SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-13135
HSB GROUP, INC.
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-1475343
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 5024, ONE STATE STREET,
HARTFORD, CONNECTICUT 06102-5024
(Address of principal executive offices) (Zip Code)
(860) 722-1866
(Registrant's telephone number, including area code)
The Hartford Steam Boiler Inspection and Insurance Company
(Former name, former address and former fiscal year,
if changed since the last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares outstanding of the registrant's common stock without par
value, as of June 30, 1997: 19,761,598
1
<PAGE>
HSB GROUP, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
----
Consolidated Statements of Operations for the
Quarters Ended June 30, 1997 and 1996 (unaudited).................. 3
Consolidated Statements of Financial Position as
of June 30, 1997 (unaudited) and December 31,
1996............................................................... 4
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996
(unaudited)........................................................ 5
Notes to Consolidated Financial Statements (unaudited)............. 6
Management's Discussion and Analysis of
Consolidated Financial Condition and Results
of Operations..................................................... 12
PART II OTHER INFORMATION
Item 1 - Legal Proceedings........................................ 21
Item 2 - Changes in Securities.................................... 22
Item 5 - Submission of Matters to a Vote of Security Holders...... 23
Item 6 - Exhibits and Reports on Form 8-K......................... 24
SIGNATURES................................................................. 25
2
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<TABLE>
HSB GROUP, INC.
Consolidated Statements of Operations
Unaudited
(In millions, except per share data)
<CAPTION>
Quarter Six Months
Ended June 30 Ended June 30
Revenues: 1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Insurance premiums $ 117.2 $ 112.9 $ 239.5 $ 221.3
Net engineering services 15.0 14.1 29.7 26.8
Net investment income 8.8 7.9 16.7 15.9
Realized investment gains 3.4 5.1 4.0 6.0
----------- ----------- ----------- -----------
Total revenues 144.4 140.0 289.9 270.0
----------- ----------- ----------- -----------
Expenses:
Claims and adjustment 51.4 56.0 102.9 100.9
Policy acquisition 20.4 21.9 43.9 42.5
Underwriting and inspection 36.0 34.4 71.3 68.1
Net engineering services 14.1 12.3 27.7 23.6
Interest 0.4 0.1 0.6 0.3
----------- ----------- ----------- -----------
Total expenses 122.3 124.7 246.4 235.4
----------- ----------- ----------- -----------
Income from continuing operations
before income taxes 22.1 15.3 43.5 34.6
Income taxes:
Current 6.1 5.2 12.7 10.4
Deferred (0.4) (1.9) (1.4) (2.2)
----------- ----------- ----------- -----------
Total income taxes 5.7 3.3 11.3 8.2
Income from continuing operations 16.4 12.0 32.2 26.4
Discontinued operations:
Income from operations
of Radian International LLC
net of income taxes of $(.8);
$1.0; $0; and $2.8 - 1.4 0.0 4.0
----------- ----------- ----------- -----------
Net income $ 16.4 $ 13.4 $ 32.2 $ 30.4
=========== =========== =========== ===========
Net income per common share:
Income from continuing operations $ 0.80 $ 0.59 $ 1.58 $ 1.29
Discontinued operations - 0.07 - 0.20
----------- ----------- ----------- -----------
Net income $ 0.80 $ 0.66 $ 1.58 $ 1.49
=========== =========== =========== ===========
Dividends declared per common share $ 0.57 $ 0.57 $ 1.14 $ 1.14
Average common shares outstanding
and common stock equivalents 20.5 20.3 20.5 20.3
</TABLE>
See Notes to Consolidated Financial Statements.
3
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HSB GROUP, INC.
Consolidated Statements of Financial Position
(In millions, except per share data)
June 30, December 31,
1997 1996
(Unaudited)
----------- ------------
Assets:
Cash $ 4.7 $ 4.5
Short-term investments, at cost 98.5 97.9
Fixed maturities, at fair value
(cost -$242.8; $231.3) 247.9 235.8
Equity securities, at fair value
(cost - $189.1; $182.9 ) 286.4 262.7
----------- --------------
Total cash and invested assets 637.5 600.9
Insurance premiums receivable 133.7 106.4
Engineering services receivable 11.9 11.7
Fixed assets 30.7 31.7
Prepaid acquisition costs 43.7 40.6
Capital lease 15.7 16.1
Investment in Radian 83.0 79.7
Reinsurance assets 147.6 162.9
Other assets 77.4 66.3
----------- ------------
Total assets $ 1,181.2 $ 1,116.3
=========== ============
Liabilities:
Unearned insurance premiums $ 295.6 $ 270.6
Claims and adjustment expenses 282.3 302.9
Short-term borrowings 26.4 3.2
Long-term borrowings 25.1 25.1
Capital lease 27.9 27.9
Deferred income taxes 29.3 23.7
Dividends payable 11.4 11.4
Other liabilities 113.7 85.9
----------- ------------
Total liabilities 811.7 750.7
----------- ------------
Convertible redeemable preferred stock-
Series B (stated and redemption
value; shares authorized,
issued and outstanding .002) 20.0 20.0
Shareholders' equity:
Common stock (stated value; shares
authorized 50.0; shares issued 21.3;
shares outstanding 19.7; 20.0) 10.0 10.0
Additional paid-in capital 31.5 32.0
Unrealized investment gains, net of tax 63.7 52.8
Retained earnings 249.2 255.1
Benefit plans (4.9) (4.3)
----------- ------------
Total shareholders' equity 349.5 345.6
------------ ------------
Total $ 1,181.2 $ 1,116.3
=========== ============
Shareholders' equity per common
share $ 17.71 $ 17.25
See Notes to Consolidated Financial Statements.
4
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HSB Group, Inc.
Consolidated Statements of Cash Flows
(In millions)
Six Months Ended
June 30,
--------------------------
1997 1996
----------- -----------
Operating activities:
Net income $ 32.2 $ 30.4
Adjustments to reconcile net income to
Cash provided by operating activities:
Depreciation and amortization 3.3 5.9
Deferred income taxes (1.4) (2.2)
Realized investment gains, including
market adjustment for derivative instruments (4.0) (6.0)
Change in:
Insurance premiums receivable (27.3) (29.4)
Engineering services receivable (0.2) (1.5)
Prepaid acquisition costs (3.1) (6.2)
Reinsurance assets 15.3 (46.7)
Unearned insurance premiums 25.0 47.5
Claims and adjustment expenses (20.6) 42.8
Investment in Radian (3.3) 8.6
Other (2.8) (6.7)
----------- -----------
Cash provided by operating activities 13.1 36.5
----------- -----------
Investing activities:
Fixed asset additions, net (2.0) (3.9)
Investments:
Purchase of short-term investments, net (0.6) 0.5
Purchase of fixed maturities (28.0) (54.3)
Proceeds from sale of fixed maturities 7.4 71.6
Redemption of fixed maturities 8.7 3.3
Purchase of equity securities (90.1) (66.7)
Proceeds from sale of equity securities 107.3 57.3
Cash transferred to investment in Radian - (0.8)
----------- -----------
Cash provided by investment activities 2.7 7.0
----------- -----------
Financing activities:
Increase (decrease) in short-term borrowings 23.2 (10.3)
Dividends paid to shareholders (23.5) (23.1)
Reacquisition of stock (16.6) (4.0)
Exercise of stock options 1.3 1.1
----------- -----------
Cash used in financing activities (15.6) (36.3)
----------- -----------
Net increase in cash 0.2 7.2
Cash at beginning of period 4.5 8.6
----------- -----------
Cash at end of period $ 4.7 $ 15.8
=========== ===========
Interest paid $ 0.6 $ 1.1
----------- -----------
Federal income tax paid $ 13.1 $ 8.8
----------- -----------
See Notes to Consolidated Financial Statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
The interim consolidated financial statements in this report include
adjustments based on management's best estimates and judgments,
including estimates of future loss payments, which are necessary to
present a fair statement of the results for the interim periods
reported. These adjustments are of a normal, recurring nature. The
financial statements are prepared on the basis of generally accepted
accounting principles and should be read in conjunction with the
financial statements and related notes in the 1996 Annual Report.
Certain amounts for 1996 have been reclassified to conform with the
1997 presentation.
2. Discontinued Operations
In 1996, the Company entered into a joint venture agreement with The
Dow Chemical Company (Dow) to form a new company, Radian International
LLC (Radian LLC). The terms of the agreement provided that HSB
contribute the net assets of its Radian Corp. subsidiary into this
joint venture for a 40% ownership. Income was subject to a preference
return to HSB in the first two years. The agreement provided HSB the
option to put its share of the 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 LLC 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 LLC; therefore this will result in a
pre-tax gain of approximately $60 million. Due to this decision, the
results of Radian LLC have been classified as discontinued operations.
