are subject to various laws and regulations which limit
the amount of dividends that can be paid without prior approval
from the applicable state department of insurance. Under the
insurance holding company laws of Connecticut which apply to
Hartford Steam Boiler, approval of the insurance commissioner is
required for payment of a dividend which when added to the other
dividends or distributions made within the preceding twelve
months, exceeds the greater of (i) 10% of policyholder surplus as
of December 31 of the preceding year or (ii) net income for the
twelve-month period ending on December 31 of the preceding year.
The maximum dividend permitted by law is not necessarily
indicative of an insurer's actual ability to pay dividends, which
may be further affected by business and regulatory
considerations, such as the impact of dividends on surplus, which
could affect an insurer's ratings, competitive position, the
amount of premiums that can be written and the ability to pay
future dividends. Furthermore, each state department of
insurance has broad discretion to limit the payment of dividends
by insurance companies domiciled in that state. A prolonged
material decline in insurance subsidiary profits or materially
adverse insurance regulatory developments, however, could subject
the Company to shortages of cash because of its inability to
receive dividends from subsidiaries.
In addition, except to the extent that the Company may
itself be a creditor with recognized claims against its
subsidiaries, claims of creditors of such subsidiaries will have
priority with respect to the assets and earnings of such
subsidiaries over the claims of creditors of the Company,
including claims under the Junior Subordinated Debentures and the
Guarantee, even though such subsidiary obligations do not
constitute Senior Indebtedness. Accordingly, the Junior
Subordinated Debentures will be effectively subordinated to all
existing and future liabilities of the Company's subsidiaries,
including loss reserves, unearned premium reserves and guarantee
obligations. GAAP basis liabilities of the subsidiaries,
including loss reserves and unearned premium reserves aggregated
$750.7 million at December 31, 1996. In addition, Hartford Steam
Boiler has agreed to guarantee up to $16 million in respect of
debt incurred by Radian International, LLC, a joint venture
between Hartford Steam Boiler and The Dow Chemical Company
("Radian International"). As of June 30, 1997, the guarantee was
applicable to $13.7 million of Radian International. Such
guarantee will terminate upon the sale of the Company's interest
in Radian International to The Dow Chemical Company which is
expected to take place on or about January 1, 1997. See "HSB
Group, Inc.--Strategy; Recent History."
In addition, in the event of a default on the Company's debt
or an insolvency, liquidation or other reorganization of the
Company, creditors of the Company will have no right to proceed
against the assets of the subsidiaries or to cause their
liquidation under federal and state bankruptcy laws. If any of
the Company's subsidiaries were to be liquidated, such
liquidation would be conducted under the insurance laws of the
domiciliary jurisdiction of such subsidiary by the insurance
regulator as the receiver with respect to such subsidiary's
property and business.
REGULATION
The Company's U.S. insurance subsidiaries are regulated
under the insurance and insurance holding company laws of their
state of domicile and other states in which they operate. These
laws, in general, require approval of the applicable insurance
regulators prior to certain actions by the insurance companies,
such as the payment of dividends in excess of statutory
limitations (as discussed above under "Holding Company Structure;
Structural Subordination; Dividend Restrictions") and certain
transactions and continuing service arrangements with affiliates.
Regulation and supervision of each insurance subsidiary is
administered by state insurance commissioners who have broad
statutory powers with respect to the granting and revoking of
licenses, approvals of premium rates, forms of insurance
contracts and types and amounts of business which may be
conducted in light of the policyholders' surplus of the
particular company. The statutes of most states provide for the
filing of premium rates and such rates may be disapproved if they
are found to be excessive, inadequate or unfairly discriminatory.
The determination of rates is based on various factors, including
acquisition costs, engineering and loss and loss adjustment
expense experience. The failure to obtain, or delay in
obtaining, the required approvals could have an adverse impact on
the operations of the Company's insurance subsidiaries.
The nature and extent of regulations pertaining to the
business the Company writes outside of the U.S. varies
considerably. Regulations cover various financial and
operational areas including such matters as amount and type of
reserves, currency, policy language, repatriation of assets and
compulsory cessions of reinsurance.
Insurance regulatory authorities require property and
casualty insurers to maintain a reasonable ratio between net
premiums written and total capital and surplus. Accordingly, a
property and casualty insurance company's volume of net premiums
written is limited by the amount of its capital and surplus. In
the absence of mitigating factors, a ratio of 3 to 1 or less is
considered acceptable by most regulatory authorities. Hartford
Steam Boiler's historical ratio has been well within this range.
Nevertheless, adverse underwriting experience, significant losses
in its investment portfolio or changes in statutory accounting
principles could have a material negative impact on Hartford
Steam Boiler's surplus to policyholders.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
So long as no Event of Default under the Junior Subordinated
Indenture (a "Debenture Event of Default") has occurred or is
continuing, the Company has the right under the Junior
Subordinated Indenture to defer the payment of interest on the
Junior Subordinated Debentures at any time or from time to time
for a period not exceeding 20 consecutive quarterly periods with
respect to each Extension Period, provided that no Extension
Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. As a consequence of any such deferral,
quarterly Distributions on the Capital Securities by the Issuer
Trust will be deferred (and the amount of Distributions to which
holders of the Capital Securities are entitled will accumulate
additional Distributions thereon at the rate of the Floating Rate
per annum, compounded quarterly from the relevant payment date
for such Distributions) during any such Extension Period. During
any such Extension Period, the Company may not, and may not
permit any subsidiary of the Company to, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or
make a liquidation payment with respect to, any of the Company's
capital stock, (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt
securities of the Company (including other Junior Subordinated
Debentures) that rank pari passu in all respects with or junior
in interest to the Junior Subordinated Debentures or (iii) make
any guarantee payments with respect to any guarantee by the
Company of the debt securities of any subsidiary of the Company
if such guarantee ranks pari passu with or junior in interest to
the Junior Subordinated Debentures (other than (a) dividends or
distributions in Company Common Stock, (b) any declaration of a
dividend in connection with the implementation of a stockholders'
rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Guarantee and (d)
purchases of Company Common Stock related to the issuance of
Company Common Stock or rights under any of the Company's or its
subsidiaries' benefit plans for their directors, officers or
employees). Prior to the termination of any such Extension
Period, the Company may further defer the payment of interest,
provided that no Extension Period may exceed 20 consecutive
quarterly periods or extend beyond the Stated Maturity of the
Junior Subordinated Debentures. Upon the termination of any
Extension Period and the payment of all interest then accrued and
unpaid (together with interest thereon at the annual rate of the
Floating Rate, compounded quarterly, to the extent permitted by
applicable law), the Company may elect to begin a new Extension
Period subject to the above requirements. There is no limitation
on the number of times that the Company may elect to begin an
Extension Period. See "Description of Exchange Capital
Securities--Distributions" and "Description of Exchange Junior
Subordinated Debentures--Option To Extend Interest Payment
Period."
Should an Extension Period occur, a holder of Capital
Securities will continue to accrue income (in the form of
original issue discount) in respect of its pro rata share of the
Junior Subordinated Debentures held by the Issuer Trust for
United States federal income tax purposes, which will be
allocated but not distributed, to holders of record of any
Capital Securities. As a result during such an Extension Period,
a holder of Capital Securities will include such income in gross
income for United States federal income tax purposes in advance
of the receipt of cash, and will not receive the cash related to
such income from the Issuer Trust if the holder disposes of the
Capital Securities prior to the record date for the payment of
Distributions. See "Certain Federal Income Tax Consequences--Interest
Income and Original Issue Discount" and "--Sales of Capital Securities."
The Company has no current intention of exercising its right
to defer payments of interest by extending the interest payment
period on the Junior Subordinated Debentures. However, should
the Company elect to exercise such right in the future, the
market price of the Capital Securities is likely to be affected.
A holder that disposes of its Capital Securities during an
Extension Period, therefore, might not receive the same return on
its investment as a holder that continues to hold its Capital
Securities. In addition, as a result of the existence of the
Company's right to defer interest payments, the market price of
the Capital Securities (which represent preferred beneficial
interests in the Issuer Trust) may be more volatile than the
market prices of other securities on which original discount
accrues that are not subject to such deferrals.
TAX EVENT--SHORTENING OF MATURITY OR REDEMPTION
Upon the occurrence and during the continuation of a Tax
Event, the Company has the right, if certain conditions are met,
(i) to shorten the maturity of the Junior Subordinated Debentures
to a date not earlier than April 15, 2012 or (ii) to redeem the
Junior Subordinated Debentures in whole (but not in part) prior
to July 15, 2007 and within 90 days following the occurrence of
such Tax Event and therefore cause a mandatory redemption of the
Capital Securities before July 15, 2007. Any such redemption
shall be at a price equal to the Redemption Price (as defined in
"Description of Exchange Capital Securities--Redemption").
See "--Possible Tax Law Changes Affecting the Capital
Securities" below for a discussion of previous legislative
proposals. The adoption of similar legislation could give rise
to a Tax Event,which may permit the Company to shorten the
maturity of the Junior Subordinated Debentures, resulting in the
shortening of the maturity of the Capital Securities or which may
permit the Company to cause a redemption of the Capital
Securities prior to July 15, 2007. Prospective investors should
be aware that the Company's exercise of its right to shorten the
maturity of the Junior Subordinated Debentures will be a taxable
event to holders of Capital Securities if the Junior Subordinated
Debentures are treated as equity for purposes of United States
federal income taxation before the maturity is shortened. See
"Description of Exchange Capital Securities--Conditional Right to
Shorten Maturity or Redeem upon a Tax Event" and "Description of
Exchange Junior Subordinated Debentures--Conditional Right to
Shorten Maturity upon a Tax Event."
"Tax Event" means the receipt by the Issuer Trust of an
opinion of counsel to the Company experienced in such matters to
the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a
result of any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement or
decision is announced on or after the date of issuance of such
Capital Securities under the Trust Agreement, there is more than
an insubstantial risk that (i) the Issuer Trust is, or will be
within 90 days of the date of such opinion, subject to United
States federal income tax with respect to income received or
accrued on the Junior Subordinated Debentures, (ii) interest
payable by the Company on the Junior Subordinated Debentures is
not, or within 90 days of the date of such opinion, will not be,
deductible by the Company, in whole or in part, for United States
federal income tax purposes or (iii) the Issuer Trust is, or will
be within 90 days of the date of such opinion, subject to more
than a de minimis amount of other taxes, duties or other
governmental charges.
EXCHANGE OF CAPITAL SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES
The holders of all of the outstanding Common Securities have
the right at any time to terminate the Issuer Trust and, after
satisfaction of the liabilities of creditors of the Issuer Trust
as provided by applicable law, cause the Junior Subordinated
Debentures to be distributed to the holders of the Trust
Securities in liquidation of the Issuer Trust, subject to the
Property Trustee having received an opinion of counsel to the
effect that such distribution will not be a taxable event to
holders of Capital Securities. See "Description of Exchange
Capital Securities--Liquidation Distribution Upon Termination."
MARKET PRICES
There can be no assurance as to the market prices for
Capital Securities or Junior Subordinated Debentures that may be
distributed in exchange for Capital Securities if a liquidation
of the Issuer Trust occurs. Accordingly, the Capital Securities
that an investor may purchase, whether pursuant to the offer made
hereby or in the secondary market, or the Junior Subordinated
Debentures that a holder of Capital Securities may receive on
liquidation of the Issuer Trust, may trade at a discount to the
price that the investor paid to purchase the Capital Securities
offered hereby. Because holders of Capital Securities may
receive Junior Subordinated Debentures on termination of the
Issuer Trust, prospective purchasers of Exchange Capital
Securities are also making an investment decision with regard to
the Exchange Junior Subordinated Debentures and should carefully
review all the information regarding the Exchange Junior
Subordinated Debentures contained herein. See "Description of
Exchange Junior Subordinated Debentures."
RIGHTS UNDER THE GUARANTEE
First Chicago will act as the trustee under the Guarantee
(the "Guarantee Trustee") and will hold the Guarantee for the
benefit of the holders of the Capital Securities. First Chicago
will also act as Debenture Trustee for the Junior Subordinated
Debentures and as Property Trustee and First Chicago (Delaware)
will act as Delaware Trustee under the Trust Agreement. The
Guarantee guarantees to the holders of the Capital Securities the
following payments, to the extent not paid by the Issuer Trust:
(i) any accumulated and unpaid Distributions required to be paid
on the Capital Securities, to the extent that the Issuer Trust
has funds on hand available therefor at such time, (ii) the
Redemption Price with respect to any Capital Securities called
for redemption, to the extent that the Issuer Trust has funds on
hand available therefor at such time and (iii) upon a voluntary
or involuntary termination, winding-up or liquidation of the
Issuer Trust (unless the Junior Subordinated Debentures are
distributed to holders of the Capital Securities), the lesser of
(a) the aggregate of the Liquidation Amount and all accumulated
and unpaid Distributions to the date of payment to the extent
that the Issuer Trust has funds on hand available therefor at
such time and (b) the amount of assets of the Issuer Trust
remaining available for distribution to holders of the Capital
Securities on liquidation of the Issuer Trust after payment of
creditors of the Issuer Trust as required by applicable law. The
Guarantee is subordinate as described under "--Ranking of
Subordinated Obligations Under the Guarantee and the Junior
Subordinated Debentures." The holders of not less than a majority
in aggregate 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 Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust
power conferred upon the Guarantee Trustee under the Guarantee.
Any holder of the Capital Securities may institute a legal
proceeding directly against the Company to enforce its rights
under the Guarantee without first instituting a legal proceeding
against the Issuer Trust, the Guarantee Trustee or any other
person or entity. If the Company were to default on its
obligation to pay amounts payable under the Junior Subordinated
Debentures, the Issuer Trust would lack funds for the payment of
Distributions or amounts payable on redemption of the Capital
Securities or otherwise and, in such event, holders of the
Capital Securities would not be able to rely upon the Guarantee
for payment of such amounts. Instead, in the event a Debenture
Event of Default shall have occurred and be continuing and such
event is attributable to the failure of the Company to pay
interest on or principal of the Junior Subordinated Debentures on
the payment date on which such payment is due and payable, then a
holder of Capital Securities may institute a legal proceeding
directly against the Company for enforcement of payment to such
holder of the principal of or interest on such Junior
Subordinated Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Capital Securities of such
holder (a "Direct Action"). In connection with such Direct
Action, the Company will have a right of set-off under the Junior
Subordinated Indenture to the extent of any payment made by the
Company to such holder of Capital Securities in the Direct
Action. Except as described herein, holders of Capital
Securities will not be able to exercise directly any other remedy
available to the holders of the Junior Subordinated Debentures or
assert directly any other rights in respect of the Junior
Subordinated Debentures. See "Description of Exchange
Securities--Description of Exchange Junior Subordinated
Debentures--Enforcement of Certain Rights by Holders of Capital
Securities," "--Debenture Events of Default" and "Description of
Exchange Guarantee." The Trust Agreement provides that each
holder of Capital Securities by acceptance thereof agrees to the
provisions of the Guarantee and the Junior Subordinated
Indenture.
LIMITED VOTING RIGHTS
Holders of Capital Securities will generally have limited
voting rights relating only to the modification of the Capital
Securities and the exercise of the Issuer Trust's rights as
holder of Junior Subordinated Debentures and the Guarantee.
Holders of Capital Securities will not be entitled to appoint,
remove or replace the Property Trustee or the Delaware Trustee
except upon the occurrence of certain events described herein.
The Property Trustee and the holders of all of the Common
Securities may amend the Trust Agreement without the consent of
holders of Capital Securities to ensure that the Issuer Trust
will be classified for United States federal income tax purposes
as a grantor trust. See "Description of Exchange Capital
Securities--Voting Rights; Amendment of Trust Agreement" and
"--Removal of Issuer Trustees; Appointment of Successors."
CONSEQUENCES OF A FAILURE TO EXCHANGE ORIGINAL CAPITAL SECURITIES
The Original Capital Securities have not been registered
under the Securities Act or any state securities laws and
therefore may not be offered, sold or otherwise transferred
except in compliance with the registration requirements of the
Securities Act and any other applicable securities laws, or
pursuant to an exemption therefrom or in a transaction not
subject thereto, and in each case in compliance with certain
other conditions and restrictions. Original Capital Securities
which remain outstanding after consummation of the Exchange Offer
will continue to bear a legend reflecting such restrictions on
transfer. In addition, upon consummation of the Exchange Offer,
holders of Original Capital Securities which remain outstanding
will not be entitled to any rights to have such Original Capital
Securities registered under the Securities Act or to any similar
rights under the Registration Rights Agreement (subject to
certain limited exceptions). The Company and the Issuer Trust do
not intend to register under the Securities Act any Original
Capital Securities which remain outstanding after consummation of
the Exchange Offer (subject to such limited exceptions, if
applicable). To the extent that Original Capital Securities are
tendered and accepted in the Exchange Offer, a holder's ability
to sell untendered Original Capital Securities could be adversely
affected.
The Exchange Capital Securities and any Original Capital
Securities which remain outstanding after consummation of the
Exchange Offer will vote together as a single class for purposes
of determining whether holders of the requisite percentage in
outstanding Liquidation Amount thereof have taken certain actions
or exercised certain rights under the Declaration. See
"Description of Exchange Securities Description of Exchange
Capital Securities Voting Rights; Amendment of the Declaration."
The Original Capital Securities provide, among other things,
that, if a registration statement relating to the Exchange Offer
has not been filed by October 13, 1997 and declared effective by
December 12, 1997, the Distribution rate borne by the Original
Capital Securities will increase by 0.25% per annum until such
registration statement has been filed or declared effective, as
the case may be. Upon consummation of the Exchange Offer,
holders of Original Capital Securities will not be entitled to
any increase in the Distribution rate thereon or any further
registration rights under the Registration Rights Agreement,
except under limited circumstances. See "Description of Original
Securities."
ABSENCE OF PUBLIC MARKET
The Original Capital Securities were issued to, and the
Company believes such securities are currently owned by, a
relatively small number of beneficial owners. The Original
Capital Securities have not been registered under the Securities
Act and will be subject to restrictions on transferability if
they are not exchanged for the Exchange Capital Securities.
Although the Exchange Capital Securities may be resold or
otherwise transferred by the holders (who are not affiliates of
the Company or the Issuer Trust) without compliance with the
registration requirements under the Securities Act, they will
constitute a new issue of securities with no established trading
market. The Company and the Issuer Trust have been advised by
the Initial Purchasers that the Initial Purchasers presently
intend to make a market in the Exchange Capital Securities.
However, the Initial Purchasers are not obligated to do so and
any market-making activity with respect to the Exchange Capital
Securities may be discontinued at any time without notice. In
addition, such market-making activity will be subject to the
limits imposed by the Securities Act and the Exchange Act and may
be limited during the Exchange Offer. Accordingly, no assurance
can be given that an active public or other market will develop
for the Exchange Capital Securities or the Original Capital
Securities, or as to the liquidity of or the trading market for
the Exchange Capital Securities or the Original Capital
Securities. If an active public market does not develop, the
market price and liquidity of the Exchange Capital Securities may
be adversely affected.
If a public trading market develops for the Exchange Capital
Securities, future trading prices will depend on many factors,
including, among other things, prevailing interest rates, the
financial condition of the Company and its subsidiaries, and the
market for similar securities. Depending on these and other
factors, the Exchange Capital Securities may trade at a discount.
Notwithstanding the registration of the Exchange Capital
Securities in the Exchange Offer, holders who are "affiliates"
(as defined under Rule 405 of the Securities Act) of the Company
or the Issuer Trust may publicly offer for sale or resell the
Exchange Capital Securities only in compliance with the
provisions of Rule 144 under the Securities Act.
Each broker-dealer that receives Exchange Capital Securities
for its own account in exchange for Original Capital Securities,
where such Original Capital Securities were acquired by such
broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital
Securities. See "Plan of Distribution."
POSSIBLE TAX LAW CHANGES AFFECTING THE CAPITAL SECURITIES
On February 6, 1997, as part of the fiscal budget submitted
to Congress, the Clinton Administration proposed certain changes
to federal income tax law which would, among other things,
generally treat as equity, for federal income tax purposes,
certain debt obligations, such as the Junior Subordinated
Debentures, that were issued on or after the date of "first
committee action" (the "Clinton Proposal"). The Junior
Subordinated Debentures were issued prior to the date of first
committee action. The Clinton Proposal was not included in the
tax legislation signed into law by President Clinton on August 5,
1997. There can be no assurance, however, that similar
legislation enacted in the future will not adversely affect the
tax treatment of the Junior Subordinated Debentures, which could
result in the redemption of the Junior Subordinated Debentures by
the Company and the distribution of the resulting cash in
redemption of the Capital Securities or a shortening of the
maturity of the Capital Securities. See "Description of Exchange
Junior Subordinated Debentures Redemption" and "Description of
Exchange Capital Securities Redemption." See also "Certain
Federal Income Tax Consequences Possible Tax Law Changes."
EXCHANGE OFFER PROCEDURES
Subject to the conditions set forth under "The Exchange
Offer Conditions to the Exchange Offer," delivery of Exchange
Capital Securities in exchange for Original Capital Securities
tendered and accepted for exchange pursuant to the Exchange Offer
will be made only after timely receipt by the Exchange Agent of
(i) certificates for Original Capital Securities or a book-entry
confirmation of a book-entry transfer of Original Capital
Securities into the Exchange Agent's account at DTC, including an
Agent's Message (as defined under "The Exchange Offer Acceptance
for Exchange and Issuance of Exchange Capital Securities") if the
tendering holder does not deliver a Letter of Transmittal, (ii) a
completed and signed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or, in the case
of a book-entry transfer, an Agent's Message in lieu of the
Letter of Transmittal, and (iii) any other documents required by
the Letter of Transmittal. Therefore, holders of Original
Capital Securities desiring to tender such Original Capital
Securities in exchange for Exchange Capital Securities should
allow sufficient time to ensure timely delivery. Neither the
Company nor the Issuer Trust is under a duty to give notification
of defects or irregularities with respect to the tenders of
Original Capital Securities for exchange.
Each broker-dealer that receives Exchange Securities for its
own account in exchange for Securities, where such Securities
were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such
Exchange Securities. See "Plan of Distribution."
HSB GROUP, INC.
GENERAL
HSB Group, Inc. is a newly formed holding company which owns
directly or indirectly, a number of insurance and engineering
service subsidiaries which specialize in insuring against losses
from accidents to boilers, pressure vessels and mechanical and
electrical machinery and equipment, and in providing related
engineering services. HSB Group's operations are divided into
three industry segments insurance, engineering services and
investments.
The most significant subsidiary of the Company is Hartford
Steam Boiler, an insurance company chartered under the laws of
the State of Connecticut in 1866. Hartford Steam Boiler is the
largest writer of equipment breakdown insurance in North America
and is establishing a presence in the engineering insurance
market outside of North America. In 1996, earned premiums for
HSB Group's insurance products were $448.6 million, approximately
81.7 percent of the revenues of HSB Group.
EQUIPMENT BREAKDOWN INSURANCE
Hartford Steam Boiler is the largest writer of equipment
breakdown insurance in North America and is establishing a
presence in the engineering insurance market outside of North
America. Based on gross earned premium, Hartford Steam Boiler's
U.S. market share, at approximately 40 percent, has remained
fairly stable over the past ten years.
Equipment breakdown insurance provides for the
indemnification of the policyholder for financial loss resulting
from destruction or damage to an insured boiler, pressure vessel,
or other item of machinery or equipment caused by an accident.
This financial loss can include the cost to repair or replace the
damaged equipment (property damage), and product spoilage, lost
profits and expenses to avert lost profits (business
interruption) stemming from an accident. This heavy emphasis on
loss prevention historically has had the dual effect of
increasing underwriting and inspection expenses, while reducing
loss and loss adjustment expenses. In this regard, the Company
distinguishes itself from other insurance suppliers by providing
a high level of loss prevention, failure analysis and other
engineering services with its insurance products. An important
ancillary benefit for the policyholder is that the inspection
performed by the Company's inspector on a boiler, pressure
vessel, or other piece of equipment, as part of the insurance
process, is normally accepted by state and other regulatory
jurisdictions for their certification purposes. Without a
certificate of inspection by the insurance carrier or another
inspection agency, policyholders cannot legally operate many
types of equipment.
The Company also writes all risk property insurance for
risks with significant machinery and equipment exposures, in
addition to its more traditional boiler and machinery products.
The all risk line is marketed to customers with equipment and
machinery exposures, such as electric utilities, where
sophisticated engineering services are important to loss
prevention and control.
ENGINEERING AND INSPECTION SERVICES
Separate divisions of the Company's Engineering Department
provide quality assurance services, training for nondestructive
testing, inspections to code standards of the American Society of
Mechanical Engineers (ASME), ISO certification services and other
specialized consulting and inspection services related to the
design and application of boilers, pressure vessels, and many
other types of equipment for domestic and foreign equipment
manufacturers and their customers. The Company is the largest
Authorized Inspection Agency for ASME codes in the world. In
addition, the Company's Engineering Department focuses on
researching and developing potential new products and services,
and new markets for current services. In 1996, net engineering
services revenues were $55.8 million, approximately 10.2 percent
of the Company's revenues.
STRATEGY; RECENT HISTORY
The Company's strategy is to maintain its market share in
North America and expand overseas through leveraging its
engineering expertise in assessing and managing risk to provide
insurance products. The Company is a multi-national company
operating in North American, European, and Asian markets.
Currently, the Company's principal market is the United States.
However, the Company seeks to become a stronger competitor in
international markets as it believes that there is significant
opportunity for profitable growth overseas. In 1996 the revenues
and pre-tax income associated with operations outside of the
United States were approximately 18.9 percent and 28.3 percent,
respectively. Identifiable assets associated with operations
outside of the United States are approximately 23.1 percent of
the consolidated amount. The Company conducts it business in
Canada through its subsidiary, The Boiler Inspection and
Insurance Company of Canada. Insurance for risks located in
countries other than the United States and Canada is written by
HSB Engineering Insurance Limited (HSB EIL). In December 1994,
the Company purchased the remaining 50% interest in HSB EIL's
parent company, Engineering Insurance Group (EIG) from General
Reinsurance Corporation.
Effective December 1, 1996 the Company increased its
membership participation in Industrial Risk Insurers ("IRI") from
14 percent to 23.5 percent. IRI is a voluntary, unincorporated
joint underwriting association, comprised of property casualty
insurance members, which provides property insurance for "highly
protected risks" larger manufacturing, processing, and industrial
businesses which have invested in protection against loss through
the use of sprinklers and other means. The Company has increased
its share because it believes that participation in the IRI is an
opportunity to apply the Company's underwriting, engineering and
reinsurance skill sets to a large block of business and to
potentially provide a quick turnaround of IRI's underwriting
results with only a limited capital outlay.
In January 1996, the Company completed the formation of
Radian International with Dow to provide environmental,
engineering, information technology, remediation and strategic
chemical management services to industries and governments world-
wide. In connection with the formation of the new company, the
Company contributed substantially all of the assets of its
wholly-owned subsidiary, Radian Corporation, and Dow contributed
the assets of Dow Environmental, Inc., its wholly-owned
subsidiary, as well as access to certain of its technologies
which help support the businesses expected to be conducted by the
joint venture company. Radian International currently is 40
percent owned by Radian Corporation and 60 percent owned by Dow
Environmental Inc. In 1996, the Company's share of the joint
venture's results are recorded as equity in Radian rather than
consolidated with the Company's net engineering services revenue
and other income statement accounts. The joint venture agreement
with Dow provided HSB the option to put its share of the joint
venture to Dow any time during the period from December 31, 1997
to December 31, 1998 upon giving appropriate notice. On July 28,
1997 the HSB Board of Directors ratified management's decision to
put its share of Radian International to Dow on or about January
1, 1998 for approximately $145 million. This amount is not
subject to any material adjustment due to the future operating
results of Radian International; therefore this will result in a
pre-tax gain of approximately $60 million. Due to this decision,
the results of Radian International have been classified as
discontinued operations. HSB's share of Radian International's
results has been immaterial to the consolidated results during
the first six months of 1997.
The Company's principal executive offices are located at One
State Street, Hartford, Connecticut 06102. The Company's
telephone number is (860) 722-1866.
CORPORATE STRUCTURE; NEWLY ORGANIZED HOLDING COMPANY
The Company was recently incorporated to become the holding
company of, and the direct owner of, Hartford Steam Boiler and
certain of its subsidiaries.
On June 24, 1997, (the "Effective Time"), each share of
common stock outstanding of Hartford Steam Boiler immediately
prior to the Effective Time was exchanged for one share of common
stock of the Company. Each share of preferred stock of Hartford
Steam Boiler outstanding immediately prior to the Effective Time
was exchanged for one share of preferred stock of the Company
(which series has substantially identical rights and preferences
as Hartford Steam Boiler preferred stock) (the "Share Exchange")
for the sole purpose of making the Company the holding company
and sole stockholder of Hartford Steam Boiler and certain other
subsidiaries.
The holding company was formed in order to achieve greater
operating and financial flexibility in connection with certain
investments, business operations and financing activities.
Holding company structures are frequently used when an
organization conducts regulated and unregulated lines of
businesses and are commonly found in the insurance industry.
The consolidated financial position and consolidated results
of operations of the Company are substantially identical to those
of Hartford Steam Boiler immediately prior to the exchange.
Complete pro forma and comparative financial information
regarding the Company and its consolidated subsidiaries giving
effect to the Share Exchange has not been included herein because
immediately following the Effective Time of the Share Exchange,
the consolidated financial statements for the Company was
substantially the same as the consolidated financial statements
of Hartford Steam Boiler immediately prior to the Share Exchange.
SELECTED CONSOLIDATED FINANCIAL DATA AND OTHER INFORMATION
The selected consolidated financial data set forth in the
table below for each of the years in the five year period ended
December 31, 1996 have been derived from Hartford Steam Boiler's
consolidated financial statements and Hartford Steam Boiler's
1996 Annual Report on Form 10-K/A, each of which is incorporated
by reference herein. The Company is a newly formed company
created for the purpose of making the Company the holding company
and sole stockholder of Hartford Steam Boiler and certain other
subsidiaries. The Share Exchange creating the new holding
company structure was consummated on June 24, 1997. The
consolidated financial position and consolidated results of
operations of the Company are substantially identical to those of
Hartford Steam Boiler immediately prior to the Share Exchange.
See "HSB Group, Inc. Corporate Structure; Newly Organized Holding
Company." The data presented for the six month periods ending
June 30, 1997 and 1996 have been derived from unaudited
consolidated financial statements included in the Company's
Quarterly Report on Form 10-Q and Hartford Steam Boiler's Quarterly
Report on Form 10-Q for such periods. The data presented for the
periods ending June 30, 1997 and 1996 have been prepared on the
same basis as the audited consolidated financial statements and
include all adjustments, consisting of normal, recurring accruals
that the Company considers necessary for a fair presentation of
the financial position and results of operations for the periods
presented. Operating results for the period ended June 30, 1997 are
not necessarily indicative of the results that may be expected for
the fiscal year ended December 31, 1997. The selected financial
data presented below should be read in conjunction with the
Company's consolidated financial statements and notes thereto and
other information appearing in Hartford Steam Boiler's 1996
Annual Report on Form 10-K/A, and with the unaudited financial
statements in the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997, each of which is incorporated herein
by reference. All numbers have been restated to eliminate the
effect of Radian International and reflect it as a discontinued
operation.
<TABLE>
Six months
ended June 30, Year ended December 31,
1997 1996 1996 1995 1994 1993 1992
---------- ------ -------- ------ ------ ------ -----
(unaudited)
(in millions, except per share amounts)
Summary of Consolidated Statements of Operations
Revenues:
<S> <C> <C> <C> <C> <C> <C> <C>
Insurance premiums....................... $239.5 $221.3 $448.6 $ 389.1 $ 336.6 $ 349.2 $ 342.9
Net engineering services(1).............. 29.7 26.8 55.8 49.9 48.0 46.0 49.4
Income from investment operations........ 20.7 21.9 44.4 31.7 34.9 55.4 62.8
Total revenues(1)........................ 289.9 270.0 548.8 470.7 419.5 450.6 455.1
Income from continuing operations before
income taxes and accounting changes.... 43.5 34.6 72.9 72.2 61.3 12.8 66.7
Income taxes............................. 11.3 8.2 18.3 19.5 16.8 1.7 14.2
Income from continuing operations before
accounting changes .................... 32.2 26.4 54.6 52.7 44.5 11.1 52.5
Income per common share from continuing
operations before accounting changes .. 1.58 1.29 2.71 2.58 2.17 .54 2.52
Dividends paid per common share.......... 1.14 1.14 2.28 2.22 2.14 2.12 2.03
Summary of Consolidated Statements of Financial
Position
Total assets............................ $1181.2 $1025.6 $1,116.3 $ 954.1 $ 877.8 $ 857.6 $ 865.7
Long-term borrowings and capital lease
obligations. ......................... 53.0 53.4 53.0 53.4 28.4 28.4 28.4
Convertible redeemable preferred.... 20.0 -- 20.0 -- -- -- --
Common.............................. 349.5 343.7 345.6 341.1 299.5 324.7 374.3
Per common share.................... 17.71 16.98 17.25 16.81 14.67 15.80 18.05
Common shares outstanding at end
of period(2) .................... 19.7 20.2 20.0 20.3 20.4 20.5 20.7
Insurance
Operating gain (loss).................. $ 21.4 $ 9.8 $ 21.8 $ 34.2 $ 20.7 $ (26.4) $ 1.8
Loss ratio......................... 43.0% 45.6% 45.6% 39.8% 42.5% 57.1% 50.3%
Expense ratio...................... 47.9% 49.5% 49.1% 50.9% 50.5% 50.5% 49.2%
Combined ratio..................... 90.9% 95.1% 94.7% 90.7% 93.0%(3) 107.6% 99.5%
Engineering Services(1)
Gross revenues......................... $ 29.7 $ 26.8 $ 55.8 $ 49.9 $ 48.3 $ 47.6 $ 50.2
Subcontract & equipment resale costs... --- --- -- --- .3 1.6 .8
Net revenues....................... 29.7 26.8 55.8 49.9 48.0 46.0 49.4
Operating gain......................... 2.0 3.2 7.3 6.7 4.3 4.0 5.5
Gross margin....................... 6.6% 12.0% 13.2% 13.3% 8.9% 8.4% 11.0%
Net margin......................... 6.6% 12.0% 13.2% 13.3% 9.0% 8.7% 11.1%
Investments
Net investment income.................. $ 16.7 $ 15.9 $ 32.3 $ 28.2 $ 26.2 $ 29.3 $ 32.0
Realized investment gains.............. 4.0 6.0 12.1 2.8 8.7 26.1 30.8
Income from investment operations...... 20.7 21.9 44.4 31.0 34.9 55.4 62.8
</TABLE>
__________________
(1) Effective June 30, 1997 Radian is identified as a
discontinued operation and consequently is excluded
from all periods presented.
(2) Reflects the repurchase of approximately .3 million through
June in 1997, .3 million shares in 1996, .1 million shares
in 1995, .1 million shares in 1994, .2 million shares in
1993, and .3 million shares in 1992.
(3) Excludes charge for Proposition 103. Had the $2.9 million
charge been included, the expense ratio would have been
51.3% and the combined ratio would have been 93.8%.
HSB CAPITAL I
The Issuer Trust is a statutory business trust created under
Delaware law pursuant to (i) the Trust Agreement executed by the
Company, as Depositor, First Chicago, as Property Trustee, and
First Chicago (Delaware), as Delaware Trustee, and (ii) the
filing of a certificate of trust with the Delaware Secretary of
State. The Issuer Trust's business and affairs are conducted by
its trustees: First Chicago, as Property Trustee, and First
Chicago, (Delaware) as Delaware Trustee. In addition, three
individuals who are employees or officers of or affiliated with
the holder of a majority of the Common Securities will act as
administrators with respect to the Issuer Trust (the
"Administrators"). The Administrators will be selected by the
holders of the Common Securities. See "Description of Capital
Securities Miscellaneous." The Issuer Trust exists for the
exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of Trust
Securities to acquire Junior Subordinated Debentures issued by
the Company and (iii) engaging in only those other activities
necessary or incidental thereto (such as registering the transfer
of the Trust Securities). Accordingly, the Junior Subordinated
Debentures and the right to reimbursement of expenses under the
related Expense Agreement will be the sole assets of the Issuer
Trust, and payments under the Junior Subordinated Debentures and
the related Expense Agreement will be the sole revenue of the
Issuer Trust.
All of the Common Securities will be owned by the Company.
The Common Securities will rank pari passu, and payments will be
made thereon pro rata, with the Capital Securities, except that
upon the occurrence and continuance of an Event of Default under
the Trust Agreement resulting from a Debenture Event of Default
under the Junior Subordinated Indenture, the rights of the
holders of the Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or
otherwise will be subordinated to the rights of the holders of
the Capital Securities. See "Description of Capital
Securities Subordination of Common Securities." The Company will
acquire Common Securities in an aggregate liquidation amount
equal to 3% of the total capital of the Issuer Trust. The Issuer
Trust has a term of 31 years, but may terminate earlier as
provided in the Trust Agreement. The principal executive office
of the Issuer Trust is One State Street, Hartford, Connecticut
06102, Attention: Corporate Secretary, and its telephone number
is (860) 722-1866.
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
The ratio of earnings to fixed charges and preferred stock
dividend requirements for the Company including its consolidated
subsidiaries is computed by dividing earnings by fixed charges
and preferred stock dividend requirements. Earnings consist of
income before income taxes plus fixed charges. Fixed charges
consist of interest expense, capitalized interest, one-third (the
portion deemed representative of the interest factor) of net
rents and expenses under long-term leases and preferred stock
dividend requirements which consist of the pre-tax earnings which
would be required to cover dividends required to be paid on the
Company's majority-owned subsidiary's outstanding preferred
stock. The following table sets forth the ratio of earnings to
fixed charges for the Company and its consolidated subsidiaries
for the periods indicated.
SIX
MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996 1995 1994 1993 1992
Ratio of Earnings to Fixed
Charges . . . . . . . . . . . . 9.53 8.29 7.22 7.97 2.60 8.94
Ratio of Earnings to Fixed Charges
and Preferred Dividends . . . . 8.13 8.29 7.22 7.97 2.60 8.94
Pro forma Ratio of Earnings to
Fixed Charges and
Preferred Dividends and
Capital Securities
Dividends . . . . . . . . . . . 5.34 5.09
USE OF PROCEEDS
Neither the Company nor the Issuer Trust will receive any
cash proceeds from the issuance of the Exchange Capital
Securities and the Exchange Guarantee offered hereby. In
consideration for issuing the Exchange Capital Securities in
exchange for Original Capital Securities as described in this
Prospectus, the Issuer Trust will receive Original Capital
Securities in like Liquidation Amount. The Original Capital
Securities surrendered in exchange for the Exchange Capital
Securities will be retired and canceled.
The proceeds to the Issuer Trust (without giving effect to
expenses of the offering payable by the Company) from the
offering of the Original Capital Securities was $108,861,500.
All of the proceeds from the sale of the Original Capital
Securities were invested by the Issuer Trust in the Original
Junior Subordinated Debentures. The Company intends that the net
proceeds from the sale of the Original Junior Subordinated
Debentures will be used for general corporate purposes which may
include, without limitation, repurchases of the Company's common
stock, funding investments in, or extensions of credit to, the
Company's subsidiaries, repayment of outstanding indebtedness and
maturing obligations, and financing possible future acquisitions.
As of the date of this Prospectus, the Company has not entered
into any material agreements or understandings with respect to
any potential acquisition. The precise amount and timing of the
application of such net proceeds used for these purposes will
depend on market prices for the Company's common stock and the
funding requirements and availability of other funds to the
Company and its subsidiaries.
CAPITALIZATION
The following table sets forth the consolidated
capitalization of the Company and its subsidiaries as of June 30,
1997 as adjusted to give effect to the issuance of $110 million
of Global Floating Rate Capital Securities by the Issuer Trust.
The issuance of the Exchange Capital Securities in the Exchange
Offer will have no effect on the capitalization of the Company.
The following data should be read in conjunction with the
consolidated financial statements and notes thereto of the
Company and its subsidiaries incorporated herein by reference.
JUNE 30, 1997
($ IN MILLIONS)
ACTUAL AS ADJUSTED
Total Long Term Debt . . . . . . . . . . . . 25.1 25.1
Capital Lease . . . . . . . . . . . . . . . . 27.9 27.9
Total Long Term Debt and Capital Lease 53.0 53.0
Company Obligated Mandatorily Redeemable
Capital Securities of Subsidiary
Trust Holding Solely Junior Subordinated
Deferrable Interest Debentures of the
Company(1) . . . . . . . . . . . . . . 110.0
Less Discount and Expenses Related to the
Issuance of Mandatorily
Redeemable Capital Securities(2) . . . . (2.4)
Convertible Redeemable Preferred Stock
Series B . . . . . . . . . . . . . . . . 20.0 20.0
----- -----
20.0 127.6
----- -----
Shareholders' Equity
Common Stock . . . . . . . . . . . . . . 10.0 10.0
Additional Paid In . . . . . . . . . . . 31.5 31.5
Unrealized Investment Gains . . . . . . 63.7 63.7
Retained Earnings . . . . . . . . . . . 249.2 249.2
Benefit Plans . . . . . . . . . . . . . (4.9) (4.9)
----- -----
Total Shareholders' Equity . . . . 349.5 349.5
Total Capitalization of the Company 422.5 530.1
______________
(1) The sole assets of the Issuer Trust will be the Junior
Subordinated Debentures. The Junior Subordinated Debentures
held by the Issuer Trust will mature on July 15, 2027. The
Company initially will own all of the Common Securities of
the Issuer Trust. See "Accounting Treatment."
(2) Includes discount of $1.1 million and underwriting, legal
and other fees of $1.3 million.
ACCOUNTING TREATMENT
For financial reporting purposes, the Issuer Trust will be
treated as a subsidiary of the Company and, accordingly, the
accounts of the Issuer Trust will be included in the consolidated
financial statements of the Company. The Capital Securities will
be presented as a separate line item in the consolidated balance
sheets of the Company, entitled "Company Obligated Mandatorily
Redeemable Capital Securities of Subsidiary Trust Holding Solely
Junior Subordinated Deferrable Interest Debentures of the
Company" and appropriate disclosures about the Capital
Securities, the Guarantee and the Junior Subordinated Debentures
will be included in the notes to the Company's consolidated
financial statements. For financial reporting purposes, the
Company will record Distributions payable on the Capital
Securities as an expense in the Company's consolidated statements
of income.
RATING OF CAPITAL SECURITIES
The Capital Securities have been assigned a rating of "A-"
by Standard and Poor's Ratings Services and "A-" by Duff
& Phelps Credit Rating Co. A security rating is not a
recommendation to buy, sell or hold securities and may be subject
to revision or withdrawal at any time by the assigning rating
organization. There is no assurance that any rating will remain
in effect for any given period of time or that any rating will
not be revised or withdrawn entirely by a assigning rating
organization in the future if in its judgment circumstances so
warrant.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Original Capital
Securities, the Company and the Issuer Trust entered into the
Registration Rights Agreement with the Initial Purchasers,
pursuant to which the Company and the Issuer Trust agreed to file
and to use their reasonable efforts to cause to become effective
with the Commission a registration statement with respect to the
exchange of the Original Capital Securities for capital
securities with terms identical in all material respects to the
terms of the Original Capital Securities. A copy of the
Registration Rights Agreement has been filed as an Exhibit to the
Registration Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual
obligations of the Company and the Issuer Trust under the
Registration Rights Agreement. The form and terms of the
Exchange Capital Securities are the same as the form and terms of
the Original Capital Securities except that the Exchange Capital
Securities have been registered under the Securities Act and will
not be subject to certain restrictions on transfer applicable to
the Original Capital Securities, and will not provide for any
increase in the Distribution rate thereon. In that regard, the
Original Capital Securities provide, among other things, that, if
a registration statement relating to the Exchange Offer has not
been filed by October 13, 1997 and declared effective by December
12, 1997, the Distribution rate borne by the Original Capital
Securities will increase by 0.25% per annum until such
registration statement is filed or declared effective, as the
case may be. Upon consummation of the Exchange Offer, holders of
Original Capital Securities will not be entitled to any increase
in the Distribution rate thereon or any further registration
rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors Consequences of a
Failure to Exchange Original Capital Securities" and "Description
of Original Securities."
The Exchange Offer is not being made to, nor will the Issuer
Trust accept tenders for exchange from, holders of Original
Capital Securities in any jurisdiction in which the Exchange
Offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
Each broker-dealer that receives Exchange Securities for its
own account in exchange for Securities, where such Securities
were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such
Exchange Securities. See "Plan of Distribution."
Unless the context requires otherwise, the term "holder"
with respect to the Exchange Offer means any person in whose name
the Original Capital Securities are registered on the books of
the Issuer Trust or any other person who has obtained a properly
completed bond power from the registered holder, or any person
whose Original Capital Securities are held of record by The
Depository Trust Company ("DTC") who desires to deliver such
Original Capital Securities by book-entry transfer at DTC.
Pursuant to the Exchange Offer, the Company will exchange as
soon as practicable after the date hereof, the Original Guarantee
for the Exchange Guarantee and the Original Junior Subordinated
Debentures, in an amount corresponding to the Original Capital
Securities accepted for exchange, for a like aggregate principal
amount of the Exchange Junior Subordinated Debentures. The
Exchange Guarantee and Exchange Junior Subordinated Debentures
have been registered under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Issuer Trust hereby offers, upon the terms and subject
to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal, to exchange up to
$110,000,000 aggregate Liquidation Amount of Exchange Capital
Securities for a like aggregate Liquidation Amount of Original
Capital Securities properly tendered on or prior to the
Expiration Date and not properly withdrawn in accordance with the
procedures described below. The Issuer Trust will issue,
promptly after the Expiration Date, an aggregate Liquidation
Amount of up to $110,000,000 of Exchange Capital Securities in
exchange for a like principal amount of outstanding Original
Capital Securities tendered and accepted in connection with the
Exchange Offer. Holders may tender their Original Capital
Securities in whole or in part in a Liquidation Amount of not
less than $1,000 Liquidation Amount (one Capital Security).
The Exchange Offer is not conditioned upon any minimum
Liquidation Amount of Original Capital Securities being tendered.
As of the date of this Prospectus, $110,000,000 aggregate
Liquidation Amount of the Original Capital Securities is
outstanding.
Holders of Original Capital Securities do not have any
appraisal or dissenters' rights in connection with the Exchange
Offer. Original Capital Securities which are not tendered for or
are tendered but not accepted in connection with the Exchange
Offer will remain outstanding and be entitled to the benefits of
the Declaration, but will not be entitled to any further
registration rights under the Registration Rights Agreement,
except under limited circumstances. See "Risk
Factors Consequences of a Failure to Exchange Original Capital
Securities" and "Description of Original Securities."
If any tendered Original Capital Securities are not accepted
for exchange because of an invalid tender, the occurrence of
certain other events set forth herein or otherwise, certificates
for any such unaccepted Original Capital Securities will be
returned, without expense, to the tendering holder thereof
promptly after the Expiration Date.
Holders who tender Original Capital Securities in connection
with the Exchange Offer will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of
Original Capital Securities in connection with the Exchange
Offer. The Company will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the
Exchange Offer. See " Fees and Expenses."
NEITHER THE COMPANY, THE BOARD OF DIRECTORS OF THE COMPANY
NOR ANY TRUSTEE OF THE ISSUER TRUST MAKES ANY RECOMMENDATION TO
HOLDERS OF ORIGINAL CAPITAL SECURITIES AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR ORIGINAL
CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION,
NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION.
HOLDERS OF ORIGINAL CAPITAL SECURITIES MUST MAKE THEIR OWN
DECISIONS WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND,
IF SO, THE AGGREGATE AMOUNT OF ORIGINAL CAPITAL SECURITIES TO
TENDER BASED ON SUCH HOLDERS' OWN FINANCIAL POSITIONS AND
REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City
time, on _______, 1997 unless the Exchange Offer is extended by
the Company or the Issuer Trust (in which case the term
"Expiration Date" shall mean the latest date and time to which
the Exchange Offer is extended).
The Company and the Issuer Trust expressly reserve the right
in their sole and absolute discretion, subject to applicable law,
at any time and from time to time, (i) to delay the acceptance of
the Original Capital Securities for exchange, (ii) to terminate
the Exchange Offer (whether or not any Original Capital
Securities have theretofore been accepted for exchange) if the
Issuer Trust determines, in its sole and absolute discretion,
that any of the events or conditions referred to under
" Conditions to the Exchange Offer" have occurred or exist or
have not been satisfied, (iii) to extend the Expiration Date of
the Exchange Offer and retain all Original Capital Securities
tendered pursuant to the Exchange Offer, subject, however, to the
right of holders of Original Capital Securities to withdraw their
tendered Original Capital Securities as described under
" Withdrawal Rights," and (iv) to waive any condition or
otherwise amend the terms of the Exchange Offer in any respect.
If the Exchange Offer is amended in a manner determined by the
Company and the Issuer Trust to constitute a material change, or
if the Company and the Issuer Trust waive a material condition of
the Exchange Offer, the Company and the Issuer Trust will
promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the holders of the
Original Capital Securities, and the Company and the Issuer Trust
will extend the Exchange Offer to the extent required by Rule
14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or
amendment will be followed promptly by oral or written notice
thereof to the Exchange Agent and by making a public announcement
thereof, and such announcement in the case of an extension will
be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
Without limiting the manner in which the Company and the Issuer
Trust may choose to make any public announcement and subject to
applicable law, the Company and the Issuer Trust shall have no
obligation to publish, advertise or otherwise communicate any
such public announcement other than by issuing a release to an
appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE CAPITAL
SECURITIES
Upon the terms and subject to the conditions of the Exchange
Offer, the Issuer Trust will exchange Exchange Capital Securities
for Original Capital Securities validly tendered and not
withdrawn (pursuant to the withdrawal rights described under
"--Withdrawal Rights") promptly after the Expiration Date.
Subject to the conditions set forth under "--Conditions to
the Exchange Offer," delivery of Exchange Capital Securities in
exchange for Original Capital Securities tendered and accepted
for exchange pursuant to the Exchange Offer will be made only
after timely receipt by the Exchange Agent of (i) certificates
for Original Capital Securities or a book-entry confirmation of a
book-entry transfer of Original Capital Securities into the
Exchange Agent's account at DTC, including an Agent's Message if
the tendering holder does not deliver a Letter of Transmittal,
(ii) a completed and signed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or, in the case
of a book-entry transfer, an Agent's Message in lieu of the
Letter of Transmittal, and (iii) any other documents required by
the Letter of Transmittal. Accordingly, the delivery of Exchange
Capital Securities might not be made to all tendering holders at
the same time, and will depend upon when certificates for
Original Capital Securities, book-entry confirmations with
respect to Original Capital Securities and other required
documents are received by the Exchange Agent.
The term "book-entry confirmation" means a timely
confirmation of a book-entry transfer of Original Capital
Securities into the Exchange Agent's account at DTC. See
" Procedures for Tendering Original Capital Securities Book Entry
Transfer." The term "Agent's Message" means a message,
transmitted by DTC to and received by the Exchange Agent and
forming a part of a book-entry confirmation, which states that
DTC has received an express acknowledgment from the tendering
participant, which acknowledgment states that such participant
has received and agrees to be bound by the Letter of Transmittal
and that the Issuer Trust and the Company may enforce such Letter
of Transmittal against such participant.
Subject to the terms and conditions of the Exchange Offer,
the Company and the Issuer Trust will be deemed to have accepted
for exchange, and thereby exchanged, Original Capital Securities
validly tendered and not withdrawn as, if and when the Issuer
Trust gives oral or written notice to the Exchange Agent of the
Company's and the Issuer Trust's acceptance of such Original
Capital Securities for exchange pursuant to the Exchange Offer.
The Exchange Agent will act as agent for the Company and the
Issuer Trust for the purpose of receiving tenders of Original
Capital Securities, Letters of Transmittal and related documents,
and as agent for tendering holders for the purpose of receiving
Original Capital Securities, Letters of Transmittal and related
documents and transmitting Exchange Capital Securities which will
not be held in global form by DTC or a nominee of DTC to validly
tendering holders. Such exchange will be made promptly after the
Expiration Date. If for any reason whatsoever, acceptance for
exchange or the exchange of any Original Capital Securities
tendered pursuant to the Exchange Offer is delayed (whether
before or after the Company's and the Issuer Trust's acceptance
for exchange of Original Capital Securities) or the Company and
the Issuer Trust extend the Exchange Offer or are unable to
accept for exchange or exchange Original Capital Securities
tendered pursuant to the Exchange Offer, then, without prejudice
to the Company's and the Issuer Trust's rights set forth herein,
the Exchange Agent may, nevertheless, on behalf of the Company
and the Issuer Trust and subject to Rule 14e-1(c) under the
Exchange Act, retain tendered Original Capital Securities and
such Original Capital Securities may not be withdrawn except to
the extent tendering holders are entitled to withdrawal rights as
described under "--Withdrawal Rights."
Pursuant to an Agent's Message or a Letter of Transmittal, a
holder of Original Capital Securities will represent, warrant and
agree in the Letter of Transmittal that it has full power and
authority to tender, exchange, sell, assign and transfer Original
Capital Securities, that the Issuer Trust will acquire good,
marketable and unencumbered title to the tendered Original
Capital Securities, free and clear of all liens, restrictions,
charges and encumbrances, and the Original Capital Securities
tendered for exchange are not subject to any adverse claims or
proxies. The holder also will warrant and agree that it will,
upon request, execute and deliver any additional documents deemed
by the Issuer Trust or the Exchange Agent to be necessary or
desirable to complete the exchange, sale, assignment, and
transfer of the Original Capital Securities tendered pursuant to
the Exchange Offer.
PROCEDURES FOR TENDERING ORIGINAL CAPITAL SECURITIES
VALID TENDER
Except as set forth below, in order for Original Capital
Securities to be validly tendered by book-entry transfer, an
Agent's Message or a completed and signed Letter of Transmittal
(or facsimile thereof), with any required signature guarantees,
and in either case any other documents required by the Letter of
Transmittal, must be delivered to the Exchange Agent by mail,
facsimile, hand delivery or overnight courier at one of the
Exchange Agent's addresses set forth under " Exchange Agent" on
or prior to the Expiration Date and either (i) such Original
Capital Securities must be tendered pursuant to the procedures
for book-entry transfer set forth below or (ii) the guaranteed
delivery procedures set forth below must be complied with.
Except as set forth below, in order for Original Capital
Securities to be validly tendered by a means other than by
book-entry transfer, a completed and signed Letter of Transmittal
(or facsimile thereof), with any required signature guarantees,
and any other documents required by the Letter of Transmittal
must be delivered to the Exchange Agent by mail, facsimile, hand
delivery or overnight courier at one of the Exchange Agent's
addresses set forth under " Exchange Agent" on or prior to the
Expiration Date and either (i) such Original Capital Securities
must be delivered to the Exchange Agent on or prior to the
Expiration Date or (ii) the guaranteed delivery procedures set
forth below must be complied with. If less than all Original
Capital Securities are tendered, a tendering holder should fill
in the amount of Original Capital Securities being tendered in
the appropriate box on the Letter of Transmittal. The entire
amount of Original Capital Securities delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise
indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND
SOLE RISK OF THE TENDERING HOLDER, AND DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF
DELIVERY IS TO BE BY MAIL, THE USE OF REGISTERED MAIL, RETURN
RECEIPT REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY
SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER
The Exchange Agent and DTC have confirmed that any
Participant (as defined in "Description of Exchange
Securities Description of Exchange Capital Securities Depositary
Procedures") in DTC's book-entry transfer facility system may
utilize DTC's ATOP procedures to tender Original Capital
Securities. The Exchange Agent will establish an account with
respect to the Original Capital Securities at DTC for purposes of
the Exchange Offer within two business days after the date of
this Prospectus. Any Participant may make a book-entry delivery
of the Original Capital Securities by causing DTC to transfer
such Original Capital Securities into the Exchange Agent's
account at DTC in accordance with DTC's ATOP procedures for
transfer. However, although delivery of Original Capital
Securities may be effected through book-entry transfer into the
Exchange Agent's account at DTC, an Agent's Message or a
completed and signed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other
documents required by the Letter of Transmittal, must in any case
be delivered to and received by the Exchange Agent at one of its
addresses set forth under " Exchange Agent" on or prior to the
Expiration Date, or the guaranteed delivery procedure set forth
below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees. Certificates for the Original Capital
Securities need not be endorsed and signature guarantees on the
Letter of Transmittal are unnecessary unless (a) a certificate
for the Original Capital Securities is registered in a name other
than that of the person surrendering the certificate or (b) such
holder completes the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" in the Letter of Transmittal.
In the case of (a) or (b) above, such certificates for Original
Capital Securities must be duly endorsed or accompanied by a
properly executed bond power, with the endorsement or signature
on the bond power and on the Letter of Transmittal guaranteed by
a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as an "eligible guarantor institution," including
(as such terms are defined therein): (i) a bank; (ii) a broker,
dealer, municipal securities broker or dealer or government
securities broker or dealer; (iii) a credit union; (iv) a
national securities exchange, registered securities association
or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association (an "Eligible
Institution"), unless surrendered on behalf of such Eligible
Institution. See Instruction 1 to the Letter of Transmittal.
Guaranteed Delivery. If a holder desires to tender Original
Capital Securities pursuant to the Exchange Offer and the
certificates for such Original Capital Securities are not
immediately available or time will not permit all required
documents to reach the Exchange Agent on or prior to the
Expiration Date, or the procedure for book-entry transfer cannot
be completed on a timely basis, such Original Capital Securities
may nevertheless be tendered, provided that all of the following
guaranteed delivery procedures are complied with:
(a) such tenders are made by or through an Eligible
Institution;
(b) properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form accompanying
the Letter of Transmittal, is received by the Exchange
Agent, as provided below, on or prior to the Expiration
Date; and
(c) the certificates (or a book-entry confirmation)
representing all tendered Original Capital Securities, in
proper form for transfer, together with a properly completed
and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any
other documents required by the Letter of Transmittal, are
received by the Exchange Agent within three New York Stock
Exchange, Inc. trading days after the date of execution of
such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand,
or transmitted by facsimile or mail to the Exchange Agent and
must include a guarantee by an Eligible Institution in the form
set forth in such notice.
Notwithstanding any other provision hereof, the delivery of
Exchange Capital Securities in exchange for Original Capital
Securities tendered and accepted for exchange pursuant to the
Exchange Offer will in all cases be made only after timely
receipt by the Exchange Agent of Original Capital Securities, or
of a book-entry confirmation with respect to such Original
Capital Securities, and a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees and any other documents required by
the Letter of Transmittal. Accordingly, the delivery of Exchange
Capital Securities might not be made to all tendering holders at
the same time, and will depend upon when Original Capital
Securities, book-entry confirmations with respect to Original
Capital Securities and other required documents are received by
the Exchange Agent.
The Issuer Trust's acceptance for exchange of Original
Capital Securities tendered pursuant to any of the procedures
described above will constitute a binding agreement between the
tendering holder and the Issuer Trust upon the terms and subject
to the conditions of the Exchange Offer.
Determination of Validity. All questions as to the form of
documents, validity, eligibility (including time of receipt) and
acceptance for exchange of any tendered Original Capital Securities
will be determined by the Company and the Issuer Trust, in their
sole discretion, whose determination shall be final and binding on
all parties. The Company and the Issuer Trust reserve the absolute
right, in their sole and absolute discretion, to reject any and all
tenders determined by them not to be in proper form or the
acceptance of which, or exchange for, may, in the opinion of
counsel to the Company and the Issuer Trust, be unlawful. The
Company and the Issuer Trust also reserve the absolute right,
subject to applicable law, to waive any of the conditions of the
Exchange Offer as set forth under " Conditions to the Exchange
Offer" or any condition or irregularity in any tender of Original
Capital Securities of any particular holder whether or not similar
conditions or irregularities are waived in the case of other
holders.
The interpretation by the Company and the Issuer Trust of the
terms and conditions of the Exchange Offer (including the Letter of
Transmittal and the instructions thereto) will be final and
binding. No tender of Original Capital Securities will be deemed to
have been validly made until all irregularities with respect to
such tender have been cured or waived. Neither the Company, the
Issuer Trust, any affiliates or assigns of the Company or the
Issuer Trust, the Exchange Agent nor any other person shall be
under any duty to give any notification of any irregularities in
tenders or incur any liability for failure to give any such
notification.
If any Letter of Transmittal, endorsement, bond power, power
of attorney, or any other document required by the Letter of
Transmittal is signed by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a Corporation or other
person acting in a fiduciary or representative capacity, such
person should so indicate when signing, and unless waived by the
Company and the Issuer Trust, proper evidence satisfactory to the
Company and the Issuer Trust, in their sole discretion, of such
person's authority to so act must be submitted.
A beneficial owner of Original Capital Securities that are
held by or registered in the name of a broker, dealer, commercial
bank, trust Company or other nominee or custodian is urged to
contact such entity promptly if such beneficial holder wishes to
participate in the Exchange Offer.
RESALES OF EXCHANGE CAPITAL SECURITIES
The Issuer Trust is making the Exchange Offer for the Exchange
Capital Securities in reliance on the position of the staff of the
Division of Corporation Finance of the Commission as set forth in
certain interpretive letters addressed to third parties in other
transactions. However, neither the Company nor the Issuer Trust
sought its own interpretive letter and there can be no assurance
that the staff of the Division of Corporation Finance of the
Commission would make a similar determination with respect to the
Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff of the
Division of Corporation Finance of the Commission, and subject to
the two immediately following sentences, the Company and the Issuer
Trust believe that Exchange Capital Securities issued pursuant to
this Exchange Offer in exchange for Original Capital Securities may
be offered for resale, resold and otherwise transferred by a holder
thereof (other than a holder who is a broker-dealer) without
further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange
Capital Securities are acquired in the ordinary course of such
holder's business and that such holder is not participating, and
has no arrangement or understanding with any person to participate,
in a distribution (within the meaning of the Securities Act) of
such Exchange Capital Securities. However, any holder of Original
Capital Securities who is an "affiliate" of the Company or the
Issuer Trust or who intends to participate in the Exchange Offer
for the purpose of distributing Exchange Capital Securities, or any
broker-dealer who purchased Original Capital Securities from the
Issuer Trust to resell pursuant to Rule 144A or any other available
exemption under the Securities Act, (a) will not be able to rely on
the interpretations of the staff of the Division of Corporation
Finance of the Commission set forth in the above-mentioned
interpretive letters, (b) will not be permitted or entitled to
tender such Original Capital Securities in the Exchange Offer and
(c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or
other transfer of such Original Capital Securities unless such sale
is made pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer holds Original
Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such
Original Capital Securities for Exchange Capital Securities, then
such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales
of such Exchange Capital Securities.
Each holder of Original Capital Securities who wishes to
exchange Original Capital Securities for Exchange Capital
Securities in the Exchange Offer will be required to represent that
(i) it is not an "affiliate" of the Company or the Issuer Trust,
(ii) any Exchange Capital Securities to be received by it are being
acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a
distribution (within the meaning of the Securities Act) of such
Exchange Capital Securities, and (iv) if such holder is not a
broker-dealer, such holder is not engaged in, and does not intend
to engage in, a distribution (within the meaning of the Securities
Act) of such Exchange Capital Securities. In addition, the Company
and the Issuer Trust may require such holder, as a condition to
such holder's eligibility to participate in the Exchange Offer, to
furnish to the Company and the Issuer Trust (or an agent thereof)
in writing information as to the number of "beneficial owners"
(within the meaning of Rule 13d-3 under the Exchange Act) on behalf
of whom such holder holds the Capital Securities to be exchanged in
the Exchange Offer. Each broker-dealer that receives Exchange
Capital Securities for its own account pursuant to the Exchange
Offer must acknowledge that it acquired the Original Capital
Securities for its own account as the result of market-making
activities or other trading activities and must agree that it will
deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such Exchange Capital Securities.
The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the staff of the
Division of Corporation Finance of the Commission in the
interpretive letters referred to above, the Company and the Issuer
Trust believe that Participating Broker-Dealers who acquired
Original Capital Securities for their own accounts as a result of
market-making activities or other trading activities may fulfill
their prospectus delivery requirements with respect to the Exchange
Capital Securities received upon exchange of such Original Capital
Securities (other than Original Capital Securities which represent
an unsold allotment from the initial sale of the Original Capital
Securities) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an
exchange offer so long as it contains a description of the plan of
distribution with respect to the resale of such Exchange Capital
Securities. Accordingly, this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating
Broker-Dealer during the period referred to below in connection
with resales of Exchange Capital Securities received in exchange
for Original Capital Securities where such Original Capital
Securities were acquired by such Participating Broker-Dealer for
its own account as a result of market-making or other trading
activities. Subject to certain provisions set forth in the
Registration Rights Agreement, the Company and the Issuer Trust
have agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such Exchange Capital
Securities for a period ending 180 days after the Expiration Date
(subject to extension under certain limited circumstances described
below) or, if earlier, when all such Exchange Capital Securities
have been disposed of by such Participating Broker-Dealer. See
"Plan of Distribution." However, a Participating Broker-Dealer who
intends to use this Prospectus in connection with the resale of
Exchange Capital Securities received in exchange for Original
Capital Securities pursuant to the Exchange Offer must notify the
Company or the Issuer Trust, or cause the Company or the Issuer
Trust to be notified, on or prior to the Expiration Date, that it
is a Participating Broker-Dealer. Such notice may be given in the
space provided for that purpose in the Letter of Transmittal or may
be delivered to the Exchange Agent at one of the addresses set
forth herein under " Exchange Agent." Any Participating
Broker-Dealer who is an "affiliate" of the Company or the Issuer
Trust may not rely on such interpretive letters and must comply
with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
In that regard, each Participating Broker-Dealer who
surrenders Original Capital Securities pursuant to the Exchange
Offer will be deemed to have agreed, by execution of the Letter of
Transmittal, that upon receipt of notice from the Company or the
Issuer Trust of the occurrence of any event or the discovery of (i)
any fact which makes any statement contained or incorporated by
reference in this Prospectus untrue in any material respect or (ii)
any fact which causes this Prospectus to omit to state a material
fact necessary in order to make the statements contained or
incorporated by reference herein, in light of the circumstances
under which they were made, not misleading, or (iii) of the
occurrence of certain other events specified in the Registration
Rights Agreement, such Participating Broker-Dealer will suspend the
sale of Exchange Capital Securities (or the Exchange Guarantee or
the Exchange Junior Subordinated Debentures, as applicable)
pursuant to this Prospectus until the Company or the Issuer Trust
has amended or supplemented this Prospectus to correct such
misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such Participating Broker-Dealer, or the
Company or the Issuer Trust has given notice that the sale of the
Exchange Capital Securities (or the Exchange Guarantee or the
Exchange Junior Subordinated Debentures, as applicable) may be
resumed, as the case may be. If the Company or the Issuer Trust
gives such notice to suspend the sale of the Exchange Capital
Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable), it shall extend the
180-day period referred to above during which Participating
Broker-Dealers are entitled to use this Prospectus in connection
with the resale of Exchange Capital Securities by the number of
days during the period from and including the date of the giving of
such notice to and including the date when Participating
Broker-Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the Exchange
Capital Securities or to and including the date on which the
Company or the Issuer Trust has given notice that the sale of
Exchange Capital Securities (or the Exchange Guarantee or the
Exchange Junior Subordinated Debentures, as applicable) may be
resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Original
Capital Securities may be withdrawn at any time on or prior to the
Expiration Date. In order for a withdrawal to be effective a
written, telegraphic, telex or facsimile transmission of such
notice of withdrawal must be timely received by the Exchange Agent
at one of its addresses set forth under " Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must
specify the name of the person who tendered the Original Capital
Securities to be withdrawn, the aggregate principal amount of
Original Capital Securities to be withdrawn, and (if certificates
for such Original Capital Securities have been tendered) the name
of the registered holder of the Original Capital Securities as set
forth on the Original Capital Securities, if different from that of
the person who tendered such Original Capital Securities. If
Original Capital Securities have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical
release of such Original Capital Securities, the tendering holder
must submit the serial numbers shown on the particular Original
Capital Securities to be withdrawn and the signature on the notice
of withdrawal must be guaranteed by an Eligible Institution, except
in the case of Original Capital Securities tendered for the account
of an Eligible Institution. If Original Capital Securities have
been tendered pursuant to the procedures for book-entry transfer
set forth in " Procedures for Tendering Original Capital
Securities," the notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawal of
Original Capital Securities, in which case a notice of withdrawal
will be effective if delivered to the Exchange Agent by written,
telegraphic, telex or facsimile transmission. Withdrawals of
tenders of Original Capital Securities may not be rescinded.
Original Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be
retendered at any subsequent time on or prior to the Expiration
Date by following any of the procedures described above under "
Procedures for Tendering Original Capital Securities."
All questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices will be
determined by the Issuer Trust, in its sole discretion, whose
determination shall be final and binding on all parties. Neither
the Company, the Issuer Trust, any affiliates or assigns of the
Company or the Issuer Trust, the Exchange Agent nor any other
person shall be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability
for failure to give any such notification. Any Original Capital
Securities which have been tendered but which are withdrawn will be
returned to the holder thereof promptly after withdrawal.
DISTRIBUTIONS ON EXCHANGE CAPITAL SECURITIES
Holders of Original Capital Securities whose Original Capital
Securities are accepted for exchange will not receive Distributions
on such Original Capital Securities and will be deemed to have
waived the right to receive any Distributions on such Original
Capital Securities accumulated from and after October 15, 1997.
Accordingly, holders of Exchange Capital Securities as of the
record date for the payment of Distributions on January 15, 1998
will be entitled to receive Distributions accumulated from and
after October 15, 1997.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or
any extension of the Exchange Offer, the Company and the Issuer
Trust will not be required to accept for exchange, or to exchange,
any Original Capital Securities for any Exchange Capital
Securities, and, as described below, may terminate the Exchange
Offer (whether or not any Original Capital Securities have
theretofore been accepted for exchange) or may waive any conditions
to or amend the Exchange Offer, if any of the following conditions
have occurred or exists or have not been satisfied:
(a) there shall occur a change in the current interpretation
by the staff of the Commission which permits the Exchange Capital
Securities issued pursuant to the Exchange Offer in exchange for
Original Capital Securities to be offered for resale, resold and
otherwise transferred by holders thereof (other than broker-dealers
and any such holder which is an "affiliate" of the Company or the
Issuer Trust within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such
Exchange Capital Securities are acquired in the ordinary course of
such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of
such Exchange Capital Securities; or
(b) any law, statute, rule or regulation shall have been
adopted or enacted which, in the judgment of the Company or the
Issuer Trust, would reasonably be expected to impair its ability to
proceed with the Exchange Offer; or
(c) a stop order shall have been issued by the Commission or
any state securities authority suspending the effectiveness of the
Registration Statement, or proceedings shall have been initiated
or, to the knowledge of the Company or the Issuer Trust, threatened
for that purpose, or any governmental approval has not been
obtained, which approval the Company or the Issuer Trust shall, in
its sole discretion, deem necessary for the consummation of the
Exchange Offer as contemplated hereby; or
(d) the Company shall receive an opinion of counsel
experienced in such matters to the effect that there is more than
an insubstantial risk that consummation of the Exchange Offer would
result in interest payable to the Issuer Trust on the Junior
Subordinated Debentures being not deductible by the Company for
United States federal income tax purposes.
If the Company or the Issuer Trust determines in its sole and
absolute discretion that any of the foregoing events or conditions
has occurred or exists or has not been satisfied, it may, subject
to applicable law, terminate the Exchange Offer (whether or not any
Original Capital Securities have theretofore been accepted for
exchange) or may waive any such condition or otherwise amend the
terms of the Exchange Offer in any respect. If such waiver or
amendment constitutes a material change to the Exchange Offer, the
Company or the Issuer Trust will promptly disclose such waiver or
amendment by means of a prospectus supplement that will be
distributed to the registered holders of the Original Capital
Securities and will extend the Exchange Offer to the extent
required by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
The First National Bank of Chicago has been appointed as
Exchange Agent for the Exchange Offer. Delivery of the Letters of
Transmittal and any other required documents, questions, requests
for assistance, and requests for additional copies of this
Prospectus or of the Letter of Transmittal should be directed to
the Exchange Agent as follows:
By Mail: Facsimile By Hand or
(Registered or Transmissions: Overnight
Certified Mail (Eligible Delivery:
recommended) Institutions Only) The First National
The First National (212) 240-8938 Bank of Chicago
Bank of Chicago c/o First Chicago
c/o First Chicago To Confirm by Trust Company of New
Trust Telephone York
Company of New York or for Information 14 Wall Street
14 Wall Street Call: (212) 240-8801 8th Floor, Window 2
8th Floor, Window 2 New York, New York
New York, New York 10005
10005
Delivery to other than the above addresses or facsimile number
will not constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable
and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection therewith. The
Company will also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and
related documents to the beneficial owners of Original Capital
Securities, and in handling or tendering for their customers.
Holders who tender their Original Capital Securities for
exchange will not be obligated to pay any transfer taxes in
connection therewith. If, however, Exchange Capital Securities are
to be delivered to, or are to be issued in the name of, any person
other than the registered holder of the Original Capital Securities
tendered, or if a transfer tax is imposed for any reason other than
the exchange of Original Capital Securities in connection with the
Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
Neither the Company nor the Issuer Trust will make any payment
to brokers, dealers or other nominees soliciting acceptances of the
Exchange Offer.
DESCRIPTION OF EXCHANGE SECURITIES
The terms of the Original Securities are identical in all
materials respects to the Exchange Securities, except that (i) the
Original Securities have not been registered under the Securities
Act, are subject to certain restrictions on transfer and are
entitled to certain rights under the applicable Registration Rights
Agreement (which rights will terminate upon consummation of the
Exchange Offer, except under limited circumstances), (ii) the
Exchange Capital Securities will not contain the restrictions on
transfer applicable to Original Capital Securities, (iii) the
Exchange Capital Securities will not provide for any increase in
the Distribution rate thereon and (iv) the Exchange Junior
Subordinated Debentures will not provide for any increase in the
interest rate thereon. The Original Securities provide that, in the
event that a registration statement relating to the Exchange Offer
has not been filed by October 13, 1997 and been declared effective
by December 12, 1997, or, in certain limited circumstances, in the
event a shelf registration statement (the "Shelf Registration
Statement") with respect to the resale of the Original Capital
Securities is not declared effective by the time required by the
Registration Rights Agreement, then liquidated damages will accrue
at the rate of 0.25% per annum on the principal amount of the
Original Junior Subordinated Debentures and Distributions will
accrue at the rate of 0.25% per annum on the Liquidation Amount of
the Original Capital Securities, for the period from the occurrence
of such event until such time as such registration statement has
been filed or declared effective, as the case may be. The Exchange
Securities are not, and upon consummation of the Exchange Offer the
Original Securities will not be, entitled to any such additional
interest or Distributions. Accordingly, holders of Original Capital
Securities should review the information set forth under "Risk
Factors Consequences of a Failure to Exchange Original Capital
Securities" and "Description of Exchange Securities."
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES
The Exchange Capital Securities will represent preferred
beneficial interests in the Issuer Trust and the holders thereof
will be entitled to a preference over the Common Securities in
certain circumstances with respect to Distributions and amounts
payable on redemption of the Trust Securities or liquidation of the
Issuer Trust. See " Subordination of Common Securities." The Trust
Agreement has been qualified under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act"). This summary of certain
provisions of the Exchange Capital Securities, the Common
Securities and the Trust Agreement does not purport to be complete
and is subject to, and is qualified in its entirety by reference
to, all the provisions of the Trust Agreement, including the
definitions therein of certain terms.
Whenever particular defined terms of the Trust Agreement (as
amended or supplemented from time to time) are referred to herein,
such defined terms are incorporated herein by reference. The Trust
Agreement is available upon request from the Issuer Trustees.
General. The Exchange Capital Securities will be limited to
$110,000,000 aggregate Liquidation Amount outstanding. The Exchange
Capital Securities will rank pari passu, and payments will be made
thereon pro rata, with the Common Securities except as described
under " Subordination of Common Securities." Legal title to the
Junior Subordinated Debentures will be held by the Issuer Trust in
trust for the benefit of the holders of the Trust Securities. The
Exchange Guarantee Agreement executed by the Company for the
benefit of the holders of the Exchange Capital Securities will be a
guarantee on a subordinated basis with respect to the Exchange
Capital Securities but will not guarantee payment of Distributions
or amounts payable on redemption or liquidation of such Capital
Securities when the Issuer Trust does not have funds on hand
available to make such payments. See "Description of Exchange
Guarantee."
Distributions. The Exchange Capital Securities represent
undivided beneficial interests in the assets of the Issuer Trust,
and Distributions on each Exchange Capital Security will be payable
at a variable annual rate equal to LIBOR plus .91% on the stated
Liquidation Amount of $1,000, payable quarterly in arrears on
January 15, April 15, July 15, and October 15 of each year (each a
"Distribution Date"), to the holders of the Exchange Capital
Securities at the close of business on the January 1, April 1, July
1, and October 1, as the case may be, next preceding the relevant
Distribution Date. Distributions on the Exchange Capital Securities
will be cumulative. Distributions will accumulate from the date of
original issuance. The amount of Distributions payable for any
period will be computed on the basis of the actual number of days
in the applicable Distribution period (which actual number of days
shall include the first day but exclude the last day of such
Distribution period) divided by 360. In the event that any date on
which Distributions are payable on the Exchange Capital Securities
is not a Business Day (as defined below), then payment of the
Distributions payable on such date will be made on the next
succeeding day that is a Business Day (and without any additional
Distributions or other payment in respect of any such delay),
except if such Business Day is in the next calendar year, such
payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date
such payment was originally payable.
So long as no Event of Default under the Junior Subordinated
Indenture has occurred and is continuing, the Company has the right
under the Junior Subordinated Indenture to defer the payment of
interest on the Exchange Junior Subordinated Debentures at any time
or from time to time for a period not exceeding 20 consecutive
quarterly periods with respect to each Extension Period, provided
that no Extension Period may extend beyond the Stated Maturity of
the Exchange Junior Subordinated Debentures. As a consequence of
any such election, quarterly Distributions on the Exchange Capital
Securities will be deferred by the Issuer Trust during any such
Extension Period. Distributions to which holders of the Exchange
Capital Securities are entitled will accumulate additional
Distributions thereon at the rate per annum equal to LIBOR plus
.91% on the stated Liquidation Amount of $1,000 thereof, compounded
quarterly from the relevant payment date for such Distributions.
The term "Distributions" as used herein shall include any such
additional Distributions. During any such Extension Period, the
Company may not, and may not permit any subsidiary of the Company
to (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to,
any of the Company's capital stock, (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or
redeem any debt securities of the Company that rank pari passu in
all respects with or junior in interest to the Exchange Junior
Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Company of the debt securities of
any subsidiary of the Company if such guarantee ranks pari passu
with or junior in interest to the Exchange Junior Subordinated
Debentures (other than (a) dividends or distributions in common
stock of the Company, (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee and (d) purchases of common stock
related to the issuance of common stock or rights under any of the
Company's or its subsidiaries' benefit plans for their directors,
officers or employees). Prior to the termination of any such
Extension Period, the Company may further defer the payment of
interest, provided that no Extension Period may exceed 20
consecutive quarterly periods or extend beyond the Stated Maturity
of the Exchange Junior Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all
amounts then due, the Company may elect to begin a new Extension
Period. There is no limitation on the number of times that the
Company may elect to begin an Extension Period. See "Description of
Exchange Junior Subordinated Debentures Option To Extend Interest
Payment Period" and "Certain Federal Income Tax Consequences
Interest Income and Original Issue Discount."
The Company has no current intention of exercising its right
to defer payments of interest by extending the interest payment
period on the Exchange Junior Subordinated Debentures.
The revenue of the Issuer Trust available for distribution to
holders of the Exchange Capital Securities will be limited to
payments under the Exchange Junior Subordinated Debentures in which
the Issuer Trust will invest the proceeds from the issuance and
sale of the Capital Securities. See "Description of Exchange Junior
Subordinated Debentures." If the Company does not make interest
payments on the Junior Subordinated Debentures, the Issuer Trust
will not have funds available to pay Distributions on the Capital
Securities. The payment of Distributions (if and to the extent the
Issuer Trust has funds legally available or the payment of such
Distributions and cash sufficient to make such payments) is
guaranteed by the Company on a limited basis as set forth herein
under "Description of Exchange Guarantee."
Distribution Rate. LIBOR and the amount of Distributions
payable in respect of each Distribution period will be calculated
by First Chicago as Calculation Agent, in the same manner as LIBOR
and the interest payable in respect of each interest payment period
for the Exchange Junior Subordinated Debentures, as described under
"Description of Exchange Junior Subordinated Debentures
Determination of Interest Rate."
Redemption. Upon the repayment or redemption, in whole or in
part, of the Junior Subordinated Debentures, whether at maturity or
upon earlier redemption as provided in the Junior Subordinated
Indenture, the proceeds from such repayment or redemption shall be
applied by the Property Trustee to redeem a Like Amount (as defined
below) of the Trust Securities, upon not less than 30 nor more than
60 days' notice, at a redemption price (the "Redemption Price")
equal to the aggregate Liquidation Amount of such Trust Securities
plus accumulated but unpaid Distributions thereon to the date of
redemption (the "Redemption Date"). See "Description of Exchange
Junior Subordinated Debentures Redemption." If less than all of the
Junior Subordinated Debentures are to be repaid or redeemed on a
Redemption Date, then the proceeds from such repayment or
redemption shall be allocated to the redemption pro rata of the
Capital Securities and the Common Securities. The amount of
premium, if any, paid by the Company upon the redemption of all or
any part of Junior Subordinated Debentures to be repaid or redeemed
on a Redemption Date shall be allocated to the redemption pro rata
of the Capital Securities and the Common Securities.
The Company has the right to redeem the Junior Subordinated
Debentures (i) on or after July 15, 2007, in whole at any time or
in part from time to time, or (ii) in whole (but not in part) prior
to July 15, 2007 and within 90 days following the occurrence of a
Tax Event. A redemption of the Junior Subordinated Debentures would
cause a mandatory redemption of the Capital Securities and Common
Securities.
"Business Day" means a day other than (i) a Saturday or a
Sunday, (ii) a day on which banking institutions in The City of New
York are authorized by law or executive order to remain closed, or
(iii) a day on which the Property Trustee's corporate trust office
or the corporate trust office of the Debenture Trustee is closed
for business.
"Like Amount" means (i) with respect to a redemption of
Capital Securities, Capital Securities having a Liquidation Amount
(as defined below) equal to that portion of the principal amount of
Junior Subordinated Debentures to be contemporaneously redeemed in
accordance with the Junior Subordinated Debentures, allocated to
the Common Securities and to the Capital Securities based upon the
relative Liquidation Amounts of such classes and the proceeds of
which will be used to pay the Redemption Price of the Capital
Securities and (ii) with respect to a distribution of Junior
Subordinated Debentures to holders of Capital Securities in
connection with a dissolution or liquidation of the Issuer Trust,
Junior Subordinated Debentures having a principal amount equal to
the Liquidation Amount of the Capital Securities of the holder to
whom such Junior Subordinated Debentures are distributed.
"Liquidation Amount" means the stated amount of $1,000 per
Capital Security.
Payment of Additional Sums. In the event a Tax Event has
occurred and is continuing and the Issuer Trust is the holder of
all of the Junior Subordinated Debentures, the Company will pay
Additional Sums (as defined below), if any, on the Junior
Subordinated Debentures.
"Additional Sums" means the additional amounts as may be
necessary in order that the amount of Distributions then due and
payable by the Issuer Trust on the outstanding Capital Securities
and Common Securities of the Issuer Trust shall not be reduced as a
result of any additional taxes, duties and other governmental
charges to which the Issuer Trust has become subject as a result of
a Tax Event.
Redemption Procedures. Exchange Capital Securities redeemed on
each Redemption Date shall be redeemed at the Redemption Price with
the applicable proceeds from the contemporaneous redemption of the
Exchange Junior Subordinated Debentures. Redemptions of the
Exchange Capital Securities shall be made and the Redemption Price
shall be payable on each Redemption Date only to the extent that
the Issuer Trust has funds on hand available for the payment of
such Redemption Price. See also " Subordination of Common
Securities."
If the Issuer Trust gives a notice of redemption in respect of
the Exchange Capital Securities, then, by 12:00 noon, New York City
time, on the Redemption Date, to the extent funds are available, in
the case of Exchange Capital Securities held in book-entry form,
the Property Trustee will deposit irrevocably with DTC funds
sufficient to pay the applicable Redemption Price and will give DTC
irrevocable instructions and authority to pay the Redemption Price
to the holders of the Exchange Capital Securities. With respect to
Exchange Capital Securities not held in book-entry form, the
Property Trustee, to the extent funds are available, will
irrevocably deposit with the paying agent for the Exchange Capital
Securities funds sufficient to pay the applicable Redemption Price
and will give such paying agent irrevocable instructions and
authority to pay the Redemption Price to the holders thereof upon
surrender of their certificates evidencing the Exchange Capital
Securities. Notwithstanding the foregoing, Distributions payable on
or prior to the Redemption Date for any Exchange Capital Securities
called for redemption shall be payable to the holders of the
Exchange Capital Securities on the relevant record dates for the
related Distribution Dates. If notice of redemption shall have been
given and funds deposited as required, then upon the date of such
deposit, all rights of the holders of such Exchange Capital
Securities so called for redemption will cease, except the right of
the holders of such Exchange Capital Securities to receive the
Redemption Price, but without interest on such Redemption Price,
and such Exchange Capital Securities will cease to be outstanding.
In the event that any date fixed for redemption of Exchange Capital
Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment
in respect of any such delay), except that, if such Business Day
falls in the next calendar year, such payment will be made on the
immediately preceding Business Day. In the event that payment of
the Redemption Price in respect of Exchange Capital Securities
called for redemption is improperly withheld or refused and not
paid either by the Issuer Trust or by the Company pursuant to the
Exchange Guarantee as described under "Description of Exchange
Guarantee," Distributions on such Exchange Capital Securities will
continue to accrue at the then applicable rate, from the Redemption
Date originally established by the Issuer Trust for such Exchange
Capital Securities to the date such Redemption Price is actually
paid, in which case the actual payment date will be the date fixed
for redemption for purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation,
United States federal securities law), the Company or its
subsidiaries may at any time and from time to time purchase
outstanding Capital Securities by tender, in the open market or by
private agreement.
If less than all of the Capital Securities and Common
Securities are to be redeemed on a Redemption Date, then the
aggregate Liquidation Amount of such Capital Securities and Common
Securities to be redeemed shall be allocated pro rata to the
Capital Securities and the Common Securities based upon the
relative Liquidation Amounts of such classes. The particular
Capital Securities to be redeemed shall be selected on a pro rata
basis not more than 60 days prior to the Redemption Date by the
Property Trustee from the outstanding Capital Securities not
previously called for redemption. The Property Trustee shall
promptly notify the trust registrar in writing of the Capital
Securities selected for redemption and, in the case of any Capital
Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of the Trust Agreement,
unless the context otherwise requires, all provisions relating to
the redemption of Capital Securities shall relate, in the case of
any Capital Securities redeemed or to be redeemed only in part, to
the portion of the aggregate Liquidation Amount of Capital
Securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but
not more than 60 days before the Redemption Date to each holder of
Capital Securities to be redeemed at its registered address. Unless
the Company defaults in payment of the Redemption Price on the
Junior Subordinated Debentures, on and after the Redemption Date
interest will cease to accrue on the Junior Subordinated Debentures
or portions thereof (and distributions will cease to accumulate on
the Capital Securities or portions thereof) called for redemption.
Conditional Right to Shorten Maturity or Redeem upon a Tax
Event. If a Tax Event occurs then the Company shall have the right,
prior to the termination of the Issuer Trust, (i) to shorten the
Stated Maturity of the Junior Subordinated Debentures to the
minimum extent required, but in any event to a date not earlier
than April 15, 2012 (the action referred to in this clause (i)
being referred to herein as a "Maturity Advancement"), such that,
in the opinion of counsel to the Company experienced in such
matters, after advancing the Stated Maturity, interest paid on the
Junior Subordinated Debentures will be deductible for federal
income tax purposes, or (ii) to redeem the Junior Subordinated
Debentures, in whole but not in part, at any time within 90 days
following the occurrence of the Tax Event at a Redemption Price
equal to 100% of the principal amount thereof plus accrued and
unpaid interest thereon to the Redemption Date. See "Description of
Exchange Capital Securities Redemption" and "Description of
Exchange Junior Subordinated Debentures General" and " Redemption".
Holders of Capital Securities should consult their own tax
advisors regarding the tax consequences to them of a Maturity
Advancement.
See "Certain Federal Tax Law Considerations--Possible Tax Law
Changes" and "Risk Factors--Tax Event Shortening of Maturity or
Redemption" and "--Possible Tax Law Changes Affecting the Capital
Securities" for a discussion of previous legislative proposals. The
adoption of similar legislation could give rise to a Tax Event,
which may permit the Company to shorten the Stated Maturity of the
Junior Subordinated Debentures or cause a redemption of the Capital
Securities prior to July 15, 2007.
Subordination of Common Securities. Payment of Distributions
on, and the Redemption Price of, the Issuer Trust's Capital
Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of such Capital Securities and
Common Securities; provided, however, that if on any Distribution
Date or Redemption Date a Debenture Event of Default shall have
occurred and be continuing, no payment of any Distribution on, or
Redemption Price of, any of the Common Securities, and no other
payment on account of the redemption, liquidation or other
acquisition of such Common Securities, shall be made unless payment
in full in cash of all accumulated and unpaid Distributions on all
of the outstanding Capital Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all of
the outstanding Capital Securities then called for redemption,
shall have been made or provided for, and all funds available to
the Property Trustee shall first be applied to the payment in full
in cash of all Distributions on, or Redemption Price of, the
Capital Securities then due and payable.
In the case of any Event of Default resulting from a Debenture
Event of Default, the Company as holder of the Common Securities
will be deemed to have waived any right to act with respect to any
such Event of Default under the Trust Agreement until the effect of
all such Events of Default with respect to such Capital Securities
have been cured, waived or otherwise eliminated. Until any such
Events of Default under the Trust Agreement with respect to the
Capital Securities have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the
holders of such Capital Securities and not on behalf of the Company
as holder of the Common Securities, and only the holders of such
Capital Securities will have the right to direct the Property
Trustee to act on their behalf.
Liquidation Distribution Upon Termination. The amount payable
on the Capital Securities in the event of any liquidation of the
Issuer Trust is $1,000 per Capital Security plus accumulated and
unpaid Distributions, which may be in the form of a distribution of
such amount in Junior Subordinated Debentures, subject to certain
exceptions.
The holders of all of the outstanding Common Securities have
the right at any time to terminate the Issuer Trust and, after
satisfaction of the liabilities of creditors of the Issuer Trust as
provided by applicable law, cause the Junior Subordinated
Debentures to be distributed to the holders of the Capital
Securities and Common Securities in liquidation of the Issuer
Trust, subject to (i) the Property Trustee having received an
opinion of counsel to the effect that such distribution will not be
a taxable event to holders of Capital Securities.
Pursuant to the Trust Agreement, the Issuer Trust shall
automatically terminate upon expiration of its term and shall
terminate on the first to occur of: (i) certain events of
bankruptcy, dissolution or liquidation of the Company; (ii) the
distribution of a Like Amount of the Junior Subordinated Debentures
to the holders of its Trust Securities, if the holders of Common
Securities have given written direction to the Property Trustee to
terminate the Issuer Trust (which direction, subject to the
foregoing restrictions, is optional and wholly within the
discretion of the holders of Common Securities); (iii) redemption
of all of the Capital Securities as described under "Description of
Exchange Capital Securities Redemption" or (iv) the entry of an
order for the dissolution of the Issuer Trust by a court of
competent jurisdiction.
If an early termination occurs as described in clause (i),
(ii) or (iv) above, the Issuer Trust shall be liquidated by the
Issuer Trustees as expeditiously as the Issuer Trustees determine
to be possible by distributing, after satisfaction of liabilities
to creditors of the Issuer Trust as provided by applicable law, to
the holders of such Trust Securities a Like Amount of the Junior
Subordinated Debentures, unless such distribution is determined by
the Property Trustee not to be practical, in which event such
holders will be entitled to receive out of the assets of the Issuer
Trust available for distribution to holders, after satisfaction of
liabilities to creditors of the Issuer Trust as provided by
applicable law, an amount equal to, in the case of holders of
Capital Securities, the aggregate of the Liquidation Amount plus
accumulated and unpaid Distributions thereon to the date of payment
(such amount being the "Liquidation Distribution"). If such
Liquidation Distribution can be paid only in part because the
Issuer Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable
directly by the Issuer Trust on its Capital Securities shall be
paid on a pro rata basis. The holder(s) of the Common Securities
will be entitled to receive distributions upon any such liquidation
pro rata with the holders of the Capital Securities, except that if
a Debenture Event of Default has occurred and is continuing, the
Capital Securities shall have a priority over the Common
Securities.
After the liquidation date fixed for any distribution of
Junior Subordinated Debentures (i) the Capital Securities will no
longer be deemed to be outstanding, (ii) DTC or its nominee, as the
record holder of the Capital Securities, will receive a registered
global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution with
respect to Capital Securities held by DTC or its nominee and (iii)
any certificates representing the Capital Securities not held by
DTC or its nominee will be deemed to represent the Junior
Subordinated Debentures having a principal amount equal to the
stated Liquidation Amount of the Capital Securities and bearing
accrued and unpaid interest in an amount equal to the accumulated
and unpaid Distributions on the Capital Securities until such
certificates are presented to the Security Registrar for transfer
or reissuance.
If the Company does not redeem the Junior Subordinated
Debentures prior to maturity and the Issuer Trust is not liquidated
and the Junior Subordinated Debentures are not distributed to
holders of the Capital Securities, the Capital Securities will
remain outstanding until the repayment of the Junior Subordinated
Debentures.
There can be no assurance as to the market prices for the
Capital Securities or the Junior Subordinated Debentures that may
be distributed in exchange for Capital Securities if a dissolution
and liquidation of the Issuer Trust were to occur. Accordingly, the
Capital Securities that an investor may purchase, or the Junior
Subordinated Debentures that the investor may receive on
dissolution and liquidation of the Issuer Trust, may trade at a
discount to the price that the investor paid to purchase the
Capital Securities offered hereby.