HSB's share of Radian LLC's results has been immaterial to the
consolidated results during the first six months of 1997.
3. Industrial Risk Insurers
On December 1, 1996 HSB increased its participation in Industrial Risk
Insurers (IRI) from 14% to 23.5%. IRI is an unincorporated, voluntary
property underwriting association currently comprised of twenty-three
property casualty insurance companies. IRI primarily writes policies on
a syndicate basis which specifies to the insured the percentage share
of risk accepted by each member of the association. Each member
company, therefore, operates as a direct insurer or reinsurer on such
policies and participates in the premiums and losses generated
thereunder in proportion to its membership interest.
In essence, the IRI facilitates the proportional sharing of risk under
one policy where each member is essentially considered to be the direct
writer for reporting, premium tax and other regulatory purposes.
Liability on such policies is several and not joint, and
6
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therefore, members are not responsible for policy liabilities of the
other members. An increased participation does not expose the Company
to the effect of adverse loss development on claims incurred prior to
the effective date of the increase.
Other than a nominal deposit, which is refunded if participation
ceases, there is no cost to becoming a member of the IRI. Members can
change or terminate their participation on an annual basis. Typically
participation levels vary based on a member's expectations of future
profits.
4. Shareholders' Equity
The Connecticut Business Corporation Act, which became effective on
January 1, 1997, eliminated the concept of treasury shares. Therefore,
shares reacquired by the Company constitute authorized but unissued
shares. As a result of this change in law, the Company eliminated the
caption Treasury Stock from its balance sheet and reclassified the
amounts to additional paid-in capital and retained earnings. These
amounts were $74.8 million as of June 30, 1997 and $59.5 million as of
December 31, 1996. The reclassifications were distributed as follows:
June 30, 1997 December 31, 1996
------------- -----------------
Additional Paid In $ 2.5 $ 2.0
Retained Earnings 72.3 57.5
---------- ----------
Total $ 74.8 $ 59.5
On December 30, 1996, the Company issued Convertible Redeemable
Preferred Stock. The Stock is convertible into 398,406 shares of HSB
common stock at a price of $50.20 per share and may be redeemed at the
option of the Company on or after the fifth anniversary of issuance and
by the holder after the eighth anniversary. As a result of the stock's
redemption features, it has been included in the "mezzanine" section of
the balance sheet located between liabilities and shareholders' equity.
Prior year amounts now conform to these presentations.
5. Derivative Instruments
On December 19, 1996, the Company entered into three "zero cost collar
contracts" to mitigate the effects of market risk on its U. S. common
stock portfolio (which, for management purposes, included certain
convertible preferreds). Each contract had a notional value of $50
million and maturity dates ranging from November 1997 to January 1998.
The contracts are European style, which means they only settle upon
maturity. The contracts, which were entered into when the S&P 500 Index
was 744.3, allow the Company to recover from the counterparty if the
index is below 695.2 at the time of maturity, and requires the Company
to reimburse the counterparty if the index is above a range of 811.3 to
818.7 at the time of maturity.
7
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The Company entered into these contracts with the intent to hold such
contracts until maturity. However, based upon price movements in the
S&P 500 Index since December 31, 1996, the contracts do have a current
estimated market value of $(19.4) million, which represents the cost
the Company would incur if it had canceled the contracts at June 30,
1997. As of June 30, 1997, the Company recorded the mark to market
valuation of $19.4 million as a reduction of realized investment gains.
At present such contracts are included in other liabilities in the
Statement of Financial Position.
At June 30, 1997, the S&P 500 Index was 885.14, which is outside the
bounds of the collar. If the contracts had reached their expiration
dates at the end of the quarter, HSB would have been required to pay
approximately $14.0 million to its counterparty and an additional $5.4
million of realized gains would have been recognized in the statement
of income.
The Company's U.S. common stock portfolio has experienced a total
return of $37 million (which includes price appreciation of
approximately $34 million) since December 31, 1996, and has had a price
movement correlation with the S&P 500 Index well in excess of 80%.
The collar subjects the Company to market and counterparty credit risk.
The Company manages this exposure by frequently modeling the effects of
potential future price movements on the value of the collar and HSB's
portfolio and by entering into contracts with internationally
recognized financial institutions, which are expected to perform under
the terms of the contract, and by evaluating the credit worthiness of
such institutions by taking into account credit ratings and other
factors.
6. Recent Accounting Developments
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share". This statement establishes standards for computing and
presenting earnings per share (EPS). It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income
statement and a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted
EPS computation. The requirements of this statement will be effective
for year end 1997 financial statements. Had this standard been in
effect as of the first quarter 1996, EPS would have been as follows:
June 30, 1997 June 30, 1996
------------- -------------
Quarter YTD Quarter YTD
------- ----- ------- ----
Basic $ .81 $1.58 $ .66 $1.50
Diluted $ .80 $1.58 $ .66 $1.49
As Reported $ .80 $1.58 $ .66 $1.49
8
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In June 1997 the FASB issued SFAS 130 " Reporting Comprehensive Income"
which requires items that comprise comprehensive income be reported in
a financial statement display with the same prominence as other
financial statements. This presentation will include such items as
market value adjustments of securities, foreign currency translation,
and certain adjustments made for benefit plans, which are currently
reported as components of the changes in shareholders' equity. This
statement will be effective beginning in 1998 with retroactive
restatement of prior periods required.
Also in June of 1997 the FASB issued SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information". This standard
requires companies to report financial and descriptive information
about reportable operating segments. It includes disclosure
requirements relating to products and services, geographic areas and
major customers. This statement will be effective beginning in 1998.
7. Legal Proceedings
The Company is involved in three arbitration or litigation proceedings
regarding the extent to which certain explosion events are insured
under boiler and machinery policies of the Company or under the
all-risk property insurance policies issued by other companies.
Management believes the Company's policies do not provide coverage for
losses resulting from the explosion events that are the subject of
these proceedings.
A lower court ruling in one of these cases held that an explosion did
occur, and that the Company was not liable for losses of the insured
resulting from the explosion. In a further action, the court denied the
Company's motion for summary judgment on certain issues, thus leaving
the Company potentially liable for certain unquantified losses
resulting from events prior to the explosion. In the first quarter of
1997 the Company and the property insurer jointly settled the case with
the insured. The Company's ultimate share of the settlement will be
determined in an arbitration proceeding with the property insurer. The
Company has incurred gross losses and LAE of $40.7 million and a net
loss after taking into account reinsurance recoverables of $6.4
million, of which $5 million represents claim cost and the remaining
$1.4 million represents loss adjustment expenses. As a result of
payments made to date, at June 30, 1997 the Company carried gross loss
and LAE reserves of $2.8 million and recoverables from reinsurers of
$2.9 million.
The Company has accrued $6.5 million with respect to the other two
cases for potential loss adjustment expenses, including legal costs to
defend the Company's position. One case is in the process of pre-trial
summary judgment motions and appeals; the other case is involved in
both arbitration and litigation proceedings. A trial date has not been
set for either case. In the event that the Company is held liable for
one or both of the remaining claims, amounts in excess of the Company's
net maximum aggregate retention of $8.5 million is recoverable from the
9
<PAGE>
Company's reinsurers. Claim amounts potentially recoverable from
reinsurers in the event of a possible adverse outcome in these cases
could range, in the aggregate, from $40 million to $195 million.
The obligations of the Company's reinsurers with respect to these cases
are not in dispute. Therefore, management believes that any adverse
outcomes in these cases will not, in the aggregate, have a material
effect on either the results of operations or financial condition of
the Company. The Company's reinsurance contracts do not require the
Company to reimburse its reinsurers for any losses such reinsurers
might incur should these cases not be decided in the Company's favor.
Nevertheless, reinsurers often quote rates for future coverages based
upon their or other reinsurer's experience on a particular account.
Therefore, in the event the Company's reinsurers pay significant sums
pursuant to the arbitration or litigation proceedings described above,
it is likely the Company's reinsurance rates would increase in future
periods. However, given the insured capacity that exists in reinsurance
markets worldwide, coupled with the Company's ability to negotiate a
redesign or restructuring of its reinsurance program, it does not
necessarily mean that such an increase would be material.
The Company is also involved in various other legal proceedings as
defendant or co-defendant that have arisen in the normal course of its
business. In the judgment of management, after consultation with
counsel, it is improbable that any liabilities which may arise from
such litigation will have a material adverse impact on the results of
operations or the financial position of the Company.
8. Holding Company Formation
At a special meeting of the Company on June 23, 1997, shareholders
voted to approve a proposal which enabled the Company to form a new
holding company, HSB Group, Inc. Shareholders of Hartford Steam
Boiler's common stock automatically became holders of HSB Group's
common stock through a share exchange approved by the shareholders, and
certificates representing Hartford Steam Boiler common stock
automatically represent the corresponding shares of HSB Group common
stock.