Events of Default; Notice. Any one of the following events
constitutes an "Event of Default" under the Trust Agreement (an
"Event of Default") with respect to the Capital Securities
(whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body):
(i) the occurrence of a Debenture Event of Default under the
Exchange Junior Subordinated Indenture (see "Description of
Exchange Junior Subordinated Debentures Debenture Events of
Default"); or
(ii) default by the Issuer Trust in the payment of any
Distribution when it becomes due and payable, and continuation of
such default for a period of 30 days (subject to the deferral of
any due date in the case of an Extension Period); or
(iii) default by the Issuer Trust in the payment of any
Redemption Price of any Trust Security when it becomes due and
payable; or
(iv) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Issuer Trustees in the
Trust Agreement (other than a covenant or warranty a default in the
performance of which or the breach of which is dealt with in clause
(ii) or (iii) above), and continuation of such default or breach
for a period of 90 days after there has been given, by registered
or certified mail, to the Issuer Trustees by the holders of at
least 25% in aggregate Liquidation Amount of the outstanding
Capital Securities a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice
is a "Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or
insolvency with respect to the Property Trustee if a successor
Property Trustee has not been appointed within 90 days thereof.
Within five Business Days after the occurrence of any Event of
Default actually known to the Property Trustee, the Property
Trustee shall transmit notice of such Event of Default to the
holders of Trust Securities and the Administrators, unless such
Event of Default shall have been cured or waived. The Company, as
Depositor, and the Administrators are required to file annually
with the Property Trustee a certificate as to whether or not they
are in compliance with all the conditions and covenants applicable
to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is
continuing, the Capital Securities shall have a preference over the
Common Securities upon termination of the Issuer Trust as described
above. See " Liquidation Distribution Upon Termination." The
existence of an Event of Default does not entitle the holders of
Capital Securities to accelerate the maturity thereof.
Removal of Issuer Trustees; Appointment of Successors. The
holders of a majority in Liquidation Amount of Capital Securities
may remove an Issuer Trustee for cause or, if an Event of Default
has occurred and is continuing, with or without cause. Unless an
Event of Default described in (i), (ii) or (iii) of the definition
thereof or an event which with notice and/or lapse of time would
constitute such an Event of Default (collectively, an "Issuer Trust
Default") shall have occurred and be continuing, any Issuer Trustee
may be removed at any time by the holder of the Common Securities.
If an Issuer Trustee shall resign, be removed by the holder of
Common Securities or the holder of Capital Securities, become
incapable of acting as trustee, or if a vacancy shall occur in the
office of any Issuer Trustee for any cause, (i) if an Issuer Trust
Default has not occurred, or has occurred and is not continuing,
the holder of the Common Securities, or (ii) if an Issuer Trust
Default has occurred and is continuing, the applicable Issuer
Trustee (unless a Debenture Event of Default has occurred and is
continuing), or the holders of at least 25% in Liquidation Amount
of Capital Securities, shall appoint a successor. If a successor
has not been appointed, any holder of Capital Securities or Common
Securities or the Property Trustee may petition a court in the
State of Delaware to appoint a successor. Any Delaware Trustee must
meet the applicable requirements of Delaware law. Any Property
Trustee must be a national or state-chartered bank and at the time
of appointment have capital and surplus of at least $50,000,000. No
resignation or removal of an Issuer Trustee and no appointment of a
successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the
provisions of the Trust Agreement.
Merger or Consolidation of Issuer Trustees. Any entity into
which the Property Trustee or the Delaware Trustee may be merged or
converted or with which it may be consolidated, or any entity
resulting from any merger, conversion or consolidation to which
such Trustee shall be a party, or any entity succeeding to all or
substantially all the corporate trust business of such Trustee,
shall be the successor of such Trustee under the Trust Agreement,
provided such entity shall be otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the
Issuer Trust. The Issuer Trust may not merge with or into,
consolidate, amalgamate, or be replaced by, or convey, transfer or
lease its properties and assets substantially as an entirety, to
any entity, except as described below or as otherwise set forth in
the Trust Agreement. The Issuer Trust may, at the request of the
holder of the Common Securities and with the consent of the
Administrative Trustees, but without the consent of the holders of
the outstanding Trust Securities, merge with or into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust
organized as such under the laws of any State; provided, that (i)
such successor entity either (a) expressly assumes all of the
obligations of the Issuer Trust with respect to the Capital
Securities or (b) substitutes for the Capital Securities other
securities having substantially the same terms as the Capital
Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Capital Securities rank in priority
with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) a trustee of such successor entity
is appointed possessing the same powers and duties as the Property
Trustee as the holder of the Junior Subordinated Debentures, (iii)
such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Capital Securities (including
any Successor Securities) to be downgraded by any nationally
recognized statistical rating organization, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and
privileges of the holders of the Capital Securities (including any
Successor Securities) in any material respect, (v) such successor
entity has a purpose substantially identical to that of the Issuer
Trust, (vi) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Issuer Trust has
received an opinion from independent counsel experienced in such
matters to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the
holders of the Capital Securities (including any Successor
Securities) in any material respect and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or
lease, neither the Issuer Trust nor such successor entity will be
required to register as an investment Company under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), and
(vii) the Company or any permitted successor or assignee owns all
of the common securities of such successor entity and guarantees
the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Issuer Trust shall not, except
with the consent of each holder of Capital Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets substantially as an
entirety to any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease would cause the Issuer Trust or the successor
entity to be classified as other than a grantor trust for United
States federal income tax purposes.
Voting Rights; Amendment of Trust Agreement. Except as
provided below and under "Description of Exchange Guarantee--
Amendments and Assignment" and as otherwise required by law and the
Trust Agreement, the holders of the Capital Securities will have no
voting rights.
The Trust Agreement may be amended from time to time by the
holders of a majority of the Common Securities and the Property
Trustee, without the consent of the holders of the Capital
Securities (i) to cure any ambiguity, correct or supplement any
provisions in the Trust Agreement that may be inconsistent with any
other provision, or to make any other provisions with respect to
matters or questions arising under the Trust Agreement, which shall
not be inconsistent with the other provisions of the Trust
Agreement, or (ii) to modify, eliminate or add to any provisions of
the Trust Agreement to such extent as shall be necessary to ensure
that the Issuer Trust will be classified for United States federal
income tax purposes as a grantor trust at all times that any Trust
Securities are outstanding or to ensure that the Issuer Trust will
not be required to register as an "investment company" under the
Investment Company Act; provided, however, such action shall not
adversely affect in any material respect the interests of any
holder of Trust Securities, and any amendments of the Trust
Agreement shall become effective when notice thereof is given to
the holders of Trust Securities. The Trust Agreement may be amended
by the holders of a majority of the Common Securities and the
Property Trustee with (i) the consent of holders representing not
less than a majority (based upon Liquidation Amounts) of the
outstanding Capital Securities and (ii) receipt by the Issuer
Trustees of an opinion of counsel to the effect that such amendment
or the exercise of any power granted to the Issuer Trustees in
accordance with such amendment will not affect the Issuer Trust's
status as a grantor trust for United States federal income tax
purposes or the Issuer Trust's exemption from status as an
"investment company" under the Investment Company Act.
Notwithstanding the foregoing, without the consent of each holder
of Trust Securities, the Trust Agreement may not be amended to (i)
change the amount or timing of any Distribution on the Trust
Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Trust Securities
as of a specified date or (ii) restrict the right of a holder of
Trust Securities to institute suit for the enforcement of any such
payment on or after such date. The Exchange Capital Securities and
any Original Capital Securities which remain outstanding after
consummation of the Exchange Offer will vote together as a single
class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken
certain actions or exercised certain rights under the Trust
Agreement.
So long as any Junior Subordinated Debentures are held by the
Issuer Trust, the Issuer Trustees shall not (i) direct the time,
method and place of conducting any proceeding for any remedy
available to the Debenture Trustee, or executing any trust or power
conferred on the Property Trustee with respect to the Junior
Subordinated Debentures, (ii) waive any past default that is
waivable under Section 5.13 of the Junior Subordinated Indenture,
(iii) exercise any right to rescind or annul a declaration that the
principal of all the Junior Subordinated Debentures shall be due
and payable or (iv) consent to any amendment, modification or
termination of the Junior Subordinated Indenture or the Junior
Subordinated Debentures, where such consent shall be required,
without, in each case, obtaining the prior approval of the holders
of a majority in aggregate Liquidation Amount of all outstanding
Capital Securities; provided, however, that where a consent under
the Junior Subordinated Indenture would require the consent of each
holder of Junior Subordinated Debentures affected thereby, no such
consent shall be given by the Property Trustee without the prior
consent of each holder of the Capital Securities. The Issuer
Trustees shall not revoke any action previously authorized or
approved by a vote of the holders of the Capital Securities except
by subsequent vote of the holders of the Capital Securities. The
Property Trustee shall notify each holder of Capital Securities of
any notice of default with respect to the Junior Subordinated
Debentures. In addition to obtaining the foregoing approvals of the
holders of the Capital Securities, prior to taking any of the
foregoing actions, the Issuer Trustees shall obtain an opinion of
counsel experienced in such matters to the effect that the Issuer
Trust will not be classified as an association taxable as a
corporation for United States federal income tax purposes on
account of such action.
Any required approval of holders of Exchange Capital
Securities may be given at a meeting of holders of Exchange Capital
Securities convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at
which holders of Exchange Capital Securities are entitled to vote,
or of any matter upon which action by written consent of such
holders is to be taken, to be given to each holder of record of
Exchange Capital Securities in the manner set forth in the Trust
Agreement.
No vote or consent of the holders of Capital Securities will
be required to redeem and cancel Capital Securities in accordance
with the Trust Agreement.
Notwithstanding that holders of Capital Securities are
entitled to vote or consent under any of the circumstances
described above, any of the Capital Securities that are owned by
the Company, the Issuer Trustees or any affiliate of the Company or
any Issuer Trustee shall, for purposes of such vote or consent, be
treated as if they were not outstanding.
Form, Denomination, Book-Entry Procedures and Transfer. The
Exchange Capital Securities initially will be represented by one or
more Capital Securities in registered, global form (collectively,
the "Global Capital Securities"). The Global Capital Securities
will be deposited upon issuance with the Property Trustee as
custodian for DTC, in New York, New York, and registered in the
name of DTC or its nominee, in each case for credit to an account
of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global Capital Securities may
be transferred, in whole and not in part, only to another nominee
of DTC or to a successor of DTC or its nominee, and such transfer
shall be effective only when reflected in the securities register
maintained by or on behalf of the Issuer Trust. Beneficial
interests in the Global Capital Securities may not be exchanged for
Capital Securities in certificated form except in the limited
circumstances described below. See " Exchange of Book-Entry Capital
Securities for Certificated Capital Securities".
Other Capital Securities will be issued only in registered,
certificated (i.e., non-global) form. Other Capital Securities may
not be exchanged for beneficial interests in any Global Capital
Securities except in the limited circumstances described below. See
" Exchange of Certificated Capital Securities for Book-Entry
Capital Securities".
Depositary Procedures. DTC has advised the Issuer Trust and
the Company that DTC is a limited-purpose trust Company created to
hold securities for its participating organizations (collectively.
the "Participants") and to facilitate the clearance and settlement
of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The
Participants include securities brokers and dealers (including the
Initial Purchasers), banks, trust companies, clearing Corporations
and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, and trust
companies that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The
ownership and transfer of ownership interest of each actual
purchaser of each security held by or on behalf of DTC are recorded
on the records of the Participants and Indirect Participants.
DTC has also advised the Issuer Trust and the Company that,
pursuant to procedures established by it, (i) upon deposit of the
Global Capital Securities, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of
the Liquidation Amount of the Global Capital Securities and (ii)
ownership of such interests in the Global Capital Securities will
be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants
(with respect to other owners of beneficial interests in the Global
Capital Securities).
Investors in the Global Capital Securities may hold their
interests directly through DTC if they are participants in such
system, or indirectly through organizations which are participants
in such system. All interests in a Global Capital Security may be
subject to the procedures and requirements of DTC. The laws of some
states require that certain persons take physical delivery in
certificated form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Capital
Security to such persons will be limited to that extent. Because
DTC can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a
person having beneficial interests in a Global Capital Security to
pledge such interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect
of such interests, may be affected by the lack of a physical
certificate evidencing such interests. For certain other
restrictions on the transferability of the Capital Securities, see
" Exchange of Book-Entry Capital Securities for Certificated
Capital Securities" and " Exchange of Certificated Capital
Securities for Book-Entry Capital Securities".
Except as described below, owners of interests in the Global
Capital Securities will not have Capital Securities registered in
their name, will not receive physical delivery of Capital
Securities in certificated form and will not be considered the
registered owners or holders thereof under the Issuer Trust
Agreement for any purpose.
Payments in respect of the Global Capital Security registered
in the name of DTC or its nominee will be payable by the Property
Trustee to DTC in its capacity as the registered holder under the
Trust Agreement. Under the terms of the Trust Agreement, the
Property Trustee will treat the persons in whose names the Capital
Securities, including the Global Capital Securities, are registered
as the owners thereof for the purpose of receiving such payments
and for any and all other purposes whatsoever. Consequently,
neither the Property Trustee nor any agent thereof has or will have
any responsibility or liability for (i) any aspect of DTC's records
or any Participant's or Indirect Participant's records relating to
or payments made on account of beneficial ownership interests in
the Global Capital Securities, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership
interests in the Global Capital Securities or (ii) any other matter
relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Issuer
Trust and the Company that its current practice, upon receipt of
any payment in respect of securities such as the Capital
Securities, is to credit the accounts of the relevant Participants
with the payment on the payment date, in amounts proportionate to
their respective holdings in Liquidation Amount of beneficial
interests in the relevant security as shown on the records of DTC
unless DTC has reason to believe it will not receive payment on
such payment date. Payments by the Participants and the Indirect
Participants to the beneficial owners of Capital Securities will be
governed by standing instructions and customary practices and will
be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the
Property Trustee, the Issuer Trust or the Company. Neither the
Issuer Trust or the Company nor the Property Trustee will be liable
for any delay by DTC or any of its Participants in identifying the
beneficial owners of the Capital Securities, and the Issuer Trust
or the Company and the Property Trustee may conclusively rely on
and will be protected in relying on instructions from DTC or its
nominee for all purposes.
Secondary market trading activity in interests in the Global
Capital Securities will settle in immediately available funds,
subject in all cases to the rules and procedures of DTC and its
participants. Transfers between Participants in DTC will be
effected in accordance with DTC's procedures, and will be settled
in same-day funds.
DTC has advised the Issuer Trust and the Company that it will
take any action permitted to be taken by a holder of Capital
Securities only at the direction of one or more Participants to
whose account with DTC interests in the Global Capital Securities
are credited and only in respect of such portion of the Liquidation
Amount of the Capital Securities as to which such Participant or
Participants has or have given such direction. However, if there is
an Event of Default under the Trust Agreement, DTC reserves the
right to exchange the Global Capital Securities for legended
Capital Securities in certificated form and to distribute such
Capital Securities to its Participants.
The information in this section concerning DTC and its book-
entry systems has been obtained from sources that the Issuer Trust
and the Company believe to be reliable, but neither the Issuer
Trust nor the Company takes responsibility for the accuracy
thereof.
Although DTC has agreed to the foregoing procedures to
facilitate transfers of interest in the Global Capital Securities
among participants in DTC, they are under no obligation to perform
or to continue to perform such procedures, and such procedures may
be discontinued at any time. Neither the Issuer Trust or the
Company nor the Property Trustee will have any responsibility for
the performance by DTC or its participants or indirect participants
of their respective obligations under the rules and procedures
governing their operations.
Exchange of Book-Entry Capital Securities for Certificated
Capital Securities. A Global Capital Security is exchangeable for
Exchange Capital Securities in registered certificated form if (i)
DTC (x) notifies the Issuer Trust that it is unwilling or unable to
continue as Depositary for the Global Capital Security and the
Issuer Trust thereupon fails to appoint a successor Depositary
within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) the Company in its sole discretion
elects to cause the issuance of the Exchange Capital Securities in
certificated form or (iii) there shall have occurred and be
continuing an Event of Default or any event which after notice or
lapse of time or both would be an Event of Default under the Trust
Agreement. In all cases, certificated Capital Securities delivered
in exchange for any Global Capital Security or beneficial interests
therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depositary (in
accordance with its customary procedures).
Exchange of Certificated Capital Securities for Book-Entry
Capital Securities. Other Capital Securities, which will be issued
in certificated form, may not be exchanged for beneficial interests
in any Global Capital Security unless such exchange occurs in
connection with a transfer of such Other Capital Securities and the
transferor first delivers to the Property Trustee a written
certificate (in the form provided in the Trust Agreement) to the
effect that such transfer will comply with the appropriate transfer
restrictions applicable to such Capital Securities.
Payment and Paying Agency. Payments in respect of the Exchange
Capital Securities shall be made to DTC, which shall credit the
relevant accounts at DTC on the applicable Distribution Dates or,
if the Issuer Trust's Exchange Capital Securities are not held by
DTC, such payments may be made, at the option of the Company, by
check mailed to the address of the holder entitled thereto as such
address shall appear on the Security Register or by wire transfer.
The paying agent (the "Paying Agent") shall initially be the
Property Trustee and any co-paying agent chosen by the Property
Trustee and acceptable to the Administrators. The Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written
notice to the Property Trustee and the Administrators. In the event
that the Property Trustee shall no longer be the Paying Agent, the
Company, or if an Issuer Trust Default shall have occurred and be
continuing, the Property Trustee shall appoint a successor (which
shall be a bank or trust Company reasonably acceptable to the
Administrators) to act as Paying Agent.
First Chicago has informed the Issuer Trust that so long as it
serves as paying agent for the Exchange Capital Securities, it
anticipates that information regarding Distributions on the Capital
Securities, including payment date, record date and redemption
information, will be made available through First Chicago.
Registrar and Transfer Agent. The Property Trustee will act as
registrar and transfer agent for the Capital Securities.
Registration of transfers of Capital Securities will be
effected without charge by or on behalf of the Issuer Trust, but
upon payment of any tax or other governmental charges that may be
imposed in connection with any transfer or exchange. The Issuer
Trust will not be required to register or cause to be registered
the transfer of its Capital Securities after such Capital
Securities have been called for redemption.
Information Concerning the Property Trustee. The Property
Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are
specifically set forth in the Trust Agreement and, after such Event
of Default, must exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her
own affairs. Subject to this provision, the Property Trustee is
under no obligation to exercise any of the powers vested in it by
the Trust Agreement at the request of any holder of Capital
Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If
no Event of Default has occurred and is continuing and the Property
Trustee is required to decide between alternative courses of
action, construe ambiguous provisions in the Trust Agreement or is
unsure of the application of any provision of the Trust Agreement,
and the matter is not one on which holders of Capital Securities
are entitled under the Trust Agreement to vote, then the Property
Trustee shall take such action as it deems advisable and in the
best interests of the holders of the Trust Securities and will have
no liability except for its own bad faith, negligence or willful
misconduct.
For information concerning the relationship between First
Chicago, the Property Trustee, and the Company, see "Description of
Exchange Junior Subordinated Debentures Information Concerning the
Debenture Trustee."
Miscellaneous. The Administrators and the Property Trustee are
authorized and directed to conduct the affairs of and to operate
the Issuer Trust in such a way that the Issuer Trust will not be
deemed to be an "investment Company" required to be registered
under the Investment Company Act or classified as an association
taxable as a Corporation for United States federal income tax
purposes and so that the Junior Subordinated Debentures will be
treated as indebtedness of the Company for United States federal
income tax purposes. In this connection, the Property Trustee and
the holders of Common Securities are authorized to take any action,
not inconsistent with applicable law, the certificate of trust of
the Issuer Trust or the Trust Agreement, that the Property Trustee
and the holders of Common Securities determine in their discretion
to be necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the
holders of the Capital Securities.
Holders of the Capital Securities have no preemptive or
similar rights.
The Issuer Trust may not borrow money or issue debt or
mortgage or pledge any of its assets.
DESCRIPTION OF EXCHANGE JUNIOR SUBORDINATED DEBENTURES
The Exchange Junior Subordinated Debentures are to be issued
under the Junior Subordinated Indenture, between the Company and
the Debenture Trustee. This summary of certain terms and provisions
of the Exchange Junior Subordinated Debentures and the Junior
Subordinated Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the
Junior Subordinated Indenture, a copy of which will be available
from the Debenture Trustee upon request. Whenever particular
defined terms of the Junior Subordinated Indenture (as supplemented
or amended from time to time) are referred to herein, such defined
terms are incorporated herein by reference.
General. Concurrently with the issuance of the Exchange
Capital Securities, the Issuer Trust invested the proceeds thereof,
together with the consideration paid by the Company for the Common
Securities, in the Original Junior Subordinated Debentures issued
by the Company. The Exchange Junior Subordinated Debentures will
bear interest, accruing from July 15, 1997, at the variable annual
rate of LIBOR plus .91% on the principal amount thereof, payable
quarterly in arrears on January 15, April 15, July 15 and October
15 of each year (each, an "Interest Payment Date"), commencing
October 15, 1997, to the person in whose name each Exchange Junior
Subordinated Debenture is registered at the close of business on
the January 1, April 1, July 1 and October 1 next preceding such
Interest Payment Date. It is anticipated that, until the
liquidation, if any, of the Issuer Trust, each Exchange Junior
Subordinated Debenture will be held in the name of the Property
Trustee for the benefit of the holders of the Trust Securities. The
amount of interest payable for any period will be computed on the
basis of the actual number of days in the applicable payment period
(which actual number of days shall include the first day but
exclude the last day of such payment period) divided by 360. In the
event that any date on which interest is payable on the Exchange
Junior Subordinated Debentures is not a Business Day, then payment
of the interest payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on the date such
payment was originally payable. Accrued interest that is not paid
on the applicable Interest Payment Date will bear additional
interest on the amount thereof (to the extent permitted by law) at
the variable rate per annum of LIBOR plus .91% on the principal
amount thereof from the relevant payment date for such interest.
The term "interest" as used herein shall include quarterly interest
payments, interest on quarterly interest payments not paid on the
applicable Interest Payment Date and Additional Sums (as defined
below), as applicable.
The Exchange Junior Subordinated Debentures will mature on the
Stated Maturity.
The Exchange Junior Subordinated Debentures will rank pari
passu with the Original Junior Subordinated Debentures. The
Exchange Junior Subordinated Debentures will be unsecured and will
rank junior and be subordinate in right of payment to all Senior
Indebtedness of the Company. Because the Company is a holding
company, the right of the Company to participate in any
distribution of assets of any subsidiary, upon such subsidiary's
liquidation or reorganization or otherwise (and thus the ability of
holders of the Capital Securities to benefit indirectly from such
distribution), is subject to the prior claims of creditors of that
subsidiary, except to the extent that the Company may itself be
recognized as a creditor of that subsidiary. Accordingly, the
Exchange Junior Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the
Company's subsidiaries, and holders of Exchange Junior Subordinated
Debentures should look only to the assets of the Company for
payments on the Exchange Junior Subordinated Debentures. See "HSB
Group, Inc." The Junior Subordinated Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of the
Company, including Senior Indebtedness, whether under the Junior
Subordinated Indenture or any existing or other indenture that the
Company may enter into in the future or otherwise. See "
Subordination."
Determination of Interest Rate. First Chicago, as Calculation
Agent (the "Calculation Agent"), will calculate the interest rate
for each quarterly interest period based on LIBOR determined as of
two London Business Days (defined as any day, other than a Saturday
or Sunday, on which banks are open for business in London) prior to
the first day of such interest period (each, a "Determination
Date"). "LIBOR" means, with respect to a quarterly interest period
relating to an Interest Payment Date (in the following order of
priority):
(1) the rate (expressed as a percentage per annum) for
Eurodollar deposits having a three-month maturity that appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date;
(2) if such rate does not appear on Telerate Page 3750 as of
11:00 a.m. (London time) on the related Determination Date, LIBOR
will be the arithmetic mean (if necessary rounded upwards to the
nearest whole multiple of 0.00001%) of the rates (expressed as
percentages per annum) for Eurodollar deposits having a three-
month maturity that appear on Reuters Monitor Money Rates Page
LIBOR ("Reuters Page LIBOR") as of 11:00 a.m. (London time) on such
Determination Date;
(3) if such rate does not appear on Reuters Page LIBOR as of
11:00 a.m. (London time) on the related Determination Date, the
Calculation Agent will request the principal London offices of four
leading banks in the London interbank market to provide such banks'
offered quotations (expressed as percentages per annum) to prime
banks in the London interbank market for Eurodollar deposits having
a three-month maturity as of 11:00 a.m. (London time) on such
Determination Date. If at least two quotations are provided, LIBOR
will be the arithmetic mean (if necessary rounded upwards to the
nearest whole multiple of 0.00001%) of such quotations;
(4) if fewer than two such quotations are provided as
requested in clause (3) above, the Calculation Agent will request
four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European
banks for loans in Eurodollars having a three-month maturity as of
11:00 a.m. (London time) on such Determination Date. If at least
two such quotations are provided, LIBOR will be the arithmetic mean
(if necessary rounded upwards to the nearest whole multiple of
0.00001%) of such quotations; and
(5) if fewer than two such quotations are provided as
requested in clause (4) above, LIBOR will be LIBOR as determined on
the previous Determination Date.
If the rate for Eurodollar deposits having a three-month
maturity that initially appears on Telerate Page 3750 or Reuters
Page LIBOR, as the case may be, as of 11:00 a.m. (London time) on
the related Determination Date is superseded on Telerate Page 3750
or Reuters Page LIBOR, as the case may be, by a corrected rate
before 12:00 noon (London time) on such Determination Date, the
corrected rate as so substituted on the applicable page will be the
applicable LIBOR for such Determination Date.
Absent manifest error, the Calculation Agent's determination
of LIBOR and its calculation of the applicable interest rate for
each interest period will be final and binding. Investors may
obtain the interest rates for the current and preceding interest
period by writing or calling Corporate Trust Administration at the
Calculation Agent at One First National Plaza, Suite 0126, Chicago,
Illinois 60670-0126 (telephone (312) 407-4660).
Option To Extend Interest Payment Period. So long as no Event
of Default under the Junior Subordinated Indenture has occurred and
is continuing, the Company has the right under the Junior
Subordinated Indenture at any time during the term of the Exchange
Junior Subordinated Debentures to defer the payment of interest at
any time or from time to time for a period not exceeding 20
consecutive quarterly periods with respect to each Extension
Period, provided that no Extension Period may extend beyond the
Stated Maturity of the Exchange Junior Subordinated Debentures. At
the end of such Extension Period, the Company must pay all interest
then accrued and unpaid (together with interest thereon at the
variable annual rate of LIBOR plus .91% on the principal amount
thereof, compounded quarterly from the relevant payment date for
such interest. The amount of additional interest payable for any
full interest period will be computed by dividing the rate per
annum by four. During an Extension Period, interest will continue
to accrue and holders of Exchange Junior Subordinated Debentures
(or holders of Capital Securities while outstanding) will be
required to accrue interest income for United States federal income
tax purposes. See "Certain Federal Income Tax Consequences Interest
Income and Original Issue Discount."
During any such Extension Period, the Company may not, and may
not permit any subsidiary of the Company to, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or
make a liquidation payment with respect to, any of the Company's
capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt
securities of the Company that rank pari passu in all respects with
or junior in interest to the Exchange Junior Subordinated
Debentures or (iii) make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary
of the Company if such guarantee ranks pari passu with or junior in
interest to the Exchange Junior Subordinated Debentures (other than
(a) dividends or distributions in common stock of the Company, (b)
any declaration of a dividend in connection with the implementation
of a stockholders' rights plan, or the issuance of stock under any
such plan in the future, or the redemption or repurchase of any
such rights pursuant thereto, (c) payments under the Guarantee and
(d) purchases of common stock related to the issuance of common
stock or rights under any of the Company's or its subsidiaries'
benefit plans for their directors, officers or employees). Prior to
the termination of any such Extension Period, the Company may
further defer the payment of interest, provided that no Extension
Period may exceed 20 consecutive quarterly periods or extend beyond
the Stated Maturity of the Exchange Junior Subordinated Debentures.
Upon the termination of any such Extension Period and the payment
of all amounts then due on any Interest Payment Date, the Company
may elect to begin a new Extension Period subject to the above
requirements. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Company must give
the Property Trustee and the Debenture Trustee notice of its
election of such Extension Period at least one Business Day prior
to the earlier of (i) the date the Distributions on the Capital
Securities would have been payable except for the election to begin
such Extension Period or (ii) the date the Property Trustee is
required to give notice to any applicable self-regulatory
organization or to holders of the Capital Securities of the record
date or (iii) the date such Distributions are payable, but in any
event not less than one Business Day prior to such record date. The
Property Trustee shall give notice of the Company's election to
begin a new Extension Period to the holders of the Capital
Securities. There is no limitation on the number of times that the
Company may elect to begin an Extension Period.
Redemption. The Exchange Junior Subordinated Debentures are
redeemable prior to maturity at the option of the Company (i) on or
after July 15, 2007, in whole or in part at any time or in part
from time to time, or (ii) in whole (but not in part) prior to July
15, 2007, and within 90 days following the occurrence of a Tax
Event (as defined under "Description of Exchange Capital Securities
Redemption"), at a redemption price equal to 100% of the principal
amount of the Exchange Junior Subordinated Debentures so redeemed
plus accrued and unpaid interest thereon to date of redemption. The
proceeds of any such redemption will be used by the Issuer Trust to
redeem the Exchange Capital Securities.
Conditional Right to Shorten Maturity upon a Tax Event. The
maturity of the Exchange Junior Subordinated Debentures may be
shortened at the option of the Company under the circumstances
described under "Description of Exchange Capital Securities
Conditional Right to Shorten Maturity or Redeem upon a Tax Event."
Upon the exercise of the right to shorten the maturity of the
Exchange Junior Subordinated Debentures, the Company will no longer
have the right to redeem the Exchange Junior Subordinated
Debentures prior to the new Stated Maturity upon the occurrence of
a Tax Event or to further shorten the maturity of the Exchange
Junior Subordinated Debentures.
See "Certain Federal Income Tax Consequences Possible Tax Law
Changes" for a discussion of certain legislative proposals that, if
adopted, could give rise to a Tax Event, which may permit the
Company to shorten the maturity of the Exchange Junior Subordinated
Debentures.
Additional Sums. If the Issuer Trust is required to pay any
additional taxes, duties or other governmental charges as a result
of a Tax Event, the Company will pay as additional amounts on the
Exchange Junior Subordinated Debentures such amounts as shall be
required so that the Distributions payable by the Issuer Trust
shall not be reduced as a result of any such additional taxes,
duties or other governmental charges. The Company has covenanted in
the Junior Subordinated Indenture that, if and so long as (i) the
Issuer Trust is the holder of all Junior Subordinated Debentures
and (ii) a Tax Event in respect of the Issuer Trust has occurred
and is continuing, the Company will pay to the Issuer Trust such
Additional Sums (as defined under "Description of Exchange Capital
Securities Redemption").
Registration, Denomination and Transfer. The Exchange Junior
Subordinated Debentures will be registered in the name of the
Issuer Trust. In the event that the Exchange Junior Subordinated
Debentures are distributed to holders of Exchange Capital
Securities, it is anticipated that the depositary arrangements for
the Exchange Junior Subordinated Debentures will be substantially
identical to those in effect for the Exchange Capital Securities.
See "Description of Exchange Capital Securities Book Entry,
Delivery and Form."
Although DTC has agreed to the foregoing procedures, it is
under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. If
DTC is at any time unwilling or unable to continue as depositary
and a successor depositary is not appointed by the Company within
90 days, the Company will cause the Exchange Junior Subordinated
Debentures to be issued in definitive registered form.
Payments on Junior Subordinated Debentures represented by a
global security will be made to Cede, the nominee for DTC, as the
depositary for the Junior Subordinated Debentures. In the event
Junior Subordinated Debentures are issued in definitive registered
form, principal and interest will be payable, the transfer of the
Junior Subordinated Debentures will be registrable, and Junior
Subordinated Debentures will be exchangeable for Junior
Subordinated Debentures of other denominations of a like aggregate
principal amount, at the corporate trust office of the Debenture
Trustee in New York, New York, or at the offices of any paying
agent or transfer agent appointed by the Company, provided that
payment of interest may be made at the option of the Company by
check mailed to the address of the persons entitled thereto or by
wire transfer.
The Exchange Junior Subordinated Debentures will be issuable
only in registered form without coupons. Exchange Junior
Subordinated Debentures will be exchangeable for other Junior
Subordinated Debentures, of any authorized denominations, of a like
aggregate principal amount.
Junior Subordinated Debentures may be presented for exchange
as provided above, and may be presented for registration of
transfer (with the form of transfer endorsed thereon, or a
satisfactory written instrument of transfer, duly executed), at the
office of the Security Registrar or at the office of any transfer
agent designated by the Company for such purpose without service
charge and upon payment of any taxes and other governmental charges
as described in the Junior Subordinated Indenture. The Company will
appoint the Debenture Trustee as Security Registrar under the
Junior Subordinated Indenture. The Company may at any time
designate additional transfer agents with respect to the Junior
Subordinated Debentures.
In the event of any redemption, neither the Company nor the
Debenture Trustee shall be required to (i) issue, register the
transfer of or exchange Junior Subordinated Debentures during a
period beginning at the opening of business 15 days before the day
of selection for redemption of Junior Subordinated Debentures and
ending at the close of business on the day of mailing of the
relevant notice of redemption or (ii) transfer or exchange any
Junior Subordinated Debentures so selected for redemption, except,
in the case of any Junior Subordinated Debentures being redeemed in
part, any portion thereof not to be redeemed.
Any moneys deposited with the Debenture Trustee or any paying
agent, or then held by the Company in trust, for the payment of the
principal of (and premium, if any) or interest on any Junior
Subordinated Debenture and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and
payable shall, at the request of the Company, be repaid to the
Company and the holder of such Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to the
Company for payment thereof.
Restrictions on Certain Payments; Certain Covenants of the
Company. The Company has covenanted that it will not, and will not
permit any subsidiary of the Company to, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or
make a liquidation payment with respect to, any of the Company's
capital stock or (ii) make any payment of principal of or interest
or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company that rank pari passu in all respects with
or junior in interest to the Exchange Junior Subordinated
Debentures or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary
of the Company if such guarantee ranks pari passu with or junior in
interest to the Exchange Junior Subordinated Debentures (other than
(a) dividends or distributions in common stock of the Company, (b)
any declaration of a dividend in connection with the implementation
of a stockholders' rights plan, or the issuance of stock under any
such plan in the future, or the redemption or repurchase of any
such rights pursuant thereto, (c) payments under the Guarantee and
(d) purchases of common stock related to the issuance of common
stock or rights under any of the Company's or its subsidiaries'
benefit plans for their directors, officers or employees), if at
such time (i) there shall have occurred any event of which the
Company has actual knowledge that (a) with the giving of notice or
the lapse of time, or both, would constitute a Debenture Event of
Default and (b) in respect of which the Company shall not have
taken reasonable steps to cure, (ii) if such Junior Subordinated
Debentures are held by the Issuer Trust, the Company shall be in
default with respect to its payment of any obligations under the
Guarantee or (iii) the Company shall have given notice of its
selection of an Extension Period as provided in the Junior
Subordinated Indenture with respect to the Exchange Junior
Subordinated Debentures and shall not have rescinded such notice,
or such Extension Period, or any extension thereof, shall be
continuing.
The Company has covenanted in the Junior Subordinated
Indenture, (i) to maintain directly or indirectly 100% ownership of
the Common Securities of the Issuer Trust, provided that certain
successors which are permitted pursuant to the Junior Subordinated
Indenture may succeed to the Company's ownership of the Common
Securities, (ii) as holder of the Common Securities, not to
voluntarily terminate, wind-up or liquidate the Issuer Trust,
except (a) in connection with a distribution of Junior Subordinated
Debentures to the holders of the Capital Securities in liquidation
of the Issuer Trust or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the Trust Agreement
and (iii) to use its reasonable efforts, consistent with the terms
and provisions of the Trust Agreement, to cause the Issuer Trust to
remain classified as a grantor trust and not as an association
taxable as a Corporation for United States federal income tax
purposes.
Modification of Junior Subordinated Indenture. From time to
time the Company and the Debenture Trustee may, without the consent
of the holders of the Exchange Junior Subordinated Debentures,
amend, waive or supplement the Junior Subordinated Indenture for
specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies (provided that any such
action does not materially adversely affect the interests of the
holders of the Exchange Junior Subordinated Debentures or the
holders of the Exchange Capital Securities so long as they remain
outstanding) and qualifying, or maintaining the qualification of,
the Junior Subordinated Indenture under the Trust Indenture Act of
1939. The Junior Subordinated Indenture contains provisions
permitting the Company and the Debenture Trustee, with the consent
of the holders of not less than a majority in principal amount of
the Exchange Junior Subordinated Debentures, to modify the Junior
Subordinated Indenture in a manner affecting the rights of the
holders of the Exchange Junior Subordinated Debentures; provided,
that no such modification may, without the consent of the holder of
each outstanding Exchange Junior Subordinated Debenture so
affected, (i) change the Stated Maturity of the Exchange Junior
Subordinated Debentures, or reduce the principal amount thereof or
any premium payable upon redemption, or reduce the rate or extend
the time of payment of interest thereon or (ii) reduce the
percentage of principal amount of Exchange Junior Subordinated
Debentures, the holders of which are required to consent to any
such modification of the Subordinated Indenture, provided that, so
long as any of the Exchange Capital Securities remain outstanding,
no such modification may be made that adversely affects the holders
of such Exchange Capital Securities in any material respect, and no
termination of the Junior Subordinated Indenture may occur, and no
waiver of any Debenture Event of Default or compliance with any
covenant under the Junior Subordinated Indenture may be effective,
without the prior consent of the holders of at least a majority of
the aggregate Liquidation Amount of such Exchange Capital
Securities unless and until the principal of the Exchange Junior
Subordinated Debentures and all accrued and unpaid interest thereon
have been paid in full and certain other conditions are satisfied.
Debenture Events of Default. The Junior Subordinated Indenture
provides that any one or more of the following described events
with respect to the Exchange Junior Subordinated Debentures that
has occurred and is continuing constitutes a Debenture Event of
Default with respect to the Exchange Junior Subordinated
Debentures:
(i) failure for 30 days to pay any interest on the Exchange
Junior Subordinated Debentures when due (subject to the deferral of
any due date in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on the
Exchange Junior Subordinated Debentures when due whether at
maturity, upon redemption, by declaration of acceleration or
otherwise; or
(iii) failure to observe or perform in any material respect
certain other covenants contained in the Junior Subordinated
Indenture for a period of 90 days after there has been given, by
registered or certified mail, to the Company from the Debenture
Trustee or the holders of at least 25% in aggregate outstanding
principal amount of the outstanding Junior Subordinated Debentures
a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a "Notice of
Default"; or
(iv) certain events in bankruptcy, insolvency or
reorganization of the Company.
The holders of a majority in aggregate outstanding principal
amount of Junior Subordinated Debentures have the right to direct
the time, method and place of conducting any proceeding for any
remedy available to the Debenture Trustee. The Debenture Trustee or
the holders of not less than 25% in aggregate outstanding principal
amount of Junior Subordinated Debentures may declare the principal
and accrued interest due and payable immediately upon a Debenture
Event of Default, and, should the Debenture Trustee or such holders
of Junior Subordinated Debentures fail to make such declaration,
the holders of at least 25% in aggregate Liquidation Amount of the
Capital Securities shall have such right. The holders of a majority
in aggregate outstanding principal amount of Junior Subordinated
Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of Junior
Subordinated Debentures which has become due solely by such
acceleration) has been cured and a sum sufficient to pay all
matured installments of interest and principal due otherwise than
by acceleration has been deposited with the Debenture Trustee.
Should the holders of Junior Subordinated Debentures fail to annul
such declaration and waive such default, the holders of a majority
in aggregate Liquidation Amount of the Capital Securities shall
have such right.
The holders of a majority in aggregate outstanding principal
amount of the Junior Subordinated Debentures affected thereby may,
on behalf of the holders of all the Junior Subordinated Debentures,
waive any past default, except a default in the payment of
principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited
with the Debenture Trustee) or a default in respect of a covenant
or provision which under the Junior Subordinated Indenture cannot
be modified or amended without the consent of the holder of each
outstanding Junior Subordinated Debenture. Should the holders of
such Junior Subordinated Debentures fail to waive any such past
default, the holders of a majority in aggregate Liquidation Amount
of the Capital Securities shall have such right. The Company is
required to file annually with the Debenture Trustee a certificate
as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it under the Junior
Subordinated Indenture.
In case a Debenture Event of Default shall occur and be
continuing, the Property Trustee will have the right to declare the
principal of and the accrued interest on the Junior Subordinated
Debentures, and any other amounts payable under the Junior
Subordinated Indenture, to be forthwith due and payable and to
enforce its other rights as a creditor with respect to the Junior
Subordinated Debentures.
Enforcement of Certain Rights by Holders of Capital
Securities. If a Debenture Event of Default has occurred and is
continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Exchange Junior
Subordinated Debentures on the date such interest or principal is
otherwise payable, a holder of Exchange Capital Securities may
institute a Direct Action. The Company may not amend the Junior
Subordinated Indenture to remove the foregoing right to bring a
Direct Action without the prior written consent of the holders of
all of the Capital Securities. The Company shall have the right
under the Exchange Junior Subordinated Indenture to set-off any
payment made to such holder of Capital Securities by the Company in
connection with a Direct Action.
The holders of the Exchange Capital Securities would not be
able to exercise directly any remedies available to the holders of
the Exchange Junior Subordinated Debentures other than those set
forth in the preceding paragraph unless there shall have been an
Event of Default under the Trust Agreement. See "Description of
Exchange Capital Securities Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions.
The Junior Subordinated Indenture provides that the Company shall
not consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an
entirety to any Person, and no Person shall consolidate with or
merge into the Company or convey, transfer or lease its properties
and assets substantially as an entirety to the Company, unless (i)
in case the Company consolidates with or merges into another Person
or conveys or transfers its properties and assets substantially as
an entirety to any Person, the successor Person is organized under
the laws of the United States or any state or the District of
Columbia, and such successor Person expressly assumes the Company's
obligations on the Exchange Junior Subordinated Debentures issued
under the Junior Subordinated Indenture; (ii) immediately after
giving effect thereto, no Debenture Event of Default, and no event
which, after notice or lapse of time or both, would become a
Debenture Event of Default, shall have occurred and be continuing;
(iii) such transaction is permitted under the Trust Agreement and
Guarantee and does not give rise to any breach or violation of the
Trust Agreement or Guarantee; and (iv) certain other conditions as
prescribed in the Junior Subordinated Indenture are met.
The general provisions of the Junior Subordinated Indenture do
not afford holders of the Exchange Junior Subordinated Debentures
protection in the event of a highly leveraged or other transaction
involving the Company that may adversely affect holders of the
Exchange Junior Subordinated Debentures.
Satisfaction and Discharge. The Junior Subordinated Indenture
provides that when, among other things, all Junior Subordinated
Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become
due and payable at their Stated Maturity within one year, and the
Company deposits or causes to be deposited with the Debenture
Trustee funds, in trust, for the purpose and in an amount
sufficient to pay and discharge the entire indebtedness on the
Junior Subordinated Debentures not previously delivered to the
Debenture Trustee for cancellation, for the principal (and premium,
if any) and interest and Additional Sums to the date of the deposit
or to the Stated Maturity, as the case may be, then the
Subordinated Indenture will cease to be of further effect (except
as to the Company's obligations to pay all other sums due pursuant
to the Junior Subordinated Indenture and to provide the officers'
certificates and opinions of counsel described therein), and the
Company will be deemed to have satisfied and discharged the Junior
Subordinated Indenture.
Subordination. The Exchange Junior Subordinated Debentures
shall be subordinate and junior in right of payment, to the extent
set forth in the Junior Subordinated Indenture, to all Senior
Indebtedness (as defined below) of the Company. In the event that
the Company shall default in the payment of any principal, premium,
if any, or interest, if any, on any Senior Indebtedness when the
same becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration of acceleration or
otherwise, then, unless and until such default shall have been
cured or waived or shall have ceased to exist or all Senior
Indebtedness shall have been paid, no direct or indirect payment
(in cash, property, securities, by set-off or otherwise) shall be
made or agreed to be made for principal, premium, if any, or
interest, if any, on the Exchange Junior Subordinated Debentures,
or in respect of any redemption, repayment, retirement, purchase or
other acquisition of any of the Exchange Junior Subordinated
Debentures.
"Debt" means with respect to the Company, whether recourse is
to all or a portion of the assets of the Company and whether or not
contingent, (i) every obligation of the Company for money borrowed;
(ii) every obligation of the Company evidenced by bonds,
debentures, notes or other similar instruments, including
obligations incurred in connection with the acquisition of
property, assets or businesses; (iii) every reimbursement
obligation of the Company with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account
of the Company; (iv) every obligation of the Company issued or
assumed as the deferred purchase price of property or services (but
excluding trade accounts payable or accrued liabilities, arising in
the ordinary course of business); (v) every capital lease
obligation of the Company; (vi) all indebtedness of the Company
whether incurred on or prior to the date of the Junior Subordinated
Indenture or thereafter incurred, for claims in respect of
derivative products, including interest rate, foreign exchange rate
and commodity forward contracts, options and swaps and similar
arrangements; and (vii) every obligation of the type referred to in
clauses (i) through (vi) of another Person and all dividends of
another Person the payment of which, in either case, the Company
has guaranteed or is responsible or liable for, directly or
indirectly, as obligor or otherwise.
"Senior Indebtedness" means the principal of (and premium, if
any) and interest, if any (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization
relating to the Company whether or not such claim for post-petition
interest is allowed in such proceeding), on Debt of the Company,
whether incurred on or prior to the date of the Junior Subordinated
Indenture or thereafter incurred, unless, in the instrument
creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are not superior
in right of payment to the Junior Subordinated Debentures;
provided, however, that Senior Indebtedness shall not be deemed to
include (i) any Debt of the Company which when incurred and without
respect to any election under Section 1111(b) of the United States
Bankruptcy Code of 1978, as amended, was without recourse to the
Company, (ii) any Debt of the Company to any of its subsidiaries,
(iii) Debt to any employee of the Company and (iv) any other debt
securities issued pursuant to the Junior Subordinated Indenture.
In the event of (i) any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment, composition or other
similar proceeding relating to the Company, its creditors or its
property, (ii) any proceeding for the liquidation, dissolution or
other winding up of the Company, voluntary or involuntary, whether
or not involving insolvency or bankruptcy proceedings, (iii) any
assignment by the Company for the benefit of creditors or (iv) any
other marshalling of the assets of the Company, all Senior
Indebtedness (including any interest thereon accruing after the
commencement of any such proceedings) shall first be paid in full
before any payment or distribution, whether in cash, securities or
other property, shall be made on account of the principal of or
premium, if any, or interest, if any, on the Junior Subordinated
Debentures. In such event, any payment or distribution on account
of the principal of or premium, if any, or interest, if any, on the
Junior Subordinated Debentures, whether in cash, securities or
other property (other than securities of the Company or any other
corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the
extent provided in the subordination provisions with respect to the
Junior Subordinated Debentures, to the payment of all Senior
Indebtedness at the time outstanding, and to any securities issued
in respect thereof under any such plan of reorganization or
readjustment), which would otherwise (but for the subordination
provisions) be payable or deliverable in respect of the Junior
Subordinated Debentures shall be paid or delivered directly to the
holders of Senior Indebtedness in accordance with the priorities
then existing among such holders until all Senior Indebtedness
(including any interest thereon accruing after the commencement of
any such proceedings) shall have been paid in full.
In the event of any such proceeding, after payment in full of
all sums owing with respect to Senior Indebtedness, the holders of
Junior Subordinated Debentures, together with the holders of any
obligations of the Company ranking on a parity with the Junior
Subordinated Debentures, shall be entitled to be paid from the
remaining assets of the Company the amounts at the time due and
owing on account of unpaid principal of and premium, if any, and
interest, if any, on the Junior Subordinated Debentures and such
other obligations before any payment or other distribution, whether
in cash, property or otherwise, shall be made on account of any
capital stock or obligations of the Company ranking junior to the
Junior Subordinated Debentures and such other obligations. If any
payment or distribution on account of the principal of or interest
on the Junior Subordinated Debentures of any character or any
security, whether in cash, securities or other property (other than
securities of the Company or any other corporation provided for by
a plan of reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in the subordination
provisions with respect to the Junior Subordinated Debentures, to
the payment of all Senior Indebtedness at the time outstanding and
to any securities issued in respect thereof under any such plan of
reorganization or readjustment) shall be received by any holder of
any Junior Subordinated Debentures in contravention of any of the
terms hereof and before all the Senior Indebtedness shall have been
paid in full, such payment or distribution or security shall be
received in trust for the benefit of, and shall be paid over or
delivered and transferred to, the holders of the Senior
Indebtedness at the time outstanding in accordance with the
priorities then existing among such holders for application to the
payment of all Senior Indebtedness remaining unpaid to the extent
necessary to pay all such Senior Indebtedness in full. By reason of
such subordination, in the event of the insolvency of the Company,
holders of Senior Indebtedness may receive more, ratably, and
holders of the Junior Subordinated Debentures having a claim
pursuant to such securities may receive less, ratably, than the
other creditors of the Company. Such subordination will not prevent
the occurrence of any Event of Default in respect of the Junior
Subordinated Debentures.
The Junior Subordinated Indenture places no limitation on the
amount of additional Senior Indebtedness that may be incurred by
the Company. The Company expects from time to time to incur
additional indebtedness constituting Senior Indebtedness.
Governing Law. The Junior Subordinated Indenture and the
Exchange Junior Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of New York.
Information Concerning the Debenture Trustee. The Debenture
Trustee is under no obligation to exercise any of the powers vested
in it by the Junior Subordinated Indenture at the request of any
holder of Exchange Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The Debenture Trustee
is not required to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties if
the Debenture Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.
First Chicago, Debenture Trustee, also serves as issuing agent
with respect to certain negotiable certificates of deposit issued
by the Company's subsidiaries. In addition, the Company and certain
of its affiliates maintain deposit accounts and/or conduct other
banking transactions with First Chicago.
Covenant to Pay Trust Expenses. The Indenture provides that
the Company will irrevocably and unconditionally guarantee to each
person or entity to whom the Issuer Trust becomes indebted or
liable, the full payment of any costs, expenses or liabilities of
the Issuer Trust, other than obligations of the Issuer Trust to pay
to the holders of the Capital Securities or other similar interests
in the Issuer Trust of the amounts due such holders pursuant to the
terms of the Capital Securities or such other similar interests, as
the case may be. The obligation of the Company includes the payment
of fees and expenses related to (i) the offering of the Trust
Securities and the Subordinated Debentures, (ii) the organization,
maintenance and dissolution of the Issuer Trust, (iii) the
retention of the Debenture Trustee, Issuer Trustee, Delaware
Trustee, Property Trustee, the Calculation Agent and Administrative
Trustees and (iv) the enforcement by the Property Trustee of the
rights of the holders of the Capital Securities. The payment of
such fees and expenses will be fully and unconditionally guaranteed
by the Company. The obligations to guarantee payment of such
expenses of the Issuer Trust will constitute an unsecured
obligation of the Company and will rank subordinate and junior in
right of payment to all Senior Indebtedness of the Company in the
same manner as Junior Subordinated Debentures.
DESCRIPTION OF EXCHANGE GUARANTEE
An Exchange Guarantee will be executed and delivered by the
Company concurrently with the issuance by the Issuer Trust of its
Capital Securities for the benefit of the holders from time to time
of such Exchange Capital Securities. First Chicago will act as
trustee ("Guarantee Trustee") under the Exchange Guarantee. This
summary of certain provisions of the Exchange Guarantee does not
purport to be complete and is subject to, and qualified in its
entirety by reference to, all of the provisions of the Exchange
Guarantee Agreement, including the definitions therein of certain
terms. A copy of the Exchange Guarantee is available upon request
from the Guarantee Trustee. The Guarantee Trustee will hold the
Exchange Guarantee for the benefit of the holders of the Exchange
Capital Securities.
General. The Company will irrevocably agree to pay in full on
a subordinated basis, to the extent set forth herein, the Guarantee
Payments (as defined below) to the holders of the Exchange Capital
Securities, as and when due, regardless of any defense, right of
set-off or counterclaim that such Issuer Trust may have or assert
other than the defense of payment. The following payments with
respect to the Exchange Capital Securities, to the extent not paid
by or on behalf of the Issuer Trust (the "Guarantee Payments"),
will be subject to the Exchange Guarantee: (i) any accrued and
unpaid Distributions required to be paid on such Exchange Capital
Securities, to the extent that the Issuer Trust has funds on hand
available therefor at such time, (ii) the Redemption Price with
respect to any Exchange Capital Securities called for redemption,
to the extent that the Issuer Trust has funds on hand available
therefor at such time, and (iii) upon a voluntary or involuntary
termination, winding up or liquidation of the Issuer Trust (unless
the Exchange Junior Subordinated Debentures are distributed to
holders of the Exchange Capital Securities), the lesser of (a) the
aggregate amount of the Liquidation Amount of $1,000 per Exchange
Capital Security plus accrued and unpaid Distributions of the
Exchange Capital Securities and (b) the amount of assets of the
Issuer Trust remaining available for distribution to holders of
Exchange Capital Securities on liquidation of the Issuer Trust. The
Company's obligation to make a Guarantee Payment may be satisfied
by direct payment of the required amounts by the Company to the
holders of the Exchange Capital Securities or by causing the Issuer
Trust to pay such amounts to such holders.
The Exchange Guarantee will be an irrevocable guarantee on a
subordinated basis of the Issuer Trust's obligations under the
Exchange Capital Securities, but will apply only to the extent that
the Issuer Trust has funds sufficient to make such payments, and is
not a guarantee of collection.
If the Company does not make interest payments on the Exchange
Junior Subordinated Debentures held by the Issuer Trust, the Issuer
Trust will not be able to pay Distributions on the Exchange Capital
Securities and will not have funds legally available therefor. The
Exchange Guarantee will rank subordinate and junior in right of
payment to all Senior Indebtedness of the Company. See " Status of
the Guarantee." Because the Company is a holding company, the right
of the Company to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or
otherwise, is subject to the prior claims of creditors of that
subsidiary, except to the extent the Company may itself be
recognized as a creditor of that subsidiary. Accordingly, the
Company's obligations under the Exchange Guarantee will be
effectively subordinated to all existing and future liabilities of
the Company's subsidiaries, and claimants should look only to the
assets of the Company for payments thereunder. The payment of
dividends by the Company's insurance company subsidiaries,
including Hartford Steam Boiler, is limited under the insurance
holding laws of each subsidiary's domicile. See "HSB Group, Inc."
The Exchange Guarantee does not limit the incurrence or issuance of
other secured or unsecured debt of the Company, including Senior
Indebtedness, whether under the Junior Subordinated Indenture or
any other indenture that the Company may enter into in the future
or otherwise.
The Company has, through the Exchange Guarantee, the Trust
Agreement, the Junior Subordinated Debentures and the Junior
Subordinated Indenture, taken together, fully, irrevocably and
unconditionally guaranteed all of the Issuer Trust's obligations
under the Exchange Capital Securities. No single document standing
alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a
full, irrevocable and unconditional guarantee of the Issuer Trust's
obligations under the Exchange Capital Securities. See
"Relationship Among the Exchange Capital Securities, the Exchange
Junior Subordinated Debentures and the Exchange Guarantee."
Status of the Exchange Guarantee. The Exchange Guarantee will
constitute an unsecured obligation of the Company and will rank
subordinate and junior in right of payment to all Senior
Indebtedness of the Company in the same manner as the Exchange
Junior Subordinated Debentures.
The Exchange Guarantee will constitute a guarantee of payment
and not of collection (i.e., the guaranteed party may institute a
legal proceeding directly against the Guarantor to enforce its
rights under the Exchange Guarantee without first instituting a
legal proceeding against any other person or entity). The Exchange
Guarantee will be held for the benefit of the holders of the
Exchange Capital Securities. The Exchange Guarantee will not be
discharged except by payment of the Guarantee Payments in full to
the extent not paid by the Issuer Trust or upon distribution to the
holders of the Exchange Capital Securities of the Exchange Junior
Subordinated Debentures. The Exchange Guarantee does not place a
limitation on the amount of additional Senior Indebtedness that may
be incurred by the Company. The Company expects from time to time
to incur additional indebtedness constituting Senior Indebtedness.
The obligations of the Company under the Exchange Guarantee
will rank pari passu with the obligations of the Company under any
similar Guarantee Agreements issued by the Company on behalf of
holders of preferred or capital securities issued by the Issuer
Trust.
Amendments and Assignment. Except with respect to any changes
which do not adversely affect the rights of holders of the Exchange
Capital Securities in any material respect (in which case no vote
will be required), the Exchange Guarantee may not be amended
without the prior approval of the holders of not less than a
majority of the aggregate Liquidation Amount of such outstanding
Exchange Capital Securities. The manner of obtaining any such
approval will be as set forth under "Description of the Exchange
Capital Securities Voting Rights; Amendment of Trust Agreement."
All guarantees and agreements contained in the Guarantee shall bind
the successors, assigns, receivers, trustees and representatives of
the Company and shall inure to the benefit of the holders of the
Exchange Capital Securities then outstanding.
Events of Default. An event of default under the Exchange
Guarantee will occur upon the failure of the Company to perform any
of its payment or other obligations thereunder. The holders of not
less than a majority in aggregate Liquidation Amount of the
Exchange Capital Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of the Exchange
Guarantee or to direct the exercise of any trust or power conferred
upon the Guarantee Trustee under the Exchange Guarantee.
Any holder of the Exchange Capital Securities may institute a
legal proceeding directly against the Company to enforce its rights
under the Exchange Guarantee without first instituting a legal
proceeding against the Issuer Trust, the Guarantee Trustee or any
other person or entity.
The Company, as guarantor, is required to file annually with
the Guarantee Trustee a certificate as to whether or not the
Company is in compliance with all the conditions and covenants
applicable to it under the Guarantee.
Information Concerning the Guarantee Trustee. The Guarantee
Trustee, other than during the occurrence and continuance of a
default by the Company in performance of the Exchange Guarantee,
undertakes to perform only such duties as are specifically set
forth in the Exchange Guarantee and, after default with respect to
the Exchange Guarantee, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of
his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested
in it by the Exchange Guarantee at the request of any holder of any
Exchange Capital Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be
incurred thereby.
For information concerning the relationship between First
Chicago, the Property Trustee, and the Company, see "Description of
Exchange Junior Subordinated Debentures Information Concerning the
Debenture Trustee."
Termination of the Exchange Guarantee. The Exchange Guarantee
will terminate and be of no further force and effect upon full
payment of the Redemption Price of the Exchange Capital Securities,
upon full payment of the amounts payable upon liquidation of the
Issuer Trust or upon distribution of Exchange Junior Subordinated
Debentures to the holders of the Exchange Capital Securities. The
Exchange Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the
Exchange Capital Securities must restore payment of any sums paid
under the Exchange Capital Securities or the Exchange Guarantee.
Governing Law. The Exchange Guarantee will be governed by and
construed in accordance with the laws of the State of New York.
RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES, THE EXCHANGE
JUNIOR SUBORDINATED DEBENTURES AND THE EXCHANGE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the
Exchange Capital Securities (to the extent the Issuer Trust has
funds available for the payment of such Distributions) are
irrevocably guaranteed by the Company as and to the extent set
forth under "Description of Exchange Guarantee." Taken together,
the Company's obligations under the Exchange Junior Subordinated
Debentures, the Junior Subordinated Indenture, the Trust Agreement,
and the Exchange Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of
distributions and other amounts due on the Exchange Capital
Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes
such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Issuer Trust's obligations under the
Exchange Capital Securities. If and to the extent that the Company
does not make payments on the Exchange Junior Subordinated
Debentures, the Issuer Trust will not pay Distributions or other
payments due on the Exchange Capital Securities. The Exchange
Guarantee does not cover payment of Distributions when the Issuer
Trust does not have sufficient funds to pay such Distributions or
other payments. In such event, the remedy of a holder of the
Exchange Capital Securities is to institute a legal proceeding
directly against the Company for enforcement of payment of such
Distributions or other payments to such holder. The obligations of
the Company under the Exchange Guarantee are subordinate and junior
in right of payment to all Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made
when due on the Exchange Junior Subordinated Debentures, such
payments will be sufficient to cover Distributions and other
payments due on the Capital Securities, primarily because (i) the
aggregate principal amount of the Exchange Junior Subordinated
Debentures will be equal to the sum of the aggregate stated
Liquidation Amount of the Exchange Capital Securities and Common
Securities, (ii) the interest rate and interest and other payment
dates on the Exchange Junior Subordinated Debentures will match the
Distribution rate and Distribution and other payment dates for the
Exchange Capital Securities, (iii) the Company shall pay for all
and any costs, expenses and liabilities of the Issuer Trust except
the Issuer Trust's obligations to holders of its Exchange Capital
Securities, and (iv) the Trust Agreement further provides that the
Issuer Trust will not engage in any activity that is not consistent
with the limited purposes of the Issuer Trust.
Notwithstanding anything to the contrary in the Junior
Subordinated Indenture, the Company has the right to set off any
payment it is otherwise required to make thereunder with, and to
the extent the Company has theretofore made or is concurrently on
the date of such payment making, a payment under the Exchange
Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF EXCHANGE CAPITAL SECURITIES
A holder of any Exchange Capital Security may institute a
legal proceeding directly against the Company to enforce its rights
under the Exchange Guarantee without first instituting a legal
proceeding against the Guarantee Trustee, the Issuer Trust or any
other person or entity.
A default or event of default under any Senior Indebtedness of
the Company would not constitute a default or an Event of Default
under the Trust Agreement. However, in the event of payment
defaults under, or acceleration of, Senior Indebtedness of the
Company, the subordination provisions of the Junior Subordinated
Indenture provide that no payments may be made in respect of the
Exchange Junior Subordinated Debentures until such Senior
Indebtedness has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required
payments on the Exchange Junior Subordinated Debentures would
constitute an Event of Default.
LIMITED PURPOSE OF ISSUER TRUST
The Issuer Trust's Exchange Capital Securities evidence an
undivided beneficial interest in the assets of the Issuer Trust,
and the Issuer Trust exists for the sole purpose of issuing its
Capital Securities and Common Securities and investing the proceeds
thereof in the Junior Subordinated Debentures. A principal
difference between the rights of a holder of a Capital Security and
a holder of Junior Subordinated Debentures is that a holder of
Junior Subordinated Debentures is entitled to receive from the
Company the principal amount of and interest accrued on Junior
Subordinated Debentures held, while a holder of Capital Securities
is entitled to receive Distributions from the Issuer Trust (or from
the Company under the Guarantee) if and to the extent the Issuer
Trust has funds available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or
liquidation of the Issuer Trust involving the liquidation of the
Junior Subordinated Debentures, after satisfaction of the
liabilities of creditors of the Issuer Trust as required by
applicable law, the holders of the Capital Securities will be
entitled to receive, out of assets held by the Issuer Trust, the
Liquidation Distribution in cash. See "Description of Exchange
Capital Securities Liquidation Distribution Upon Termination." Upon
any voluntary or involuntary liquidation or bankruptcy of the
Company, the Property Trustee, as holder of the Exchange Junior
Subordinated Debentures, would be a subordinated creditor of the
Company, subordinated in right of payment to all Senior
Indebtedness as set forth in the Junior Subordinated Indenture, but
entitled to receive payment in full of principal and interest,
before any stockholders of the Company receive payments or
distributions. Since the Company is the guarantor under the
Exchange Guarantee and has agreed to pay for all costs, expenses
and liabilities of the Issuer Trust (other than the Issuer Trust's
obligations to the holders of its Capital Securities), the
positions of a holder of the Exchange Capital Securities and a
holder of such Exchange Junior Subordinated Debentures relative to
other creditors and to stockholders of the Company in the event of
liquidation or bankruptcy of the Company are expected to be
substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of certain of the material United
States federal income tax consequences of the exchange of Original
Securities for Exchange Securities pursuant to the Exchange Offer.
Unless otherwise stated, this summary deals only with Capital
Securities held as capital assets by holders who purchased the
Capital Securities upon original issuance. It does not deal with
special classes of holders such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance
companies, dealers in securities or currencies, tax- exempt
investors, persons that have a functional currency other than the
U.S. Dollar or persons that will hold the Capital Securities as a
position in a "straddle," as part of a "synthetic security" or
"hedge," as part of a "conversion transaction" or other integrated
investment, or as other than a capital asset. Further, it does not
include any description of any alternative minimum tax consequences
or the tax laws of any state or local government of any foreign
government that may be applicable to the Capital Securities. This
summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury regulations thereunder and administrative
and judicial interpretations thereof, as of the date hereof, all of
which are subject to change, possibly on a retroactive basis.
EXCHANGE OF CAPITAL SECURITIES FOR EXCHANGE CAPITAL SECURITIES
The exchange of Original Securities for Exchange Securities
pursuant to the Exchange Offer should have no federal income tax
consequences to holders. Such exchange should not be treated as an
"exchange" for United States federal income tax purposes because
the Exchange Capital Securities and Exchange Junior Subordinated
Debentures should not be considered to differ materially in kind or
extent from the Original Capital Securities and the Original Junior
Subordinated Debentures, respectively, and because the exchange
will occur by operation of the terms of the Original Capital
Securities and Original Junior Subordinated Debentures.
Accordingly, the Exchange Junior Subordinated Debentures should
have the same issue price as the Junior Subordinated Debentures,
and a holder should have the same adjusted tax basis and holding
period in the Exchange Capital Securities as the holder had in the
Original Capital Securities immediately before the exchange.
Moreover, a holder that acquired an interest in the Original Junior
Subordinated Debentures with either market discount or bond premium
will hold an interest in the Exchange Junior Subordinated
Debentures with the same amount of market discount or bond premium
and will be required to include such market discount in or deduct
such bond premium from their income in the same manner as on the
Original Junior Subordinated Debentures. Holders are urged to
consult their tax advisors regarding the applicability of the
market discount and bond premium rules.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the Original Junior
Subordinated Debentures, Skadden, Arps, Slate, Meagher & Flom LLP
(''Skadden, Arps''), special tax counsel to the Company and Issuer
Trust, rendered its opinion generally to the effect that, under
then current law and assuming full compliance with the terms of the
Indenture (and certain other documents), and based on certain facts
and assumptions contained in such opinion, the Original Junior
Subordinated Debentures held by the Issuer Trust will be classified
for United States federal income tax purposes as indebtedness of
the Company.
CLASSIFICATION OF HSB CAPITAL TRUST
In connection with the issuance of the Original Capital
Securities, Skadden, Arps rendered its opinion generally to the
effect that, under then current law and assuming full compliance
with the terms of the Declaration and the Indenture (and certain
other documents), and based on certain facts and assumptions
contained in such opinion, the Issuer Trust will be classified for
United States federal income tax purposes as a grantor trust and
not as an association taxable as a corporation. Accordingly, for
United States federal income tax purposes, each holder of Capital
Securities generally will be considered the owner of an undivided
interest in the Junior Subordinated Debentures, and each holder
will be required to include in its gross income interest or
original issue discount (''OID'') with respect to its allocable
share of those Junior Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations (the ''Regulations''),
the Junior Subordinated Debentures will constitute variable rate
debt instruments that will not be treated as issued with OID
provided that stated interest is unconditionally payable at least
annually. Under such Regulations, a ''remote'' contingency that
stated interest will not be timely paid will be ignored in
determining whether a debt instrument is issued with OID. The
Company believes that the likelihood of its exercising its option
to defer payments is remote. Based on the foregoing, the Company
believes that the Junior Subordinated Debentures will not be
considered to be issued with OID at the time of their original
issuance and, accordingly, a holder of the Capital Securities
should include in gross income such holder's allocable share of
interest on the Junior Subordinated Debentures in accordance with
such holder's method of tax accounting.
Under the Regulations, if the Company exercised its option to
defer any payment of interest, the Junior Subordinated Debentures
would at that time be treated as issued with OID, and all stated
interest on the Junior Subordinated Debentures would thereafter be
treated as OID as long as the Junior Subordinated Debentures
remained outstanding. In such event, all of a holder's taxable
interest income with respect to the Junior Subordinated Debentures
would be accounted for as OID on an economic accrual basis
regardless of such holder's method of tax accounting, and actual
distributions of stated interest would not be reported as taxable
income. In general, the amount of OID that would accrue during any
quarter would be calculated as if interest on the Junior
Subordinated Debentures were payable at a fixed rate equal to the
value of LIBOR plus .91% at the time when the Company first
exercised its option to defer an interest payment, increased or
decreased to take into account the difference, if any, between that
rate and any actual payment of stated interest during the quarter.
Consequently, a holder of Capital Securities would be required to
include in gross income OID even though the Company would not make
any actual cash payments during an Extension Period.
The Regulations have not been addressed in any rulings or
other interpretations by the Internal Revenue Service (the
"IRS"), and it is possible that the IRS could take a position
contrary to the interpretation herein.
Because income on the Capital Securities will constitute
interest or OID, corporate holders of Capital Securities will not
be entitled to a dividends-received deduction with respect to any
income recognized with respect to the Capital Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH
Under certain circumstances, as described under "Description
of the Capital Securities Liquidation Distribution Upon
Termination," Junior Subordinated Debentures may be distributed to
holders in exchange for the Capital Securities upon the liquidation
of the Issuer Trust. Under current law, such a distribution, for
United States federal income tax purposes, would be treated as a
non-taxable event to each holder, and each holder would receive an
aggregate tax basis in the Junior Subordinated Debentures equal to
such holder's aggregate tax basis in its Capital Securities. A
holder's holding period in the Junior Subordinated Debentures
received in liquidation of the Issuer Trust would include the
period during which the Capital Securities were held by such
holder.
Under certain circumstances, as described under "Description
of the Capital Securities Redemption", the Junior Subordinated
Debentures may be redeemed by the Company for cash and the proceeds
of such redemption distributed by the Issuer Trust to holders in
redemption of their Capital Securities. Under current law, such a
redemption would, for United States federal income tax purposes,
constitute a taxable disposition of the redeemed Capital
Securities, and a holder would recognize gain or loss as if it sold
such redeemed Capital Securities for cash. See "--Sales of Capital
Securities."
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities will be considered to
have disposed of all or part of the holder's pro rata share of the
Junior Subordinated Debentures and will recognize gain or loss
equal to the difference between its adjusted tax basis in the
Capital Securities and the amount realized on the sale of such
Capital Securities. Assuming that the Company does not exercise its
option to defer payment of interest on the Junior Subordinated
Debentures, a holder's adjusted tax basis in the Capital Securities
generally will be its initial purchase price. If the Junior
Subordinated Debentures are deemed to be issued with OID as a
result of the Company's deferral of any interest payment, a
holder's tax basis in the Capital Securities generally will be its
initial purchase price, increased by OID previously includible in
such holder's gross income to the date of disposition and decreased
by distributions or other payments received on the Capital
Securities since and including the date of the first Extension
Period. Such gain or loss generally will be a capital gain or loss
(except to the extent of any accrued interest with respect to such
holder's pro rata share of the Junior Subordinated Debentures not
previously included in income) and generally will be a long-term
capital gain or loss if the Capital Securities have been held for
more than one year.
Should the Company exercise its option to defer any payment of
interest on the Junior Subordinated Debentures, the Capital
Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest with respect to the
underlying Junior Subordinated Debentures. In the event of such a
deferral, a holder who disposes of its Capital Securities between
record dates for payments of distributions thereon will be required
to include in income as ordinary income accrued but unpaid interest
on the Junior Subordinated Debentures to the date of disposition
and to add such amount to its adjusted tax basis in its pro rata
share of the underlying Junior Subordinated Debentures deemed
disposed of. To the extent the selling price is less than the
holder's adjusted tax basis, such holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot
be applied to offset ordinary income for United States federal
income tax purposes.
CONDITIONAL RIGHT TO SHORTEN MATURITY
Prospective investors should be aware that the Company's
exercise of its right to shorten the maturity of the Junior
Subordinated Debentures will be a taxable event to holders of
Capital Securities if the Junior Subordinated Debentures are
treated as equity for purposes of United States federal income
taxation before the maturity is shortened. See "Description of
Capital Securities Conditional Right to Shorten Maturity or Redeem
upon a Tax Event," "Description of Junior Subordinated Debentures
Conditional Right to Shorten Maturity or Redeem upon a Tax Event
and "--Possible Tax Law Changes."
POSSIBLE TAX LAW CHANGES
On February 6, 1997, as part of the fiscal budget submitted to
Congress, the Clinton Administration proposed the Clinton Proposal
which would, among other things, generally treat as equity, for
federal income tax purposes, certain debt obligations, such as the
Junior Subordinated Debentures, that were issued on or after the
date of "first committee action". The Junior Subordinated
Debentures were issued prior to the date of first committee action.
The Clinton Proposal was not included in the tax legislation signed
into law by President Clinton on August 5, 1997. There can be no
assurance, however, that similar legislation enacted in the future
will not adversely affect the tax treatment of the Junior
Subordinated Debentures, which could result in the redemption of
the Junior Subordinated Debentures by the Company and the
distribution of the resulting cash in redemption of the Capital
Securities or a shortening of the maturity of the Capital
Securities. See "Description of Exchange Junior Subordinated
Debentures Redemption" and "Description of Exchange Capital
Securities Redemption."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien
Holder" is any corporation, individual, partnership, estate or
trust that is, as to the United States, a foreign corporation, a
non-resident alien individual, a foreign partnership, or a non-
resident fiduciary of a foreign estate or trust.
Under present United States federal income tax law: (i)
payments by the Issuer Trust or any of its paying agents to any
holder of a Capital Security who or which is a United States Alien
Holder will not be subject to United States federal withholding
tax; provided, that, (a) the beneficial owner of the Capital
Security does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company
entitled to vote, (b) the beneficial owner of the Capital Security
is not a controlled foreign corporation that is related to the
Company through stock ownership, and (c) either (A) the beneficial
owner of the Capital Security certifies to the Issuer Trust or its
agent, under penalties of perjury, that it is not a United States
Alien Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or
business (a ''Financial Institution''), and holds the Capital
Security in such capacity, certifies to the Issuer Trust or its
agent, under penalties of perjury, that such statement has been
received from the beneficial owner by it or by a Financial
Institution holding such security for the beneficial owner and
furnished the Issuer Trust or its agent with a copy thereof; and
(ii) a United States Alien Holder of a Capital Security will not be
subject to United States federal withholding tax on any gain
realized upon the sale or other disposition of a Capital Security.
Proposed Treasury regulations could affect the procedures to
be followed by a United States Alien Holder in establishing such
holder's status for purposes of United States federal withholding
tax rules. The proposed regulations, if adopted in their current
form, generally would be effective for payments made after December
31, 1997. Prospective purchasers should consult their tax advisors
concerning the potential adoption of such regulations and their
effect on an investment in the Capital Securities.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported
to holders on Forms 1099, which forms should be mailed to holders
of Capital Securities by January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital
Securities may be subject to a ''backup'' withholding tax of 31%
unless the holder complies with certain identification
requirements. Any withheld amounts will be allowed as a credit
against the holder's United States federal income tax, provided the
required information is provided to the IRS on a timely basis.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH
ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE
APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS
SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
THE CAPITAL SECURITIES AND THE EXCHANGE OF ORIGINAL CAPITAL
SECURITIES FOR EXCHANGE CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS.
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a Plan should consider the fiduciary
standards of ERISA in the context of the Plan's particular
circumstances before authorizing an investment in the Capital
Securities. Accordingly, among other factors, the fiduciary should
consider whether the investment would satisfy the prudence and
diversification requirements of ERISA and would be consistent with
the documents and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit
Plans, as well as individual retirement accounts and Keogh plans
subject to Section 4975 of the Code (also "Plans"), from engaging
in certain transactions involving "plan assets" with persons who
are "parties in interest" under ERISA or "disqualified persons"
under the Code ("Parties in Interest") with respect to such Plan. A
violation of these "prohibited transaction" rules may result in an
excise tax or other liabilities under ERISA and/or Section 4975 of
the Code for such persons, unless exemptive relief is available
under an applicable statutory or administrative exemption. Employee
benefit plans that are governmental plans (as defined in Section
3(32) of ERISA), certain church plans (as defined in Section 3(33)
of ERISA) and foreign plans (as described in Section 4(b)(5) of
ERISA) are not subject to the requirements of ERISA or Section 4975
of the Code.
Under a regulation (the "Plan Assets Regulation") issued by
the U.S. Department of Labor (the "DOL"), the assets of the Issuer
Trust would be deemed to be "plan assets" of a Plan for purposes of
ERISA and Section 4975 of the Code if "plan assets" of the Plan
were used to acquire an equity interest in the Trust and no
exception were applicable under the Plan Assets Regulation. An
"equity interest" is defined under the Plan Assets Regulation as
any interest in an entity other than an instrument which is treated
as indebtedness under applicable local law and which has no
substantial equity features and specifically includes a beneficial
interest in a trust.
Pursuant to an exception contained in the Plan Assets
Regulation, the assets of the Issuer Trust would not be deemed to
be "plan assets" of investing Plans if, immediately after the most
recent acquisition of any equity interest in the Trust, less than
25% of the value of each class of equity interests in the Trust
were held by Plans, other employee benefit plans not subject to
ERISA or Section 4975 of the Code (such as governmental, church and
foreign plans), and entities holding assets deemed to be "plan
assets" of any Plan (collectively, "Benefit Plan Investors"). No
assurance can be given by the Initial Purchasers that the value of
the Capital Securities held by Benefit Plan Investors will be less
than 25% of the total value of such Capital Securities at the
completion of the initial offering or thereafter, and no monitoring
or other measures will be taken with respect to the satisfaction of
the conditions to this exception. All of the Common Securities will
be purchased and held by the Company.
Certain transactions involving the Issuer Trust could be
deemed to constitute direct or indirect prohibited transactions
under ERISA and Section 4975 of the Code with respect to a Plan if
the Capital Securities were acquired with "plan assets" of such
Plan and assets of the Issuer Trust were deemed to be "plan assets"
of Plans investing in the Issuer Trust. For example, if the Company
is a Party in Interest with respect to an investing Plan (either
directly or by reason of its ownership of its subsidiaries),
extensions of credit between the Company and the Issuer Trust (as
represented by the Junior Subordinated Debentures and the
Guarantee) would likely be prohibited by Section 406(a)(1)(B) of
ERISA and Section 4975(c)(1)(B) of the Code, unless exemptive
relief were available under an applicable administrative exemption
(see below). In addition, if the Company were considered to be a
fiduciary with respect to the Issuer Trust as a result of certain
powers it holds (such as the powers to remove and replace the
Property Trustee and the Administrators), the optional redemption
or acceleration of the Junior Subordinated Debentures could be
considered to be prohibited transactions under Section 406(b) of
ERISA and Section 4975(c)(1)(E) of the Code. In order to seek to
avoid such prohibited transactions, each investing Plan, by
purchasing the Capital Securities, will be deemed to have directed
the Issuer Trust to invest in the Junior Subordinated Debentures
and to have appointed the Property Trustee and will have certain
powers with respect to the removal and replacement of the Property
Trustee.
The DOL has issued five PTCEs that may provide exemptive
relief for direct or indirect prohibited transactions resulting
from the purchase or holding of the Capital Securities, assuming
that assets of the Issuer Trust were deemed to be "plan assets" of
Plans investing in the Trust (see above). Those class exemptions
are PTCE 96-23 (for certain transactions determined by in-house
asset managers), PTCE 95-60 (for certain transactions involving
insurance company general accounts), PTCE 91-38 (for certain
transactions involving bank collective investment funds), PTCE 90-1
(for certain transactions involving insurance company separate
accounts), and PTCE 84-14 (for certain transactions determined by
independent qualified asset managers).
Because the Capital Securities may be deemed to be equity
interests in the Issuer Trust for purposes of applying ERISA and
Section 4975 of the Code, the Capital Securities may not be
purchased or held by any Plan, any entity whose underlying assets
include "plan assets" by reason of any Plan's investment in the
entity (a "Plan Asset Entity") or any person investing "plan
assets" of any Plan, unless such purchaser or holder is eligible
for the exemptive relief available under PTCE 96-23, 95-60, 91- 38,
90-1 or 84-14 or another applicable exemption. Any purchaser or
holder of the Capital Securities or any interest therein will be
deemed to have represented by its purchase and holding thereof that
it either (a) is not a Plan or a Plan Asset Entity and is not
purchasing such securities on behalf of or with "plan assets" of
any Plan or (b) is eligible for the exemptive relief available
under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable
exemption with respect to such purchase or holding. See "Notice to
Investors" herein.
In order to delineate fiduciary responsibility appropriately,
each investing Plan, by purchasing the Capital Securities, will be
deemed to have (i) directed the Issuer Trust to invest in the
Junior Subordinated Debentures and (ii) appointed First Chicago (an
entity unaffiliated with and independent of the Issuer Trust) as
Property Trustee under the Trust Agreement responsible for certain
administrative functions with respect to the Capital Securities.
The appointment of First Chicago as Property Trustee in the
preceding sentence does not extend beyond the duties of First
Chicago as Property Trustee set forth in the Trust Agreement and
First Chicago expressly assumes no other fiduciary responsibilities
to the Plan, including without limitation any duty with respect to
the prudence or diversification of investments under the Plan.
Due to the complexity of these rules and the penalties that
may be imposed upon persons involved in non-exempt prohibited
transactions, it is particularly important that fiduciaries or
other persons considering purchasing the Capital Securities on
behalf of or with "plan assets" of any Plan consult with their
counsel regarding the potential consequences if the assets of the
Issuer Trust were deemed to be "plan assets" and the availability
of exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14
or any other applicable exemption.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its
own account pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
Exchange Securities. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Securities received in exchange
for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. The Company
has agreed that, for a period of 180 days after the Expiration
Date, it will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such
resale. In addition, until , 199 , all dealers effecting
transactions in the Exchange Securities may be required to deliver
a prospectus.
The Company will not receive any proceeds from any sale of
Exchange Securities by broker-dealers. Exchange Securities received
by broker-dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Securities or a combination
of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that
were received by it for its own account pursuant to the Exchange
Offer and any broker or dealer that participates in a distribution
of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such
resale of Exchange Securities and any commission or concessions
received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 180 days after the Expiration Date the Company
will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker- dealer
that requests such documents in the Letter of Transmittal. The
Company has agreed to pay all expenses incident to the Exchange
Offer (including the expenses of one counsel for the Holders of the
Securities) other than commissions or concessions of any brokers or
dealers and will indemnify the Holders of the Securities (including
any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
VALIDITY OF SECURITIES
The validity of the Exchange Capital Securities, the Exchange
Guarantee and the Exchange Junior Subordinated Debentures will be
passed upon for the Company by Robert C. Walker, Senior Vice
President and General Counsel of the Company and by Skadden, Arps,
Slate, Meagher & Flom LLP as special counsel to the Issuer Trust.
Certain matters relating to United States federal income tax
considerations will be passed upon for the Company by Skadden,
Arps, Slate, Meagher & Flom LLP.
EXPERTS
The consolidated financial statements and schedules of
Hartford Steam Boiler and consolidated subsidiaries included in the
Company's Annual Report on Form 10-K as of December 31, 1996 and
1995, and for each of the years in the three-year period ended
December 31, 1996, have been incorporated by reference herein and
elsewhere in the Registration Statement, in reliance upon the
report of Coopers & Lybrand LLP, independent certified public
accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
NO PERSON HAS BEEN
AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS $110,000,000
PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN HSB CAPITAL I
AUTHORIZED. NEITHER THE
DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER OFFER TO EXCHANGE ITS GLOBAL
SHALL, UNDER ANY FLOATING RATE CAPITAL
CIRCUMSTANCES, CREATE ANY SECURITIES, SERIES B
IMPLICATION THAT THERE HAS (LIQUIDATION AMOUNT $1,000 PER
BEEN NO CHANGE IN THE AFFAIRS EXCHANGE CAPITAL SECURITY)
OF THE COMPANY OR THE ISSUER WHICH HAVE BEEN REGISTERED
TRUST SINCE THE DATE HEREOF OR UNDER THE SECURITIES ACT OF
THAT THE INFORMATION CONTAINED 1933 FOR ANY AND ALL OF
HEREIN IS CORRECT AS OF ANY ITS OUTSTANDING
TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR GLOBAL FLOATING RATE
THE SOLICITATION OF AN OFFER CAPITAL SECURITIES, SERIES A
TO BUY ANY SECURITIES OTHER (LIQUIDATION AMOUNT $1,000 PER
THAN THE SECURITIES DESCRIBED ORIGINAL CAPITAL SECURITY)
IN THIS PROSPECTUS OR AN OFFER FULLY AND UNCONDITIONALLY
TO SELL OR THE SOLICITATION OF GUARANTEED, TO THE EXTENT
AN OFFER TO BUY SUCH DESCRIBED HEREIN, BY
SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH
OFFER OR SOLICITATION IS HSB GROUP, INC.
UNLAWFUL.
TABLE OF CONTENTS
PAGE PROSPECTUS
Available Information . . . .
Incorporation of Certain
Documents by Reference . .
Prospectus Summary . . . . .
Risk Factors . . . . . . . .
HSB Group, Inc. . . . . . .
Selected Consolidated
Financial Data
and Other Information . . .
HSB Capital I . . . . . . . .
Ratio of Earnings to Fixed
Charges and Preferred
Stock Dividend
Requirements . . . . . . .
Use of Proceeds . . . . . . .
Capitalization . . . . . . .
Accounting Treatment . . . .
Rating of Capital
Securities . . . . . . . .
The Exchange Offer . . . . .
Description of Exchange
Securities . . . . . . . .
Relationship Among the
Exchange Capital
Securities, the Exchange
Junior Subordinated
Debentures and the
Exchange Guarantee . . . .
Certain Federal Income Tax
Consequences . . . . . . .
Certain ERISA Considerations
Plan of Distribution . . . .
Validity of Securities . . .
Experts . . . . . . . . . . .
, 1997
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
HSB Group's Articles of Incorporation provide that HSB will
indemnify directors to the fullest extent permitted under the law.
The Connecticut Business Corporation Act ("CBCA") permits a
corporation to indemnify its directors against liability (including
judgments, settlements, penalties and fines) if such individual
acted in good faith, reasonably believed that his or her conduct
was in the corporation's best interests and, in the case of
criminal proceedings, had no reasonable cause to believe his or her
conduct was unlawful. In a proceeding by or in the right of the
corporation, the corporation may indemnify a director only for
reasonable expenses, and may not indemnify a director who is
adjudged liable to the corporation. Indemnification of such
expenses is mandatory when a director is successful in the defense
of any proceeding. The CBCA also permits a corporation to pay or
reimburse the reasonable expenses incurred by a director who is a
party to an action, suit or proceeding (whether civil, criminal,
administrative or investigative) in advance of the final
disposition of such action, suit or proceeding provided that (i)
such director affirms in writing such director's good faith belief
that the standard of conduct required under the statute has been
met; (ii) such director furnishes a written undertaking to repay
the corporation if it is ultimately determined that such standard
has not been met; and (iii) a determination is made pursuant to the
statute that the facts then known would not preclude
indemnification under the statute. Provision for such advance of
expenses in accordance with the CBCA is included in HSB Group's
Articles of Incorporation. As permitted by the CBCA, HSB Group will
continue to secure insurance which provides broader indemnification
of directors than is required under the CBCA.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit
4.1 Indenture of HSB Group, Inc. relating to the Junior
Subordinated Debentures (incorporated herein by reference to
Exhibit 4 to HSB Group, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997 (File No. 001-13135))
4.2 First Supplemental Indenture of HSB Group, Inc.
(incorporated herein by reference to Exhibit 4 to HSB Group,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
June 30, l997 (File No. 001-13135))
4.3 Form of Certificate of Exchange Junior Subordinated
Debentures
4.4 Certificate of Trust of HSB Capital I
4.5 Amended and Restated Trust Agreement of HSB Capital Inc.
(incorporated herein by reference to Exhbit 4 to HSB Group,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
June 30, l997 (File No. 001-13135))
4.6 Form of Exchange Capital Security Certificate for HSB
Capital I
4.7 Form of Exchange Guarantee of HSB Group, Inc. relating to
the Exchange Capital Securities
4.8 Registration Rights Agreement
5.1 Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
LLP to HSB Group, Inc. as to legality of the Exchange
Capital Securities to be issued by HSB Capital I
5.2 Opinion and Consent of Robert C. Walker, Senior Vice
President and General Counsel, of HSB Group, Inc. as to the
Exchange Junior Subordinated Debentures and the Exchange
Guarantee to be issued by HSB Group, Inc.
8 Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
LLP as to certain federal income tax matters
12.1 Computation of ratio of earnings to fixed charges
23.1 Consent of Coopers & Lybrand LLP
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)
23.3 Consent of Robert C. Walker, Senior Vice President and
General Counsel of HSB Group, Inc. (included in Exhibit 5.2)
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8)
24 Power of Attorney of certain officers and directors of HSB
Group, Inc. (contained in, and incorporated herein by
reference to, Page II-4 of this Registration Statement)
25.1 Form T-1 Statement of Eligibility of The First National Bank
of Chicago to act as trustee under the Indenture
25.2 Form T-1 Statement of Eligibility of The First National Bank
of Chicago to act as Property Trustee under the Amended and
Restated Trust Agreement of HSB Capital I
25.3 Form T-1 Statement of Eligibility of The First National Bank
of Chicago under the Exchange Guarantee for the benefit of
the holders of Exchange Capital Securities of HSB Capital I
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Exchange Agent Agreement
ITEM 22. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes that,
for purposes of determining any liability under the Securities Act
of 1933, as amended, each filing of a Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by
reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of each undersigned Registrant pursuant to the
provisions, or otherwise, each Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
each undersigned Registrant of expenses incurred or paid by a
director, officer of controlling person of each Registrant in the
successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with
the securities being registered, each Registrant will, unless in
the opinion of its counsel the matter has been settled by the
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
The undersigned Registrants hereby undertake to respond to
requests for information that is incorporated by reference into the
Prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the HSB Group, Inc. certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-4 and has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
City of Hartford, in the State of Connecticut, on the 9th of
October, 1997.
HSB GROUP, INC.
By: /s/ GORDON W. KREH
_________________________
Gordon W. Kreh
President, Chief Executive
Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Robert C. Walker
his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and his name, place and
stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration
statement (or any other registration statement for the same
offering that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act), and to file the same, with all
exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and
perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities indicated on the 9th of October, 1997.
Signature Title
/s/ GORDON W. KREH
____________________ Chairman of the Board, Chief
Gordon W. Kreh Executive Officer and Director
/s/ SAUL L. BASCH
____________________ Senior Vice President, Treasurer
Saul L. Basch and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
/s/ ROBERT C. WALKER
____________________ Senior Vice President and General
Robert C. Walker Counsel
/s/ JOEL B. ALVORD
____________________ Director
Joel B. Alvord
/s/ RICHARD H. BOOTH
____________________ Director
Richard H. Booth
/s/ COLIN G. CAMPBELL
____________________ Director
Colin G. Campbell
/s/ RICHARD G. DOOLEY
____________________ Director
Richard G. Dooley
/s/ WILLIAM B. ELLIS
____________________ Director
William B. Ellis
/s/ E. JAMES FERLAND
____________________ Director
E. James Ferland
/s/ SIMON W. LEATHES
____________________ Director
Simon W. Leathes
/s/ LOIS DICKSON RICE
____________________ Director
Lois Dickson Rice
/s/ JOHN M. WASHBURN, JR.
____________________ Director
John M. Washburn, Jr.
/s/ WILSON WILDE
____________________ Director
Wilson Wilde
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
HSB Capital I certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form S-4 and has
duly caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of
Hartford, in the State of Connecticut, on the 9th of October, 1997.
HSB Capital I
/s/ SAUL L. BASCH
______________________________
By
Saul L. Basch
Administrative Trustee
/s/ R. KEVIN PRICE
_______________________________
By
R. Kevin Price
Administrative Trustee
/s/ ROBERT C. WALKER
_______________________________
By
Robert C. Walker
Administrative Trustee
EXHIBIT INDEX
Exhibit Description
4.1 Indenture of HSB Group, Inc. relating to the Junior
Subordinated Debentures (incorporated herein by reference to
Exhibit 4 to HSB Group, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997 (File No. 001-13135))
4.2 First Supplemental Indenture of HSB Group, Inc.(incorporated
herein by reference to Exhibit 4 to HSB Group, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30,
l997 (File No. 001-13135))
4.3 Form of Certificate of Exchange Junior Subordinated
Debentures
4.4 Certificate of Trust of HSB Capital I
4.5 Amended and Restated Trust Agreement of HSB Capital I,
(incorporated herein by reference to Exhibit 4 to HSB Group,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
June 30, l997 (File No. 001-13135))
4.6 Form of Exchange Capital Security Certificate for HSB
Capital I
4.7 Form of Exchange Guarantee of HSB Group, Inc. relating to
the Exchange Capital Securities
4.8 Registration Rights Agreement
5.1 Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
LLP to HSB Group Inc. as to legality of the Exchange Capital
Securities to be issued by HSB Capital I
5.2 Opinion and Consent of Robert C. Walker, Senior Vice
President and General Counsel, of HSB Group Inc. as to the
Exchange Junior Subordinated Debentures and the Exchange
Guarantee to be issued by HSB Group, Inc.
8 Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
LLP, as to certain federal income tax matters
12.1 Computation of ratio of earnings to fixed charges
23.1 Consent of Coopers & Lybrand LLP
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)
23.3 Consent of Robert C. Walker, Senior Vice President and
General Counsel of HSB Group, Inc. (included in Exhibit 5.2)
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8)
24 Power of Attorney of certain officers and directors of HSB
Group, Inc. (contained in, and incorporated herein by
reference to, Page II-4 of this Registration Statement)
25.1 Form T-1 Statement of Eligibility of The First National Bank
of Chicago to act as trustee under the Indenture
25.2 Form T-1 Statement of Eligibility of The First National Bank
of Chicago to act as Property Trustee under the Amended and
Restated Trust Agreement of HSB Capital I
25.3 Form T-1 Statement of Eligibility of The First National Bank
of Chicago under the Exchange Guarantee for the benefit of
the holders of Exchange Capital Securities of HSB Capital I
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Exchange Agent Agreement
HSB GROUP, INC.