9. Capital Securities
On July 10, 1997, HSB Group, Inc. announced the sale of $110 million of
30 year Capital Securities in a private placement. The securities are
non-callable for ten years and may be called earlier upon the
occurrence of a Tax Event. The securities were issued through HSB
Capital I, a Delaware business trust created by HSB Group, Inc. at a
floating rate tied to 90 day LIBOR. The initial coupon is approximately
6.7 percent. Holders of the Capital Securities will be entitled to
receive preferential cumulative cash distributions accumulating from
the date of
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original issuance and payable quarterly in arrears. The Company has
the right to defer payment of interest at any time or from time to
time for a period not exceeding 20 consecutive quarterly periods with
respect to each deferral period. During an extension period, interest
will continue to accrue and the amount of distributions to which
holders of the Capital Securities are entitled will accumulate, and
the Company will be prohibited from paying any cash dividends on its
common stock. The Company has irrevocably and unconditionally
guaranteed all of the Issuer Trust's obligations under the Capital
Securities. The Company expects to use the proceeds for general
corporate purposes, which may include the repurchase of HSB common
stock; funding investments in, or extensions of credit to,
subsidiaries; repayment of maturing debt; and financing possible
future acquisitions.
10. Computation of Earnings Per Share
Quarter Ended Year to Date
June 30, 1997 June 30, 1997
------------- -------------
Net Income $16.4 (A) $ 32.2 (A)
===== =======
Weighted Average Common
Shares Outstanding 19.9 20.0
Common Stock Equivalents
Preferred Stock -
assuming conversion .4 .4
Options .2 .1
---- -------
20.5 (B) 20.5 (B)
===== =======
EPS - (A)/(B) $0.80 $1.58*
*Computation excludes rounding
11
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<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
JUNE 30, 1997
RESULTS OF OPERATIONS
(dollar amounts in millions)
Consolidated Overview
Quarter Ended Six Months Ended
June 30 June 30
--------------------- -----------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Insurance premium $ 117.2 $ 112.9 $ 239.5 $ 221.3
Net engineering services revenue 15.0 14.1 29.7 26.8
Net investment income 8.8 7.9 16.7 15.9
Realized investment gains 3.4 5.1 4.0 6.0
-------- ------- -------- -------
Total revenues $ 144.4 $ 140.0 $ 289.9 $ 270.0
====== ======= ======== =======
Income from continuing operations $ 16.4 $ 12.0 $ 32.2 $ 26.4
-------- ------- -------- -------
Net income $ 16.4 $ 13.4 $ 32.2 $ 30.4
======= ======= ======== =======
Income from continuing operations
per common share $ 0.80 $ 0.59 $ 1.58 $ 1.29
-------- ------- -------- -------
Net income per common share $ 0.80 $ 0.66 $ 1.58 $ 1.49
======== ======= ======== =======
</TABLE>
Net income per common share for the second quarter of 1997 increased 21 percent
from the second quarter of 1996 and increased 6 percent in the first six months
of 1997 compared to 1996 due to significantly higher underwriting gains in the
Company's insurance operations. There were no earnings from HSB's interest in
its joint venture, Radian International LLC during the quarter and year to date
through June 30, 1997. Continued softness in Radian's businesses due to delays
associated with the transition of their client mix to one that is more
commercial based than government based accounted for the decrease. On July 28,
1997 the HSB Board ratified management's decision to exercise its option to put
its share of Radian International LLC to Dow on or about January 1, 1998 for
approximately $145 million. Due to this decision, the results of Radian
International LLC have been classified as discontinued operations. In comparison
to 1996 results, income per share from continuing operations increased 36
percent and 22 percent for the second quarter and year to date respectively.
Insurance premiums grew 4 percent in the quarter and 8 percent year to date,
with the increased participation in IRI a contributing factor as well as growth
in both the domestic and international
12
<PAGE>
books of business. The second quarter combined ratio improved from 99.0 percent
in 1996 to 91.8 percent in 1997. Net engineering services revenue increased 7
percent for the second quarter and 11 percent year to date compared to
comparable periods last year.
The effective tax rates for the second quarter and year to date were 26 percent
compared to 22 percent and 24 percent for the comparable prior periods. Tax rate
fluctuations occur as underwriting and engineering services results change the
mix of pre-tax income between fully taxable earnings and tax preferred earnings.
The Company continues to manage its use of tax advantageous investments to
maximize after tax earnings.
Recent Accounting Developments
- ------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share". This statement
establishes standards for computing and presenting earnings per share (EPS). It
replaces the presentation of primary EPS with a presentation of basic EPS. It
also requires dual presentation of basic and diluted EPS on the face of the
income statement and a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted EPS
computation. The requirements of this statement will be effective for year end
1997 financial statements. Had this standard been in effect for 1997, basic EPS
would have increased $.01 for the second quarter to $.81.
In June 1997 the FASB issued SFAS 130 " Reporting Comprehensive Income" which
requires items that comprise comprehensive income be reported in a financial
statement display with the same prominence as other financial statements. This
will include a presentation of items such as market value adjustments of
securities, foreign currency translation, and certain adjustments made for
benefit plans. This statement will be effective beginning in 1998 with
retroactive restatement of prior periods required.
Also in June of 1997 the FASB issued SFAS No. 131 "Disclosures about Segments of
an Enterprise and Related Information". This standard requires companies to
report financial and descriptive information about reportable operating
segments. It includes disclosure requirements relating to products and services,
geographic areas and major customers. This statement will be effective beginning
in 1998.
Other Developments
- ------------------
At a special meeting for the Company on June 23, shareholders voted to approve a
proposal which enabled the Company to form a new holding company, HSB Group,
Inc. Shareholders of Hartford Steam Boiler's common stock automatically became
holders of HSB Group's common stock through a share exchange approved by the
shareholders, and certificates representing Hartford Steam Boiler common stock
automatically represent the corresponding shares of HSB Group common stock.
13
<PAGE>
Insurance Operations
- --------------------
Insurance operations include the insurance results of The Hartford Steam Boiler
Inspection and Insurance Company(HSB), HSB Engineering Insurance Limited
(HSB-EIL), The Boiler Inspection and Insurance Company of Canada (BI&I) and The
Allen Insurance Company, Ltd.
On December 1, 1996 HSB increased its participation in Industrial Risk Insurers
(IRI) from 14% to 23.5%. IRI is an unincorporated, voluntary property
underwriting association currently comprised of twenty-three property casualty
insurance companies. IRI primarily writes policies on a syndicate basis which
specifies to the insured the percentage share of risk accepted by each member of
the association. Each member company, therefore, operates as a direct insurer or
reinsurer on such policies and participates in the premiums and losses generated
thereunder in proportion to its membership interest.
In essence, the IRI facilitates the proportional sharing of risk under one
policy where each member is essentially considered to be the direct writer for
reporting, premium tax and other regulatory purposes. Liability on such policies
is several and not joint, and therefore, members are not responsible for policy
liabilities of the other members. An increased participation does not expose the
Company to the effect of adverse loss development on claims incurred prior to
the effective date of the increase.
Other than a nominal deposit, which is refunded if participation ceases, there
is no cost to becoming a member of the IRI. Members can change or terminate
their participation on an annual basis. Typically participation levels vary
based on a member's expectations of future profits.
IRI has a fiscal year ending November 30, and provides reports to its members on
a quarterly basis. As a result, the Company's increased participation to 23.5
percent has initially been reflected in the first quarter financial results for
1997.
14
<PAGE>
<TABLE>
Quarter Ended Six Months Ended
June 30 June 30
--------------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross earned premium $ 149.2 $ 137.7 $ 305.0 $ 271.4
Ceded premium 32.0 24.8 65.5 50.1
------ --------- -------- ---------
Insurance premium 117.2 112.9 239.5 221.3
Claims and adjustment expenses 51.4 56.0 102.9 100.9
Underwriting, acquisition
and other expenses 56.4 56.3 115.2 110.6
------ --------- -------- ---------
Underwriting gain $ 9.4 $ 0.6 $ 21.4 $ 9.8
========= ========== ======== =========
Loss ratio 43.9% 49.5% 43.0% 45.6%
Expense ratio 47.9% 49.5% 47.9% 49.5%
---------- ---------- -------- --------
Combined ratio 91.8% 99.0% 90.9% 95.1%
========== ========== ======== ========
</TABLE>
Gross earned premiums in the second quarter and year to date increased 8 percent
and 12 percent from the comparable periods in 1996. This increase was primarily
attributable to the increased participation in IRI ($6.4 million and $16.5
million) and to growth in both domestic and global markets. Gross earned
premiums representing coverage outside the U.S. increased 12 percent in the
second quarter and 21 percent year to date from the comparable period in 1996.