Global Floating Rate Junior Subordinated
Debentures, Series B
No. R-___ $_________
HSB Group, Inc., a Connecticut corporation (hereinafter called the
"Corporation", which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises
to pay to The First National Bank of Chicago, as Property Trustee,
pursuant to the Amended and Restated Trust Agreement of HSB Capital I,
dated as of July 15, 1997, or registered assigns, the principal sum of
____________ ($________) Dollars on July 15, 2027; provided that the
Corporation may shorten the Stated Maturity of the principal of this
Security to a date not earlier than April 15, 2012, in the circumstances
described on the reverse hereof. The Corporation further promises to pay
interest on said principal sum from October 15, 1997 or from the most
recent Interest Payment Date to which interest has been paid or duly
provided for quarterly (subject to deferral as set forth herein) in
arrears on January 15, April 15, July 15, and October 15 of each year,
commencing Janu ary 15, 1998, at the variable annual rate of LIBOR plus
.91% on the principal amount thereof, together with Additional Sums, if
any, as provided in Section 10.6 of the Indenture until the principal
hereof is paid or duly provided for or made available for payment;
provided that any overdue principal, premium or Additional Sums and any
overdue installment of interest shall bear Additional Interest at the
variable annual rate of LIBOR plus .91% (to the extent that the payment
of such interest shall be legally enforceable), compounded quarterly from
the dates such amounts are due until they are paid. The amount of
interest payable for any period will be computed on the basis of the
actual number of Days in the applicable payment period (which actual
number of days shall include the first day but exclude the last day of
such payment period) divided by 360. LIBOR shall mean the rate for
Eurodollar deposits having a three month maturity determined in
accordance with the First Supplemental Indenture hereinafter referred to.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular
Record Date for such interest installment, which shall be the January 1,
April 1, July 1 or October 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date. Any such interest not
so punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid
to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this
series not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this
series may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
So long as no Event of Default has occurred and is continuing, the
Corporation shall have the right, at any time during the term of this
Security, from time to time to defer the payment of interest on this
Security for up to 20 consecutive quarterly interest payment periods with
respect to each deferral period (each an "Extension Period") at the end
of which the Corporation shall pay all interest then accrued and unpaid
(including any Additional Interest, as provided below); provided,
however, that no Extension Period shall extend beyond the Stated Maturity
of the principal of this Security, as then in effect, and no such
Extension Period may end on a date other than an Interest Payment Date.
During any such Extension Period, the Corporation shall not and shall not
permit any subsidiary of the Company to, (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of the Corporation's capital stock, or (ii)
make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Corporation that
rank pari passu in all respects with or junior in interest to this
Security or (iii) make any guarantee payments with respect to any
guarantee by the Corporation of the debt securities of any subsidiary of
the Corporation if such guarantee ranks pari passu with or junior in
interest to this Security (other than (a) dividends or distributions in
common stock of the Corporation, (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee and (d) purchases of common stock related to the issuance of
common stock or rights under any of the Corpora tion's or its
subsidiaries' benefit plans for their directors, officers or employees).
Prior to the termination of any such Extension Period, the Corporation
may further defer the payment of interest, provided that no Extension
Period shall exceed 20 consecutive quarterly interest payment periods,
extend beyond the Stated Maturity of the principal of this Security or
end on a date other than an Interest Payment Date. Upon the termination
of any such Extension Period and upon the payment of all accrued and
unpaid interest and any Additional Interest then due on any Interest
Payment Date, the Corporation may elect to begin a new Extension Period,
subject to the above conditions. No interest shall be due and payable
during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable
during such Extension shall bear Additional Interest (to the extent that
the payment of such interest shall be legally enforceable) at the rate of
LIBOR plus .91% per annum, compounded quarterly and calculated as set
forth in the first paragraph of this Security, from the dates on which
amounts would otherwise have been due and payable until paid or made
available for payment. The Corporation shall give the Holder of this
Security and the Trustee notice of its election to begin any Extension
Period at least one Business Day prior to the next succeeding Interest
Payment Date on which interest on this Secu rity would be payable but for
such deferral or so long as such Securities are held by HSB Capital I
(the "Issuer Trust") or a trustee thereof, at least one Business Day
prior to the earlier of (i) the next succeeding date on which
Distributions on the Capital Securities of such Issuer Trust would be
payable but for such deferral, and (ii) the date on which the Property
Trustee of such Issuer Trust is required to give notice to holders of
such Capital Securities of the record date or the date such Distributions
are payable.
Payment of the principal of (and premium, if any) and interest on
this Security will be made at the office or agency of the Corporation
maintained for that purpose in New York, New York or Chicago, Illinois,
in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Corporation payment of
interest may be made (i) by check mailed to the address of the Person
entitled thereto as such address shall appear in the Securities Register,
or (ii) by wire transfer in immediately available funds at such place and
to such account as may be designated by the Person entitled thereto as
specified in the Securities Register.
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and junior in right of payment to
the prior payment in full of all Senior Indebtedness, and this Security
is issued subject to the provisions of the Indenture with respect
thereto. Each Holder of this Security, by accepting the same, (a) agrees
to and shall be bound by such provisions, (b) authorizes and directs the
Trustee on such Holder's behalf to take such actions as may be
necessary or appropriate to effectuate the subordination so provided,
and (c) appoints the Trustee his or her attorney-in-fact for any and all
such purposes. Each Holder hereof, by such Holder's acceptance hereof,
waives all notice of the acceptance of the subordination provisions
contained herein and in the Indenture by each holder of Senior
Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or
be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Corporation has caused this instrument to
be duly executed under its corporate seal.
HSB GROUP, INC.
By:_____________________________
Name: Saul L. Basch
Title: Senior Vice President,
Treasurer and Chief
Financial Officer
Attest:
SECTION 2.3. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of
the Corporation (herein called the "Securities"), issued and to be issued
in one or more series under the Junior Subordinated Indenture, dated as
of July 15, 1997 (herein called the "Indenture"), between the Corporation
and The First National Bank of Chicago, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the
Indenture), the First Supplemental Indenture (the "First Supplemental
Indenture") dated as of July 15, 1997, between the Corporation and the
Trustee to which Indenture, First Supplemental Indenture and all
indentures supplemental thereto reference is hereby made for a statement
of the respective rights, limitations of rights, duties and immunities
thereunder of the Corporation, the Trustee, the holders of Senior
Indebtedness and the Holders of the Securities, and of the terms upon
which the Securities are, and are to be, authenticated and delivered.
This Security is one of the series designated on the face hereof ,
limited in aggregate principal amount to $_______).
All terms used in this Security that are defined in the Indenture
or in the Amended and Restated Trust Agreement, dated as of July 15, 1997
(as modified, amended or supplemented from time to time, the "Trust
Agreement"), relating to Issuer Trust among the Corporation, as
Depositor, the Trustees named therein and the Holders from time to time
of the Trust Securities issued pursuant thereto, shall have the meanings
assigned to them in the Indenture or the Trust Agreement, as the case may
be.
The Corporation may at any time, at its option, on or after July
15, 2007 and subject to the terms and conditions of Article XI of the
Indenture, redeem this Security in whole at any time or in part from time
to time, at a Redemption Price equal to 100% of the principal amount
hereof, together, in the case of any such redemption, with accrued
interest (including any Additional Interest) to but excluding the date
fixed for redemption.
In addition, upon the occurrence and during the continuation of a
Tax Event in respect of the Issuer Trust, the Corporation may, at its
option, at any time within 90 days of the occurrence and during the
continuation of such Tax Event redeem this Security, in whole but not
in part, subject to the terms and conditions of Article XI of the
Indenture, at a Redemption Price equal to 100% of the principal amount of
the Junior Subordinated Debentures so redeemed plus accrued and unpaid
interest thereon to the date of redemption.
In the event of redemption of this Security in part only, a new
Security or Securities of this series for the unredeemed portion hereof
will be issued in the name of the Holder hereof upon the cancellation
hereof.
Upon the occurrence and during the continuation of a Tax Event, the
Corporation may, at its option, shorten the Stated Maturity of this
Security to the minimum extent, but in no event to a date not earlier
than April 15, 2012, such that, in the opinion of counsel to the
Corporation experienced in such matters that, after advancing the Stated
Maturity, interest paid on this Security will be deductible for U.S.
federal income tax purposes. Upon the exercise of the right to shorten
the Stated Maturity of this Security, the Corporation will not have the
right to redeem this Security prior to the new Stated Maturity upon the
occurrence of a Tax Event or to further shorten the maturity of this
Security.
The Indenture contains provisions for satisfaction and discharge of
the entire indebtedness of this Security upon compliance by the
Corporation with certain conditions set forth in the Indenture.
Upon the occurrence and during the continuation of a Tax Event, the
Corporation may, at its option, shorten the Stated Maturity of this
Security to the minimum extent, but in no event to a date not earlier
than April 15, 2012, such that, in the opinion of counsel to the
Corporation experienced in such matters that, after advancing the Stated
Maturity, interest paid on this Security will be deductible for U.S.
federal income tax purposes. Upon the exercise of the right to shorten
the Stated Maturity of the Corporation will not have the right to redeem
the Security prior to the new Stated Maturity upon the occurrence of a
Tax Event or to further shorten the maturity of this Security.
The Indenture permits, with certain exceptions as therein provided,
the Corporation and the Trustee at any time to enter into a supplemental
indenture or indentures for the purpose of modifying in any manner the
rights and obligations of the Corporation and of the Holders of the
Securities, with the consent of the Holders of not less than a majority
in principal amount of the Outstanding Securities of each series to be
affected by such supplemental indenture. The Indenture also contains
provisions permitting Holders of specified percentages in principal
amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive
compliance by the Corporation with certain provisions of the Indenture
and certain past defaults under the Indenture and their consequences. Any
such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security
and of any Security issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, if
an Event of Default with respect to the Securities of this series at the
time Outstanding occurs and is continuing, then and in every such case
the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Outstanding Securities of this series may declare the
principal amount of all the Outstanding Securities of this series to be
due and payable immediately, by a notice in writing to the Corporation
(and to the Trustee if given by Holders), provided that, if upon an Event
of Default, the Trustee or such Holders fail to declare the principal of
all the Outstanding Securities of this series to be immediately due and
payable, the holders of at least 25% in aggregate Liquidation Amount of
the Capital Securities then Outstanding shall have the right to make such
declaration by a notice in writing to the Corporation and the Trustee;
and upon any such declaration the principal of and the accrued interest
(including any Additional Interest) on all the Securities of this series
shall become immediately due and payable, provided that the payment of
such principal and interest (including any Additional Interest) on such
Securities shall remain subordinated to the extent provided in Article
XIII of the Indenture.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Corporation, which is absolute and unconditional, to pay the principal
of (and premium, if any) and interest (including any Additional Interest)
on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Securities Register, upon surrender of this Security for registration
of transfer at the office or agency of the Corporation maintained under
Section 10.2 of the Indenture for such purpose, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to
the Corporation and the Securities Registrar duly executed by, the Holder
hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Securities of this series, of like tenor, of
authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or trans ferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple of
$1,000 in excess thereof except that certain Holders may be required to
hold a minimum of $100,000 as provided for in the Indenture. As provided
in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal
amount of Securities of this series and of like tenor of a different
authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of
transfer or exchange, but the Corporation may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Corporation, the Trustee and any agent of the Corporation
or the Trustee may treat the Person in whose name this Security is
registered as the owner hereof for all purposes, whether or not this
Security be overdue, and neither the Corporation, the Trustee nor any
such agent shall be affected by notice to the contrary.
The Corporation and, by its acceptance of this Security or a
beneficial interest therein, the Holder of, and any Person that acquires
a beneficial interest in, this Security agree that for United States
Federal, state and local tax purposes it is intended that this Security
constitute indebtedness.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
The Trustee's certificates of authentication shall be in
substantially the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated: _______, 1997
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
By: ______________________________
Authorized Officer
CERTIFICATE OF TRUST OF
HSB CAPITAL I
This Certificate of Trust of HSB Capital I
(the "Trust"), dated as of July 10, 1997, is being
duly executed and filed by the undersigned, as
trustee, to form a business trust under the Delaware
Business Trust Act (12 Del. C. (S) 3801 et seq.).
1. NAME. The name of the business
trust being formed hereby is HSB Capital I.
2. DELAWARE TRUSTEE. The name and
business address of the trustee of the Trust with a
principal place of business in the State of Delaware
is: First Chicago Delaware Inc., 300 King Street,
Wilmington, Delaware 19801.
3. ADMINISTRATIVE TRUSTEES. The names of
the Administrative Trustees are: Saul L. Basch, R.
Kevin Price, Robert C. Walker.
4. EFFECTIVE DATE. This Certificate of
Trust shall be effective upon the filing of this
Certificate of Trust.
IN WITNESS WHEREOF, the undersigned trustee
of the Trust has, executed this Certificate of Trust
as of the date first above written.
/s/ Saul L. Basch
-----------------------------
Name: Saul L. Basch
Title: Administrative Trustee
/s/ R. Kevin Price
-----------------------------
Name: R. Kevin Price
Title: Administrative Trustee
/s/ Robert C. Walker
-----------------------------
Name: Robert C. Walker
Title: Administrative Trustee
FIRST CHICAGO DELAWARE INC.,
as Delaware Trustee
By: /s/ Richard D. Manella
-----------------------------
Name: Richard D. Manella
Title: Vice President
UNLESS THIS EXCHANGE CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), 55 WATER STREET, NEW YORK, NEW YORK, TO THE COMPANY (AS DEFINED
BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE,
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
THIS EXCHANGE CAPITAL SECURITY IS A GLOBAL SECURITY WITHIN THE
MEANING SET FORTH IN THE TRUST AGREEMENT HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF DTC OR A NOMINEE OF DTC. THIS NOTE IS
EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC
OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A
NOMINEE OF DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ITS NOMINEE TO A
SUCCESSOR DEPOSITORY OR ITS NOMINEE.
NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE") (EACH, A "PLAN"), NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE
"PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY (A "PLAN
ASSET ENTITY"), AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN, MAY
ACQUIRE OR HOLD THIS EXCHANGE CAPITAL SECURITIES CERTIFICATE OR ANY
INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE
EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED
TRANSACTION CLASS EXEMPTION ("PTCE") 96-23, 95-60, 91-38, 90-1 OR 84-14
OR ANOTHER APPLICABLE EXEMPTION WITH RESPECT TO SUCH PURCHASE OR HOLDING
AND, IN THE CASE OF ANY PURCHASER OR HOLDER RELYING ON ANY EXEMPTION
OTHER THAN PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14, HAS COMPLIED WITH ANY
REQUEST BY THE DEPOSITOR OR THE ISSUER TRUST FOR AN OPINION OF COUNSEL OR
OTHER EVIDENCE WITH RESPECT TO THE AVAILABILITY OF SUCH EXEMPTION. ANY
PURCHASER OR HOLDER OF THIS CAPITAL SECURITIES CERTIFICATE OR ANY
INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND
HOLDING HEREOF THAT IT EITHER (A) IS NOT A PLAN OR A PLAN ASSET ENTITY
AND IS NOT PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS"
OF ANY PLAN, OR (B) IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE
EXEMPTION WITH RESPECT TO SUCH PURCHASE OR HOLDING.
CERTIFICATE NUMBER AGGREGATE LIQUIDATION AMOUNT:
R-_____
UP TO $110,000,000
CUSIP NO. ___________
CERTIFICATE EVIDENCING CAPITAL SECURITIES
OF
HSB CAPITAL I
GLOBAL FLOATING RATE CAPITAL SECURITIES, SERIES B
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
HSB Capital I, a statutory business trust created under the laws of
the State of Delaware (the "Issuer Trust"), hereby certifies that Cede &
Co. (the "Holder") is the registered owner of ________ (______) capital
securities (aggregate Liquidation Amount_______ ($________)) of the
Issuer Trust representing a preferred undivided beneficial interest in
the assets of the Issuer Trust and designated the Global Floating Rate
Capital Securities, Series B (liquidation amount $1,000 per Capital
Security) (the "Capital Securities"). The Capital Securities are
transferable on the books and records of the Issuer Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly
endorsed and in proper form for transfer as provided in Section 5.5 of
the Trust Agree ment (as defined below). The designations, rights,
privileges, restrictions, preferences and other terms and provisions of
the Capital Securities are set forth in, and this certificate and the
Capital Securities represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Amended and
Restated Trust Agreement of the Issuer Trust, dated as of July 15, 1997,
as the same may be amended from time to time (the "Trust Agreement"),
among HSB Group, Inc., a Connecticut corporation, as Depositor, The First
National Bank of Chicago, as Property Trustee, First Chicago Delaware,
Inc., as Delaware Trustee, and the Administrative Trustees named therein,
including the designation of the terms of the Capital Securities as set
forth therein. The Holder is entitled to the benefits of the Exchange
Guarantee Agreement, dated as of _____, 1997 (the "Exchange Guarantee
Agreement"), entered into by HSB Group, Inc. and The First National Bank
of Chicago, as guarantee trustee, to the extent provided therein. The
Issuer Trust will furnish a copy of the Trust Agreement and the Exchange
Guarantee Agreement to the Holder without charge upon written request to
the Issuer Trust at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Issuer
Trust has executed this certificate this _____ day of ______, 1997.
HSB CAPITAL I
By:____________________________
Name:
Administrative Trustee
SCHEDULE A
This Global Certificate represents Capital Securities with an
aggregate liquidation amount of up to $110,000,000. The initial
liquidation amount of this Global Certificate shall be $__________. The
following increases or decreases in the liquidation amount of this Global
Certificate have been made:
<TABLE>
===========================================================================================================
<S> <C> <C> <C> <C>
Amount of increase
in Liquidation
Amount of this Liquidation Amount Signature of
Global Certificate Amount of decrease of this Global authorized
including upon in Liquidation Certificate officer of Trustee
exercise of over- Amount of this following such or Securities
Date Made allotment option Global Certificate decrease or increase Custodian
- ----------------------------------------------------------------------------------------------------------
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==========================================================================================================
</TABLE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Capital Security to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Capital Securities Certificate on the books of the
Issuer Trust. The agent may substitute another to act for him or her.
Date: ________________
Signature:
____________________________________________________________________
(Sign exactly as your name appears on the other side of this Capital
Security Certificate)
The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbro kers, savings and loan associations and
credit unions with membership in an approved signature guarantee
medallion program), pursuant to S.E.C. Rule 17Ad-15.
EXCHANGE GUARANTEE AGREEMENT
between
HSB GROUP, INC.,
as Guarantor
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Guarantee Trustee
Relating to
HSB Capital I
---------------------------
Dated as of _____, 1997
---------------------------
EXCHANGE CAPITAL SECURITIES GUARANTEE AGREEMENT ("Exchange
Guarantee Agreement"), dated as of _____, 1997, between HSB GROUP, INC., a
Connecticut corporation (the "Guarantor"), having its principal office at
One State Street, Hartford, Connecticut 06102 and The First National Bank
of Chicago, a national banking association, as trustee (the "Guarantee
Trustee"), for the benefit of the Holders (as defined herein) from time to
time of the Exchange Capital Securities (as defined herein) of HSB Capital
I, a Delaware statutory business trust (the "Issuer Trust").
RECITALS OF THE CORPORATION
WHEREAS, pursuant to an Amended and Restated Trust Agreement,
dated as of July 15, 1997 (the "Trust Agreement"), among HSB Group, Inc.,
as Depositor, The First National Bank of Chicago, as Property Trustee,
First Chicago Delaware Inc. as Delaware Trustee, and the Administrative
Trustees named therein, the Issuer Trust is issuing $110,000,000 aggregate
Liquidation Amount (as defined in the Trust Agreement) of its Global
Floating Rate Capital Securities, Series B (liquidation amount $1,000 per
capital security) (the "Exchange Capital Securities"), representing
preferred undivided beneficial interests in the assets of the Issuer Trust
and having the terms set forth in the Trust Agreement; and
WHEREAS, as incentive for the Holders to exchange their respective
beneficial interests in the Global Floating Rate Captial Securities, Series
A (the "Series A Capital Securities") for Exchange Capital Securities, the
Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Exchange Guarantee Agreement, to pay to the Holders of
the Exchange Capital Securities the Guarantee Payments (as defined below).
The Guarantor agrees to make certain other payments on the terms and
conditions set forth herein; and
WHEREAS, the Guarantor has executed and delivered a guarantee
agreement (the "Common Securities Guarantee"), with substantially identical
terms to this Exchange Guarantee Agreement, for the benefit of the holders
of the Common Securities (as defined herein), except that if an Event of
Default (as defined in the Declaration) has occurred and is continuing, the
rights of holders of the Common Securities to receive Guarantee Payments
under the Common Securities Guarantee are subordinated, to the extent and
in the manner set forth in the Common Securities Guarantee, to the rights
of holders of Exchange Capital Securities and the Exchange Capital
Securities to receive Guarantee Payments under this Exchange Guarantee
Agreement and the Exchange Guarantee, as the case may be.
NOW, THEREFORE, in consideration of the exchange by each Holder,
which exchange the Guarantor hereby acknowledges will benefit the
Guarantor, the Guarantor executes and delivers this Exchange Guarantee
Agreement for the benefit of the Holders from time to time.
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.
For all purposes of this Exchange Guarantee Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) The terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the singular;
(b) All other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation";
(d) All accounting terms used but not defined herein have the
meanings assigned to them in accordance with United States generally
accepted accounting principles;
(e) Unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may
be, of this Exchange Guarantee Agreement; and
(f) The words "hereby", "herein", "hereof" and "hereunder" and
other words of similar import refer to this Exchange Guarantee Agreement as
a whole and not to any particular Article, Section or other subdivision.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control", when used with respect to any specified Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Board of Directors" means the board of directors of the Guarantor
or the Executive Committee of the board of directors of the Guarantor (or
any other committee of the board of directors of the Guarantor performing
similar functions) or a committee designated by the board of directors of
the Guarantor (or such committee), comprised of two or more members of the
board of directors of the Guarantor or officers of the Guarantor, or both.
"Capital Securities" means the Initial Capital Securities together
with the Exchange Capital Securities.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer Trust.
"Event of Default" means (i) a default by the Guarantor in any of
its payment obligations under this Exchange Guarantee Agreement or (ii) a
default by the Guarantor in any other obligation hereunder that remains
unremedied for 90 days.
"Exchange Capital Securities" has the meaning specified in the
Recitals to this Exchange Guarantee Agreement.
"Exchange Capital Securities Guarantee" means this Exchange
Guarantee Agreement, as modified, amended or supplemented from time to
time.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Exchange Capital
Securities, to the extent not paid or made by or on behalf of the Issuer
Trust: (i) any accrued and unpaid Distributions required to be paid on the
Exchange Capital Securities, to the extent the Issuer Trust has funds on
hand available therefor at such time, (ii) the Redemption Price with
respect to any Exchange Capital Securities called for redemption, to the
extent the Issuer Trust has funds on hand available therefor at such time,
and (iii) upon a voluntary or involuntary termination, winding up or
liquidation of the Issuer Trust (unless the Exchange Junior Subordinated
Debentures are distributed to the Holders) the lesser of (a) the
Liquidation Distribution (as defined in the Trust Agreement) with respect
to the Exchange Capital Securities, and (b) the amount of assets of the
Issuer Trust remaining available for distribution to Holders on liquidation
of the Issuer Trust.
"Guarantee Trustee" means The First National Bank of Chicago,
solely in its capacity as Guarantee Trustee and not in its individual
capacity, until a Successor Guarantee Trustee has been appointed and has
accepted such appointment pursuant to the terms of this Exchange Guarantee
Agreement, and thereafter means each such Successor Guarantee Trustee.
"Guarantor" has the meaning specified in the first paragraph of
this Exchange Guarantee Agreement.
"Holder" means any Holder (as defined in the Trust Agreement) of
any Exchange Capital Securities; provided, however, that in determining
whether the holders of the requisite percentage of Exchange Capital
Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor, the Guarantee Trustee, or any
Affiliate of the Guarantor or the Guarantee Trustee.
"Indenture" means the Junior Subordinated Indenture, dated as of
July 15, 1997, between HSB Group, Inc. and The First National Bank of
Chicago, as trustee, as the same may be modified, amended or supplemented
from time to time.
"Initial Capital Securities" has the meaning specified in the
Recitals to the Exchange Guarantee Agreement.
"Issuer Trust" has the meaning specified in the first paragraph of
this Exchange Guarantee Agreement.
"List of Holders" has the meaning specified in Section 2.2(a).
"Majority in Liquidation Amount of the Exchange Capital
Securities" means, except as provided by the Trust Indenture Act, Exchange
Capital Securities representing more than 50% of the aggregate Liquidation
Amount (as defined in the Trust Agreement) of all Exchange Capital
Securities then Outstanding (as defined in the Trust Agreement).
"Officers' Certificate" means a certificate signed by one of the
Senior Vice Presidents or Chief Executive Officer or the President or Vice
Presidents of the Guarantor, and by the Treasurer, an Assistant Treasurer,
the Corporate Secretary or an Assistant Secretary of the Guarantor, and
delivered to the Guarantee Trustee. Any Officers' Certificate delivered
with respect to compliance with a condition or covenant provided for in
this Exchange Guarantee Agreement shall include:
(a) a statement by each officer signing the Officers'
Certificate that such officer has read the covenant or condition
and the definitions relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by such officer in
rendering the Officers' Certificate;
(c) a statement that such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as
to whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether, in the opinion of such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint-stock
company, company, limited liability company, trust, business trust,
unincorporated association, or government or any agency or political
subdivision thereof, or any other entity of whatever nature.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of July 15, 1997, by and among the Guarantor, the
Issuer Trust and the Initial Purchasers named therein as such agreement may
be amended, modified or supplemented from time to time.
"Responsible Officer" means, with respect to the Guarantee
Trustee, any Senior Vice President, any Vice President, any Assistant Vice
President, the Secretary, any Assistant Secretary, the Treasurer, any
Assistant Treasurer, any Trust Officer or Assistant Trust Officer or any
other officer of the Corporate Trust Department of the Guarantee Trustee
and also means, with respect to a particular matter, any other officer to
whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section
4.1.
"Trust Agreement" means the Amended and Restated Trust Agreement
of the Issuer Trust referred to in the recitals to this Exchange Guarantee
Agreement, as modified, amended or supplemented from time to time.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this Exchange Guarantee Agreement was
executed; provided, however, that if the Trust Indenture Act of 1939 is
amended after such date, "Trust Indenture Act" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939 as so
amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application.
Except as otherwise expressly provided herein, the Trust Indenture
Act shall apply as a matter of contract to this Exchange Guarantee
Agreement for purposes of interpretation, construction and defining the
rights and obligations hereunder, and this Exchange Guarantee Agreement,
the Guarantor and the Guarantee Trustee shall be deemed for all purposes
hereof to be subject to and governed by the Trust Indenture Act to the same
extent as would be the case if this Exchange Guarantee Agreement were
qualified under that Act on the date hereof. Except as otherwise expressly
provided herein, if and to the extent that any provision of this Exchange
Guarantee Agreement limits, qualifies or conflicts with the duties imposed
by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
SECTION 2.2. List of Holders.
(a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) quarterly, on or before January 1, April 1, July 1
and October 1 of each year, a list, in such form as the Guarantee Trustee
may reasonably require, of the names and addresses of the Holders (a "List
of Holders") as of a date not more than 15 days prior to the delivery
thereof, and (b) at such other times as the Guarantee Trustee may request
in writing, within 30 days after the receipt by the Guarantor of any such
request, a List of Holders as of a date not more than 15 days prior to the
time such list is furnished, in each case to the extent such information is
in the possession or control of the Guarantor and has not otherwise been
received by the Guarantee Trustee in its capacity as such. The Guarantee
Trustee may destroy any List of Holders previously given to it on receipt
of a new List of Holders.
(b) The Guarantee Trustee shall comply with the requirements of
Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture
Act.
SECTION 2.3. Reports by the Guarantee Trustee.
Not later than 60 days following May 15 of each year, commencing
May 15, 1998, the Guarantee Trustee shall provide to the Holders such
reports as are required by Section 313 of the Trust Indenture Act, if any,
in the form and in the manner provided by Section 313 of the Trust
Indenture Act. If this Exchange Guarantee Agreement shall have been
qualified under the Trust Indenture Act, the Guarantee Trustee shall also
comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4. Periodic Reports to the Guarantee Trustee.
The Guarantor shall provide to the Guarantee Trustee and the
Holders such documents, reports and information, if any, as required by
Section 314 of the Trust Indenture Act and the compliance certificate
required by Section 314 of the Trust Indenture Act, in the form, in the
manner and at the times required by Section 314 of the Trust Indenture Act,
provided that such documents, reports and information shall not be required
to be provided to the Securities and Exchange Commission unless this
Exchange Guarantee Agreement shall have been qualified under the Trust
Indenture Act.
SECTION 2.5. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Guarantee Trustee such evidence
of compliance with such conditions precedent, if any, provided for in this
Exchange Guarantee Agreement that relate to any of the matters set forth in
Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer of the Guarantor pursuant to Section
314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.6. Events of Default; Waiver.
The Holders of at least a Majority in Liquidation Amount of the
Exchange Capital Securities may, by vote, on behalf of the Holders of all
the Exchange Capital Securities, waive any past default or Event of Default
and its consequences. Upon such waiver, any such default or Event of
Default shall cease to exist, and any default or Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Exchange Guarantee Agreement, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right
consequent thereon.
SECTION 2.7. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default known to it, transmit by mail, first
class postage prepaid, to the Holders, notice of any such Event of Default,
unless such Event of Default has been cured before the giving of such
notice, provided that, except in the case of a default in the payment of a
Guarantee Payment, the Guarantee Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of
the Guarantee Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge of
any Event of Default unless the Guarantee Trustee shall have received
written notice, or a Responsible Officer charged with the administration of
this Exchange Guarantee Agreement shall have obtained actual knowledge, of
such Event of Default.
SECTION 2.8. Conflicting Interests.
The Trust Agreement and the Indenture shall be deemed to be
specifically described in this Exchange Guarantee Agreement for the
purposes of clause (i) of the first proviso contained in Section 310(b) of
the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Guarantee Trustee.
(a) This Exchange Guarantee Agreement shall be held by the
Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee
shall not transfer this Exchange Guarantee Agreement to any Person except
to a Successor Guarantee Trustee on acceptance by such Successor Guarantee
Trustee of its appointment to act as Guarantee Trustee hereunder. The
right, title and interest of the Guarantee Trustee, as such, hereunder
shall automatically vest in any Successor Guarantee Trustee, upon
acceptance by such Successor Guarantee Trustee of its appointment
hereunder, and such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered
pursuant to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Exchange Guarantee Agreement for the
benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically
set forth in this Exchange Guarantee Agreement (including pursuant to
Section 2.1), and no implied covenants shall be read into this Exchange
Guarantee Agreement against the Guarantee Trustee. If an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6),
the Guarantee Trustee shall exercise such of the rights and powers vested
in it by this Exchange Guarantee Agreement, and use the same degree of care
and skill in its exercise thereof, as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Exchange Guarantee Agreement shall be
construed to relieve the Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(i) Prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express
provisions of this Exchange Guarantee Agreement
(including pursuant to Section 2.1), and the Guarantee
Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth
in this Exchange Guarantee Agreement (including pursuant
to Section 2.1); and
(B) in the absence of bad faith on the part of
the Guarantee Trustee, the Guarantee Trustee may
conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the Guarantee
Trustee and conforming to the requirements of this
Exchange Guarantee Agreement; but in the case of any such
certificates or opinions that by any provision hereof or
of the Trust Indenture Act are specifically required to
be furnished to the Guarantee Trustee, the Guarantee
Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements
of this Exchange Guarantee Agreement.
(ii) The Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of
the Guarantee Trustee, unless it shall be proved that the
Guarantee Trustee was negligent in ascertaining the pertinent
facts upon which such judgment was made.
(iii) The Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not less
than a Majority in Liquidation Amount of the Exchange Capital
Securities relating to the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee,
or exercising any trust or power conferred upon the Guarantee
Trustee, under this Exchange Guarantee Agreement.
(iv) Subject to Sections 3.1(b) and 3.1(d), no provision
of this Exchange Guarantee Agreement shall require the Guarantee
Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if the
Guarantee Trustee shall have reasonable grounds for believing that
the repayment of such funds or liability is not reasonably assured
to it under the terms of this Exchange Guarantee Agreement or
adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 3.2. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document reasonably
believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated
by this Exchange Guarantee Agreement shall be sufficiently
evidenced by an Officers' Certificate unless otherwise prescribed
herein.
(iii) Whenever, in the administration of this Exchange
Guarantee Agreement, the Guarantee Trustee shall deem it desirable
that a matter be proved or established before taking, suffering or
omitting to take any action hereunder, the Guarantee Trustee
(unless other evidence is herein specifically prescribed) may, in
the absence of bad faith on its part, request and rely upon an
Officers' Certificate which, upon receipt of such request from the
Guarantee Trustee, shall be promptly delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal
counsel, and the written advice or opinion of such legal counsel
with respect to legal matters shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted to be taken by it hereunder in good faith and
in accordance with such advice or opinion. Such legal counsel may
be legal counsel to the Guarantor or any of its Affiliates and may
be one of its or their employees. The Guarantee Trustee shall have
the right at any time to seek instructions concerning the
administration of this Exchange Guarantee Agreement from any court
of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Exchange
Guarantee Agreement at the request or direction of any Holder
unless such Holder shall have provided to the Guarantee Trustee
such adequate security and indemnity as would satisfy a reasonable
person in the position of the Guarantee Trustee against the costs,
expenses (including attorneys' fees and expenses) and liabilities
that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested
by the Guarantee Trustee; provided that nothing contained in this
Section 3.2(a)(v) shall be taken to relieve the Guarantee Trustee,
upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Exchange
Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the
Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see
fit.
(vii) The Guarantee Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either
directly or by or through its agents or attorneys, and the
Guarantee Trustee shall not be responsible for any misconduct or
negligence on the part of any such agent or attorney appointed by
it with due care hereunder.
(viii) Whenever in the administration of this Exchange
Guarantee Agreement the Guarantee Trustee shall deem it desirable
to receive instructions with respect to enforcing any remedy or
right or taking any other action hereunder, the Guarantee Trustee
(A) may request instructions from the Holders, (B) may refrain
from enforcing such remedy or right or taking such other action
until such instructions are received, and (C) shall be protected
in acting in accordance with such instructions.
(b) No provision of this Exchange Guarantee Agreement shall be
deemed to impose any duty or obligation on the Guarantee Trustee to perform
any act or acts or exercise any right, power, duty or obligation conferred
or imposed on it in any jurisdiction in which it shall be illegal, or in
which the Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to
exercise any such right, power, duty or obligation. No permissive power or
authority available to the Guarantee Trustee shall be construed to be a
duty to act in accordance with such power and authority.
SECTION 3.3. Compensation; Fees.
The Guarantor agrees:
(a) to pay to the Guarantee Trustee from time to time
such reasonable compensation for all services rendered by it
hereunder as may be agreed by the Guarantor and the Guarantee
Trustee from time to time (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee
of an express trust); and
(b) except as otherwise expressly provided herein, to
reimburse the Guarantee Trustee upon request for all reasonable
expenses, disbursements and advances incurred or made by the
Guarantee Trustee in accordance with any provision of this
Exchange Guarantee Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may
be attributable to its negligence or bad faith; and
(c) to the fullest extent permitted by applicable law, to
indemnify and hold harmless (i) the Guarantee Trustee, (ii) any
Affiliate of the Guarantee Trustee, and (iii) any officer,
director, shareholder, employee, representative or agent of the
Guarantee Trustee (referred to herein as an "Indemnified Person"),
from and a any loss, damage, liability, tax, penalty, expense or
claim of any kind or nature whatsoever incurred by such
Indemnified Person in connection with this Exchange Guarantee
Agreement or any act or omission performed or omitted by such
Indemnified Person in good faith and in manner such Indemnified
Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by this Exchange Guarantee
Agreement, except that no Indemnified Person shall be entitled to
be indemnified in respect of any loss, damage or claim incurred by
such Indemnified Person by reason of negligence or willful
misconduct with respect to such acts or omissions.
The Guarantee Trustee will not claim or exact any lien or charge
on any Guarantee Payments as a result of any amount due to it under this
Exchange Guarantee Agreement.
The provisions of this Section 3.3 shall survive the termination
of this Exchange Guarantee Agreement or the resignation or removal of the
Guarantee Trustee.
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.1. Guarantee Trustee; Eligibility.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is a national or state chartered
bank and eligible pursuant to the Trust Indenture Act to act as
such, and that has at the time of such appointment securities
rated in one of the three highest rating categories by a
nationally recognized statistical rating organization and a
combined capital and surplus of at least $50,000,000, and shall be
a corporation meeting the requirements of Section 310(a) of the
Trust Indenture Act. If such corporation publishes reports of
condition at least annually, pursuant to law or to the
requirements of its supervising or examining authority, then, for
the purposes of this Section 4.1 and to the extent permitted by
the Trust Indenture Act, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus
as set forth in its most recent report of condition so published.
(b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section
4.2.
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act,
the Guarantee Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.2. Appointment, Removal and Resignation of the Guarantee
Trustee.
(a) Subject to Section 4.2(c), the Guarantee Trustee may be
appointed or removed at any time by the Guarantor.
(b) Subject to Section 4.2(c), the Guarantee Trustee may resign
from office (without need for prior or subsequent accounting) by giving
written notice thereof to the Holders and the Guarantor and by appointing a
successor Guarantee Trustee.
(c) The Guarantee Trustee appointed hereunder shall hold office
until a Successor Guarantee Trustee shall have been appointed and shall
have accepted such appointment. No removal or resignation of a Guarantee
Trustee shall be effective until a Successor Guarantee Trustee has been
appointed and has accepted such appointment by written instrument executed
by such Successor Guarantee Trustee and delivered to the Guarantor and, in
the case of any resignation, the resigning Guarantee Trustee.
(d) If the Guarantee Trustee shall resign, be removed or become
incapable of acting as Guarantee Trustee and a replacement shall not be
appointed prior to such resignation or removal, or if a vacancy shall occur
in the office of Guarantee Trustee for any reason, and no Successor
Guarantee Trustee shall have been appointed and accepted appointment as
provided in this Section 4.2 within 60 days after delivery to the Holders
and the Guarantor of a notice of resignation, the resigning Guarantee
Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for appointment of a Successor Guarantee Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may
deem proper, appoint a Successor Guarantee Trustee.
ARTICLE V
GUARANTEE
SECTION 5.1. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by or on behalf of the Issuer Trust), as and when due,
regardless of any defense, right of set-off or counterclaim that the Issuer
Trust may have or assert, except the defense of payment. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment
of the required amounts by the Guarantor to the Holders or by causing the
Issuer Trust to pay such amounts to the Holders.
SECTION 5.2. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Exchange
Guarantee Agreement and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first
against the Guarantee Trustee, the Issuer Trust or any other Person before
proceeding against the Guarantor, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
SECTION 5.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor
under this Exchange Guarantee Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the
following:
(a) the release or waiver, by operation of law or
otherwise (other than by Act (as defined in the Trust Agreement)
of the Holders), of the performance or observance by the Issuer
Trust of any express or implied agreement, covenant, term or
condition relating to the Exchange Capital Securities to be
performed or observed by the Issuer Trust;
(b) the extension of time for the payment by the Issuer
Trust of all or any portion of the Distributions (other than an
extension of time for payment of Distributions that results from
the extension of any interest payment period on the Debentures as
provided in the Indenture), Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the
Exchange Capital Securities or the extension of time for the
performance of any other obligation under, arising out of, or in
connection with, the Exchange Capital Securities;
(c) any failure, omission, delay or lack of diligence on
the part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to
the terms of the Exchange Capital Securities, or any action on the
part of the Issuer Trust granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation,
dissolution, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement, composition
or readjustment of debt of, or other similar proceedings
affecting, the Issuer Trust or any of the assets of the Issuer
Trust;
(e) any invalidity of, or defect or deficiency in, the
Exchange Capital Securities;
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or
(g) the consummation of the Exchange Offer; or
(h) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of
a guarantor (other than payment of the underlying obligation), it
being the intent of this Section 5.3 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any
and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
the consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4. Rights of Holders.
The Guarantor expressly acknowledges that: (i) this Exchange
Guarantee Agreement will be deposited with the Guarantee Trustee to be held
for the benefit of the Holders; (ii) the Guarantee Trustee has the right to
enforce this Exchange Guarantee Agreement on behalf of the Holders; (iii)
the Holders of a Majority in Liquidation Amount of the Exchange Capital
Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of this Exchange Guarantee Agreement or exercising any trust or
power conferred upon the Guarantee Trustee under this Exchange Guarantee
Agreement; and (iv) any Holder may institute a legal proceeding directly
against the Guarantor to enforce its rights under this Exchange Guarantee
Agreement without first instituting a legal proceeding against the
Guarantee Trustee, the Issuer Trust or any other Person.
SECTION 5.5. Guarantee of Payment.
This Exchange Guarantee Agreement creates a guarantee of payment
and not of collection. This Exchange Guarantee Agreement will not be
discharged except by payment of the Guarantee Payments in full (without
duplication of amounts theretofore paid by the Issuer Trust) or upon the
distribution of Debentures to Holders as provided in the Trust Agreement.
SECTION 5.6. Subrogation.
The Guarantor shall be subrogated to all rights (if any) of the
Holders against the Issuer Trust in respect of any amounts paid to the
Holders by the Guarantor under this Exchange Guarantee Agreement; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights
which it may acquire by way of subrogation or any indemnity, reimbursement
or other agreement, in all cases as a result of payment under this Exchange
Guarantee Agreement, if, at the time of any such payment, any amounts are
due and unpaid under this Exchange Guarantee Agreement. If any amount shall
be paid to the Guarantor in violation of the preceding sentence, the
Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
SECTION 5.7. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer Trust with respect to the
Exchange Capital Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to
the terms of this Exchange Guarantee Agreement notwithstanding the
occurrence of any event referred to in subsections (a) through (g),
inclusive, of Section 5.3 hereof.
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.1. Subordination.
The obligations of the Guarantor under this Exchange Capital
Securities Guarantee Agreement will constitute unsecured obligations of the
Guarantor and will rank subordinate and junior in right of payment to all
Senior Indebtedness (as defined in the Indenture) of the Guarantor to the
extent and in the manner set forth in the Indenture with respect to the
Debentures, and the provisions of Article XIII of the Indenture will apply,
mutatis mutandis, to the obligations of the Guarantor hereunder. The
obligations of the Guarantor hereunder do not constitute Senior
Indebtedness (as defined in the Indenture) of the Guarantor.
SECTION 6.2. Pari Passu Guarantees.
The obligations of the Guarantor under this Exchange Guarantee
Agreement shall rank pari passu with the obligations of the Guarantor under
(i) any similar guarantee agreements issued by the Guarantor on behalf of
the holders of preferred or capital securities issued by any Issuer Trust
(as defined in the Indenture) including the Guarantee Agreement, dated as
of July 15, 1997 in respect of the Series A Capital Securities; (ii) the
Indenture and the Securities (as defined therein) issued thereunder; and
(iii) any other security, guarantee or other agreement or obligation that
is expressly stated to rank pari passu with the obligations of the
Guarantor under this Exchange Guarantee Agreement or with any obligation
that ranks pari passu with the obligations of the Guarantor under this
Exchange Guarantee Agreement.
ARTICLE VII
TERMINATION
SECTION 7.1. Termination.
This Exchange Guarantee Agreement shall terminate and be of no
further force and effect upon (i) full payment of the Redemption Price (as
defined in the Trust Agreement) of all Exchange Capital Securities, (ii)
the distribution of Debentures to the Holders in exchange for all of the
Exchange Capital Securities, or (iii) full payment of the amounts payable
in accordance with Article IX of the Trust Agreement upon liquidation of
the Issuer Trust. Notwithstanding the foregoing, this Exchange Guarantee
Agreement will continue to be effective or will be reinstated, as the case
may be, if at any time any Holder is required to repay any sums paid with
respect to Exchange Capital Securities or this Exchange Guarantee
Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Successors and Assigns.
All guarantees and agreements contained in this Exchange Guarantee
Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the
Holders of the Exchange Capital Securities then outstanding. Except in
connection with a consolidation, merger or sale involving the Guarantor
that is permitted under Article VIII of the Indenture and pursuant to which
the successor or assignee agrees in writing to perform the Guarantor's
obligations hereunder, the Guarantor shall not assign its obligations
hereunder, and any purported assignment other than in accordance with this
provision shall be void.
SECTION 8.2. Amendments.
Except with respect to any changes that do not adversely affect
the rights of the Holders in any material respect (in which case no consent
of the Holders will be required), this Exchange Guarantee Agreement may
only be amended with the prior approval of the Holders of not less than a
Majority in Liquidation Amount of the Exchange Capital Securities. The
provisions of Article VI of the Trust Agreement concerning meetings of the
Holders shall apply to the giving of such approval.
SECTION 8.3. Notices.
(a) Any notice, request or other communication required or
permitted to be given hereunder shall be in writing, duly signed by the
party giving such notice, and delivered, by facsimile or first class mail
as follows:
(i) if given to the Guarantor, to the address or facsimile number
set forth below or such other address or facsimile number as the Guarantor
may give notice to the Guarantee Trustee and the Holders:
HSB Group, Inc.
One State Street
Hartford, Connecticut 06102
General Counsel
Facsimile: (860) 722-1818
(ii) if given to the Guarantee Trustee, at the address or
facsimile number set forth below or such other address or facsimile number
as the Guarantee Trustee may give notice to the Guarantor and the Holders:
The First National Bank of Chicago
One First National Plaza, Suite #0126
Chicago, Illinois 60070-0126
Corporate Trust Division
Facsimile: (312) 407-1708
(iii) if given to any Holder, in the manner set forth in Section
10.8 of the Trust Agreement.
(b) All notices hereunder shall be deemed to have been given when
received in person, by facsimile with receipt confirmed, or mailed by first
class mail, postage prepaid, except that if a notice or other document is
refused delivery or cannot be delivered because of a changed address of
which no notice was given, such notice or other document shall be deemed to
have been delivered on the date of such refusal or inability to deliver,
provided that any notice given as provided in Section 8.3(a)(iii) shall be
deemed to have been given at the time specified in Section 10.8 of the
Trust Agreement.
SECTION 8.4. Benefit.
This Exchange Guarantee Agreement is solely for the benefit of the
Holders and is not separately transferable from the Exchange Capital
Securities.
SECTION 8.5. Governing Law.
THIS EXCHANGE GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 8.6. Counterparts.
This Exchange Guarantee Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Exchange
Guarantee Agreement to be duly executed, and their respective corporate
seals to be hereunto affixed, all as of the day and year first above
written.
HSB GROUP, INC.
By:
Name: Saul L. Basch
Title: President, Treasurer and
Chief Financial Officer
THE FIRST NATIONAL BANK OF CHICAGO,
as Guarantee Trustee
By:
Name: Mellisa Weisman
Title: Vice President
Conformed Copy
July 15, 1997
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
CONNING & CO.
185 Asylum Street
Hartford, Connecticut 06103
Dear Sirs and Madams:
HSB Capital I, a statutory business trust
created pursuant to a Trust Agreement, as amended and
restated (the "Trust Agreement"), under the laws of the
state of Delaware (the "Trust"), proposes to issue and
sell to certain purchasers (the "Initial Purchasers"),
upon the terms set forth in a purchase agreement, dated
July 15, 1997 (the "Purchase Agreement"), $110,000,000
liquidation amount of Global Floating Rate Capital
Securities, Series A (liquidation amount $1,000 per
Capital Security) (the "Capital Securities").
Capitalized terms used but not specifically defined
herein are defined in the Purchase Agreement.