In certain areas of the Company's direct domestic and international businesses,
the market is experiencing price erosion. HSB will not write business at rates
which would lessen our ability to maintain underwriting profit. Increases in
ceded premium of 29 percent in the current quarter and 31 percent year to date
were primarily due to the additional participation in IRI and the purchase of
facultative reinsurance at EIL.
The loss ratio decreased from 49.5 percent in the second quarter of 1996 to 43.9
percent in the current quarter and from 45.6 percent in the first six months of
1996 to 43.0 percent in the first six months of 1997. In 1996, high frequency of
claims and unusually severe winter weather impacted the loss ratio.
Approximately $2.6 million of flood related losses were reported during the
first six months of 1997, which impacted the loss ratio by 1.1 percentage
points. Gross claims and adjustment expenses for 1997 and 1996 were $142.5
million and $214.2 million, respectively.
15
<PAGE>
The expense ratio improved in both the quarter and year to date from comparable
periods in the previous year as the growth rate in earned premium exceeded the
growth rate in underwriting and inspection expenses. Underwriting, acquisition
and other expenses were flat in the second quarter but increased approximately 4
percent year to date primarily due to increased participation in IRI. In April
HSB was notified that expected obligations to the Florida Insurance Guaranty
Association relating to Hurricane Andrew were canceled. Expenses in the second
quarter benefited from the release $.6 million of reserves that had been
established in prior years for these assessments.
Engineering Services Operations
<TABLE>
Quarter Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net engineering services revenue $ 15.0 $ 14.1 $ 29.7 $ 26.8
Net engineering services expenses 14.1 12.3 27.7 23.6
------ ------ ------- -------
Operating gain $ 0.9 $ 1.8 $ 2.0 $ 3.2
======= ======= ====== =======
Net margin 6.1% 12.6% 6.6% 12.0%
</TABLE>
Engineering services operations include the results of HSB's and BI&I's
engineering services, HSB Reliability Technologies (HSBRT) and the Company's
other engineering services subsidiaries.
Net engineering services revenues increased $.9 million in the second quarter
and $2.9 million year to date compared to the same periods in 1996. The growth
in revenues was primarily due to increases generated by HSBRT. The decline in
operating gain from the previous periods reflects slower growth in the domestic
book and Far East operations, and operating costs incurred to develop new
products and in new start up operations.
16
<PAGE>
Investment Operations
<TABLE>
Quarter Ended Six Months Ended
June 30 June 30
--------------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net investment income $ 8.8 $ 7.9 $ 16.7 $ 15.9
Realized investment gains 3.4 5.1 4.0 6.0
--------- --------- -------- ---------
Pretax income from
investment operations $ 12.2 $ 13.0 $ 20.7 $ 21.9
========= ========= ======== =========
</TABLE>
Net investment income for the second quarter and year to date increased $.9
million and $.8 million compared to the same periods in 1996. Investable assets
increased in 1997 in comparison to the same period in 1996. Net investment
income was impacted earlier in 1997 by calls of high yielding preferred stocks
and cash collections from reinsurers that were not received until late in March.
In the second quarter net investment income increases reflected more investable
funds and a modest change in the mix of the portfolio from tax preferred
investments to more taxable investments with higher pre-tax yields. Second
quarter net investment income was also impacted by higher interest costs related
to a larger amount of commercial paper outstanding.
The Company's investment strategy continues to be to maximize total return on
the investment portfolio through investment income and capital appreciation.
Investment strategies for any given year are developed based on many factors
including operational results, tax implications, regulatory requirements,
interest rates, dividends to stockholders and market conditions. The investment
portfolio includes a wide variety of high quality equity securities and both
domestic and foreign fixed maturities. The Company continues to manage its use
of tax advantageous investments to maximize after tax investment earnings.
In the fourth quarter of 1996, HSB entered into three zero cost collar contracts
to mitigate the effects of market risk on its domestic common stock portfolio.
The contracts have maturity dates ranging from November 1997 to January 1998.
The contracts, which were entered into when the S&P index was 744.3, allow the
Company to recover from the counterparty if the index is below 695.2 at the time
of maturity and requires the Company to reimburse the counterparty if the index
is above a range of 811.3 to 818.7 at the time of maturity. In addition to
offering downside protection for market declines in excess of approximately 6
percent, the collar permits the Company to receive the dividends on its common
stock investments and retain a certain level of upside appreciation depending on
market movements.
At June 30, 1997 the S&P index was at 885.14 which is outside the bounds of the
collar. Although there would have been a settlement of $14.0 million had these
contracts matured at June 30, 1997, HSB has adjusted its value of the contracts
to an estimated fair value at that date
17
<PAGE>
and reduced realized investment gains by $19.4 million on a year to date basis.
The impact on the quarter was $18.0 million.
The Company's U.S. common stock portfolio has experienced a total return of $37
million (which includes price appreciation of approximately $34 million) since
December 31, 1996, and has had a price movement correlation with the S&P 500
Index well in excess of 80%.
Liquidity and Capital Resources
- -------------------------------
Balances at
June 30 December 31
------- -----------
1997 1996
---- ----
Total assets $ 1,181.2 $ 1,116.3
Short-term investments 98.5 97.9
Cash 4.7 4.5
Short-term borrowings 26.4 3.2
Convertible Redeemable Preferred Stock 20.0 20.0
Common shareholder's equity 349.5 345.6
Liquidity refers to the Company's ability to generate sufficient funds to meet
the cash requirements of its business operations. The Company receives a regular
inflow of cash from maturing investments and engineering services and insurance
operations. The mix of the investment portfolio is managed to respond to
expected claim pay-out patterns. The Company also maintains a highly liquid
short-term portfolio to provide for immediate cash needs.
Cash provided from operations was $13.1 million in the first six months of 1997
compared to $36.5 million for the same period in 1996. Insurance operations cash
flow decreased as claims paid increased 54 percent compared to the same period
in 1996, and premiums collected were 5 percent higher year to date. Collections
from reinsurers increased significantly in the current year. The Company's
participation in IRI impacted components of the Consolidated Statement of Cash
Flows for 1997, including a year to date positive impact of $8.3 million and
$9.4 million for 1997 and 1996, respectively, to cash provided from operations.
Capital resources consist of shareholders' equity, convertible redeemable
preferred stock and debt outstanding and represent those funds deployed or
available to be deployed to support business operations. Common shareholders'
equity of $349.5 million at June 30, 1997 increased by $3.9 million since
December 31, 1996. The increase reflects net income of $32.2 million year to
date and an increase in unrealized gains, net of tax, of $10.9 million, offset
by dividends of $23.3 million and share repurchases.
On January 27, 1997 the Board of Directors renewed the Company's authorization
to repurchase up to one million of its common shares. During the second quarter
the Company repurchased 340,400 common shares at a cost of $15.3 million. At its
July meeting, the HSB Board of Directors increased the authorization to
repurchase shares to two million. Treasury stock of
18
<PAGE>
$74.8 million was reclassified to retained earnings and additional paid-in
capital during 1997 in accordance with the Connecticut Business Corporation Act
which, effective January 1, 1997, eliminated the concept of treasury shares. For
comparative purposes treasury stock of $59.5 million was likewise reclassified
at December 1996.
At June 30, 1997, the Company had significant short-term and long-term borrowing
capacity. The Company is currently authorized to issue up to $75 million of
commercial paper. Commercial paper outstanding at June 30, 1997 and December 31,
1996 was $26.4 million and $3.2 million, respectively. The Company has
authorized a guaranty of up to 40 percent of Radian International, LLC's $40
million credit facility with The Dow Chemical Company. At June 30, 1997 the
amount guaranteed was $13.7 million.
On July 10, 1997, HSB Group, Inc. announced the sale of $110 million of 30 year
Capital Securities in a private placement. The securities are non-callable for
ten years and may be called earlier upon the occurrence of a tax event. The
securities were issued through HSB Capital I, a Delaware business trust created
by HSB Group, Inc. at a floating rate tied to 90 day LIBOR. The initial coupon
is approximately 6.7 percent. 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. The Company has the right
to defer payment of interest at any time or from time to time for a period not
exceeding 20 consecutive quarterly periods with respect to each deferral period.
During an extension period, interest will continue to accrue and the amount of
distributions to which holders of the Capital Securities are entitled will
accumulate, and the Company will be prohibited from paying any cash dividends on
its common stock. The Company has irrevocably and unconditionally guaranteed all
of the Issuer Trust's obligations under the Capital Securities. The Company
expects to use the proceeds for general corporate purposes, which may include
the repurchase of HSB common stock; funding investments in, or extensions of
credit to, subsidiaries; repayment of maturing debt; and financing possible
future acquisitions.