The Trust exists for the sole purpose of
issuing its trust interests and investing the proceeds
thereof in Global Floating Rate Junior Subordinated
Deferable Interest Debentures, Series A (the "Junior
Subordinated Debentures") to be issued by HSB Group,
Inc., a Connecticut corporation (the "Company"). The
Company has, through a Guarantee Agreement, the Trust
Agreement, the Junior Subordinated Debentures, and the
Indenture under which the Junior Subordinated Debentures
are issued (the "Indenture") (the "Guarantee" and,
together with the Capital Securities and the Junior
Subordinated Debentures, the "Securities") guaranteed
certain obligations in respect of the Capital Securities.
As an inducement to the Initial Purchasers to enter into
the Purchase Agreement and in satisfaction of a condition
to your obligations thereunder, the Company and the Trust
agree with you, for the benefit of the holders of the
Capital Securities (including the Initial Purchasers)
(the "Holders"), as follows:
1. REGISTERED EXCHANGE OFFER. The Company
and the Trust shall use their best efforts to file with
the Commission within 90 calendar days after the Closing
Date a registration statement (the "Exchange Offer
Registration Statement") on an appropriate form under the
Securities Act with respect to a proposed offer (the
"Registered Exchange Offer") to the Holders to issue and
deliver to such Holders, in exchange for (a) the Capital
Securities, a like amount of a new series of capital
securities of the Trust (the "Exchange Capital
Securities") with terms substantially identical to those
of the Capital Securities (except that the Exchange
Capital Securities will not contain terms with respect to
transfer restrictions under the Securities Act, and will
be entitled, to the extent applicable, to the benefits of
trust indentures which have been qualified under the
Trust Indenture Act), (b) the Guarantee, the Company's
guarantee in respect of the Exchange Capital Securities
(the "Exchange Guarantee") with terms substantially
identical to those of the Guarantee (except that the
Exchange Guarantee will not contain terms with respect to
transfer restrictions under the Securities Act) and (c)
the Junior Subordinated Debentures, a like amount of a
new series of junior subordinated debentures (the
"Exchange Junior Subordinated Debentures" and, together
with the Exchange Capital Securities and the Exchange
Guarantee, the "Exchange Securities") with terms
substantially identical to those of the Junior
Subordinated Debentures (except that the Exchange Junior
Subordinated Debentures will not contain terms with
respect to transfer restrictions under the Securities
Act, and will be entitled, to the extent applicable, to
the benefits of trust indentures which have been
qualified under the Trust Indenture Act), shall use their
best efforts to cause the Exchange Offer Registration
Statement to become effective under the Securities Act
within 150 calendar days of the Closing Date and shall
keep the Exchange Offer Registration Statement effective
for not less than 30 calendar days (or longer, if
required by applicable law) after the date notice of the
Exchange Offer is mailed to the Holders (such period
being called the "Exchange Offer Registration Period").
The Exchange Securities will be issued under the
Indenture or an indenture (the "Exchange Securities
Indenture") between the Company and the Debenture Trustee
or such other bank or trust company reasonably
satisfactory to you, as trustee (the "Exchange Securities
Trustee"), such indenture to be identical in all material
respects to the Indenture except for the transfer
restrictions relating to the Securities (as described
above).
Upon the effectiveness of the Exchange Offer
Registration Statement, the Company and the Trust shall
promptly commence the Registered Exchange Offer. An
exchange for purposes of clauses (i) and (ii) of the next
sentence will be deemed to have been completed only if
the Exchange Securities received by holders, other than
holders that are unable to make the representations set
forth in the penultimate paragraph of Section 1 or are
referred to in clause (iv) of Section 2 hereof, are, upon
receipt, transferable by each such holder without
restriction under the Securities Act and without material
restrictions under the blue sky or securities laws of a
substantial majority of the States of the United States
of America. The Exchange Offer shall be deemed to have
been completed upon the earlier to occur of (i) the
Company and the Trust having exchanged the Exchange
Securities for all outstanding Securities pursuant to the
Exchange Offer and (ii) the Company having exchanged,
pursuant to the Exchange Offer, Exchange Securities for
all Securities that have been properly tendered and not
withdrawn before the expiration of the Exchange Offer
Registration Period. The Company and the Trust
acknowledge that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities
Act, (i) each Holder that is a broker-dealer electing to
exchange Securities, acquired for its own account as a
result of market making activities or other trading
activities, for Exchange Securities (an "Exchanging
Dealer"), is required to deliver a prospectus containing
the information set forth in Annex A hereto on the cover,
in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section,
and in Annex C hereto in the "Plan of Distribution"
section of such prospectus in connection with a sale of
any such Exchange Securities received by such Exchanging
Dealer pursuant to the Registered Exchange Offer and (ii)
if any Initial Purchaser elects to sell Exchange
Securities acquired in exchange for Securities
constituting any portion of an unsold allotment it is
required to deliver a prospectus, containing the
information required by Items 507 and/or 508 of
Regulation S-K under the Securities Act, as applicable,
in connection with such a sale.
In connection with the Registered Exchange
Offer, the Company and the Trust shall:
(a) mail to each Holder a copy of the
prospectus forming part of the Exchange Offer
Registration Statement, together with an appropriate
letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open
for not less that 30 days after the date notice thereof
is mailed to the Holders (or longer if required by
applicable law);
(c) utilize the services of a Depositary for
the Registered Exchange Offer with an address in the
Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered
Securities at any time prior to the close of business,
New York time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all
applicable laws applicable to the Registered Exchange
Offer.
As soon as practicable after the close of the
Registered Exchange Offer, the Company and/or the Trust,
as the case may be, shall:
(a) accept for exchange all Securities
tendered and not validly withdrawn pursuant to the
Registered Exchange Offer;
(b) deliver to the Property Trustee for
cancellation all Capital Securities so accepted for
exchange; and
(c) cause the Property Trustee promptly to
authenticate and deliver to each holder of Capital
Securities, Exchange Capital Securities equal in
liquidation amount to the Capital Securities of such
holder so accepted for exchange.
The Company shall make available for a period
of 180 days after the consummation of the Registered
Exchange Offer, a copy of the prospectus forming part of
the Exchange Offer Registration Statement to any
broker-dealer for use in connection with any resale of
any Exchange Securities. The Company shall keep the
Exchange Offer Registration Statement effective for a
period (the "Resale Period") beginning when Exchange
Securities are first issued in the Exchange Offer and
ending upon the earlier of (i) either (a) the expiration
of the 180th day after the Exchange Offer has been
completed or (b) in the event the Company and the Trust
have at any time suspended the use of the prospectus
contained in the Exchange Offer Registration Statement
pursuant to Section 4(b) hereof, the day beyond the 180th
day after the Exchange Offer has been completed that
reflects an additional period of days equal to the number
of days during all of the periods from and including the
dates the Company and the Trust give notice pursuant to
Section 4(b) hereof to and including the date when
broker-dealers receive an amended or supplemented
prospectus necessary to permit resales of Exchange
Securities or to and including the date on which the
Company and the Trust give a Resumption Notice (as
defined in Section 4(x)) or (ii) such time as such
broker-dealers no longer own any Exchange Securities
whose resales by them are subject to the prospectus
delivery requirements under the Securities Act. With
respect to such registration statement, each
broker-dealer that holds Exchange Securities received in
an Exchange Offer in exchange for Securities not acquired
by it directly from the Company shall have the benefit of
the rights of indemnification and contribution set forth
in Section 6 hereof in connection with resales of
Exchange Securities during the Resale Period.
Each Holder participating in the Registered
Exchange Offer shall be required to represent to the
Company and the Trust that at the time of the
consummation of the Registered Exchange Offer (i) any
Exchange Securities received by such Holder will be
acquired in the ordinary course of business, (ii) such
Holder will have no arrangements or understanding with
any person to participate in the distribution of the
Securities or the Exchange Securities within the meaning
of the Securities Act and (iii) such Holder is not an
affiliate of the Company within the meaning of the
Securities Act.
Notwithstanding any other provisions hereof,
the Company and the Trust will ensure that (i) any
Exchange Offer Registration Statement and any amendment
thereto and any prospectus forming part thereof and any
supplement thereto complies in all material respects with
the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration
Statement and any amendment thereto does not, when it
becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming
part of any Exchange Offer Registration Statement, and
any supplement to such prospectus, does not include an
untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which
they were made, not misleading.
2. SHELF REGISTRATION. If (i) the Company
and the Trust are not required to file the Exchange Offer
Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy, (ii)
for any reason the Exchange Offer Registration Statement
is not declared effective within 150 calendar days after
the Closing Date, (iii) the Company has received an
opinion of counsel, rendered by a law firm having a
recognized national tax practice, to the effect that, as
a result of the consummation of the Exchange Offer, there
is more than an insubstantial risk that (x) the Trust is,
or will be, within 90 days of the date of such opinion,
subject to United States federal income tax with respect
to income received or accrued on the Junior Subordinated
Debentures or Exchange Junior Subordinated Debentures,
(y) interest payable by the Company on such Junior
Subordinated Debentures or Exchange Junior Subordinated
Debentures is not, or within 90 days of the date of such
opinion, will not be, deductible by the Company, in whole
or in part, for United States federal income tax
purposes, or (z) the Trust is, or will be within 90 days
of such opinion, subject to more than a de minimis amount
of other taxes, duties or other governmental charges, or
(iv) any holder of Transfer Restricted Securities
notifies the Company or the Trust on or by the 20th
business day following the consummation of the Exchange
Offer that (A) it is prohibited by law or Commission
policy from participating in the Exchange Offer, (B) it
may not resell the Exchange Capital Securities, the
Exchange Guarantees and the Exchange Junior Subordinated
Debentures acquired by it in the Exchange Offer to the
public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is
not appropriate or available for such resales or (C) it
is a broker-dealer and owns Capital Securities acquired
directly from the Trust or an affiliate of the Trust, or
(v) if the Company so elects, then the following
provisions shall apply:
(a) The Company and the Trust shall use their
best efforts as promptly as practicable to file with the
Commission and thereafter shall use their best efforts to
cause to be declared effective a "shelf" registration
statement on an appropriate form under the Securities Act
providing for the registration of, and the sale on a
continuous or delayed basis by the holders of, all of the
Transfer Restricted Securities, pursuant to Rule 415 or
any similar rule that may be adopted by the Commission
(hereafter, a "Shelf Registration Statement" and,
together with any Exchange Offer Registration Statement,
a "Registration Statement").
(b) The Company and the Trust shall use their
best efforts to keep the Shelf Registration Statement
continuously effective in order to permit the prospectus
forming part thereof to be usable by Holders for a period
ending on the earlier of (i) (x) the second anniversary
of the Closing Date, (y) the expiration of the period
following the Closing Date after which Rule 144(k) under
the Securities Act generally becomes available to
non-affiliates of an issuer or (z) in the event the
Company and the Trust have at any time suspended the use
of the prospectus contained in the Shelf Registration
Statement pursuant to Section 4(b) hereof, the date
beyond the earlier of the periods referred to in clauses
(x) and (y) that reflects an additional period of days
equal to the number of days during all of the periods
from and including the dates the Company and the Trust
give notice of such suspension pursuant to Section 4(b)
to and including the date when holders of Securities
receive an amended or supplemented prospectus necessary
to permit resales of Securities under the Shelf
Registration Statement or to and including the date on
which the Company and Trust give a Resumption Notice or
(ii) such time as all of the Securities covered by the
Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement or pursuant to Rule 144
(in any such case, such period being called the "Shelf
Registration Period"). The Company and the Trust shall
be deemed not to have used their best efforts to keep the
Shelf Registration Statement effective during the
requisite period if they voluntarily take any action that
would result in Holders of Securities covered thereby not
being able to offer and sell such Securities during that
period, unless such action, in the opinion of the Company
after consulting with legal counsel, is required by
applicable law.
(c) Notwithstanding any other provisions
hereof, the Company and the Trust will ensure that (i)
any Shelf Registration Statement and any amendment
thereto and any prospectus forming part thereof and any
supplement thereto complies in all material respects with
the Securities Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and any
amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading
and (iii) any prospectus forming part of any Shelf
Registration Statement, and any supplement to such
prospectus does not include an untrue statement of a
material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of
the circumstances under which they were made, not
misleading.
3. LIQUIDATED DAMAGES.
(a) The parties hereto agree that the Holders
of Securities will suffer damages if the Company fails to
fulfill its obligations under Section l or Section 2, as
applicable, and that it would not be feasible to
ascertain the extent of such damages. Accordingly, if
(i) the applicable Registration Statement is not filed
with the Commission on or prior to 90 calendar days after
the Closing Date, (ii) the Exchange Offer Registration
Statement or, as the case may be, the Shelf Registration
Statement, is not declared effective within 150 calendar
days after the Closing Date, (iii) the Exchange Offer is
not consummated on or prior to 30 business days after the
date on which the Exchange Offer Registration Statement
was declared effective by the Commission, or (iv) the
Shelf Registration Statement is filed and declared
effective within 150 calendar days after the Closing Date
but shall thereafter cease to be effective (at any time
that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 30
calendar days by an additional Registration Statement
filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"),
the Company will pay to holders of Transfer Restricted
Securities (as defined below) as liquidated damages,
additional interest in respect of the Junior Subordinated
Debentures, and corresponding distributions shall
accumulate on the Liquidation Amount of Capital
Securities, at a rate of 0.25% per annum until (i) the
applicable Registration Statement is filed, (ii) the
Exchange Registration Statement is declared effective and
the Exchange Offer is consummated, (iii) the Shelf
Registration Statement is declared effective or (iv) the
Shelf Registration Statement again becomes effective, as
the case may be. Following the cure of all Registration
Defaults, the accrual of liquidated damages will cease.
As used herein, "Transfer Restricted Securities" means
each Capital Security, Guarantee and Junior Subordinated
Debenture until (i) the date on which such securities
have been exchanged for a freely transferable Exchange
Capital Security, Exchange Guarantee and Exchange Junior
Subordinated Debenture in the Exchange Offer, (ii) the
date on which such securities have been effectively
registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iii)
the date on which such securities are distributed to the
public pursuant to Rule 144 under the Securities Act or
are salable pursuant to Rule 144(k) under the Securities
Act. Notwithstanding anything to the contrary in this
Section 3(a), the Company shall not be required to pay
liquidated damages to the holder of Transfer Restricted
Securities if such holder: (a) failed to comply with its
obligations to make the representations in the second to
last paragraph of Section 1; or (b) failed to provide the
information required to be provided by it, if any,
pursuant to Section 4(n).
(b) The Company and the Trust shall notify the
Property Trustee under the Trust Agreement immediately
upon the happening of each and every Registration
Default. The Company shall pay the liquidated damages
due on the Transfer Restricted Securities by depositing
with the Property Trustee (which may not be the Company
for these purposes), in trust, for the benefit of the
Holders thereof, prior to 10:00 a.m. New York City time
on the next date specified by the Trust Agreement and the
Capital Securities for the payment of cash distributions
in respect of the Capital Securities, sums sufficient to
pay the liquidated damages then due. The liquidated
damages due shall be payable on each distribution payment
date specified by the Trust Agreement and the Capital
Securities to the record holder entitled to receive this
distribution payment to be made on such date. Each
obligation to pay liquidated damages shall be deemed to
accrue from and including the applicable Registration
Default.
(c) The parties hereto agree that the
liquidated damages provided for in this Section 3
constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by
holders of Transfer Restricted Securities by reason of
the failure of (i) the Shelf Registration Statement or
the Exchange Offer Registration Statement to be filed,
(ii) the Shelf Registration Statement to be declared
effective or to remain effective, or (iii) the Exchange
Offer Registration Statement to be declared effective and
the Exchange Offer to be consummated, to the extent
required by this Agreement.
4. REGISTRATION PROCEDURES. In connection
with any Registration Statement, the following provisions
shall apply:
(a) The Company and the Trust shall (i)
furnish to you, prior to the filing thereof with the
Commission, a copy of the Registration Statement and each
amendment thereof and each supplement, if any, to the
prospectus included therein and, in the event that any of
the Initial Purchasers (with respect to any portion of an
unsold allotment from the original offering) are
participating in the Registered Exchange Offer or the
Shelf Registration, shall use reasonable efforts to
reflect in each such document, when so filed with the
Commission, such comments as you reasonably may propose;
(ii) with respect to an Exchange Offer Registration
Statement, include the information set forth in Annex A
hereto on the cover, in Annex B hereto in the "Exchange
Offer Procedures" section and the "Purpose of the
Exchange Offer" section and in Annex C hereto in the
"Plan of Distribution" section of the prospectus forming
a part of the Exchange Offer Registration Statement, and
include the information set forth in Annex D hereto in
the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; and (iii) if requested by any
Initial Purchaser, include the information required by
Items 507 or 508 of Regulation S-K under the Securities
Act, as applicable, in the prospectus forming a part of
the Exchange Offer Registration Statement.
(b) The Company and the Trust shall advise you
and, in the case of a Shelf Registration Statement, the
Holders (if applicable), and, if requested by you or any
such Holder, confirm such advice in writing (which advice
pursuant to clauses (ii)-(v) hereof shall be accompanied
by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
(i) when the Registration Statement and
any amendment thereto has been filed with the Commission
and when the Registration Statement or any post-effective
amendment thereto has become effective;
(ii) of any comments by the Commission
and by the Blue Sky or securities commissioner or
regulator of any state with respect thereto or of any
request by the Commission for amendments or supplements
to the Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission
of any stop order suspending the effectiveness of the
Registration Statement or the initiation or threatening
of any proceedings for that purpose;
(iv) of the receipt by the Company or the
Trust of any notification with respect to the suspension
of the qualification of the Securities or the Exchange
Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose; and
(v) of the happening of any event that
requires the making of any changes in the Registration
Statement, prospectus, prospectus amendment or supplement
or post-effective amendment so that, as of such date, the
statements therein are not misleading and do not omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(c) The Company and the Trust will use their
best efforts to obtain the withdrawal of any order
suspending the effectiveness of any Registration
Statement at the earliest possible time.
(d) The Company and the Trust will furnish to
each Holder of Securities included within the coverage of
any Shelf Registration Statement, without charge, at
least one copy of such Shelf Registration Statement and
any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests
in writing, all exhibits (including those incorporated by
reference).
(e) The Company and the Trust will deliver to
each Holder of Securities included within the coverage of
any Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary
prospectus) included in such Shelf Registration Statement
and any amendment or supplement thereto as such Holder
may reasonably request; and the Company and the Trust
consent to the use of the prospectus or any amendment or
supplement thereto by each of the selling Holders of
Securities in connection with the offering and sale of
the Securities covered by the prospectus or any amendment
or supplement thereto.
(f) The Company and the Trust will furnish to
each Exchanging Dealer or Initial Purchaser, as
applicable, which so requests, without charge, at least
one copy of the Exchange Offer Registration Statement and
any post-effective amendment thereto, including financial
statements and schedules, and, if the Exchanging Dealer
or Initial Purchaser, as applicable, so requests in
writing, all exhibits (including those incorporated by
reference).
(g) The Company and the Trust will, during the
Exchange Offer Registration Period or the Shelf
Registration Period, as applicable, promptly deliver to
each Exchanging Dealer or Initial Purchaser, as
applicable, without charge, as many copies of the
prospectus included in such Exchange Offer Registration
Statement or Shelf Registration Statement, as applicable,
and any amendment or supplement thereto as such
Exchanging Dealer or Initial Purchaser, as applicable,
may reasonably request for delivery by (i) such
Exchanging Dealer in connection with a sale of Exchange
Securities received by it pursuant to the Registered
Exchange Offer or (ii) such Initial Purchaser in
connection with a sale of Exchange Securities received by
it in exchange for Securities constituting any portion of
an unsold allotment; and the Company and the Trust
consent to the use of the prospectus or any amendment or
supplement thereto by any such Exchanging Dealer or
Initial Purchaser, as applicable, as aforesaid.
(h) Prior to any public offering of Securities
or Exchange Securities pursuant to any Registration
Statement, the Company and the Trust will use their best
efforts to register or qualify or cooperate with the
Holders of Securities included therein and their
respective counsel in connection with the registration or
qualification of such securities for offer and sale under
the securities or blue sky laws of such jurisdictions as
any such Holder reasonably requests in writing and do any
and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of the
Securities or Exchange Securities covered by such
Registration Statement; provided, however, that the
Company and the Trust (or any subsidiary or affiliate of
the Company) will not be required to qualify generally to
do business in any jurisdiction where they are not then
so qualified or to take any action which would subject
them to general service of process or to taxation in any
such jurisdiction where they are not then so subject.
(i) The Company and the Trust will cooperate
with the Holders of Securities to facilitate the timely
preparation and delivery of certificates representing
Securities or Exchange Securities to be sold pursuant to
any Registration Statement free of any restrictive
legends and in such denominations and registered in such
names as Holders may request in writing prior to delivery
of Securities or Exchange Securities pursuant to such
Registration Statement.
(j) Upon the occurrence of any event
contemplated by paragraphs (b)(ii) through (v) above
during the period for which the Company and the Trust are
required to maintain an effective Registration Statement,
the Company and the Trust will promptly prepare a
post-effective amendment to the Registration Statement or
a supplement to the related prospectus or file any other
required document so that, as so amended or supplemented,
the prospectus will not include an untrue statement of a
material fact or omit to state any material fact required
to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which
they were made, not misleading.
(k) Not later than the effective date of the
applicable Registration Statement, the Company and the
Trust will provide a CUSIP number for the Securities or
Exchange Securities, as the case may be, and provide the
applicable trustee with printed certificates for the
Securities or Exchange Securities, as the case may be, in
a form eligible for deposit with The Depository Trust
Company.
(l) The Company will comply with all
applicable rules and regulations of the Commission and
will make generally available to its security holders not
later than 90 days after the end of the 12 month period
beginning at the end of the fiscal quarter in which the
applicable Registration Statement first became effective
under the Securities Act, an earnings statement (which
need not be audited) satisfying the provisions of Section
ll(a) of the Securities Act.
(m) The Company and the Trust will cause the
Trust Agreement and the Indenture or the Exchange
Securities Indenture, as the case may be, to be qualified
under the Trust Indenture Act as required by applicable
law in a timely manner.
(n) The Company and the Trust may require each
Holder of Securities to be sold pursuant to any Shelf
Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of
such Securities as the Company may from time to time
reasonably request in writing for inclusion in such
Registration Statement, but only to the extent that such
information is required in order to comply with the
Securities Act or the Rules of the NASD, and the Company
may exclude from such registration the Securities of any
Holder that unreasonably fails to furnish such
information within a reasonable time after receiving such
request.
(o) The Company and the Trust shall enter into
such customary agreements (including, if requested, an
underwriting agreement in customary form) and take all
such other action, if any, as Holders of a majority in
aggregate liquidation amount of Capital Securities or
Exchange Capital Securities being sold or the managing
underwriters (if any) shall reasonably request in order
to facilitate the disposition of Securities pursuant to
any Shelf Registration Statement.
(p) In the case of a Shelf Registration
Statement, the Company shall provide to any of (A) the
holders of the securities to be included in such
registration statement, (B) the underwriters (which term,
for purposes of this Exchange and Registration Rights
Agreement, shall include a person deemed to be an
underwriter within the meaning of Section 2(11) of the
Securities Act), if any, thereof, (C) the sales or
placement agent, if any, therefor, (D) counsel for such
underwriters or agent and (E) not more than one counsel
for all the holders of such securities who so request of
the Company in writing the opportunity to participate in
the preparation of such registration statement, each
prospectus included therein or filed with the Commission
and each amendment or supplement thereto.
(q) In the case of a Shelf Registration
Statement, for a reasonable period prior to the filing
thereof, the Company shall (i) make reasonably available
for inspection by the persons referred to in Section 4(p)
who shall certify to the Company and the Trust that they
have a current intention to sell the Securities pursuant
to the Shelf Registration Statement, all relevant
financial and other records, pertinent corporate
documents and properties of the Company and the
Subsidiaries and (ii) use reasonable efforts to have
Company's and the Subsidiaries' officers, directors,
employees, counsel, accountants and independent auditors
supply all relevant information reasonably requested by
such persons (each, an "Inspector") in connection with
any such Registration Statement, as shall be reasonably
necessary, in the judgment of the respective counsel
referred to in such Section, to conduct a reasonable
investigation within the meaning of Section 11 of the
Securities Act, subject to executing a confidentiality
undertaking in customary form with respect to
confidential or proprietary information of the Company or
such Subsidiary.
(r) In the case of a Shelf Registration
Statement, the Company and the Trust shall, if requested
by any managing underwriter or underwriters, any
placement or sales agent or any holder of Securities,
promptly incorporate in a prospectus supplement or
post-effective amendment such information as is required
by the applicable rules and regulations of the Commission
that such managing underwriter or underwriters, such
agent or such holder specifies should be included therein
relating to the terms of the sale of such Securities,
including information with respect to the principal
amount of Securities being sold by such holder or agent
or to any underwriters, the name and description of such
holder, agent or underwriter, the offering price of such
Securities and any discount, commission or other
compensation payable in respect thereof, the purchase
price being paid therefor by such underwriters and with
respect to any other terms of the offering of the
Securities to be sold by such holder or agent or to such
underwriters; and make all required filings of such
prospectus supplement or post-effective amendment
promptly after notification of the matters to be
incorporated in such prospectus supplement or
post-effective amendment.
(s) In the case of a Shelf Registration
Statement, the Company and the Trust, shall (A) make such
representations and warranties to the holders of such
Securities and the placement or sales agent, if any,
therefor and the underwriters, if any, thereof in form,
substance and scope as are customarily made by the
Company in connection with an offering of debt securities
pursuant to any appropriate agreement or to a
registration statement filed on the form applicable to
the Shelf Registration; (B) obtain an opinion of counsel
to the Company and an opinion of counsel to the Trust in
each case in customary form and covering such matters, of
the type customarily covered by such an opinion, and in
the case of the Company as customarily given in public
offerings of the Company's debt securities as the
managing underwriters, if any, or as any holders of at
least 25% in aggregate principal amount of the Securities
at the time outstanding may reasonably request, addressed
to such holder or holders and the placement or sales
agent, if any, therefor and the underwriters, if any,
thereof and dated the effective date of such registration
statement (and if such registration statement
contemplates an underwritten offering of a part or all of
the Securities, dated the date of the closing under the
underwriting agreement relating thereto); (C) to the
extent permitted by Statement of Auditing Standards No.
72, obtain a "cold comfort" letter or letters from the
independent certified public accountants of the Company
addressed to the selling holders of Securities, the
placement or sales agent, if any, therefor or the
underwriters, if any, thereof, dated (i) the effective
date of such registration statement and (ii) the
effective date of any prospectus supplement to the
prospectus included in such registration statement or
post-effective amendment to such registration statement
which includes audited financial statements as of a date
or for a period subsequent to that of the latest such
statements included in such prospectus (and, if such
registration statement contemplates an underwritten
offering pursuant to any prospectus supplement to the
prospectus included in such registration statement or
post-effective amendment to such registration statement
which includes unaudited or audited financial statements
as of a date or for a period subsequent to that of the
latest such statements included in such prospectus, dated
the date of the closing under the underwriting agreement
relating thereto), such letter or letters to be in
customary form and covering such matters of the type
customarily covered by letters of such type in public
offerings of debt securities of the Company; (D) deliver
such documents and certificates, including officers' or
trustees' or Administrative Trustees' certificates, as
applicable, as may be reasonably requested by any holders
of at least 25% in aggregate principal amount of the
Securities at the time outstanding or the placement or
sales agent, if any, therefor and the managing
underwriters, if any, thereof to evidence the accuracy of
the representations and warranties made pursuant to
clause (A) above and the compliance with or satisfaction
of any agreements or conditions contained in the
underwriting agreement or other agreement entered into by
the Company or the Trust, as applicable; and (E)
undertake such obligations relating to expense
reimbursement, indemnification and contribution as are
provided in Section 6 hereof.
(t) The Company will use reasonable efforts to
cause the Capital Securities or the Exchange Capital
Securities, as applicable, covered by a Registration
Statement to be rated with an appropriate rating agency,
if so requested by Holders of a majority in aggregate
liquidation amount of Capital Securities covered by such
Registration Statement or the Exchange Capital
Securities, as the case may be, or by the managing
underwriters, if any.
(u) The Company will use reasonable efforts to
cause the Capital Securities or the Exchange Capital
Securities, as applicable, relating to such Registration
Statement to be listed on each securities exchange, if
any, on which debt securities issued by the Company are
then listed, if so requested by Holders of a majority in
aggregate liquidation amount of Capital Securities
covered by such Registration Statement or the Exchange
Capital Securities, as the case may be, or by the
managing underwriters, if any.
(v) In the case of a Shelf Registration
Statement, the Company and/or the Trust shall notify in
writing each holder of Securities of any proposal by the
Company and/or the Trust to amend or waive any provision
of this Registration Rights Agreement pursuant to Section
9(a) hereof and of any amendment or waiver effected
pursuant thereto, each of which notices shall contain the
text of the amendment or waiver proposed or effected, as
the case may be;
(w) In the case of a Shelf Registration
Statement, in the event that any broker-dealer registered
under the Exchange Act shall underwrite any Securities or
participate as a member of an underwriting syndicate or
selling group or "assist in the distribution" (within the
meaning of the Rules of Conduct and the By-Laws of the
National Association of Securities Dealers, Inc.
("NASD") or any successor thereto, as amended from time
to time) thereof, whether as a holder of such Securities
or as an underwriter, a placement or sales agent or a
broker or dealer in respect thereof, or otherwise, the
Company and the Trust shall assist such broker-dealer in
complying with the requirements of such Rules and
By-Laws, including by (A) if such Rules shall so require,
permitting a "qualified independent underwriter" (as
defined in such Rules (or any successor thereto)) to
participate in the preparation of the registration
statement relating to such Securities, to exercise usual
standards of due diligence in respect thereto and, if any
portion of the offering contemplated by such registration
statement is an underwritten offering or is made through
a placement or sales agent, to recommend the yield of
such Securities, (B) indemnifying any such qualified
independent underwriter to the extent of the
indemnification of underwriters provided in Section 6
hereof, and (C) providing such information to such
broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the
Rules of Conduct of the NASD.
(x) In the case of a Shelf Registration
Statement, each Holder of Securities agrees by
acquisition of such Securities that, upon receipt of any
notice of the Company pursuant to Section 4(b)(ii)
through (v) hereof, such Holder will discontinue
disposition of such Securities covered by such
Registration Statement until such Holder's receipt of
copies of the supplemental or amended prospectus
contemplated by Section 4(j) hereof, or until advised in
writing (the "Resumption Notice") by the Company that the
use of the applicable prospectus may be resumed.
5. REGISTRATION EXPENSES. The Company agrees
to bear and to pay or cause to be paid promptly upon
request being made therefor all expenses incident to the
Company's and the Trust's performance of or compliance
with this Registration Rights Agreement, including the
reasonable fees and disbursements of one firm of
attorneys (in addition to local counsel) chosen by the
Holders of a majority in aggregate principal amount of
the Securities and the Exchange Securities to be sold
pursuant to a Registration Statement (the "Special
Counsel") acting for the Holders in connection therewith
(the "Registration Expenses"). To the extent that any
Registration Expenses are incurred, assumed or paid by
any Holder, or any placement or sales agent therefor or
underwriter thereof on behalf of the Company or the
Trust, the Company shall reimburse such person for the
full amount of the Registration Expenses so incurred,
assumed or paid promptly after receipt of a request
therefor with appropriate documentation in support
thereof. The Holders shall be responsible for all
underwriting commissions and discounts in the case of a
Shelf Registration Statement.
6. INDEMNIFICATION.
(a) Upon the registration of the Securities
pursuant to Section 1 or 2 hereof, and in consideration
of the agreements of the Initial Purchasers contained
herein, and as an inducement to the Initial Purchasers to
purchase the Capital Securities, each of the Company and
the Trust shall, and it hereby agrees jointly and
severally to, indemnify and hold harmless each of the
holders of Securities to be included in such
registration, and each person who participates as an
underwriter in any offering or sale of such Securities
and each person who controls any such person against any
losses, claims, damages or liabilities, joint or several,
to which such holder or underwriter may become subject
under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any
registration statement under which such Securities were
registered under the Securities Act, or any preliminary,
final or summary prospectus contained therein or
furnished by the Company or the Trust to any such holder
or underwriter, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements
therein not misleading and each of the Company and the
Trust shall, and it hereby agrees jointly and severally
to, reimburse each such holder or underwriter for any
legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however,
that the Company and the Trust shall not be liable to any
such person in any such case to the extent that any such
loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such
registration statement, or preliminary, final or summary
prospectus, or amendment or supplement thereto, in
reliance upon and in conformity with written information
furnished to the Company and the Trust by holders of
Securities expressly for use therein. This indemnity
agreement will be in addition to any liability which the
Company or the Trust may otherwise have.
(b) The Company and the Trust may require, as
a condition to including any Securities in any
registration statement filed pursuant to Section 1 or 2
hereof or to entering into any underwriting agreement
with respect thereto, that the Company and the Trust
shall have received an undertaking reasonably
satisfactory to it from the holder of such Securities and
from each underwriter named in any such underwriting
agreement, severally and not jointly, to indemnify and
hold harmless the Company and the Trust, each of the
Company's directors, and each person who controls the
Company or the Trust within the meaning of either the
Securities Act or the Exchange Act, to the same extent as
the foregoing indemnity from the Company and the Trust,
but only with reference to written information furnished
to the Company and the Trust by or on behalf of such
person specifically for use in any registration
statement, or any preliminary or final or summary
prospectus contained therein or any amendment or
supplement thereto. This indemnity agreement will be in
addition to any liability which any such person may
otherwise have.
(c) Promptly after receipt by an indemnified
party under Section 6(a) or (b) of notice of the
commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement
thereof; provided, however, that failure to so notify an
indemnifying party shall not relieve such indemnifying
party from any obligation that it may have pursuant to
this Section except to the extent it has been materially
prejudiced by such failure; provided further, however,
that the failure to notify the indemnifying party shall
not relieve it from any liability that it may have to an
indemnified party otherwise than on account of this
Section. If any such claim or action shall be brought
against an indemnified party, and the indemnified party
notifies the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to
the extent that it may elect by written notice delivered
to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, jointly
with any other similarly notified indemnifying party, to
assume the defense thereof with counsel satisfactory to
the indemnified party, provided that, if the defendants
in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties
which are different from or additional to those available
to the indemnifying party, the indemnified party or
parties shall have the right to select separate counsel
to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of
notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim
or action and approval by the indemnified party of
counsel, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal
or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof
other than reasonable costs of investigation; provided,
however, that an indemnified party will have the right to
employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the
expense of such indemnified party unless (1) the
employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the
indemnified party shall have employed separate counsel in
connection with the assertion of legal defenses in
accordance with the proviso to the next preceding
sentence, (3) a conflict or potential conflict exists
(based on advice of counsel to the indemnified party)
between the indemnified party and indemnifying party (in
which case the indemnifying party will not have the right
to direct the defense of such action on behalf of the
indemnified party) or (4) the indemnifying party has not
in fact employed counsel satisfactory to the indemnified
party to assume the defense of such action within a
reasonable time after receiving notice of the
commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party
or parties. It is understood that the indemnifying party
or parties shall not, in connection with any proceeding
or related proceedings in the same jurisdiction, be
liable for the reasonable fees, disbursements and other
charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all
such indemnified party or parties. Each indemnified
party shall use all reasonable efforts to cooperate with
the indemnifying party in the defense of any such action
or claim. No indemnifying party shall be liable for any
settlement of any such action effected without its
written consent, but if settled with its written consent
or if there be a final judgment for the plaintiff in any
such action, the indemnifying party agrees to indemnify
and hold harmless any indemnified party from and against
any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in
respect of which any indemnified party is or could have
been a party and indemnity could have been sought
hereunder by such indemnified party, unless such
settlement includes an unconditional release of such
indemnified party from all liability on claims that are
the subject matter of such proceeding.
(d) Each party hereto agrees that, if for any
reason the indemnification provisions contemplated by
Section 6(a) or Section 6(b) are unavailable to or
insufficient to hold harmless an indemnified party in
respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein (other
than by reason of the exceptions to the indemnification
obligations set forth in such Sections), then each
applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of
such losses, claims, damages or liabilities (or actions
in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the indemnifying party
and indemnified party in connection with the statements
or omissions that resulted in such losses, claims,
damages or liabilities (or actions in respect thereof) as
well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified
party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of
a material fact or omission or alleged omission to state
a material fact relates to information supplied by such
indemnifying party or indemnified party, and the parties'
relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or
omission. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to
above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such
action or claim.
The parties hereto agree that it would not be
just and equitable if contribution pursuant to this
Section 6(d) were determined by pro rata allocation (even
if the holders or any agents or underwriters or all of
them were treated as one entity for such purpose) or by
any other method of allocation that does not take into
account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the
provisions of this Section, an indemnifying party that is
a holder of Transfer Restricted Securities or Exchange
Securities shall not be required to contribute any amount
in excess of the amount by which the dollar amount of the
proceeds received by such holder from the sale of any
Securities (after deducting any fees, discounts and
commissions applicable thereto) exceeds the amount of any
damages that such holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement
or omission or alleged omission, and no underwriter shall
be required to contribute any amount in excess of the
amount by which the total price at which the Securities
underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages
which such underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of
Section ll(f) of the Securities Act) shall be entitled to
any contribution from any person who was not guilty of
such fraudulent misrepresentation. The holders' and any
underwriters' obligations in this Section 6(d) to
contribute shall be several in proportion to the
principal amount of Securities registered or
underwritten, as the case may be, by them and not joint.
7. RULES 144 AND 144A. The Company shall use
its best efforts to file the reports required to be filed
by it under the Securities Act and the Exchange Act in a
timely manner and, if at any time the Company is not
required to file such reports, it will, upon the written
request of any holder of Transfer Restricted Securities,
make publicly available other information so long as
necessary to permit sales of such holder's securities
pursuant to Rules 144 and 144A. The Company covenants
that it will take such further action as any holder of
Transfer Restricted Securities may reasonably request,
all to the extent required from time to time to enable
such holder to sell Transfer Restricted Securities
without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and
144A (including, without limitation, the requirements of
Rule 144A(d)(4)). Upon the written request of any holder
of Transfer Restricted Securities, the Company shall
deliver to such holder a written statement as to whether
it has complied with such requirements. Notwithstanding
the foregoing, nothing in this Section 7 shall be deemed
to require the Company or the Trust to register any of
its securities pursuant to the Exchange Act.
8. UNDERWRITTEN REGISTRATIONS. If any of the
Transfer Restricted Securities covered by any Shelf
Registration Statement are to be sold in an underwritten
offering, the investment banker or investment bankers and
manager or managers that will administer the offering
will be selected by the holders of a majority in
aggregate liquidation amount of Capital Securities to be
included in such offering, subject to the consent of the
Company (which shall not be unreasonably withheld or
delayed). The Holders shall be responsible for all
underwriting commissions and discounts.
No person may participate in any underwritten
registration hereunder unless such person (i) agrees to
sell such person's Transfer Restricted Securities on the
basis provided in any underwriting arrangements approved
by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably
required under the terms of such underwriting
arrangements.
9. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. The provisions of
this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the
Company and the Trust have obtained the written consent
of Holders of a majority in aggregate liquidation amount
of the Capital Securities and the Exchange Capital
Securities, taken as a single class. Notwithstanding the
foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates
exclusively to the rights of the Holders of Securities
whose Securities or Exchange Securities are being sold
pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders
may be given by Holders of a majority in aggregate
liquidation amount of the Capital Securities or Exchange
Capital Securities being sold by such Holders pursuant to
such Registration Statement.
(b) NOTICES. All notices and other
communications provided for or permitted hereunder shall
be made in writing by hand-delivery, first-class mail,
telecopier, or air courier guaranteeing overnight
delivery:
(1) if to a Holder, at the most current
address given by such Holder to the Trust in accordance
with the provisions of this Section 9(b), which address
initially is, with respect to each Holder, the address of
such Holder maintained by the Trustee under the Trust
Agreement;
(2) if to you, initially at the respective
addresses set forth in the Purchase Agreement; and
(3) if to the Company or the Trust, initially
at the address set forth in the Purchase Agreement.
All such notices and communications shall be
deemed to have been duly given: when delivered by hand,
if personally delivered; one business day after being
delivered to a next-day air courier; five business days
after being deposited in the mail; when answered back, if
faxed; and when receipt is acknowledged by the
recipient's telecopier machine, if telecopied.
(c) SUCCESSORS AND ASSIGNS. All the terms and
provisions of this Registration Rights Agreement shall be
binding upon, shall inure to the benefit of and shall be
enforceable by the respective successors and assigns of
the parties hereto. In the event that any transferee of
any holder of Securities shall, in any manner, whether by
gift, bequest, purchase, operation of law or otherwise
acquire Transfer Restricted Securities, such transferee
shall, without any further writing or action of any kind,
be deemed a party hereto for all purposes and such
Securities shall be held subject to all of the terms of
this Registration Rights Agreement, and by taking and
holding such Securities such transferee shall be entitled
to receive the benefits of, and be conclusively deemed to
have agreed to be bound by and to perform, all of the
applicable terms and provisions of this Registration
Rights Agreement.
(d) COUNTERPARTS. This Agreement may be
executed in any number of counterparts (which may be
delivered in original form or by telecopies) and by the
parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the
same agreement.
(e) HEADINGS. The headings in this Agreement
are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.
(f) GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF JURY TRIAL.
THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. THE COMPANY AND THE TRUST HEREBY
IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK
STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE
CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE
BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT
OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPT FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
THE COMPANY AND THE TRUST IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE
LAW, TRIAL BY JURY AND ANY OBJECTION THAT THEY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF ANY HOLDER OF A TRANSFER RESTRICTED SECURITY TO
SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION.
(g) REMEDIES. In the event of a breach by the
Company, the Trust or a holder of Transfer Restricted
Securities, of any of their obligations under this
Agreement, each holder of Transfer Restricted Securities
or the Company or the Trust, as the case may be, in
addition to being entitled to exercise all rights granted
by law, including recovery of damages (other than the
recovery of damages for a breach by the Company or the
Trust of their obligations under Sections 1 and 2 hereof
for which liquidated damages have been paid pursuant to
Section 3 hereof), will be entitled to specific
performance of its rights under this Agreement. The
Company, the Trust and each holder of Transfer Restricted
Securities agree that, except for such liquidated
damages, when payable monetary damages would not be
adequate compensation for any loss incurred by reason of
a breach by it of any of the provisions of this Agreement
and hereby further agree that, in the event of any action
for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be
adequate.
(h) NO INCONSISTENT AGREEMENTS. The Company
and the Trust have not, nor shall they on or after the
date of this Agreement, enter into any agreement that is
inconsistent with the rights granted to the holders of
Transfer Restricted Securities in this Agreement or
otherwise conflicts with the provisions hereof. The
Company and the Trust have not previously entered into
any agreement which remains in effect granting any
registration rights with respect to any capital
securities to any person. Without limiting the
generality of the foregoing, without the written consent
of the holders of a majority in aggregate principal
amount of the then outstanding Transfer Restricted
Securities, the Company and the Trust shall not grant to
any person the right to request the Company to register
any capital securities of the Company or the Trust under
the Securities Act unless the rights so granted are
subject in all respects to the prior rights of the
holders of Transfer Restricted Securities set forth
herein, and are not otherwise in conflict or inconsistent
with the provisions of the Agreement.
(i) NO PIGGYBACK ON REGISTRATIONS. Neither
the Company nor any of its securityholders (other than
the holders of Transfer Restricted Securities in such
capacity) shall have the right to include any securities
of the Company in any Shelf Registration or Exchange
Offer other than Transfer Restricted Securities.
(j) SEVERABILITY. The remedies provided
herein are cumulative and not exclusive of any remedies
provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an
alternative means to achieve the same or substantially
the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the
parties that they would have executed the remaining
terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(k) SURVIVAL. The respective indemnities,
agreements, representations, warranties and each other
provision set forth in this Registration Rights Agreement
or made pursuant hereto shall remain in full force and
effect regardless of any investigation (or statement as
to the results thereof) made by or on behalf of any
holder of Securities, any director, officer or partner of
such holder, any agent or underwriter or any director,
officer or partner thereof, or any controlling person of
any of the foregoing, and shall survive delivery of and
payment for the Securities pursuant to the Purchase
Agreement and the transfer and registration of Securities
by such holder and the consummation of an Exchange Offer.
(l) INSPECTION. For so long as this
Registration Rights Agreement shall be in effect, this
Registration Rights Agreement and a complete list of the
names and addresses of all the holders of Securities
shall be made available, upon reasonable prior notice to
the Company, the Property Trustee or the Trustee under
the Indenture, as applicable, for inspection and copying
on any business day by any holder of Securities for
proper purposes only (which shall include any purpose
related to the rights of the holders of Securities under
the Securities, the Indenture and this Agreement) at the
offices of the Company at the address thereof referenced
in Section 9(b) above, at the office of the Property
Trustee or at the office of the Trustee under the
Indenture.
Please confirm that the foregoing correctly
sets forth the agreement between the Company and you.
Very truly yours,
HSB CAPITAL I
By: /s/ Saul L. Basch
Name: Saul L. Basch
Title: Administrative Trustee
HSB GROUP, INC.
By: /s/ R. Kevin Price
Name: R. Kevin Price
Title: Senior Vice President and
Corporate Secretary
Accepted as of the date hereof:
Goldman, Sachs & Co.
Conning & Co.
By: /s/ Goldman, Sachs & Co.
(Goldman, Sachs & Co.)
On behalf of each of the Initial Purchasers
ANNEX A
Each broker-dealer that receives Exchange
Securities for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange
Securities. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in
connection with resales of Exchange Securities received
in exchange for Securities where such Securities were
acquired by such broker-dealer as a result of
marketmaking activities or other trading activities. The
Company has agreed that, for a period of 180 days after
the Expiration Date (as defined herein), it will make
this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of
Distribution."
ANNEX B
Each broker-dealer that receives Exchange
Securities for its own account in exchange for
Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of
such Exchange Securities. See "Plan of Distribution."
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange
Securities for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange
Securities. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange
Securities received in exchange for Securities where such
Securities were acquired as a result of market-making
activities or other trading activities. The Company has
agreed that, for a period of 180 days after the
Expiration Date, it will make this prospectus, as amended
or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until
, 199 , all dealers effecting
transactions in the Exchange Securities may be required
to deliver a prospectus./*/
The Company will not receive any proceeds from
any sale of Exchange Securities by broker-dealers.
Exchange Securities received by broker-dealers for their
own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Securities
or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers
of any such Exchange Securities. Any broker-dealer that
resells Exchange Securities that were received by it for
its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of
such Exchange Securities may be deemed to be an
"underwriter" within the meaning of the Securities Act
and any profit on any such resale of Exchange Securities
and any commission or concessions received by any such
persons may be deemed to be underwriting compensation
under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration
Date the Company will promptly send additional copies of
__________________
/*/ In addition, the legend required by Item 502(e) of
Regulation S-K will appear on the back cover page of
the Exchange Offer prospectus.
this Prospectus and any amendment or supplement to this
Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal. The Company has
agreed to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for the Holders of
the Securities) other than commissions or concessions of
any brokers or dealers and will indemnify the Holders of
the Securities (including any broker-dealers) against
certain liabilities, including liabilities under the
Securities Act.
ANNEX D
[ ] check here if you are a broker-dealer and wish to receive
10 additional copies of the prospectus and 10 copies of
any amendments or supplements thereto.
Name:
Address:
If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and
does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that
will receive Exchange Securities for its own account in
exchange for Securities that were acquired as a result of
market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Securities;
however, by so acknowledging and delivering a prospectus,
the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NY 10022-3897
TEL: (212) 735-3000
FAX: (212) 735-2000
October 9, 1997
HSB Group, Inc.