The Company is involved in three arbitration or litigation proceedings regarding
the extent to which certain explosion events are insured under boiler and
machinery policies of the Company or under the all-risk property insurance
policies issued by other companies. Management believes the Company's policies
do not provide coverage for losses resulting from the explosion events that are
the subject of these proceedings. More information pertaining to these legal
proceedings may be found under note 7 of the Notes to Consolidated Financial
Statements herein.
Forward-Looking Statements
Certain statements contained in this report are forward-looking and are based on
management's current expectations. Actual results may differ materially from
such expectations depending on the outcome of certain factors described with
such forward-looking statements and other factors including: significant natural
disasters and severe weather conditions; changes in interest rates and the
performance of the financial markets; changes in the availability, cost and
collectibility
19
<PAGE>
of reinsurance; changes in domestic and foreign laws, regulations and taxes; the
entry of new or stronger competitors and the intensification of pricing
competition; the loss of current customers or the inability to obtain new
customers; changes in the coverage terms selected by insurance customers,
including higher deductibles and lower limits; the adequacy of loss reserves;
changes in asset valuations; consolidation and restructuring in the insurance
industry; changes in the demand and customer base for engineering and inspection
services offered by the Company, whether resulting from changes in the law or
otherwise, and other general market conditions.
20
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
The Company is involved in three arbitration or litigation proceedings regarding
the extent to which certain explosion events are insured under boiler and
machinery policies of the Company or under the all-risk property insurance
policies issued by other companies. Management believes the Company's policies
do not provide coverage for losses resulting from the explosion events that are
the subject of these proceedings.
A lower court ruling in one of these cases held that an explosion did occur, and
that the Company was not liable for losses of the insured resulting from the
explosion. In a further action, the court denied the Company's motion for
summary judgment on certain issues, thus leaving the Company potentially liable
for certain unquantified losses resulting from events prior to the explosion. In
the first quarter of 1997 the Company and the property insurer jointly settled
the case with the insured. The Company's ultimate share of the settlement will
be determined in an arbitration proceeding with the property insurer. The
Company has incurred gross losses and LAE of $40.7 million and a net loss after
taking into account reinsurance recoverables of $6.4 million, of which $5
million represents claim cost and the remaining $1.4 million represents loss
adjustment expenses. As a result of payments made to date, at June 30, 1997 the
Company carried gross loss and LAE reserves of $2.8 million and recoverables
from reinsurers of $2.9 million.
The Company has accrued $6.5 million with respect to the other two cases for
potential loss adjustment expenses, including legal costs to defend the
Company's position. One case is in the process of pre-trial summary judgment
motions and appeals; the other case is involved in both arbitration and
litigation proceedings. A trial date has not been set for either case. In the
event that the Company is held liable for one or both of the remaining claims,
amounts in excess of the Company's net maximum aggregate retention of $8.5
million is recoverable from the Company's reinsurers. Claim amounts potentially
recoverable from reinsurers in the event of a possible adverse outcome in these
cases could range, in the aggregate, from $40 million to $195 million.
The obligations of the Company's reinsurers with respect to these cases are not
in dispute. Therefore, management believes that any adverse outcomes in these
cases will not, in the aggregate, have a material effect on either the results
of operations or financial condition of the Company. The Company's reinsurance
contracts do not require the Company to reimburse its reinsurers for any losses
such reinsurers might incur should these cases not be decided in the Company's
favor. Nevertheless, reinsurers often quote rates for future coverages based
upon their or other reinsurer's experience on a particular account. Therefore,
in the event the Company's reinsurers pay significant sums pursuant to the
arbitration or litigation proceedings described above, it is likely the
Company's reinsurance rates would increase in future periods. However, given the
insured capacity that exists in reinsurance markets worldwide, coupled with the
Company's ability to negotiate a redesign
21
<PAGE>
or restructuring of its reinsurance program, it does not necessarily mean that
such an increase would be material.
The Company is also involved in various other legal proceedings as defendant or
co-defendant that have arisen in the normal course of its business. In the
judgment of management, after consultation with counsel, it is improbable that
any liabilities which may arise from such litigation will have a material
adverse impact on the results of operations or the financial position of the
Company.
Item 2. Changes in Securities
- ------------------------------
Recent Sales of Unregistered Securities
Effective September 26, 1996, the Company terminated its retirement plan for
current and future non-employee directors and adopted the Directors Stock and
Deferred Compensation Plan (the "Directors Plan"). At that time, the value of
benefits payable to current non-employee directors who were covered under the
terminated retirement plan was converted into stock equivalent units under the
Directors Plan. Under the Directors Plan, non-employee directors will each
receive an annual award of 550 stock equivalent units, and may elect to defer
all or a portion of their cash compensation for payment at a future date.
Deferred accounts will be credited annually with interest or translated into
stock equivalent units, at the election of the director. The number of stock
equivalent units equals the amount of cash compensation divided by the fair
market value of Company common stock on the date such compensation would
otherwise have been paid.
Account balances held under the Directors Plan are paid out in cash or an
equivalent number of shares of Company common stock, at the election of the
director. Dividend equivalents, in an amount equal to the amount of dividends
that would have been payable had each stock equivalent unit constituted a share
of Company common stock, are payable in cash at the end of the plan year on all
stock equivalent units credited under the plan.
33,858.48 stock equivalent units, in the aggregate, were granted to eight of the
Company's non-employee directors on September 26, 1996, based on a price of
$44.625 per share.
Under the Company's Long-Term Incentive Plan (the "Long-Term Incentive Plan"),
senior executives of the Company are eligible for awards based on the
achievement of long-term performance goals. For each performance goal, an award
schedule of performance contingent units is established. The actual award
payable at the conclusion of a three year performance period is based on the
level of attainment of the performance goals established for such period. Any
payments under the plan are made in cash or in shares of Company common stock
(which may be restricted shares) as determined by the committee administering
the plan. Dividend equivalent units may be paid in conjunction with award
payouts made under the plan equal to the amount of cash dividends that would
have been paid if the award had been made in Company common stock at the
committee's discretion.
22
<PAGE>
On January 27, 1997, a total of 7,586 shares of restricted stock were awarded to
senior executives under the plan. The fair market value of a share of the
Company's common stock on that date was $45.8125.
To the extent that such grants under the Directors Plan and the Long-Term
Incentive Plan constitute sales of equity securities, the Company issued such
stock equivalent units, performance contingent units and restricted stock in
reliance on the exemption provided by Section 4(2) of the Securities Act of
1933, as amended, taking into account the nature of the Directors Plan and
Long-Term Incentive Plan, the sophistication of the non-employee directors and
senior executives and their access to the kind of information that a
registration statement would provide.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
(a) The Annual Meeting of Stockholders was held on April 24, 1997
and a Special Meeting of Stockholders was held on June 23,
1997.
(b) Three directors were nominated for election at the Annual
Meeting. Proxies for such meeting were solicited by
Registrant's management pursuant to Regulation 14A under the
Securities Exchange Act of 1934; there was no solicitation in
opposition to management's nominees as listed in the proxy
statement; and all of such nominees were elected for a
three-year term.
(c) The following matters were voted upon at the Annual Meeting
with the voting results indicated.
1. Election of Directors
---------------------
Nominee Votes For Votes Withheld
------- --------- --------------
William B. Ellis 16,371,482 797,462
E. James Ferland 16,817,823 351,121
Wilson Wilde 16,602,165 566,779
2. Proposal to amend and restate 1995 Stock Option Plan
----------------------------------------------------
Votes for Against Abstain
--------- ------- -------
15,302,655 1,536,186 330,103
3. Appointment of Coopers & Lybrand as Independent
------------------------------------------------
Public Accountants
------------------
Votes for Against Abstain
--------- ------- -------
16,863,270 115,596 191,356
23
<PAGE>
The following matter was voted upon at the June 27, 1997
Special Meeting with the voting results indicated.
Proposal to approve Agreement and Plan of Share
-----------------------------------------------------
Exchange in connection with the formation of a
-----------------------------------------------------
revised holding company structure.
---------------------------------
Votes for Against Abstain
--------- ------- -------
15,276,070 191,093 161,267
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits -- Exhibit 4. Documents related to HSB Capital I:
Amended and Restated Trust Agreement dated as of
July 15, 1997 among HSB Group, Inc., The First
National Bank of Chicago, First Chicago Delaware
Inc. and the Administrative Trustees.
Junior Subordinated Indenture dated as of July 15,
1997 between HSB Group, Inc. and The First National
Bank of Chicago.
Guarantee Agreement between HSB Group, Inc. and The
First National Bank of Chicago dated as of July 15,
1997.
First Supplemental Indenture between HSB Group, Inc.
and The First National Bank of Chicago dated as of
July 15, 1997.
Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8-K -
Form 8-K/A filed on May 12, 1997 amending Form 8-K
dated January 30, 1996.
Form 8-K filed June 23, 1997 to announce shareholder
approval of a revised holding company structure.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HSB GROUP, INC.