HSB Capital I
c/o HSB Group, Inc.
One State Street
Hartford, Connecticut 06102
Ladies and Gentlemen:
We have acted as special counsel to HSB Group,
Inc., a Connecticut corporation (the "Company"), and HSB
Capital I, a business trust formed under the Business
Trust Act of the State of Delaware (Chapter 38, Title 12,
of the Delaware Code, 12 Del. C. SECTIONS 3801 et. seq.) (the
"Issuer Trust"), in connection with the preparation of
the Registration Statement on Form S-4 (the "Registration
Statement") to be filed by the Company and the Issuer
Trust with the Securities and Exchange Commission (the
"Commission") on the date hereof. The Registration
Statement relates to the registration under the
Securities Act of 1933, as amended (the "Act"), of
$110,000,000 aggregate liquidation amount of Global
Floating Rate Capital Securities, Series B (the "Capital
Securities") in connection with a proposed exchange offer
(the "Exchange Offer").
The Capital Securities are to be issued
pursuant to the Amended and Restated Trust Agreement of
the Issuer Trust, dated as of July 15, 1997 (the "Trust
Agreement"), among Saul L. Basch, R. Kevin Price and
Robert C. Walker, as administrative trustees, The First
National Bank of Chicago, as property trustee (the
"Property Trustee"), First Chicago Delaware Inc., as
Delaware trustee, and the Company, as sponsor.
This opinion is being furnished in accordance
with the requirements of Item 601(b)(5) of Regulation S-K
under the Act.
In connection with this opinion, we have
examined originals or copies, certified or otherwise
identified to our satisfaction, of (i) the Registration
Statement; (ii) an executed copy of the Registration
Rights Agreement, dated as of July 15, 1997 (the
"Registration Rights Agreement"), among the Company, the
Issuer Trust, and Goldman, Sachs & Co.; (iii) the form of
the Capital Securities and a specimen certificate
thereof; (iv) the Certificate of Trust of the Issuer
Trust filed with the Secretary of State of the State of
Delaware on July 10, 1997; and (v) the Trust Agreement.
We have also examined originals or copies, certified or
otherwise identified to our satisfaction, of such other
documents, certificates and records as we have deemed
necessary or appropriate as a basis for the opinions set
forth herein.
In our examination, we have assumed the legal
capacity of all natural persons, the genuineness of all
signatures, the authenticity of all documents submitted
to us as originals, the conformity to original documents
of all documents submitted to us as certified or
photostatic copies and the authenticity of the originals
of such latter documents. In making our examination of
documents executed by parties other than the Issuer
Trust, we have assumed that such parties had the power,
corporate or other, to enter into and perform all
obligations thereunder and have also assumed the due
authorization by all requisite action, corporate or
other, and execution and delivery by such parties of such
documents and the validity and binding effect thereof on
such parties. As to any facts material to the opinions
expressed herein which we did not independently establish
or verify, we have relied upon oral or written statements
and representations of officers, trustees and other
representatives of the Company, the Issuer Trust and
others.
Members of our firm are admitted to the bar in
the States of New York and Delaware, and we do not
express any opinion as to the laws of any other
jurisdiction other than the laws of the United States of
America to the extent referred to specifically herein.
Based upon and subject to the foregoing, we are
of the opinion that:
1. The Capital Securities have been duly
authorized for issuance by the Issuer Trust, and when (i)
the Registration Statement becomes effective and the
Trust Agreement has been qualified under the Trust
Indenture Act of 1939, as amended, and (ii) the Capital
Securities are duly executed, authenticated and issued in
accordance with the Trust Agreement and delivered and
issued in the Exchange Offer as contemplated by the
Registration Rights Agreement and the Registration
Statement, the Capital Securities will be duly and
validly issued, fully paid and nonassessable undivided
beneficial interests in the assets of the Issuer Trust.
We bring to your attention, however, that the holders of
the Capital Securities may be obligated, pursuant to the
Trust Agreement, to (i) provide indemnity and/or security
in connection with, and pay taxes or governmental charges
arising from, transfers of Capital Securities and the
issuance of replacement Capital Securities and (ii)
provide security and indemnity in connection with
requests of or directions to the Property Trustee in
connection with the exercise of its rights and powers
under the Trust Agreement.
2. The holders of the Capital Securities will
be entitled to the same limitation of personal liability
extended to stockholders of private corporations for
profit organized under the General Corporation Law of the
State of Delaware.
We hereby consent to the filing of this opinion
with the Commission as an exhibit to the Registration
Statement. We also consent to the reference to our firm
under the caption "Validity of Securities" in the
Registration Statement. In giving this consent, we do
not thereby admit that we are included in the category of
persons whose consent is required under Section 7 of the
Act or the rules and regulations of the Commission. This
opinion is expressed as of the date hereof, and we
disclaim any undertaking to advise you of any subsequent
changes in the facts stated or assumed herein or of any
subsequent changes in applicable law.
Very truly yours,
/S/Skadden, Arps, Slate, Meagher & Flom LLP
October 9, 1997
HSB Capital I
HSB Group, Inc.
One State Street
Hartford, Connecticut 06102
Re: Global Floating Rate Capital
Securities of HSB Capital I
Ladies and Gentlemen:
The undersigned, an attorney-at-law admitted to
practice in the State of Connecticut, is Senior Vice
President and General Counsel of HSB Group, Inc., a
Connecticut corporation (the "Company"). As such, I am
familiar with the proceedings taken by the Company and
HSB Capital I, a trust formed under the laws of the State
of Delaware and all of the common securities of which are
owned by the Company (the "Issuer Trust"), in connection
with the preparation of a Registration Statement on Form
S-4 (the "Registration Statement") filed with the
Securities and Exchange Commission (the "Commission") on
the date hereof by the Company and the Issuer Trust with
respect to the registration under the Securities Act of
1933, as amended (the "Act"), (i) by the Issuer Trust of
$110 million aggregate liquidation amount of Global
Floating Rate Capital Securities, Series B (the "Exchange
Capital Securities"); (ii) by the Company of its
guarantee of payment of cash distributions and payments
on liquidation of the Issuer Trust or redemption of the
Exchange Capital Securities pursuant to the Exchange
Guarantee Agreement (the "Exchange Guarantee Agreement")
and (iii) by the Company of $110 million aggregate
principal amount of its Global Junior Subordinated
Deferrable Interest Debentures, Series B due July 15,
2027 (the "Exchange Junior Subordinated Debentures").
This opinion is being furnished in accordance
with the requirements of Item 601(b)(5) of Regulation S-K
under the Act.
In rendering the opinions set forth herein,
either I or other members of my staff subject to my
supervision have examined (i) the Registration Statement
filed with the Commission on the date hereof (the
"Registration Statement"), (ii) the Registration Rights
Agreement dated as of July 15, 1997 (the "Registration
Rights Agreement"), among the Company, the Issuer Trust
and Goldman Sachs & Co. and Conning & Co., (iii) the
Indenture and the First Supplemental Indenture dated as
of July 15, 1997 (collectively, the "Indenture") between
The First National Bank of Chicago, as Indenture Trustee,
and the Company, (iv) the Amended and Restated Trust
Agreement, dated as of July 15, 1997 (the "Trust
Agreement") among Saul L. Basch, R. Kevin Price and
Robert C. Walker, as Administrative Trustees, The First
National Bank of Chicago, as property trustee, First
Chicago Delaware Inc., as Delaware trustee and the
Company, as sponsor, (v) the form of the Exchange Junior
Subordinated Debentures and a specimen certificate
thereof; (vi) the Exchange Guarantee Agreement, (vii) the
Certificate of Incorporation and By-Laws of the Company
and (viii) originals or copies, certified or otherwise
identified to our satisfaction, of such other agreements,
instruments, certificates of public officials and
corporate officers of the Company and such other
documents, certificates, records, authorizations and
proceedings, as have been deemed requisite to enable me
to express the opinions hereinafter set forth.
In our examination, we have assumed the legal
capacity of all natural persons, the genuineness of all
signatures, the authenticity of all documents submitted
to us as originals, the conformity to original documents
of all documents submitted to us as certified or
photocopies and the authenticity of the originals of such
latter documents. In making our examination of documents
executed by parties other than the Company, we have
assumed that such parties had the power, corporate or
other, to enter into and perform all obligations
thereunder and have also assumed the due authorization by
all requisite action, corporate or other, and execution
and delivery by such parties of such documents and the
validity and binding effect thereof on such parties.
Based on the foregoing, it is my opinion that:
(a) The Exchange Guarantee Agreement has
been duly authorized by the Company, and when
(i) the Trust Agreement and Indenture have been
qualified under the Trust Indenture Act of
1939, as amended (the "TIA"), and (ii) the
Exchange Guarantee Agreement is duly executed
and delivered by the Company and issued in the
exchange offer as contemplated by the
Registration Rights Agreement and the
Registration Statement, the Exchange Guarantee
Agreement will constitute a valid, legal and
binding agreement of the Company in favor of
the holders of Exchange Capital Securities,
enforceable against the Company in accordance
with its terms, except to the extent that
enforcement thereof may be limited by (1)
bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect
relating to creditors' rights generally and (2)
general principles of equity (regardless of
whether enforceability is considered in a
proceeding at law or in equity); and
(b) The Exchange Junior Subordinated
Debentures have been duly authorized for
issuance and sale by the Company and when (i)
the Trust Agreement and Indenture have been
qualified under the TIA and (ii) the Exchange
Junior Subordinated Debentures are duly
executed, authenticated and issued in
accordance with the Indenture and delivered and
issued in the exchange offer as contemplated by
the Registration Rights Agreement and the
Registration Statement, the Exchange Junior
Subordinated Debentures will constitute valid
and binding obligations of the Company
enforceable against the Company in accordance
with their terms, except to the extent that
enforcement thereof may be limited by (1)
bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect
relating to creditors' rights generally and (2)
general principles of equity (regardless of
whether enforceability is considered in a
proceeding at law or in equity).
My opinions are subject to the following
qualification:
(a) I am qualified to practice law in the
State of Connecticut. The opinions expressed
herein are limited to the law of the State of
Connecticut.
I hereby consent to the filing of this opinion
with the Commission as an exhibit to the Registration
Statement. I also consent to the reference to myself
under the caption "Validity of Securities" in the
Registration Statement.
Very truly yours,
/s/ ROBERT C. WALKER
Robert C. Walker
Senior Vice President
and General Counsel
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NY 10022-3897
TEL: (212) 735-3000
FAX: (212) 735-2000
October 9, 1997
HSB Group, Inc.
HSB Capital I
c/o HSB Group, Inc.
One State Street
Hartford, Connecticut 06102
Re: Registration Statement on Form S-4
Ladies and gentlemen:
We have acted as special tax counsel to HSB
Group, Inc., a Connecticut corporation (the "Company"),
and HSB Capital I, a Delaware business trust (the "Issuer
Trust"), in connection with the exchange of up to 110,000
of the Issuer Trust's Global Floating Rate Capital
Securities, Series B, liquidation amount $1,000 per
preferred security (the "Exchange Capital Securities")
for a like liquidation amount of the Issuer Trust's
outstanding Global Floating Rate Capital Securities,
Series A (the "Original Capital Securities") (the
"Exchange Offer"). Pursuant to the Exchange Offer, the
Company is offering to exchange up to $110,000,000
aggregate principal amount of its Global Floating Rate
Junior Subordinated Deferrable Interest Debentures,
Series B, due July 15, 2027 (which date may be shortened,
in certain circumstances, to a date not earlier than
April 15, 2012) (the "Exchange Debentures") for a like
aggregate principal amount of Global Floating Rate Junior
Subordinated Deferrable Interest Debentures, Series A,
due July 15, 2027 (which date may be shortened, in
certain circumstances, to a date not earlier than April
15, 2012) (the "Original Debentures").
In rendering our opinion, we have participated
in the preparation of the above-captioned registration
statement on Form S-4 (the "Registration Statement")
filed with the Securities and Exchange Commission (the
"Commission") on the date hereof. Our opinion is
conditioned on, among other things, the initial and
continuing accuracy of the facts, information, covenants
and representations set forth in the Registration
Statement and certain other documents and the statements
and representations made by officers of the Company. In
our examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as
originals, the conformity to original documents of all
documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such
documents. We also have assumed that the transactions
related to the exchange of Exchange Capital Securities
for Original Capital Securities and Exchange Debentures
for Original Debentures will be consummated in the manner
contemplated by the Registration Statement.
In rendering our opinion, we have considered
the current provisions of the Internal Revenue Code of
1986, as amended, Treasury regulations promulgated
thereunder, judicial decisions and Internal Revenue
Service rulings, all of which are subject to change,
which changes may be retroactively applied. A change in
the authorities upon which our opinion is based could
affect our conclusions. There can be no assurances,
moreover, that any of the opinions expressed herein will
be accepted by the Internal Revenue Service or, if
challenged, by a court.
Based solely upon the foregoing, we are of the
opinion that, although the summary set forth in the
Registration Statement under the heading "Certain Federal
Income Tax Consequences" does not purport to discuss all
possible United States federal income tax consequences of
the exchange of Exchange Capital Securities for Original
Capital Securities and Exchange Debentures for Original
Debentures, such summary constitutes, in all material
respects, a fair and accurate summary of the United
States federal income tax consequences of such exchange
under current United States federal income tax law.
Except as set forth above, we express no
opinion to any party as to the tax consequences, whether
federal, state, local or foreign, of the exchange of
Exchange Capital Securities for Original Capital
Securities or Exchange Debentures for Original Debentures
or of any transaction related to or contemplated by the
Exchange Offer. This opinion is furnished to you solely
for your benefit in connection with the Exchange Offer
and is not to be used, circulated, quoted or otherwise
referred to for any other purpose or relied upon by any
other person without our prior written consent. We
consent to the use of our name under the heading
"Validity of Securities" in the Registration Statement.
We hereby consent to the filing of this opinion with the
Commission as Exhibit 8 to the Registration Statement.
In giving this consent, we do not thereby admit that we
are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or
the rules and regulations of the Commission promulgated
thereunder. This opinion is expressed as of the date
hereof, unless otherwise expressly stated, and we
disclaim any undertaking to advise you of any subsequent
changes of the facts stated or assumed herein or any
subsequent changes in applicable law.
Very truly yours,
/S/ Skadden, Arps, Slate, Meagher
& Flom LLP
Exhibit 12.1
<TABLE>
<CAPTION>
Ratios of Earnings to Fixed Charges
June-97 Dec-96 Dec-95 Dec-94 Dec-93 Dec-92
--------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Pre-tax income from continuing
operations $43.5 72.9 72.2 61.3 12.8 66.7
Fixed Charges:
Interest on indebtedness 1.4 2.3 4.1 3.0 2.3 2.6
Interest factor on operating
leases 1.7 1.9 1.6 1.7 1.6 1.7
Interest factor on capital
leases 2.0 4.1 4.1 4.1 4.1 4.1
Preferred stock dividend of
majority owned sub 1.7 1.8
--------- ---------- ---------- --------- --------- ----------
Income as adjusted 48.6 82.9 83.8 70.1 20.8 75.1
========= ========== ========== ========= ========= ==========
Fixed Charges:
Interest on indebtedness 1.4 2.3 4.1 3.0 2.3 2.6
Interest factor on operating
leases 1.7 1.9 1.6 1.7 1.6 1.7
Interest factor on capital
leases 2.0 4.1 4.1 4.1 4.1 4.1
Preferred stock dividend of
majority owend sub 1.7 1.8
--------- --------- ---------- ---------- -------- ----------
Total fixed charges 5.1 10.0 11.6 8.8 8.0 8.4
========= ========= ========== ========== ======== ==========
Ratio of Earnings to fixed
charges 9.53 8.29 7.22 7.97 2.60 8.94
Preferred Stock Dividend 0.9
Ratio of Earnings to fixed
charges and preferred stock
dividend 8.13 8.29 7.22 7.97 2.60 8.94
Impact of Capital Securities
Dividend after debt retirement 3.1 6.3
Pro Forma Ratio of Earnings to
Fixed Charges, Preferred Stock
Dividend and Capital Securities Dividend 5.34 5.09
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration
statement on Form S-4 of our report dated January 27,
1997, on our audits of the financial statements and
financial statement schedules of The Hartford Steam
Boiler Inspection and Insurance Company. We also consent
to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Hartford, Connecticut
October 9, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)
THE FIRST NATIONAL BANK OF CHICAGO
(Exact name of trustee as specified in its charter)
A National Banking Association 36-0899825
(I.R.S. employer
identification number)
One First National Plaza, Chicago, Illinois 60670-0126
(Address of principal executive offices) (Zip Code)
The First National Bank of Chicago
One First National Plaza, Suite 0286
Chicago, Illinois 60670-0286
Attn: Lynn A. Goldstein, Law Department (312) 732-6919
(Name, address and telephone number of agent for service)
HSB GROUP, INC.
(Exact name of obligor as specified in its charter)
Connecticut 06-1475343
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
One State Street
Hartford, Connecticut 06102
(Address of principal executive offices) (Zip Code)
Global Floating Rate Junior Subordinated Deferrable Interest
Debentures, Series B
(Title of Indenture Securities)
Item 1. General Information. Furnish the following
information as to the trustee:
(a) Name and address of each examining or
supervising authority to which it is subject.
Comptroller of Currency, Washington, D.C., Federal
Deposit Insurance Corporation, Washington, D.C., The
Board of Governors of the Federal Reserve System,
Washington D.C.
(b) Whether it is authorized to exercise
corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. Affiliations With the Obligor. If the obligor
is an affiliate of the trustee, describe each
such affiliation.
No such affiliation exists with the trustee.
Item 16. List of exhibits. List below all exhibits filed as a
part of this Statement of Eligibility.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939,
as amended, the trustee, The First National Bank of Chicago, a
national banking association organized and existing under the laws
of the United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Chicago and State of
Illinois, on the 8th day of October, 1997.
The First National Bank of Chicago,
Trustee
By /s/ Richard D. Manella
Richard D. Manella
Vice President and Senior Counsel
* Exhibits 1, 2, 3 and 4 are herein incorporated by reference to Exhibits
bearing identical numbers in Item 16 of the Form T-1 of The First National
Bank of Chicago, filed as Exhibit 25.1 to the Registration Statement on
Form S-3 of SunAmerica Inc. filed with the Securities and Exchange
Commission on October 25, 1996 (Registration No. 333-14201).
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
October 8, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of an indenture between HSB Group,
Inc. and The First National Bank of Chicago, the undersigned, in accordance
with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby
consents that the reports of examinations of the undersigned, made by
Federal or State authorities authorized to make such examinations, may be
furnished by such authorities to the Securities and Exchange Commission
upon its request therefor.
Very truly yours,
The First National Bank of Chicago
By: /s/ Richard D. Manella
Richard D. Manella
Vice President and Senior Counsel
EXHIBIT 7
Legal Title
of Bank: The First National Call Date: 06/30/97 ST-BK: 17-1630 FFIEC 031
Bank of Chicago Page RC-1
Address: One First National
Plaza, Ste 0303
City, State
Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
Dollar Amounts in C400
Thousands RCFD BIL MIL THOU
ASSETS
<S> <C> <C> <C> <C>
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1).. 0081 4,415,563 1.a.
b. Interest-bearing balances(2)........................... 0071 7.049,275 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)... 1773 4,455,173 2.b.
3. Federal funds sold and securities purchased under agreements to
resell 1350 4,604,233 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C)..................................................... RCFD 2122 24,185,099 4.a.
b. LESS: Allowance for loan and lease losses.............. RCFD 3123 423,419 4.b.
c. LESS: Allocated transfer risk reserve.................. RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c).......... 2125 23,761,680 4.d.
5. Trading assets (from Schedule RD-D)....................... 3545 6.930.216 5.
6. Premises and fixed assets (including capitalized leases).. 2145 705,704 6.
7. Other real estate owned (from Schedule RC-M)..... 2150 7,960 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)............................ 2130 64,504 8.
9. Customers' liability to this bank on acceptances outstanding... 2155 562,251 9.
10. Intangible assets (from Schedule RC-M).................... 2143 283,716 10.
11. Other assets (from Schedule RC-F)......................... 2160 1,997,778 11.
12. Total assets (sum of items 1 through 11).................. 2170 54,837,423 12.
_________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1)................... RCON 2200 21,852,164 13.a
(1) Noninterest-bearing(1).................... RCON 6631 9,474,510 13.a.1
(2) Interest-bearing.......................... RCON 6636 12,377,654 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II)... RCFN 2200 13,756,280 13.b.
(1) Noninterest bearing....................... RCFN 6631 330,030 13.b.1
(2) Interest-bearing.......................... RCFN 6636 13,426,250 13.b.2
14. Federal funds purchased and securities sold under agreements
to repurchase: RCFD 2800 3.827,159 14
15. a. Demand notes issued to the U.S. Treasury RCON 2840 40,307 15.a
b. Trading Liabilities(from Schedule RC-D).................... RCFD 3548 4,985,577 15.b
16. Other borrowed money:
a. With original maturity of one year or less.... RCFD 2332 2,337,018 16.a
b. With original maturity of than one year through three years.... A547 265,393 16.b
. c. With a remaining maturity of more than three years ................................ A548 322,175 16.c
17. Not applicable
18. Bank's liability on acceptance executed and outstanding RCFD 2920 562,251 18
19. Subordinated notes and debentures (2)... RCFD 3200 1,700,000 19
20. Other liabilities (from Schedule RC-G).. RCFD 2930 929,875 20
21. Total liabilities (sum of items 13 through 20)... RCFD 2948 50,618,199 21
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus.... RCFD 3838 0 23
24. Common stock..................................... RCFD 3230 200,858 24
25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 2,948,616 25
26. a. Undivided profits and capital reserves........ RCFD 3632 1,059,214 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities.................................... RCFD 8434 12,788 26.b.
27. Cumulative foreign currency translation adjustments RCFD 3284 (2,252) 27
28. Total equity capital (sum of items 23 through 27) RCFD 3210 4,219,224 28
29. Total liabilities and equity capital (sum of items 21 and 28)............... RCFD 3300 54,837,423 29
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that
best describes the most comprehensive level of auditing work performed Number
for the bank by independent external auditors as of any date during _________
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . ....RCFD 6724 . ... N/A . M.1.
_________
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other
with generally accepted auditing standards by a external auditors (may be required by state chartering
certified public accounting firm which submits a authority)
report on the bank
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be
required by state chartering authority)
___________________
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)
THE FIRST NATIONAL BANK OF CHICAGO
(Exact name of trustee as specified in its charter)
A National Banking Association 36-0899825
(I.R.S. employer
identification number)
One First National Plaza, Chicago, Illinois 60670-0126
(Address of principal executive offices) (Zip Code)
The First National Bank of Chicago
One First National Plaza, Suite 0286
Chicago, Illinois 60670-0286
Attn: Lynn A. Goldstein, Law Department (312) 732-6919
(Name, address and telephone number of agent for service)
HSB CAPITAL I
(Exact name of obligor as specified in its charter)
Delaware 06-6452634
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
One State Street
Hartford, Connecticut 06102
(Address of principal executive offices) (Zip Code)
Global Floating Rate Capital Securities, Series B
(Title of Indenture Securities)
Item 1. General Information. Furnish the following
information as to the trustee:
(a) Name and address of each examining or
supervising authority to which it is subject.
Comptroller of Currency, Washington, D.C., Federal
Deposit Insurance Corporation, Washington, D.C., The
Board of Governors of the Federal Reserve System,
Washington D.C.
(b) Whether it is authorized to exercise
corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. Affiliations With the Obligor. If the obligor
is an affiliate of the trustee, describe each
such affiliation.
No such affiliation exists with the trustee.
Item 16. List of exhibits. List below all exhibits filed as a
part of this Statement of Eligibility.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939,
as amended, the trustee, The First National Bank of Chicago, a
national banking association organized and existing under the laws
of the United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Chicago and State of
Illinois, on the 8th day of October, 1997.
The First National Bank of Chicago,
Trustee
By /s/ Richard D. Manella
Richard D. Manella
Vice President and Senior Counsel
* Exhibits 1, 2, 3 and 4 are herein incorporated by reference to Exhibits
bearing identical numbers in Item 16 of the Form T-1 of The First National
Bank of Chicago, filed as Exhibit 25.1 to the Registration Statement on
Form S-3 of SunAmerica Inc. filed with the Securities and Exchange
Commission on October 25, 1996 (Registration No. 333-14201).
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
October 8, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of the Amended and Restated Trust
Agreement of HSB Capital I, the undersigned, in accordance with Section
321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that
the reports of examinations of the undersigned, made by Federal or State
authorities authorized to make such examinations, may be furnished by such
authorities to the Securities and Exchange Commission upon its request
therefor.
Very truly yours,
The First National Bank of Chicago
By: /s/ Richard D. Manella
Richard D. Manella
Vice President and Senior Counsel
EXHIBIT 7
Legal Title
of Bank: The First National Call Date: 06/30/97 ST-BK: 17-1630 FFIEC 031
Bank of Chicago Page RC-1
Address: One First National
Plaza, Ste 0303
City, State
Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
Dollar Amounts in C400
Thousands RCFD BIL MIL THOU
ASSETS
<S> <C> <C> <C> <C>
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1).. 0081 4,415,563 1.a.
b. Interest-bearing balances(2)........................... 0071 7.049,275 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)... 1773 4,455,173 2.b.
3. Federal funds sold and securities purchased under agreements to
resell 1350 4,604,233 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C)..................................................... RCFD 2122 24,185,099 4.a.
b. LESS: Allowance for loan and lease losses.............. RCFD 3123 423,419 4.b.
c. LESS: Allocated transfer risk reserve.................. RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c).......... 2125 23,761,680 4.d.
5. Trading assets (from Schedule RD-D)....................... 3545 6.930.216 5.
6. Premises and fixed assets (including capitalized leases).. 2145 705,704 6.
7. Other real estate owned (from Schedule RC-M)..... 2150 7,960 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)............................ 2130 64,504 8.
9. Customers' liability to this bank on acceptances outstanding... 2155 562,251 9.
10. Intangible assets (from Schedule RC-M).................... 2143 283,716 10.
11. Other assets (from Schedule RC-F)......................... 2160 1,997,778 11.
12. Total assets (sum of items 1 through 11).................. 2170 54,837,423 12.
_________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1)................... RCON 2200 21,852,164 13.a
(1) Noninterest-bearing(1).................... RCON 6631 9,474,510 13.a.1
(2) Interest-bearing.......................... RCON 6636 12,377,654 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II)... RCFN 2200 13,756,280 13.b.
(1) Noninterest bearing....................... RCFN 6631 330,030 13.b.1
(2) Interest-bearing.......................... RCFN 6636 13,426,250 13.b.2
14. Federal funds purchased and securities sold under agreements
to repurchase: RCFD 2800 3.827,159 14
15. a. Demand notes issued to the U.S. Treasury RCON 2840 40,307 15.a
b. Trading Liabilities(from Schedule RC-D).................... RCFD 3548 4,985,577 15.b
16. Other borrowed money:
a. With original maturity of one year or less.... RCFD 2332 2,337,018 16.a
b. With original maturity of than one year through three years.... A547 265,393 16.b
. c. With a remaining maturity of more than three years ................................ A548 322,175 16.c
17. Not applicable
18. Bank's liability on acceptance executed and outstanding RCFD 2920 562,251 18
19. Subordinated notes and debentures (2)... RCFD 3200 1,700,000 19
20. Other liabilities (from Schedule RC-G).. RCFD 2930 929,875 20
21. Total liabilities (sum of items 13 through 20)... RCFD 2948 50,618,199 21
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus.... RCFD 3838 0 23
24. Common stock..................................... RCFD 3230 200,858 24
25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 2,948,616 25
26. a. Undivided profits and capital reserves........ RCFD 3632 1,059,214 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities.................................... RCFD 8434 12,788 26.b.
27. Cumulative foreign currency translation adjustments RCFD 3284 (2,252) 27
28. Total equity capital (sum of items 23 through 27) RCFD 3210 4,219,224 28
29. Total liabilities and equity capital (sum of items 21 and 28)............... RCFD 3300 54,837,423 29
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that
best describes the most comprehensive level of auditing work performed Number
for the bank by independent external auditors as of any date during _________
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . ....RCFD 6724 . ... N/A . M.1.
_________
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other
with generally accepted auditing standards by a external auditors (may be required by state chartering
certified public accounting firm which submits a authority)
report on the bank
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be
required by state chartering authority)
___________________
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)___
_______________________
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA,
CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
HSB GROUP, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
CONNECTICUT 06-1475343
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
ONE STATE STREET
HARTFORD, CONNECTICUT 06102
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
GUARANTEE OF GLOBAL FLOATING RATE CAPITAL SECURITIES, SERIES B
OF HSB CAPITAL I
(TITLE OF INDENTURE SECURITIES)
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C., Federal
Deposit Insurance Corporation, Washington, D.C.,
The Board of Governors of the Federal Reserve
System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate
trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF
THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the United
States of America, has duly caused this Statement of Eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all
in the City of Chicago and State of Illinois, on the 8th day of October,
1997.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
BY /S/ RICHARD D. MANELLA
RICHARD D. MANELLA
VICE PRESIDENT AND SENIOR COUNSEL
* EXHIBITS 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL
BANK OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM
S-3 OF SUNAMERICA INC. FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
OCTOBER 25, 1996 (REGISTRATION NO. 333-14201).
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
October 8, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of a Guarantee of HSB Group, Inc.
relating to the Global Floating Rate Capital Securities, Series B, of HSB
Capital I, the undersigned, in accordance with Section 321(b) of the Trust
Indenture Act of 1939, as amended, hereby consents that the reports of
examinations of the undersigned, made by Federal or State authorities
authorized to make such examinations, may be furnished by such authorities to
the Securities and Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /S/ RICHARD D. MANELLA
RICHARD D. MANELLA
VICE PRESIDENT AND SENIOR COUNSEL
EXHIBIT 7
Legal Title
of Bank: The First National Call Date: 06/30/97 ST-BK:
Bank of Chicago 17-1630 FFIEC 031
Address: One First National Plaza,
Ste 0303 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificat: 0/3/6/1/8
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
<TABLE>
<CAPTION>
SCHEDULE RC--BALANCE SHEET
DOLLAR AMOUNTS IN C400
THOUSANDS RCFD BIL MIL THOU
ASSETS
<S> <C> <C> <C> <C> <C>
1. Cash and balances due from depository
institutions (from Schedule RC-A):
a. Noninterest-bearing balances and
currency and coin(1)................... 0081 4,415,563 1.a.
b. Interest-bearing balances(2)........... 0071 7.049,275 1.b.
2. Securities
a. Held-to-maturity securities(from
Schedule RC-B, column A)............... 1754 0 2.a.
b. Available-for-sale securities (from
Schedule RC-B, column D)............... 1773 4,455,173 2.b.
3. Federal funds sold and securities purchased
under agreements to resell................ 1350 4,604,233 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income
(from Schedule RC-C)................... RCFD 2122 24,185,099 4.a.
b. LESS: Allowance for loan and lease
losses................................. RCFD 3123 423,419 4.b.
c. LESS: Allocated transfer risk reserve... RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus
4.b and 4.c)............................ 2125 23,761,680 4.d.
5. Trading assets (from Schedule RD-D)........ 3545 6.930.216 5.
6. Premises and fixed assets (including
capitalized leases)........................ 2145 705,704 6.
7. Other real estate owned (from Schedule
RC-M)...................................... 2150 7,960 7.
8. Investments in unconsolidated subsidiaries
and associated companies (from Schedule
RC-M)...................................... 2130 64,504 8.
9. Customers' liability to this bank on
acceptances outstanding.................... 2155 562,251 9.
10. Intangible assets (from Schedule RC-M).... 2143 283,716 10.
11. Other assets (from Schedule RC-F)......... 2160 1,997,778 11.
12. Total assets (sum of items 1 through 11).. 2170 54,837,423 12.
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of
columns A and C from Schedule RC-E,
part 1)................................. RCON 2200 21,852,164 13.a
(1) Noninterest-bearing(1).............. RCON 6631 9,474,510 13.a.1
(2) Interest-bearing.................... RCON 6636 12,377,654 13.a.2
b. In foreign offices, Edge and Agreement
subsidiaries, and IBFs (from Schedule
RC-E, part II).......................... RCFN 2200 13,756,280 13.b.
(1) Noninterest bearing................. RCFN 6631 330,030 13.b.1
(2) Interest-bearing.................... RCFN 6636 13,426,250 13.b.2
14. Federal funds purchased and securities
sold under agreements to repurchase: RCFD 2800 3.827,159 14
15. a. Demand notes issued to the U.S.
Treasury............................... RCON 2840 40,307 15.a
b. Trading Liabilities(from Schedule
RC-D)................................... RCFD 3548 4,985,577 15.b
16. Other borrowed money:
a. With original maturity of one year
or less................................. RCFD 2332 2,337,018 16.a
b. With original maturity of than one year
through three years..................... A547 265,393 16.b
c. With a remaining maturity of more than
three years ............................ A548 322,175 16.c
17. Not applicable
18. Bank's liability on acceptance executed
and outstanding .......................... RCFD 2920 562,251 18
19. Subordinated notes and debentures (2)..... RCFD 3200 1,700,000 19
20. Other liabilities (from Schedule RC-G).... RCFD 2930 929,875 20
21. Total liabilities (sum of items 13
through 20)............................... RCFD 2948 50,618,199 21
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related
surplus................................... RCFD 3838 0 23
24. Common stock.............................. RCFD 3230 200,858 24
25. Surplus (exclude all surplus related to
preferred stock).......................... RCFD 3839 2,948,616 25
26. a. Undivided profits and capital reserves.. RCFD 3632 1,059,214 26.a.
b. Net unrealized holding gains (losses)
on available-for-sale securities........ RCFD 8434 12,788 26.b.
27. Cumulative foreign currency translation
adjustments................................ RCFD 3284 (2,252) 27
28. Total equity capital (sum of items 23
through 27................................. RCFD 3210 4,219,224 28
29. Total liabilities and equity capital (sum
of items 21 and 28)........................ RCFD 3300 54,837,423 29
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the
statement below that best describes the most
comprehensive level of auditing work performed for
the bank by independent external Number
___________
| N/A |
auditors as of any date during 1996.......................RCFD 6724 ........ |___________| M.1.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
1 = Independent audit of the bank conducted in 4. = Directors' examination of the bank performed
accordance with generally accepted auditing by other external auditors (may be
standards by a certified public accounting required by state chartering authority)
firm which submits a report on the bank 5 = Review of the bank's financial statements by
2 = Independent audit of the bank's parent external auditors
holding company conducted in accordance 6. = Compilation of the bank's financial statements
with generally accepted auditing standards by external auditors
by a certified public accounting firm which 7. = Other audit procedures (excluding tax preparation
submits a report on the consolidated holding work)
company (but not on the bank separately) 8. = No external audit work
</TABLE>
- --------------------------
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
(2) Includes limited-life preferred stock and related surplus.
LETTER OF TRANSMITTAL
HSB CAPITAL I
OFFER TO EXCHANGE ITS
GLOBAL FLOATING RATE CAPITAL SECURITIES, SERIES B
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
GLOBAL FLOATING RATE CAPITAL SECURITIES, SERIES A
PURSUANT TO THE PROSPECTUS DATED ______ , 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON 1997, UNLESS THE
OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE
The Exchange Agent For The Exchange Offer Is:
The First National Bank of Chicago
By Mail:
(Registered or Certified Mail Recommended)
The First National Bank of Chicago
c/o First Chicago Trust
Company of New York
14 Wall Street
8th Floor, Window 2
New York, New York 10005
Facsimile Transmissions
Eligible Institutions Only
(212) 240-8938
To Confirm by Telephone or for Information Call:
(212) 240-8801
By Hand or Overnight Delivery:
The First National Bank of Chicago
c/o First Chicago Trust Company of New York
14 Wall Street
8th Floor, Window 2
New York, New York 10005
Delivery of this letter of transmittal to an address
other than as set forth above or transmission of this
letter of transmittal via facsimile to a number other than
as set forth above does not constitute a valid delivery.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY
BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall
have the same meaning given them in the Prospectus (as
defined below).
The Letter of Transmittal is to be completed by
holders (which term, for purposes of this document, shall
include any participant in The Depository Trust Company
("DTC")) either if (a) certificates are to be forwarded
herewith or (b) tenders are to be made pursuant to the
procedures for tender by book-entry transfer set forth
under "The Exchange Offer-Procedures for Tendering Original
Capital Securities" in the Prospectus and an Agent's
Message (as defined below) is not delivered. Certificates,
or book-entry confirmation of a book-entry transfer of such
Original Capital Securities into the Exchange Agent's
account at DTC, as well as this Letter of Transmittal (or
facsimile thereof or delivery of an Agent's Message in lieu
thereof), properly completed and duly executed, with any
required signature guarantees, and any other documents
required by this Letter of Transmittal, must be received by
the Exchange Agent at its address set forth herein on or
prior to the Expiration Date. Tenders by book-entry
transfer may also be made by delivering an Agent's Message
in lieu of this Letter of Transmittal. The term
"book-entry confirmation" means a confirmation of a
book-entry transfer of Original Capital Securities into the
Exchange Agent's account at DTC. The term "Agent's Message"
means a message transmitted by DTC to and received by the
Exchange Agent and forming part of a book-entry
confirmation, which states that DTC has received an express
acknowledgment from the tendering participant, which
acknowledgment states that such participant has received
and agrees to be bound by this Letter of Transmittal and
that the Issuer Trust and HSB Group, Inc. (the "Company")
may enforce this Letter of Transmittal against such
participant.
Holders of Original Capital Securities whose
certificates (the "Certificates") for such Original Capital
Securities are not immediately available or who cannot
deliver their Certificates and all other required documents
to the Exchange Agent on or prior to the Expiration Date
(as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis, must
tender their Original Capital Securities according to the
guaranteed delivery procedures set forth in "The Exchange
Offer-Procedures for Tendering Original Capital Securities"
in the Prospectus.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX
DESCRIPTION OF ORIGINAL CAPITAL SECURITIES
___________________________________________________________
If blank, please print name and address of Original Capital
Securities registered tendered holder.
(Attach additional list if necessary)
Aggregate Principal
Principal Amount of Original
Amount of Capital
Original Securities
Certificate Capital Tendered
Number(s)(1) Securities (if less than all)(2)
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
TOTAL AMOUNT
TENDERED
--------------------------
(1) Need not be completed by book-entry holders.
(2) Original Capital Securities may be tendered in whole
or in part in denominations of $1,000 and integral
multiples of $1,000 in excess thereof, provided that
if any Original Capital Securities are tendered for
exchange in part, the untendered principal amount
thereof must be $1,000 or any integral multiple of
$1,000 in excess thereof. All Original Capital
Securities held shall be deemed tendered unless a
lesser number is specified in this column. See
Instruction 4.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
( ) CHECK HERE IF TENDERED ORIGINAL CAPITAL SECURITIES ARE
BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE
ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution
DTC Account Number
Transaction Code Number
( ) CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF
GUARANTEED DELIVERY IF TENDERED ORIGINAL CAPITAL
SECURITIES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE
AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
Window Ticket Number (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which Guaranteed Delivery
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution
DTC Account Number
Transaction Code Number
( ) CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND
NON-EXCHANGED ORIGINAL CAPITAL SECURITIES ARE TO BE
RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET
FORTH ABOVE.
( ) CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE
ORIGINAL CAPITAL SECURITIES FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF
ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend
to engage in, a distribution of Exchange Securities. If
the undersigned is a broker-dealer that will receive
Exchange Securities for its own account in exchange for
Securities that were acquired as a result of market-making
activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any
resale of such Exchange Securities; however, by so
acknowledging and delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
( ) CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10
COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
Ladies and Gentlemen:
The undersigned hereby tenders to HSB Capital I, a
trust formed under the laws of the State of Delaware (the
"Issuer Trust") and HSB Group, Inc., a Connecticut
corporation (the "Company"), the above described aggregate
Liquidation Amount of the Issuer Trust's Global Floating
Rate Capital Securities, Series A (the "Original Capital
Securities") in exchange for a like aggregate Liquidation
Amount of the Issuer Trust's Global Floating Rate Capital
Securities, Series B (the "Exchange Capital Securities")
which have been registered under the Securities Act of 1933
(the "Securities Act"), upon the terms and subject to the
conditions set forth in the Prospectus dated ______ 1997
(as the same may be amended or supplemented from time to
time, the "Prospectus"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which,
together with the Prospectus, constitute the "Exchange
Offer").
Subject to and effective upon the acceptance for
exchange of all or any portion of the Original Capital
Securities tendered herewith in accordance with the terms
and conditions of the Exchange Offer (including, if the
Exchange Offer is extended or amended, the terms and
conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon
the order of the Issuer Trust all right, title and interest
in and to such Original Capital Securities as are being
tendered herewith. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent
and attorney-in-fact (with full knowledge that the Exchange
Agent is also acting as agent of the Company and the Issuer
Trust in connection with the Exchange Offer) with respect
to the tendered Original Capital Securities, with full
power of substitution (such power of attorney being deemed
to be an irrevocable power coupled with an interest)
subject only to the right of withdrawal described in the
Prospectus, to (i) deliver Certificates for Original
Capital Securities to the Company or the Issuer Trust
together with all accompanying evidences of transfer and
authenticity to, or upon the order of, the Issuer Trust,
upon receipt by the Exchange Agent, as the undersigned's
agent, of the Exchange Capital Securities to be issued in
exchange for such Original Capital Securities, (ii) present
Certificates for such Original Capital Securities for
transfer, and to transfer the Original Capital Securities
on the books of the Issuer Trust, and (iii) receive for the
account of the Trust all benefits and otherwise exercise
all rights of beneficial ownership of such Original Capital
Securities, all in accordance with the terms and conditions
of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT
THE UNDERSIGNED HAS FULL POWER AND AUTHORITY TO TENDER,
EXCHANGE, SELL, ASSIGN AND TRANSFER THE ORIGINAL CAPITAL
SECURITIES TENDERED HEREBY AND THAT, WHEN THE SAME ARE
ACCEPTED FOR EXCHANGE, THE ISSUER TRUST WILL ACQUIRE GOOD,
MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR
OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND
THAT THE ORIGINAL CAPITAL SECURITIES TENDERED HEREBY ARE
NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE
UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY
ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY, THE ISSUER
TRUST OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE
ORIGINAL CAPITAL SECURITIES TENDERED HEREBY, AND THE
UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE
REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND
AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered
holder(s) (which term, for purposes of this document, shall
include any participant in DTC) of the Original Capital
Securities tendered hereby should be printed above, if they
are not already set forth above, as they appear on the
Certificates representing such Original Capital Securities.
The Certificate number(s) and the Original Capital
Securities that the undersigned wishes to tender should be
indicated in the appropriate boxes above.
If any tendered Original Capital Securities are not
exchanged pursuant to the Exchange Offer for any reason, or
if Certificates are submitted for more Original Capital
Securities than are tendered or accepted for exchange,
Certificates for such nonexchanged or nontendered Original
Capital Securities will be returned (or, in the case of
Original Capital Securities tendered by book-entry
transfer, such Original Capital Securities will be credited
to an account maintained at DTC), without expense to the
tendering holder, promptly following the expiration or
termination of the Exchange Offer.
The undersigned understands that tenders of Original
Capital Securities pursuant to any one of the procedures
described in "The Exchange Offer-Procedures for Tendering
Original Capital Securities" in the Prospectus and in the
instructions attached hereto will, upon the Company's and
the Issuer Trust's acceptance for exchange of such tendered
Original Capital Securities, constitute a binding agreement
between the undersigned, the Company and the Issuer Trust
upon the terms and subject to the conditions of the
Exchange Offer.
The undersigned recognizes that, under certain
circumstances set forth in the Prospectus, the Company and
the Issuer Trust may not be required to accept for exchange
any of the Original Capital Securities tendered hereby.
Unless otherwise indicated herein in the box entitled
"Special Issuance Instructions" below, the undersigned
hereby directs that the Exchange Capital Securities be
issued in the name(s) of the undersigned or, in the case of
a book-entry transfer of Original Capital Securities, that
such Exchange Capital Securities be credited to the account
indicated above maintained at DTC. If applicable,
substitute Certificates representing Original Capital
Securities not exchanged or not accepted for exchange will
be issued to the undersigned or, in the case of a
book-entry transfer of Original Capital Securities, will be
credited to the account indicated above maintained at DTC.
Similarly, unless otherwise indicated under "Special
Delivery Instructions," please deliver Exchange Capital
Securities to the undersigned at the address shown below
the undersigned's signature.
BY TENDERING ORIGINAL CAPITAL SECURITIES AND EXECUTING
THIS LETTER OF TRANSMITTAL, OR EFFECTING DELIVERY OF AN
AGENT'S MESSAGE IN LIEU THEREOF, THE UNDERSIGNED HEREBY
REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN
"AFFILIATE" OF THE COMPANY OR THE ISSUER TRUST, (II) ANY
EXCHANGE CAPITAL SECURITIES TO BE RECEIVED BY THE
UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF
ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR
UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A
DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF
EXCHANGE CAPITAL SECURITIES TO BE RECEIVED IN THE EXCHANGE
OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER,
THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO
ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF THE
SECURITIES ACT) OF SUCH EXCHANGE CAPITAL SECURITIES. BY
TENDERING ORIGINAL CAPITAL SECURITIES PURSUANT TO THE
EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, OR
EFFECTING DELIVERY OF AN AGENT'S MESSAGE IN LIEU THEREOF, A
HOLDER OF ORIGINAL CAPITAL SECURITIES WHICH IS A
BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH
CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE
DIVISION OF CORPORATION FINANCE OF THE SECURITIES AND
EXCHANGE COMMISSION TO THIRD PARTIES, THAT (A) SUCH
ORIGINAL CAPITAL SECURITIES HELD BY THE BROKER-DEALER ARE
HELD ONLY AS A NOMINEE, OR (B) SUCH ORIGINAL CAPITAL
SECURITIES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER
TRADING ACTIVITIES AND IT WILL DELIVER THE PROSPECTUS (AS
AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE
REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY
RESALE OF SUCH EXCHANGE CAPITAL SECURITIES (PROVIDED THAT,
BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH
BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN
"UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
THE COMPANY AND THE ISSUER TRUST HAVE AGREED THAT,
SUBJECT TO THE PROVISIONS OF THE REGISTRATION RIGHTS
AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A
PARTICIPATING BROKER-DEALER (AS DEFINED BELOW) IN CONNECTION
WITH RESALES OF EXCHANGE CAPITAL SECURITIES RECEIVED IN
EXCHANGE FOR ORIGINAL CAPITAL SECURITIES, WHERE SUCH
ORIGINAL CAPITAL SECURITIES WERE ACQUIRED BY SUCH
PARTICIPATING BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT
OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES, FOR
A PERIOD ENDING 90 DAYS AFTER THE EXPIRATION DATE (SUBJECT
TO EXTENSION UNDER CERTAIN LIMITED CIRCUMSTANCES DESCRIBED
IN THE PROSPECTUS) OR, IF EARLIER, WHEN ALL SUCH EXCHANGE
CAPITAL SECURITIES HAVE BEEN DISPOSED OF BY SUCH
PARTICIPATING BROKER-DEALER. IN THAT REGARD, EACH
BROKER-DEALER WHO ACQUIRED ORIGINAL CAPITAL SECURITIES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER
TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER"), BY
TENDERING SUCH ORIGINAL CAPITAL SECURITIES AND EXECUTING
THIS LETTER OF TRANSMITTAL, OR EFFECTING DELIVERY OF AN
AGENT'S MESSAGE IN LIEU THEREOF, AGREES THAT, UPON RECEIPT
OF NOTICE FROM THE COMPANY OR THE ISSUER TRUST OF THE
OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH
MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY REFERENCE
IN THE PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR WHICH
CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL FACT
NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR
INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING OR
OF THE OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE
REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-
DEALER WILL SUSPEND THE SALE OF EXCHANGE CAPITAL SECURITIES
PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY AND THE ISSUER
TRUST HAVE AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT
SUCH MISSTATEMENT OR OMISSION AND HAVE FURNISHED COPIES OF
THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING
BROKER-DEALER OR THE COMPANY OR THE ISSUER TRUST HAS GIVEN
NOTICE THAT THE SALE OF THE EXCHANGE CAPITAL SECURITIES MAY
BE RESUMED, AS THE CASE MAY BE. IF THE COMPANY OR THE ISSUER
TRUST GIVES SUCH NOTICE TO SUSPEND THE SALE OF THE EXCHANGE
CAPITAL SECURITIES, THEY SHALL EXTEND THE 90-DAY PERIOD
REFERRED TO ABOVE DURING WHICH PARTICIPATING BROKER-DEALERS
ARE ENTITLED TO USE THE PROSPECTUS IN CONNECTION WITH THE
RESALE OF EXCHANGE CAPITAL SECURITIES BY THE NUMBER OF DAYS
DURING THE PERIOD FROM AND INCLUDING THE DATE OF THE GIVING
OF SUCH NOTICE TO AND INCLUDING THE DATE WHEN PARTICIPATING
BROKER-DEALERS SHALL HAVE RECEIVED COPIES OF THE
SUPPLEMENTED OR AMENDED PROSPECTUS NECESSARY TO PERMIT
RESALES OF THE EXCHANGE CAPITAL SECURITIES OR TO AND
INCLUDING THE DATE ON WHICH THE COMPANY OR THE ISSUER TRUST
HAS GIVEN NOTICE THAT THE SALE OF EXCHANGE CAPITAL
SECURITIES MAY BE RESUMED, AS THE CASE MAY BE.
AS A RESULT, A PARTICIPATING BROKER-DEALER WHO INTENDS
TO USE THE PROSPECTUS IN CONNECTION WITH RESALES OF EXCHANGE
CAPITAL SECURITIES RECEIVED IN EXCHANGE FOR ORIGINAL CAPITAL
SECURITIES PURSUANT TO THE EXCHANGE OFFER MUST NOTIFY THE
COMPANY AND THE ISSUER TRUST, OR CAUSE THE COMPANY AND THE
ISSUER TRUST TO BE NOTIFIED, ON OR PRIOR TO THE EXPIRATION
DATE, THAT IT IS A PARTICIPATING BROKER-DEALER. SUCH NOTICE
MAY BE GIVEN IN THE SPACE PROVIDED ABOVE OR MAY BE DELIVERED
TO THE EXCHANGE AGENT AT THE ADDRESS SET FORTH IN THE
PROSPECTUS UNDER "THE EXCHANGE OFFER-EXCHANGE AGENT."
Holders of Original Capital Securities whose Original
Capital Securities are accepted for exchange will not
receive Distributions on such Original Capital Securities
and the undersigned waives the right to receive any
Distributions on such Original Capital Securities
accumulated from and including October 15, 1997.
Accordingly, holders of Exchange Capital Securities as of
the record date for the payment of Distributions on January
15, 1998 will be entitled to Distributions accumulated from
and including October 15, 1997.
The undersigned will, upon request, execute and deliver
any additional documents deemed by the Company or the Issuer
Trust to be necessary or desirable to complete the sale,
assignment and transfer of the Original Capital Securities
tendered hereby. All authority herein conferred or agreed to
be conferred in this Letter of Transmittal shall survive the
death or incapacity of the undersigned and any obligation of
the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives,
trustees in bankruptcy, legal representatives, successors
and assigns of the undersigned. Except as stated in the
Prospectus, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION
OF ORIGINAL CAPITAL SECURITIES" ABOVE AND SIGNING THIS
LETTER, WILL BE DEEMED TO HAVE TENDERED THE ORIGINAL CAPITAL
SECURITIES AS SET FORTH IN SUCH BOX.
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 23)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED
BY INSTRUCTION 2)
Must be signed by registered holder(s) (which term, for
purposes of this document, shall include any participant in
DTC) exactly as name(s) appear(s) on Certificate(s) for the
Original Capital Securities hereby tendered or on the
register of holders maintained by the Issuer Trust, or by
any person(s) authorized to become the registered holder(s)
by endorsements and documents transmitted herewith
(including such opinions of counsel, certifications and
other information as may be required by the Issuer Trust or
the Trustee for the Original Capital Securities to comply
with the restrictions on transfer applicable to the Original
Capital Securities). If signature is by an
attorney-in-fact, executor, administrator, trustee,
guardian, officer of a corporation or another acting in a
fiduciary capacity or representative capacity, please set
forth the signer's full title. See Instruction 5.
_____________________________
_____________________________
(Signature(s) of Holder(s))
Date: ________, 1997
Name(s) _____________________
(Please Print)
Capacity (full title) ____________
Address ______________________
(Include Zip Code)
Area Code and
Telephone Number _____________
_____________________________
(Tax Identification or Social Security Number(s))
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
____________________________
(Authorized Signature)
Date: ________, 1997
Name(s) _____________________
(Please Print)
Capacity (full title) _______________
Address ______________________
(Include Zip Code)
Area Code and
Telephone Number _____________
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 5 and 6)
To be completed ONLY if Exchange Capital Securities or
Original Capital Securities not tendered are to be issued in
the name of someone other than the registered holder of the
Original Capital Securities whose name(s) appear(s) above.
Issue
( ) Original Capital Securities not tendered to:
( ) Exchange Capital Securities to:
Name(s) _____________________
(Please Print)
Address ______________________
(Include Zip Code)
Area Code and
Telephone Number _____________
Tax Identification or Social Security Number(s)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5 and 6)
To be completed ONLY if Exchange Capital Securities or
Original Capital Securities not tendered are to be sent to
someone other than the registered holder of the Original
Capital Securities whose name(s) appear(s) above, or such
registered holder(s) at an address other than that shown
above.
Mail
( ) Original Capital Securities not tendered to:
( ) Exchange Capital Securities to:
Name(s) _____________________
(Please Print)
Address ______________________
(Include Zip Code)
Area Code and
Telephone Number _____________
Tax Identification or Social Security Number(s)
INSTRUCTIONS
Forming Part of the Terms and Conditions of the
Exchange Offer
1. Delivery of Letter of Transmittal and
Certificates; Guaranteed Delivery Procedures. This Letter
of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders
are to be made pursuant to the procedures for tender by
book-entry transfer set forth in "The Exchange
Offer-Procedures for Tendering Original Capital Securities"
in the Prospectus. Certificates, or timely confirmation of
a book-entry transfer of such Original Capital Securities
into the Exchange Agent's account at DTC, as well as this
Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature
guarantees, or an Agent's Message in lieu thereof, and any
other documents required by this Letter of Transmittal,
must be received by the Exchange Agent at its address set
forth herein on or prior to the Expiration Date. Original
Capital Securities may be tendered in whole or in part in
the principal amount of $100,000 (100 Capital Securities)
and integral multiples of $1,000 in excess thereof,
provided that, if any Original Capital Securities are
tendered for exchange in part, the untendered principal
amount thereof must be $100,000 (100 Capital Securities) or
any integral multiple of $1,000 in excess thereof.
Holders who wish to tender their Original Capital
Securities and (i) whose Original Capital Securities are
not immediately available or (ii) who cannot deliver their
Original Capital Securities, this Letter of Transmittal and
all other required documents to the Exchange Agent on or
prior to the Expiration Date or (iii) who cannot complete
the procedures for delivery by book-entry transfer on a
timely basis, may tender their Original Capital Securities
by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery
procedures set forth in "The Exchange Offer-Procedures for
Tendering Original Capital Securities" in the Prospectus.
Pursuant to such procedures: (i) such tender must be made
by or through an Eligible Institution (as defined below);
(ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made
available by the Issuer Trust, must be received by the
Exchange Agent on or prior to the Expiration Date; and
(iii) the Certificates (or a book-entry confirmation (as
defined in this Prospectus)) representing all tendered
Original Capital Securities, in proper form for transfer,
together with a Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any
required signature guarantees, or an Agent's Message in
lieu thereof, and any other documents required by this
Letter of Transmittal, must be received by the Exchange
Agent within three New York Stock Exchange, Inc. trading
days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in "The Exchange
Offer-Procedures for Tendering Original Capital Securities"
in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by
hand or transmitted by facsimile or mail to the Exchange
Agent, and must include a guarantee by an Eligible
Institution in the form set forth in such Notice. For
Original Capital Securities to be properly tendered
pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or
prior to the Expiration Date. As used herein and in the
Prospectus, "Eligible Institution" means a firm or other
entity identified in Rule 17Ad-15 under the Exchange Act as
"an eligible guarantor institution," including (as such
terms are defined therein) (i) a bank; (ii) a broker,
dealer, municipal securities broker or dealer or government
securities broker or dealer; (iii) a credit union; (iv) a
national securities exchange, registered securities
association or clearing agency; or (v) a savings
association, with membership in an approved signature
medallion guarantee program, that is a participant in a
Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND SOLE RISK OF THE TENDERING HOLDER AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR
OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Neither the Company nor the Issuer Trust will accept
any alternative, conditional or contingent tenders. Each
tendering holder, by execution of a Letter of Transmittal
(or facsimile thereof), or delivery of an Agent's Message
in lieu thereof, waives any right to receive any notice of
the acceptance of such tender.
2. Guarantee of Signatures. No signature guarantee
on this Letter of Transmittal is required if:
(i) this Letter of Transmittal is signed by the
registered holder (which term, for purposes of
this document, shall include any participant in
DTC whose name appears on a security position
listing as the owner of the Original Capital
Securities) of Original Capital Securities
tendered herewith, unless such holder(s) has
completed either the box entitled "Special
Issuance Instructions" or the box entitled
"Special Delivery Instructions" above, or
(ii) such Original Capital Securities are tendered for
the account of a firm that is an Eligible
Institution.
In all other cases, an Eligible Institution must
guarantee the signature(s) on this Letter of Transmittal.
See Instruction 5.
3. Inadequate Space. If the space provided in the
box captioned "Description of Original Capital Securities"
is inadequate, the Certificate number(s) and/or the
principal amount of Original Capital Securities and any
other required information should be listed on a separate
signed schedule which is attached to this Letter of
Transmittal.
4. Partial Tenders and Withdrawal Rights. Tenders of
Original Capital Securities will be accepted only in the
principal amount of $1,000 (1 Capital Security) and
integral multiples of $1,000 in excess thereof, provided
that if any Original Capital Securities are tendered for
exchange in part, the untendered principal amount thereof
must be $1,000 (1 Capital Security) or any integral
multiple of $1,000 in excess thereof. If less than all the
Original Capital Securities evidenced by any Certificate
submitted are to be tendered, fill in the principal amount
of Original Capital Securities which are to be tendered in
the box entitled "Principal Amount of Original Capital
Securities Tendered." In such case, new Certificate(s) for
the remainder of the Original Capital Securities that were
evidenced by your old Certificate(s) will only be sent to
the holder of the Original Capital Security, promptly after
the Expiration Date. All Original Capital Securities
represented by Certificates delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise
indicated.
Except as otherwise provided herein, tenders of
Original Capital Securities may be withdrawn at any time on
or prior to the Expiration Date. In order for a withdrawal
to be effective on or prior to that time, a written,
telegraphic, telex or facsimile transmission of such notice
of withdrawal must be timely received by the Exchange Agent
at one of its addresses set forth above or in the
Prospectus on or prior to the Expiration Date. Any such
notice of withdrawal must specify the name of the person
who tendered the Original Capital Securities to be
withdrawn, the aggregate principal amount of Original
Capital Securities to be withdrawn, and (if Certificates
for Original Capital Securities have been tendered) the
name of the registered holder of the Original Capital
Securities as set forth on the Certificate for the Original
Capital Securities, if different from that of the person
who tendered such Original Capital Securities. If
Certificates for the Original Capital Securities have been
delivered or otherwise identified to the Exchange Agent,
then prior to the physical release of such Certificates for
the Original Capital Securities, the tendering holder must
submit the serial numbers shown on the particular
Certificates for the Original Capital Securities to be
withdrawn and the signature on the notice of withdrawal
must be guaranteed by an Eligible Institution, except in
the case of Original Capital Securities tendered for the
account of an Eligible Institution. If Original Capital
Securities have been tendered pursuant to the procedures
for book-entry transfer set forth in the Prospectus under
"The Exchange Offer-Procedures for Tendering Original
Capital Securities," the notice of withdrawal must specify
the name and number of the account at DTC to be credited
with the withdrawal of Original Capital Securities, in
which case a notice of withdrawal will be effective if
delivered to the Exchange Agent by written, telegraphic,
telex or facsimile transmission. Withdrawals of tenders of
Original Capital Securities may not be rescinded. Original
Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but
may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures
described in the Prospectus under "The Exchange
Offer-Procedures for Tendering Original Capital
Securities."
All questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices will
be determined by the Company and the Issuer Trust, in their
sole discretion, whose determination shall be final and
binding on all parties. Neither the Company, the Issuer
Trust, any affiliates or assigns of the Company or the
Issuer Trust, the Exchange Agent nor any other person shall
be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any
Original Capital Securities which have been tendered but
which are withdrawn will be returned to the holder thereof
without cost to such holder promptly after withdrawal.
5. Signatures on Letter of Transmittal, Assignments
and Endorsements. If this Letter of Transmittal is signed
by the registered holder(s) of the Original Capital
Securities tendered hereby, the signature(s) must
correspond exactly with the name(s) as written on the face
of the Certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Original Capital Securities tendered
hereby are owned of record by two or more joint owners, all
such owners must sign this Letter of Transmittal.
If any tendered Original Capital Securities are registered
in different name(s) on several Certificates, it will be
necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles thereof) as there are
different registrations of Certificates.
If this Letter of Transmittal or any Certificates or
bond powers are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate
when signing and must submit proper evidence satisfactory
to the Company and the Issuer Trust, in their sole
discretion, of each such person's authority so to act.
When this Letter of Transmittal is signed by the
registered owner(s) of the Original Capital Securities
listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required
unless Exchange Capital Securities are to be issued in the
name of a person other than the registered holder(s).
Signature(s) on such Certificate(s) or bond power(s) must
be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person
other than the registered owner(s) of the Original Capital
Securities listed, the Certificates must be endorsed or
accompanied by appropriate bond powers, signed exactly as
the name or names of the registered owner(s) appear(s) on
the Certificates, and also must be accompanied by such
opinions of counsel, certifications and other information
as the Company, the Issuer Trust or the Trustee for the
Original Capital Securities may require in accordance with
the restrictions on transfer applicable to the Original
Capital Securities. Signatures on such Certificates or bond
powers must be guaranteed by an Eligible Institution.
6. Special Issuance and Delivery Instructions. If
Exchange Capital Securities are to be issued in the name of
a person other than the signer of this Letter of
Transmittal, or if Exchange Capital Securities are to be
sent to someone other than the signer of this Letter of
Transmittal or to an address other than that shown above,
the appropriate boxes on this Letter of Transmittal should
be completed. Certificates for Original Capital Securities
not exchanged will be returned by mail or, if tendered by
book-entry transfer, by crediting the account indicated
above maintained at DTC. See Instruction 4.
7. Irregularities. The Company and the Issuer Trust
will determine, in their sole discretion, all questions as
to the form of documents, validity, eligibility (including
time of receipt) and acceptance for exchange of any tender
of Original Capital Securities, which determination shall
be final and binding on all parties. The Company and the
Issuer Trust reserve the absolute right to reject any and
all tenders determined by either of them not to be in
proper form or the acceptance of which, or exchange for
which, may, in the view of counsel to the Company and the
Issuer Trust be unlawful. The Company and the Issuer Trust
also reserve the absolute right, subject to applicable law,
to waive any of the conditions of the Exchange Offer set
forth in the Prospectus under "The Exchange
Offer-Conditions to the Exchange Offer" or any conditions
or irregularity in any tender of Original Capital
Securities of any particular holder whether or not similar
conditions or irregularities are waived in the case of
other holders. The Company's and the Issuer Trust's
interpretation of the terms and conditions of the Exchange
Offer (including this Letter of Transmittal and the
instructions hereto) will be final and binding. No tender
of Original Capital Securities will be deemed to have been
validly made until all irregularities with respect to such
tender have been cured or waived. The Company, the Issuer
Trust, any affiliates or assigns of the Company, the Issuer
Trust, the Exchange Agent, or any other person shall not be
under any duty to give notification of any irregularities
in tenders or incur any liability for failure to give such
notification.
8. Questions, Requests For Assistance and Additional
Copies. Questions and requests for assistance may be
directed to the Exchange Agent at its address and telephone
number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, the
Notice of Guaranteed Delivery and this Letter of
Transmittal may be obtained from the Exchange Agent or from
your broker, dealer, commercial bank, trust company or
other nominee.
9. 31% Backup Withholding; Substitute Form W-9.
Under U.S. Federal income tax law, a holder whose tendered
Original Capital Securities are accepted for exchange is
required to provide the Exchange Agent with such holder's
correct taxpayer identification number ("TIN") on
Substitute Form W-9 below. If the Exchange Agent is not
provided with the correct TIN, the Internal Revenue Service
(the "IRS") may subject the holder or other payee to a $50
penalty. In addition, payments to such holders or other
payees with respect to Original Capital Securities
exchanged pursuant to the Exchange Offer may be subject to
31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be
checked if the tendering holder has not been issued a TIN
and has applied for a TIN or intends to apply for a TIN in
the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of
Awaiting Taxpayer Identification Number below in order to
avoid backup withholding. Notwithstanding that the box in
Part 2 is checked and the Certificate of Awaiting Taxpayer
Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a
properly certified TIN is provided to the Exchange Agent.
The Exchange Agent will retain such amounts withheld during
the 60-day period following the date of the Substitute Form
W-9. If the holder furnishes the Exchange Agent with its
TIN within 60 days after the date of the Substitute Form W-
9, the amounts retained during the 60-day period will be
remitted to the holder and no further amounts shall be
retained or withheld from payments made to the holder
thereafter. If, however, the holder has not provided the
Exchange Agent with its TIN within such 60-day period,
amounts withheld will be remitted to the IRS as backup
withholding. In addition, 31% of all payments made
thereafter will be withheld and remitted to the IRS until a
correct TIN is provided.
The holder is required to give the Exchange Agent the
TIN (e.g., social security number or employer
identification number) of the registered owner of the
Original Capital Securities or of the last transferee
appearing on the transfers attached to, or endorsed on, the
Original Capital Securities. If the Original Capital
Securities are registered in more than one name or are not
in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional guidance on
which number to report.
Certain holders (including, among others,
corporations, financial institutions and certain foreign
persons) may not be subject to these backup withholding and
reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write
"exempt" on the face thereof, to avoid possible erroneous
backup withholding. A foreign person may qualify as an
exempt recipient by submitting a properly completed IRS
Form W-8, signed under penalties of perjury, attesting to
that holder's exempt status. Please consult the enclosed
"Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional guidance on
which holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal
income tax. Rather, the U.S. Federal income tax liability
of a person subject to backup withholding will be reduced
by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. Waiver of Conditions. The Company and the Issuer
Trust reserve the absolute right to waive satisfaction of
any or all conditions enumerated in the Prospectus.
11. No Conditional Tenders. No alternative,
conditional or contingent tenders will be accepted. All
tendering holders of Original Capital Securities, by
execution of this Letter of Transmittal, shall waive any
right to receive notice of the acceptance of Original
Capital Securities for exchange.
Neither the Company, the Issuer Trust, the Exchange
Agent nor any other person is obligated to give notice of
any defect or irregularity with respect to any tender of
Original Capital Securities nor shall any of them incur any
liability for failure to give any such notice.
12. Lost, Destroyed or Stolen Certificates. If any
Certificate(s) representing Original Capital Securities
have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be
instructed as to the steps that must be taken in order to
replace the Certificate(s). This Letter of Transmittal and
related documents cannot be processed until the procedures
for replacing lost, destroyed or stolen Certificate(s) have
been followed.
13. Security Transfer Taxes. Holders who tender their
Original Capital Securities for exchange will not be
obligated to pay any transfer taxes in connection
therewith. If, however, Exchange Capital Securities are to
be delivered to, or are to be issued in the name of, any
person other than the registered holder of the Original
Capital Securities tendered, or if a transfer tax is
imposed for any reason other than the exchange of Original
Capital Securities in connection with the Exchange Offer,
then the amount of any such transfer tax (whether imposed
on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of
such transfer taxes will be billed directly to such
tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE
THEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED
BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
TO BE COMPLETED BY ALL TENDERING SECURITYHOLDERS
(See Instruction 9)
PAYOR'S NAME: THE FIRST NATIONAL BANK OF CHICAGO
SUBSTITUTE
Form W-9
Department of the Treasury
Internal Revenue Service
Payer's Request for Taxpayer
Identification Number ("TIN")
and Certification
Part 1-PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND
CERTIFY BY SIGNING AND DATING BELOW:
TIN:
Social Security Number or
Employer Identification Number
______________________________
Part 2-TIN Applied For
______________________________
CERTIFICATION UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct taxpayer
identification number (or I am waiting for a number to
be issued to me).
(2) I am not subject to backup withholding either because
(i) I am exempt from backup withholding, (ii) I have
not been notified by the Internal Revenue Service
("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or
dividends, or (iii) the IRS has notified me that I am
no longer subject to backup withholding, and
(3) any other information provided on this form is true
and correct.
Signature
Date
You must cross out all of Part (2) above if you have been
notified by the IRS that you are subject to backup
withholding because of underreporting interest or dividends
on your tax return and you have not been notified by the
IRS that you are no longer subject to backup withholding.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN
CERTAIN CIRCUMSTANCES RESULT IN BACKUP WITHHOLDING OF 31%
OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE EXCHANGE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 2 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer
identification number has not been issued to me, and either
(1) I have mailed or delivered an application to receive a
taxpayer identification number to the appropriate Internal
Revenue Service Center or Social Security Administration
Office or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a
taxpayer identification number by the time of payment, 31%
of all payments made to me on account of the Exchange
Capital Securities shall be retained until I provide a
taxpayer identification number to the Exchange Agent and
that, if I do not provide my taxpayer identification number
within 60 days, such retained amounts shall be remitted to
the Internal Revenue Service as backup withholding and 31%
of all reportable payments made to me thereafter will be
withheld and remitted to the Internal Revenue Service until
I provide a taxpayer identification number.
_______________________ Signature(s)
_______________________ Date
Notice of Guaranteed Delivery
for Tender of
Global Capital Securities, Series A
(Liquidation Amount $1,000 Per Capital Security)
of
HSB Capital I
Fully and Unconditionally Guaranteed by
HSB Group, Inc.
This Notice of Guaranteed Delivery, or one
substantially equivalent to this form, must be used to
accept the Exchange Offer (as defined below) if (i)
certificates for the Issuer Trust's (as defined below)
Global Floating Rate Capital Securities, Series A (the
"Original Capital Securities") are not immediately
available, (ii) Original Capital Securities, the Letter of
Transmittal and all other required documents cannot be
delivered to The First National Bank of Chicago (the
"Exchange Agent") on or prior to the Expiration Date (as
defined in the Prospectus referred to below) or (iii) the
procedures for delivery by book-entry transfer cannot be
completed on a timely basis. This Notice of Guaranteed
Delivery may be delivered by hand, overnight courier or
mail, or transmitted by facsimile transmission, to the
Exchange Agent. See "The Exchange Offer-Procedures for
Tendering Original Capital Securities" in the Prospectus. In
addition, in order to utilize the guaranteed delivery
procedure to tender Original Capital Securities pursuant to
the Exchange Offer, a completed, signed and dated Letter of
Transmittal relating to the Original Capital Securities (or
facsimile thereof) must also be received by the Exchange
Agent on or prior to the Expiration Date. Capitalized terms
not defined herein have the meanings assigned to them in the
Prospectus.
The Exchange Agent For The Exchange Offer Is:
The First National Bank of Chicago
By Mail:
(Registered or Certified Mail recommended)
The First National Bank of Chicago
c/o First Chicago Trust
Company of New York
14 Wall Street
8th Floor, Window 2
New York, New York 10005
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 240-8938
To Confirm by Telephone or for Information Call:
(212) 240-8801
By Hand or Overnight Delivery:
The First National Bank of Chicago
c/o First Chicago Trust Company of New York
14 Wall Street
8th Floor, Window 2
New York, New York 10005
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN
ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
This Notice of Guaranteed Delivery is not to be used to
guarantee signatures. If a signature on a Letter of
Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature
guarantee must appear in the applicable space provided in
the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to HSB Capital I, a
Delaware business trust (the "Issuer Trust") and to HSB
Group, Inc., a Connecticut corporation (the "Company"), upon
the terms and subject to the conditions set forth in the
Prospectus dated _______, 1997 (as the same may be amended
or supplemented from time to time, the "Prospectus"), and
the related Letter of Transmittal (which together constitute
the "Exchange Offer"), receipt of which is hereby
acknowledged, the aggregate principal amount of Original
Capital Securities set forth below pursuant to the
guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer-Procedures for
Tendering Original Capital Securities."
Aggregate Liquidation Amount:
Name(s) of Registered Holder(s):
Amount Tendered: $(1)
Certificate No.(s) (if available):
(Total Liquidation Amount Represented by Original Capital Securities
Certificate(s)
$
If Original Capital Securities will be tendered by
book-entry transfer, provide the following information:
DTC Account Number:
Date:
PLEASE SIGN HERE
X
X
---------------------
(1) Must be in denominations of a Liquidation Amount of
$1,000 and any integral multiple thereof, and not
less than $100,000 aggregate Liquidation Amount.
All authority herein conferred or agreed to be
conferred shall survive the death or incapacity of
the undersigned and every obligation of the
undersigned hereunder shall be binding upon the
heirs, personal representatives, successors and
assigns of the undersigned.
Signature(s) of Owner(s)
or Authorized Signatory
Date:
Area Code and Telephone Number:
Must be signed by the holder(s) of the Original Capital
Securities as their name(s) appear(s) on certificates for
Original Capital Securities or on a security position
listing, or by person(s) authorized to become registered
holder(s) by endorsement and documents transmitted with this
Notice of Guaranteed Delivery. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer
or other person acting in a fiduciary or representative
capacity, such person must set forth his or her full title
below. Please print name(s) and address(es)
(Name(s):
Capacity:
Address(es):
GUARANTEE
(Not To Be Used For Signature Guarantee)
The undersigned, a firm or other entity identified in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, as an "eligible guarantor institution," including
(as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker, municipal
securities dealer, government securities broker or
government securities dealer; (iii) a credit union; (iv) a
national securities exchange, registered securities
association or clearing agency; or (v) a savings association
that is a participant in a Securities Transfer Association
recognized program (each of the foregoing being referred to
as an "Eligible Institution"), hereby guarantees to deliver
to the Exchange Agent, at one of its addresses set forth
above, either the Original Capital Securities tendered
hereby in proper form for transfer, or confirmation of the
book-entry transfer of such Original Capital Securities to
the Exchange Agent's account at The Depository Trust Company
("DTC"), pursuant to the procedures for book-entry transfer
set forth in the Prospectus, in either case together with
one or more properly completed and duly executed Letter(s)
of Transmittal (or facsimile thereof) and any other required
documents within three business days after the date of
execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the
Letter(s) of Transmittal and the Original Capital Securities
tendered hereby to the Exchange Agent within the time period
set forth above and that failure to do so could result in a
financial loss to the undersigned.
(Please Type or Print)
Name of Firm:
Address:
Zip Code:
Area Code and Telephone No. :
Authorized Signature:
Title:
Dated:
NOTE: DO NOT SEND CERTIFICATES FOR ORIGINAL CAPITAL
SECURITIES WITH THIS FORM. CERTIFICATES FOR
ORIGINAL CAPITAL SECURITIES SHOULD ONLY BE SENT
WITH YOUR LETTER OF TRANSMITTAL.
October ___, 1997
The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago, Illinois 60670-0126
Ladies and Gentlemen:
HSB Capital I, a trust formed under the laws of the
State of Delaware (the "Trust") proposes to make an offer
(the "Exchange Offer") to exchange its Global Floating
Rate Capital Securities, Series A (Liquidation Amount
$1,000 per Capital Security) (the "Original Capital
Securities") for its Global Floating Rate Capital
Securities, Series B (Liquidation Amount $1,000 per
Capital Security) (the "Exchange Capital Securities").
All of the beneficial interests represented by common
securities of the Trust are owned by HSB Group, Inc. a
Connecticut corporation (the "Corporation"). The terms
and conditions of the Exchange Offer as currently
contemplated are set forth in a prospectus, dated ______,
1997 (the "Prospectus"), to be distributed to all record
holders of the Original Capital Securities. The Original
Capital Securities and the Exchange Capital Securities
are collectively referred to herein as the "Securities."
The Trust hereby appoints The First National Bank of
Chicago to act as exchange agent (the "Exchange Agent")
in connection with the Exchange Offer. References
hereinafter to "you" shall refer to The First National
Bank of Chicago.
The Exchange Offer is expected to be commenced by
the Trust on or about _______, 1997. The Letter of
Transmittal accompanying the Prospectus (or in the case
of book entry securities, the ATOP system) is to be used
by the holders of the Original Capital Securities to
accept the Exchange Offer and contains instructions with
respect to (i) the delivery of certificates for Original
Capital Securities tendered in connection therewith and
(ii) the book-entry transfer of Securities to the
Exchange Agent's account.
The Exchange Offer shall expire at 5:00 P.M., New
York City time, on _______, 1997 or on such later date or
time to which the Trust may extend the Exchange Offer
(the "Expiration Date"). Subject to the terms and
conditions set forth in the Prospectus, the Trust
expressly reserves the right to extend the Exchange Offer
from time to time by giving oral (to be confirmed in
writing) or written notice to you before 9:00 A.M., New
York City time, on the business day following the
previously scheduled Expiration Date.
The Trust expressly reserves the right to amend or
terminate the Exchange Offer, and not to accept for
exchange any Original Capital Securities not theretofore
accepted for exchange, upon the occurrence of any of the
conditions of the Exchange Offer specified in the
Prospectus under the caption "The Exchange Offer--
Conditions to the Exchange Offer." The Trust will give
oral (confirmed in writing) or written notice of any
amendment, termination or nonacceptance of Original
Capital Securities to you promptly after any amendment,
termination or nonacceptance.
In carrying out your duties as Exchange Agent, you
are to act in accordance with the following instructions:
1. You will perform such duties and only such
duties as are specifically set forth in the section of
the Prospectus captioned "The Exchange Offer" or as
specifically set forth herein; provided, however, that in
no way will your general duty to act in good faith be
discharged by the foregoing.
2. You will establish an account with respect to
the Original Capital Securities at The Depository Trust
Company (the "Book-Entry Transfer Facility") for purposes
of the Exchange Offer within two business days after the
date of the Prospectus, and any financial institution
that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the
Original Capital Securities by causing the Book-Entry
Transfer Facility to transfer such Original Capital
Securities into your account in accordance with the Book-
Entry Transfer Facility's procedure for such transfer.
3. You are to examine each of the Letters of
Transmittal and certificates for Original Capital
Securities (or confirmation of book-entry transfer into
your account at the Book-Entry Transfer Facility) and any
other documents delivered or mailed to you by or for
holders of the Original Capital Securities to ascertain
whether: (i) the Letters of Transmittal and any such
other documents are duly executed and properly completed
in accordance with instructions set forth therein and
(ii) the Original Capital Securities have otherwise been
properly tendered. In each case where the Letter of
Transmittal or any other document has been improperly
completed or executed or any of the certificates for
Original Capital Securities are not in proper form for
transfer or some other irregularity in connection with
the acceptance of the Exchange Offer exists, you will
endeavor to inform the presenters of the need for
fulfillment of all requirements and to take any other
action as may be necessary or advisable to cause such
irregularity to be corrected.
4. With the approval of any Administrative Trustee
of the Trust or any person designated in writing by the
Corporation (a "Designated Officer") or any other party
designated by any such Administrative Trustee or
Designated Officer in writing, you are authorized to
waive any irregularities in connection with any tender of
Original Capital Securities pursuant to the Exchange
Offer.
5. Tenders of Original Capital Securities may be
made only as set forth in the Letter of Transmittal and
in the section of the Prospectus captioned "The Exchange
Offer--Procedures for Tendering Original Capital
Securities," and Original Capital Securities shall be
considered properly tendered to you only when tendered in
accordance with the procedures set forth therein.
Notwithstanding the provisions of this paragraph 5,
Original Capital Securities which any Administrative
Trustee of the Trust or Designated Officer of the
Corporation shall approve as having been properly
tendered shall be considered to be properly tendered
(such approval, if given orally, shall be confirmed in
writing).
6. You shall advise the Trust and the Corporation
with respect to any Original Capital Securities received
subsequent to the Expiration Date and accept their
instructions with respect to disposition of such Original
Capital Securities.
7. You shall accept tenders:
(a) in cases where the Original Capital Securities
are registered in two or more names only if signed by all
named holders;
(b) in cases where the signing person (as indicated
on the Letter of Transmittal) is acting in a fiduciary or
a representative capacity only when proper evidence of
such person's authority so to act is submitted; and
(c) from persons other than the registered holder
of Original Capital Securities provided that customary
transfer requirements, including any applicable transfer
taxes, are fulfilled.
You shall accept partial tenders of Original Capital
Securities where so indicated and as permitted in the
Letter of Transmittal and deliver certificates for
Original Capital Securities to the transfer agent for
split-up and return any untendered Original Capital
Securities to the holder (or such other person as may be
designated in the Letter of Transmittal) as promptly as
practicable after expiration or termination of the
Exchange Offer.
8. Upon satisfaction or waiver of all of the
conditions to the Exchange Offer, the Trust will notify
you (such notice if given orally, to be confirmed in
writing) of its acceptance, promptly after the Expiration
Date, of all Original Capital Securities properly
tendered and you, on behalf of the Trust, will exchange
such Original Capital Securities for Exchange Capital
Securities and cause such Original Capital Securities to
be canceled. Delivery of Exchange Capital Securities
will be made on behalf of the Trust by you at the rate of
$1,000 principal amount of Exchange Capital Securities
for each $1,000 principal amount of the corresponding
series of Original Capital Securities tendered promptly
after notice (such notice if given orally, to be
confirmed in writing) of acceptance of said Original
Capital Securities by the Trust; provided, however, that
in all cases, Original Capital Securities tendered
pursuant to the Exchange Offer will be exchanged only
after timely receipt by you of certificates for such
Original Capital Securities (or confirmation of book-
entry transfer into your account at the Book-Entry
Transfer Facility), a properly completed and duly
executed Letter of Transmittal (or facsimile thereof)
with any required signature guarantees and any other
required documents. You shall issue Exchange Capital
Securities only in denominations of $1,000 or any
integral multiple thereof. Original Capital Securities
may be tendered in whole or in part in denominations of
$100,000 and integral multiples of $1,000 in excess
thereof, provided that if any Original Capital Securities
are tendered for exchange in part, the untendered
principal amount thereof must be $100,000 or any integral
multiple of $1,000 in excess thereof.
9. Tenders pursuant to the Exchange Offer are
irrevocable, except that, subject to the terms and upon
the conditions set forth in the Prospectus and the Letter
of Transmittal, Original Capital Securities tendered
pursuant to the Exchange Offer may be withdrawn at any
time on or prior to the Expiration Date.
10. The Trust shall not be required to exchange any
Original Capital Securities tendered if any of the
conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Trust not to exchange any
Original Capital Securities tendered shall be given
orally (and confirmed in writing) or in writing by the
Trust to you.
11. If, pursuant to the Exchange Offer, the Trust
does not accept for exchange all or part of the Original
Capital Securities tendered because of an invalid tender,
the occurrence of certain other events set forth in the
Prospectus under the caption "The Exchange Offer--
Conditions to the Exchange Offer" or otherwise, you shall
promptly after the expiration or termination of the
Exchange Offer return those certificates for unaccepted
Original Capital Securities (or effect appropriate book-
entry transfer), together with any related required
documents and the Letters of Transmittal relating thereto
that are in your possession, to the persons who deposited
them.
12. All certificates for reissued Original Capital
Securities, unaccepted Original Capital Securities or for
Exchange Capital Securities shall be forwarded by (a)
first-class certified mail, return receipt requested,
under a blanket surety bond protecting you and the Trust
from loss or liability arising out of the non-receipt or
non-delivery of such certificates, (b) by registered mail
insured separately for the replacement value of each of
such certificates, or (c) by appropriate book-entry
transfer.
13. You are not authorized to pay or offer to pay
any concessions, commissions or solicitation fees to any
broker, dealer, bank or other persons or to engage or
utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other than
those specifically set forth in the section of the
Prospectus captioned "The Exchange Offer," the Letter of
Transmittal or herein or as may be subsequently agreed to
in writing by you and the Trust;
(b) will be regarded as making no representations
and having no responsibilities as to the validity,
sufficiency, value or genuineness of any of the
certificates or the Original Capital Securities
represented thereby deposited with you pursuant to the
Exchange Offer, and will not be required to and will make
no representation as to the validity, value or
genuineness of the Exchange Offer;
(c) shall not be obligated to take any legal action
hereunder which might in your reasonable judgment involve
any expense or liability, unless you shall have been
furnished with reasonable indemnity;
(d) may reasonably rely on and shall be protected
in acting in reliance upon any certificate, instrument,
opinion, notice, letter, telegram or other document or
security delivered to you and reasonably believed by you
to be genuine and to have been signed by the proper party
or parties;
(e) may reasonably act upon any tender, statement,
request, agreement or other instrument whatsoever not
only as to its due execution and validity and
effectiveness of its provisions, but also as to the truth
and accuracy of any information contained therein, which
you shall in good faith believe to be genuine or to have
been signed or represented by a proper person or persons;
(f) may rely on and shall be protected in acting
upon written or oral instructions from any Administrative
Trustee of the Trust or from any Designated Officer of
the Corporation;
(g) may consult with your counsel with respect to
any questions relating to your duties and
responsibilities and the advice or opinion of such
counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or
omitted to be taken by you hereunder in good faith and in
accordance with the advice or opinion of such counsel;
and
(h) shall not advise any person tendering Original
Capital Securities pursuant to the Exchange Offer as to
the wisdom of making such tender or as to the market
value or decline or appreciation in market value of any
Original Capital Securities.
15. You shall take such action as may from time to
time be requested by the Trust or its counsel or any
Designated Officer of the Corporation (and such other
action as you may reasonably deem appropriate) to furnish
copies of the Prospectus, Letter of Transmittal and the
Notice of Guaranteed Delivery (as defined in the
Prospectus) or such other forms as may be approved from
time to time by the Trust or the Corporation, to all
persons requesting such documents and to accept and
comply with telephone requests for information relating
to the Exchange Offer, provided that such information
shall relate only to the procedures for accepting (or
withdrawing from) the Exchange Offer. The Trust will
furnish you with copies of such documents at your
request. All other requests for information relating to
the Exchange Offer shall be directed to the Trust,
Attention: ___________.
16. You shall advise by facsimile transmission or
telephone, and promptly thereafter confirm in writing to
__________ of the Trust, and such other person or persons
as the Trust or the Corporation may request, daily (and
more frequently during the week immediately preceding the
Expiration Date and if otherwise requested) up to and
including the Expiration Date, as to the number of
Original Capital Securities which have been tendered
pursuant to the Exchange Offer and the items received by
you pursuant to this Agreement, separately reporting and
giving cumulative totals as to items properly received
and items improperly received. In addition, you will
also inform, and cooperate in making available to, the
Trust or the Corporation or any such other person or
persons upon oral request made from time to time on or
prior to the Expiration Date of such other information as
it or such person reasonably requests. Such cooperation
shall include, without limitation, the granting by you to
the Trust or the Corporation and such person as the Trust
or the Corporation may request of access to those persons
on your staff who are responsible for receiving tenders,
in order to ensure that immediately prior to the
Expiration Date the Trust or the Corporation shall have
received information in sufficient detail to enable it to
decide whether to extend the Exchange Offer. You shall
prepare a final list of all persons whose tenders were
accepted, the aggregate principal amount of Original
Capital Securities tendered, the aggregate principal
amount of Original Capital Securities accepted and
deliver said list to the Trust promptly after the
Expiration Date.
17. Any Letters of Transmittal and Notices of
Guaranteed Delivery which are received by the Exchange
Agent shall be stamped by you as to the date and the time
of receipt thereof and shall be preserved by you for a
period of time at least equal to the period of time you
preserve other records pertaining to the transfer of
securities. You shall dispose of unused Letters of
Transmittal and other surplus materials by returning them
to the Trust at the address set forth below for notices.
18. You hereby expressly waive any lien,
encumbrance or right of set-off whatsoever that you may
have with respect to funds deposited with you for the
payment of transfer taxes by reasons of amounts, if any,
borrowed by the Trust, or any of its subsidiaries or
affiliates pursuant to any loan or credit agreement with
you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent
hereunder, you shall be entitled to such compensation as
set forth on Schedule I attached hereto.
20. You hereby acknowledge receipt of the
Prospectus and the Letter of Transmittal and further
acknowledge that you have examined each of them. Any
inconsistency between this Agreement, on the one hand,
and the Prospectus and the Letter of Transmittal (as they
may be amended from time to time), on the other hand,
shall be resolved in favor of the latter two documents,
except with respect to the duties, liabilities and
indemnification of you as Exchange Agent, which shall be
controlled by this Agreement.
21. (a) The Trust covenants and agrees to indemnify
and hold you harmless in your capacity as Exchange Agent
hereunder against any loss, liability, cost or expense,
including reasonable attorneys' fees and expenses,
arising out of or in connection with any act, omission,
delay or refusal made by you in reliance upon any
signature, endorsement, assignment, certificate, order,
request, notice, instruction or other instrument or
document reasonably believed by you to be valid, genuine
and sufficient and in accepting any tender or effecting
any transfer of Original Capital Securities reasonably
believed by you in good faith to be authorized, and in
delaying or refusing in good faith to accept any tenders
or effect any transfer of Original Capital Securities;
provided, however, that the Trust shall not be liable for
indemnification or otherwise for any loss, liability,
cost or expense to the extent arising out of your
negligence or misconduct. In no case shall the Trust be
liable under this indemnity with respect to any claim
against you unless the Trust shall be notified by you, by
letter or cable or by facsimile confirmed by letter, of
the written assertion of a claim against you or of any
other action commenced against you, promptly after you
shall have received any such written assertion or notice
of commencement of action. The Trust shall be entitled
to participate at its own expense in the defense of any
such claim or other action, and, if the Trust so elects,
the Trust may assume the defense of any suit brought to
enforce any such claim. In the event that the Trust
shall assume the defense of any such suit or threatened
action in respect of which indemnification may be sought
hereunder, the Trust shall not be liable for the fees and
expenses of any additional counsel thereafter retained by
you so long as you consent to the Trust's retention of
counsel, which consent may not be unreasonably withheld;
provided that the Trust shall not be entitled to assume
the defense of any such action if the named parties to
such action include both the Trust and you and
representation of both parties by the same legal counsel
would, in the written opinion of counsel to you, be
inappropriate due to actual or potential conflicting
interests between you and the Trust. It is understood
that the Trust shall not be liable under this paragraph
for the fees and expenses of more than one legal counsel
for you. In the event that the Trust shall assume the
defense of any such suit, the Trust shall not thereafter
be liable for the fees and expenses of any counsel
retained by you.
(b) You agree that, without the prior written
consent of the Trust, you will not settle, compromise or
consent to the entry of any pending or threatened claim,
action or proceeding in respect of which indemnification
could be sought in accordance with the indemnification
provisions of this Agreement (whether or not you or the
Trust or any of its trustees, or controlling persons is
an actual or potential party to such claim, action or
proceeding), unless such settlement, compromise or
consent includes an unconditional release of the Trust
and its trustees and controlling persons from all
liability arising out of such claim, action or
proceeding.
22. You shall arrange to comply with all
requirements under the tax laws of the United States,
including those relating to missing Tax Identification
Numbers, and shall file any appropriate reports with the
Internal Revenue Service. The Trust understands that you
are required in certain instances to deduct 31% with
respect to interest paid on the Exchange Capital
Securities and proceeds from the sale, exchange,
redemption or retirement of the Exchange Capital
Securities from holders who have not supplied their
correct Taxpayer Identification Number or required
certification. Such funds will be turned over to the
Internal Revenue Service in accordance with applicable
regulations.
23. You shall notify the Trust of the amount of any
transfer taxes payable in respect of the exchange of
Original Capital Securities and, upon receipt of written
approval from the Trust, you shall deliver or cause to be
delivered, in a timely manner to each governmental
authority to which any transfer taxes are payable in
respect of the exchange of Original Capital Securities,
your check in the amount of all transfer taxes so
payable, and the Trust shall reimburse you for the amount
of any and all transfer taxes payable in respect of the
exchange of Original Capital Securities; provided,
however, that you shall reimburse the Trust for amounts
refunded to you in respect of your payment of any such
transfer taxes, at such time as such refund is received
by you.
24. This Agreement and your appointment as Exchange
Agent hereunder shall be construed and enforced in
accordance with the laws of the State of New York
applicable to agreements made and to be performed
entirely within such state, and without regard to
conflicts of law principles, and shall inure to the
benefit of, and the obligations created hereby shall be
binding upon, the successors and assigns of each of the
parties hereto.
25. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an
original and all of which taken together shall constitute
one and the same agreement.
26. In case any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
27. This Agreement shall not be deemed or construed
to be modified, amended, rescinded, canceled or waived,
in whole or in part, except by a written instrument
signed by a duly authorized representative of the party
to be charged. This Agreement may not be modified
orally.
28. Unless otherwise provided herein, all notices,
requests and other communications to any party hereunder
shall be in writing (including facsimile or similar
writing) and shall be given to such party, addressed to
it, at its address or telecopy number set forth below:
If to the Trust:
HSB Capital I
One State Street
Hartford, Connecticut 06102-5024
Facsimile:
Attention:
If to the Exchange Agent:
The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago, Illinois 60670
Telephone:
Facsimile:
Attention:
29. Unless terminated earlier by the parties
hereto, this Agreement shall terminate 90 days following
the Expiration Date. Notwithstanding the foregoing,
Paragraphs 19, 21 and 23 shall survive the termination of
this Agreement. Upon any termination of this Agreement,
you shall promptly deliver to the Trust any certificates
for Securities, funds or property then held by you as
Exchange Agent under this Agreement.
30. This Agreement shall be binding and effective
as of the date hereof.
Please acknowledge receipt of this Agreement and
confirm the arrangements herein provided by signing and
returning the enclosed copy.
HSB CAPITAL I
By: _________________________
Name:
Title: Administrative Trustee
Accepted as the date
first above written:
THE FIRST NATIONAL BANK OF CHICAGO, as Exchange Agent
By:___________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
FEE SCHEDULE
EXCHANGE AGENTS SERVICES
HSB CAPITAL I
I. Exchange Agency
A fee for the receipt of exchanged Global Floating
Rate Capital Securities, Series A of HSB Capital I
will be charged at ________.