Date: August 13, 1997 By: /s/ Saul L. Basch
Saul L. Basch
Senior Vice President, Treasurer
and Chief Financial Officer
Date: August 13, 1997 By: /s/ Robert C. Walker
Robert C. Walker
Senior Vice President and
General Counsel
25
<PAGE>
AMENDED AND RESTATED 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 HEREIN
---------------------------
Dated as of July 15, 1997
---------------------------
HSB CAPITAL I
<PAGE>
HSB CAPITAL I
Certain Sections of this Trust Agreement relating
to Sections 310 through 318 of the Trust Indenture
Act of 1939:
Trust Indenture Act Section Trust Agreement Section
((ss.)) 310 (a)(1)............................................ 8.7
(a)(2)............................................ 8.7
(a)(3)............................................ 8.9
(a)(4)............................................ 2.7(a)(ii)
(b)............................................... 8.8
((ss.)) 311 (a)............................................... 8.13
(b)............................................... 8.13
((ss.)) 312 (a)............................................... 5.8
(b)............................................... 5.8
(c)............................................... 5.8
((ss.)) 313 (a)............................................... 8.15
(a)(4)............................................ 8.15
(b)............................................... 8.15
(c)............................................... 10.8
(d)............................................... 15
((ss.)) 314 (a)............................................... 8.16
(b)............................................... Not Applicable
(c)(1)............................................ 8.17
(c)(2)............................................ 8.17
(c)(3)............................................ Not Applicable
(d)............................................... Not Applicable
(e)............................................... 1.1, 8.17
((ss.)) 315 (a)............................................... 8.1(a), 8.3(a)
(b)............................................... 8.2, 10.8
(c)............................................... 8.1(a)
(d)............................................... 8.1, 8.3
(e)............................................... Not Applicable
((ss.)) 316 (a)............................................... Not Applicable
(a)(1)(A)......................................... Not Applicable
(a)(1)(B)......................................... Not Applicable
(a)(2)............................................ Not Applicable
(b)............................................... 5.15
(c)............................................... 6.7
((ss.)) 317 (a)(1)............................................ Not Applicable
(a)(2)............................................ Not Applicable
(b)............................................... 5.10
((ss.)) 318 (a)............................................... 10.10
- -----------------------
Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to
be a part of the Trust Agreement.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINED TERMS
SECTION 1.1. Definitions.................................................... 1
ARTICLE II
CONTINUATION OF THE ISSUER TRUST
SECTION 2.1. Name ......................................................... 12
SECTION 2.2. Office of the Delaware Trustee;
Principal Place of Business................................... 12
SECTION 2.3. Initial Contribution of Trust
Property; Organizational Expenses............................. 12
SECTION 2.4. Issuance of the Capital Securities............................ 13
SECTION 2.5. Issuance of the Common Securities;
Subscription and Purchase of Debentures....................... 13
SECTION 2.6. Continuation of Trust......................................... 13
SECTION 2.7. Authorization to Enter into
Certain Transactions.......................................... 14
SECTION 2.8. Title to Trust Property....................................... 17
ARTICLE III
PAYMENT ACCOUNT
SECTION 3.1. Payment Account............................................... 18
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 4.1. Distributions................................................. 18
SECTION 4.2. Redemption.................................................... 20
SECTION 4.3. Subordination of Common Securities............................ 22
SECTION 4.4. Payment Procedures............................................ 23
SECTION 4.5. Tax Returns and Reports....................................... 23
SECTION 4.6. Payment of Taxes, Duties, Etc. of the Issuer Trust............ 23
SECTION 4.7. Payments under Indenture or Pursuant to Direct Actions........ 24
i
<PAGE>
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership............................................. 24
SECTION 5.2. The Trust Securities Certificates............................. 24
SECTION 5.3. Execution and Delivery of Trust
Securities Certificates....................................... 26
SECTION 5.4. Global Securities; Non-Global Securities;
Common Securities Certificate................................. 26
SECTION 5.5. Registration, Transfer and Exchange Generally;
Certain Transfers and Exchanges; Securities Act Legends....... 27
SECTION 5.6. Mutilated, Destroyed, Lost or Stolen Trust
Securities Certificates....................................... 33
SECTION 5.7. Persons Deemed Holders........................................ 33
SECTION 5.8. Access to List of Holders' Names and Addresses................ 33
SECTION 5.9. Maintenance of Office or Agency............................... 34
SECTION 5.10. Appointment of Paying Agents.................................. 34
SECTION 5.11. Ownership of Common Securities by Depositor................... 34
SECTION 5.12. Notices to Clearing Agency.................................... 35
SECTION 5.13. Definitive Capital Securities Certificates.................... 35
SECTION 5.14. Restrictive Legends........................................... 35
SECTION 5.15. Rights of Holders; Waivers of Past Defaults................... 37
ARTICLE VI
ACTS OF HOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Voting Rights.................................. 39
SECTION 6.2. Notice of Meetings............................................ 40
SECTION 6.3. Meetings of Holders of the Capital Securities................. 40
SECTION 6.4. Voting Rights................................................. 40
SECTION 6.5. Proxies, etc.................................................. 41
SECTION 6.6. Holder Action by Written Consent.............................. 41
SECTION 6.7. Record Date for Voting and Other Purposes..................... 41
SECTION 6.8. Acts of Holders............................................... 41
SECTION 6.9. Inspection of Records......................................... 42
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties of the Property Trustee and the
Delaware Trustee.............................................. 43
SECTION 7.2. Representations and Warranties of Depositor................... 44
ii
<PAGE>
ARTICLE VIII
THE ISSUER TRUSTEES; PAYING AGENTS
SECTION 8.1. Certain Duties and Responsibilities........................... 44
SECTION 8.2. Certain Notices............................................... 47
SECTION 8.3. Certain Rights of Property Trustee............................ 47
SECTION 8.4. Not Responsible for Recitals or Issuance of Securities........ 49
SECTION 8.5. May Hold Securities........................................... 50
SECTION 8.6. Compensation; Indemnity; Fees................................. 50
SECTION 8.7. Corporate Property Trustee Required; Eligibility
of Issuer Trustees............................................ 51
SECTION 8.8. Conflicting Interests......................................... 52
SECTION 8.9. Co-Trustees and Separate Trustee.............................. 52
SECTION 8.10. Resignation and Removal; Appointment of Successor............. 54
SECTION 8.11. Acceptance of Appointment by Successor........................ 55
SECTION 8.12. Merger, Conversion, Consolidation or Succession
to Business................................................... 56
SECTION 8.13. Preferential Collection of Claims Against
Depositor or Issuer Trust..................................... 56
SECTION 8.14. Property Trustee May File Proofs of Claim..................... 56
SECTION 8.15. Reports by Property Trustee................................... 57
SECTION 8.16. Reports to the Property Trustee............................... 58
SECTION 8.17. Evidence of Compliance with Conditions Precedent.............. 58
SECTION 8.18. Number of Issuer Trustees..................................... 58
SECTION 8.19. Delegation of Power........................................... 58
SECTION 8.20. Appointment of Administrative Trustees........................ 59
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
SECTION 9.1. Dissolution Upon Expiration Date.............................. 59
SECTION 9.2. Early Dissolution............................................. 60
SECTION 9.3. Termination................................................... 60
SECTION 9.4. Liquidation................................................... 60
SECTION 9.5. Mergers, Consolidations, Amalgamations or Replacements
of Issuer Trust............................................... 62
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Holders............................... 63
SECTION 10.2. Amendment..................................................... 63
SECTION 10.3. Separability.................................................. 64
SECTION 10.4. Governing Law................................................. 64
SECTION 10.5. Payments Due on Non-Business Day.............................. 65
iii
<PAGE>
SECTION 10.6. Successors.................................................... 65
SECTION 10.7. Headings...................................................... 65
SECTION 10.8. Reports, Notices and Demands.................................. 65
SECTION 10.9. Agreement Not to Petition..................................... 66
SECTION 10.10. Trust Indenture Act; Conflict with Trust
Indenture Act................................................. 67
SECTION 10.11. Acceptance of Terms of Trust Agreement,
Guarantee Agreement and Indenture............................. 67
SECTION 10.12. Registration Rights........................................... 67
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depository Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Capital Securities Certificate
Exhibit E Form of Regulation S Certificate
Exhibit F Form of Restricted Securities Certificate
Exhibit G Form of Unrestricted Securities Certificate
iv
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT, dated as of July 15, 1997, among
(i) HSB Group, Inc., a Delaware corporation (including any successors or
assigns, the "Depositor"), (ii) The First National Bank of Chicago, a national
banking association as property trustee (in such capacity, the "Property
Trustee" and, in its separate corporate capacity and not in its capacity as
Property Trustee, the "Bank"), (iii) First Chicago Delaware Inc., a Delaware
corporation, as Delaware trustee (in such capacity, the "Delaware Trustee"), and
(iv) Saul L. Basch, an individual, R. Kevin Price, an individual, and Robert C.
Walker, an individual, each of whose address is c/o HSB Group, Inc., One State
Street, Hartford, Connecticut 06102 (each an "Administrative Trustee"), (the
Property Trustee, the Delaware Trustee and the Administrative Trustees being
referred to collectively as the "Issuer Trustees").
WITNESSETH
WHEREAS, the Depositor, the Delaware Trustee and the Administrative
Trustees have heretofore duly declared and created a business trust pursuant to
the Delaware Business Trust Act by entering into the Trust Agreement, dated as
of July 10, 1997 (the "Original Trust Agreement"), and by the execution of the
Certificate of Trust by the Delaware Trustee and the Administrative Trustees and
the filing of such Certificate of Trust with the Secretary of State of the State
of Delaware on July 10, 1997, attached as Exhibit A; and
WHEREAS, the Depositor and the Issuer Trustees desire to amend and
restate the Original Trust Agreement in its entirety as set forth herein to
provide for, among other things, (i) the issuance of the Common Securities by
the Issuer Trust to the Depositor, (ii) the issuance and sale of the Capital
Securities by the Issuer Trust pursuant to the Purchase Agreement, (iii) the
acquisition by the Issuer Trust from the Depositor of all of the right, title
and interest in the Debentures, and (iv) the appointment of the Property Trustee
and certain additional Administrative Trustees;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, each party, for the benefit of the
other parties and for the benefit of the Holders, hereby amends and restates the
Original Trust Agreement in its entirety and agrees as follows:
ARTICLE I
DEFINED TERMS
SECTION 1.1. Definitions.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
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(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", a "Section" or an "Exhibit" refers to an Article, a Section or an
Exhibit, as the case may be, of or to this Trust Agreement; and
(f) The words "hereby", "herein", "hereof" and "hereunder" and other
words of similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.8.
"Additional Distributions" means, with respect to Trust Securities of
a given Liquidation Amount and/or a given period, the amount of Additional
Interest (as defined in the Indenture) paid by the Depositor on a Like Amount of
Debentures for such period.
"Additional Sums" has the meaning specified in Section 10.6 of the
Indenture.
"Administrative Trustee" means each Person appointed in accordance
with Section 8.20 solely in such Person's capacity as Administrative Trustee of
the Issuer Trust heretofore created and continued hereunder and not in such
Person's individual capacity, or any successor Administrative Trustee appointed
as herein provided.
"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.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Book-Entry Capital Security, the rules and procedures of
the Clearing Agency for such Book- Entry Capital Security, in each case to the
extent applicable to such transaction and as in effect from time to time. 2
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"Bank" has the meaning specified in the preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in
the premises judging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjudication or
composition of or in respect of such Person under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law, or appointing
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of such Person or of any substantial part of its property or ordering
the winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive days; or
(b) the institution by such Person of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or similar official) of
such Person or of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due and its willingness
to be adjudicated a bankrupt, or the taking of corporate action by such Person
in furtherance of any such action.
"Bankruptcy Laws" has the meaning specified in Section 10.9.
"Board of Directors" means the board of directors of the Depositor or
the Executive Committee of the board of directors of the Depositor (or any other
committee of the board of directors of the Depositor performing similar
functions) or a committee designated by the board of directors of the Depositor
(or any such committee), comprised of two or more members of the board of
directors of the Depositor or officers of the Depositor, or both.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a
day on which banking institutions in The City of New York are authorized by law
or executive order to remain closed, or (c) a day on which the Property
Trustee's corporate trust office or the corporate trust office of the Debenture
Trustee is closed for business.
"Capital Securities Certificate" means a certificate evidencing
ownership of Capital Securities, substantially in the form attached as Exhibit
D.
"Capital Securities Guarantee Agreement" means the Capital Securities
Guarantee Agreement executed and delivered by the Depositor and The First
National Bank of Chicago, as guarantee trustee, contemporaneously with the
execution and delivery of this Trust
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Agreement, for the benefit of the Holders of the Capital Securities, as amended
from time to time.
"Capital Security" means any Initial Capital Security, together with,
if issued pursuant to the Registration Rights Agreement, any Exchange Capital
Securities.
"CEDEL" means Centrale de Livraison de Valeurs Mobilieres, S.A., or
its successor.
"Certificate Depository Agreement" means the agreement among the
Issuer Trust, the Depositor and DTC, as the initial Clearing Agency, dated as of
the Closing Date, substantially in the form attached as Exhibit B, as the same
may be amended and supplemented from time to time.
"Certificated Capital Securities" has the meaning specified in Section
5.2.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. DTC will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means the Time of Delivery, which date is also the date
of execution and delivery of this Trust Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, or, if at any time after the execution of this
instrument such Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing such
duties at such time.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit C.
"Common Security" means an undivided beneficial interest in the assets
of the Issuer Trust, having a Liquidation Amount of $1,000 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution to the extent provided herein.
"Corporate Trust Office" means (i) when used with respect to the
Property Trustee, the principal office of the Property Trustee located in
Chicago, Illinois, and (ii) when used with
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respect to the Debenture Trustee, the principal office of the Debenture Trustee
located in Chicago, Illinois.
"Debenture Event of Default" means any "Event of Default" specified in
Section 5.1 of the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to
be redeemed under the Indenture, the date fixed for redemption of such
Debentures under the Indenture.
"Debenture Trustee" means the Person identified as the "Trustee" in
the Indenture, solely in its capacity as Trustee pursuant to the Indenture and
not in its individual capacity, or its successor in interest in such capacity,
or any successor Trustee appointed as provided in the Indenture.
"Debentures" means the Depositor's Global Floating Rate Junior
Subordinated Deferrable Interest Debentures, Series A, issued pursuant to the
Indenture.
"Definitive Capital Securities Certificates" means either or both (as
the context requires) of (i) Capital Securities Certificates issued as
Book-Entry Capital Securities Certificates as provided in Section 5.2 or 5.5,
and (ii) Capital Securities Certificates issued in certificated, fully
registered form as provided in Section 5.2, 5.5 or 5.6.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss. 3801 et seq., or any successor statute thereto,
in each case as amended from time to time.
"Delaware Trustee" means the Person identified as the "Delaware
Trustee" in the preamble to this Trust Agreement, solely in its capacity as
Delaware Trustee of the trust heretofore created and continued hereunder and not
in its individual capacity, or its successor in interest in such capacity, or
any successor Delaware trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Amount" means, with respect to any Trust Security and
any Distribution period, the amount of Distribution payable in respect of such
Distribution period, which amount shall be calculated by applying the
Distribution Rate to the Liquidation Amount of each Trust Security Outstanding
at the commencement of the Distribution period, by multiplying each such amount
by the actual number of days in the Distribution period concerned (which actual
number of days shall include the first day but exclude the last day of such
Distribution Period) divided by 360 and rounding the resultant figure upwards to
the nearest cent (half a cent being rounded upwards). The determination of the
Distribution Rate and the Distribution Amount by or on behalf of the Issuer
Trust shall (in the absence of manifest error) be final and binding on all
parties.
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"Distribution Date" has the meaning specified in Section 4.1(a).
"Distribution Period" means the period for payment on the Trust
Securities set forth in Section 4.1(a).
"Distribution Rate" means, with respect to any Distribution period, a
rate per annum equal to the Interest Rate (as defined in and determined in
accordance with the Supplemental Indenture) with respect to the Interest Period
under (and as defined in the Supplemental Indenture) that begins on the same
date as such Distribution Period begins and ends on the same date as such
Distribution Period ends.
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 4.1.
"DTC" means The Depository Trust Company.
"Early Termination Event" has the meaning specified in Section 9.2.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
Office, or its successor as operator of the Euroclear System.
"Event of Default" means any one of the following events (whatever the
reason for such event 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):
(a) the occurrence of a Debenture Event of Default; or
(b) 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, as such term is defined in
the Indenture); or
(c) default by the Issuer Trust in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Issuer Trustees in this
Trust Agreement (other than those specified in clause (b) or (c)
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"
hereunder; or
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(e) the occurrence of a Bankruptcy Event with respect to the
Property Trustee if a successor Property Trustee has not been
appointed within 90 days thereof.
"Exchange Capital Security" means an undivided beneficial preferred
interest in the assets of the Trust, having a Liquidation Amount of $1,000 and
having the rights provided therefor in this Trust Agreement, including the right
to receive Distributions and a Liquidation Distribution, as provided herein, and
to be issued hereunder in connection with the offer to exchange the Initial
Capital Securities for a new series of capital securities of the Trust as
contemplated by the Registration Rights Agreement.
"Exchange Offer" has the meaning specified in the Registration Rights
Agreement.
"Expiration Date" has the meaning specified in Section 9.1.
"Global Capital Security" means the Capital Securities Certificates
representing Global Capital Securities.
"Global Certificate" means a Capital Security that is registered in
the Securities Register in the name of a nominee thereof.
"Holder" means a Person in whose name a Trust Security or Trust
Securities are registered in the Securities Register; any such Person shall be a
beneficial owner within the meaning of the Delaware Business Trust Act.
"Indenture" means the Junior Subordinated Indenture, dated as of July
15, 1997, between the Depositor and the Debenture Trustee, as trustee, as
amended or supplemented from time to time.
"Initial Capital Security" means an undivided beneficial interest in
the assets of the Issuer Trust, having a Liquidation Amount of $1,000 and having
the rights provided therefor in this Trust Agreement, including the right to
receive Distributions and a Liquidation Distribution to the extent provided
herein, and designated as Global Floating Rate Capital Securities, Series A.
"Institutional Accredited Investor" means an institutional accredited
investor within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act.
"Issuer Trust" means the Delaware business trust known as "HSB Capital
I", which was created on July 10, 1997, under the Delaware Business Trust Act
pursuant to the Original Trust Agreement and is continued pursuant to this Trust
Agreement.
"Issuer Trustees" means, collectively, the Property Trustee, the
Delaware Trustee and the Administrative Trustees.
7
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"Investment Company Act" means the Investment Company Act of 1940, or
any successor statute thereto, in each case as amended from time to time.
"Lead Manager" means Goldman, Sachs & Co.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"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.
"Liquidated Damages Distribution" means, with respect to the Trust
Securities of a given Liquidation Amount and/or a given period, the amount of
Liquidated Damages (as defined in the Indenture) paid by the Depositor on a Like
Amount of Debentures for such period in accordance with terms of the
Registration Rights Agreement.
"Liquidation Amount" means the stated amount of $1,000 per Trust
Security.
"Liquidation Date" means the date of the dissolution, winding-up or
termination of the Issuer Trust pursuant to Section 9.4.
"Liquidation Distribution" has the meaning specified in Section
9.4(d).
"Majority in Liquidation Amount of the Capital Securities" means,
except as provided by the Trust Indenture Act, Capital Securities representing
more than 50% of the aggregate Liquidation Amount of all then Outstanding
Capital Securities.
"Officers' Certificate" means a certificate signed by the Chief
Executive Officer, the President or one of the Senior Vice Presidents, and by
the Treasurer, an Assistant Treasurer, the Corporate Secretary or an Assistant
Secretary, of the Depositor, and delivered to the Issuer Trustees. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Trust 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;
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(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.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for or an employee of the Depositor or any Affiliate of the Depositor.
"Original Trust Agreement" has the meaning specified in the recitals
to this Trust Agreement.
"Outstanding", when used with respect to Trust Securities, means, as
of the date of determination, all Trust Securities theretofore executed and
delivered under this Trust Agreement, except:
(a) Trust Securities theretofore canceled by the Property Trustee
or delivered to the Property Trustee for cancellation;
(b) Trust Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property
Trustee or any Paying Agent; provided that, if such Trust Securities
are to be redeemed, notice of such redemption has been duly given
pursuant to this Trust Agreement; and
(c) Trust Securities that have been paid or in exchange for or in
lieu of which other Capital Securities have been executed and
delivered pursuant to Sections 5.4, 5.5, 5.6 and 5.11;
provided, however, that in determining whether the Holders of the requisite
Liquidation Amount of the Outstanding Capital Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Capital
Securities owned by the Depositor, any Issuer Trustee or any Affiliate of the
Depositor or any Issuer Trustee shall be disregarded and deemed not to be
Outstanding, except that (a) in determining whether any Issuer Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Capital Securities that such Issuer Trustee
knows to be so owned shall be so disregarded, and (b) the foregoing clause (a)
shall not apply at any time when all of the Outstanding Capital Securities are
owned by the Depositor, one or more of the Issuer Trustees and/or any such
Affiliate. Capital Securities so owned that have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Administrative
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Trustees the pledgee's right so to act with respect to such Capital Securities
and that the pledgee is not the Depositor or any Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of Book-Entry
Capital Securities as reflected in the records of the Clearing Agency or, if a
Clearing Agency Participant is not the Owner, then as reflected in the records
of a Person maintaining an account with such Clearing Agency (directly or
indirectly, in accordance with the rules of such Clearing Agency).
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.11 and shall initially be the Property Trustee.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its trust
department for the benefit of the Holders in which all amounts paid in respect
of the Debentures will be held and from which the Property Trustee, through the
Paying Agent, shall make payments to the Holders in accordance with Sections 4.1
and 4.2.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, company,
limited liability company, trust, unincorporated association, or government or
any agency or political subdivision thereof, or any other entity of whatever
nature.
"Plan" means an employee benefit or other plan subject to Title I of
the Employee Retirement Income Security Act of 1974, as amended, or Section 4975
of the Code.
"Plan Asset Entity" means any Person whose underlying assets include
"plan assets" by reason of any Plan's investment in such Person.
"Property Trustee" means the Person identified as the "Property
Trustee" in the preamble to this Trust Agreement, solely in its capacity as
Property Trustee of the trust heretofore created and continued hereunder and not
in its individual capacity, or its successor in interest in such capacity, or
any successor property trustee appointed as herein provided.
"PTCE" means a U.S. Department of Labor Prohibited Transaction Class
Exemption.
"Purchase Agreement" means the Purchase Agreement, dated as of July
10, 1997, among the Issuer Trust, the Depositor and the Purchasers, as the same
may be amended from time to time.
"Purchasers" has the meaning specified in the Purchase Agreement and
Schedule I thereto.
"QIB" means a "qualified institutional buyer", as such term is defined
under Rule 144A.
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"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the stated maturity
of the Debentures shall be a Redemption Date for a Like Amount of Trust
Securities.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium, if
any, paid by the Depositor upon the concurrent redemption of a Like Amount of
Debentures.
"Registered Exchange Offer" has the meaning specified in the
Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of July 15, 1997 among the Initial Purchasers, the Depositor
and the Trust, as such agreement may be amended, modified or supplemented from
time to time in accordance with the terms thereof.
"Regulation D" means Regulation D under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Regulation S Capital Security" means all Capital Securities required
pursuant to Section 5.4(c) to bear a Regulation S Legend. Such term includes the
Regulation S Global Certificate.
"Regulation S Certificate" has the meaning specified in Section
5.5(b).
"Regulation S Global Certificate" has the meaning specified in Section
5.2.
"Relevant Trustee" has the meaning specified in Section 8.10.
"Restricted Capital Securities" means all Capital Securities the
Capital Securities Certificate, including Book-Entry Capital Securities
Certificate, for which is required pursuant to Section 5.6(c) to bear a
Restricted Capital Securities Legend.
"Restricted Capital Securities Legend" means a legend substantially in
the form of the legend required in the form of Capital Securities Certificate
set forth in Exhibit D to be placed upon a Restricted Securities Certificate.
"Restricted Certificated Securities" has the meaning specified in
Section 5.2.
"Restricted Global Certificate" has the meaning specified in Section
5.2.
"Restricted Period" means the 40-day period following the last
original issue date of the Capital Securities (including any Capital Securities
issued to cover over-allotments).
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"Restricted Securities Certificate" has the meaning specified in
Section 5.5(b).
"Restricted Securities Legend" has the meaning specified in Section
5.14(a).
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"Rule 144A Securities" has the meaning specified in Section 5.2.
"Securities Act" means the Securities Act of 1933, and any successor
statute thereto, in each case as amended from time to time.
"Securities Act Legend" means a Restricted Securities Legend or a
Regulation S Legend.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.5.
"Shelf Registration Statement" has the meaning assigned thereto in the
Registration Rights Agreement.
"Successor Capital Securities" of any particular Capital Securities
Certificate means every Capital Securities Certificate issued after, and
evidencing all or a portion of the same beneficial interest in the Issuer Trust
as that evidenced by, such particular Capital Securities Certificate; and, for
the purposes of this definition, any Capital Securities Certificate executed and
delivered under Section 5.7 in exchange for or in lieu of a mutilated,
destroyed, lost or stolen Capital Securities Certificate shall be deemed to
evidence the same beneficial interest in the Issuer Trust as the mutilated,
destroyed, lost or stolen Capital Securities Certificate.
"Time of Delivery" has the meaning specified in the Purchase
Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including (i) all Exhibits, and (ii) for all
purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Trust Agreement and any such modification, amendment or
supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument 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.
"Trust Property" means (a) the Debentures, (b) any cash on deposit in,
or owing to, the Payment Account, and (c) all proceeds and rights in respect of
the foregoing and any other
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property and assets for the time being held or deemed to be held by the Property
Trustee pursuant to the trusts of this Trust Agreement.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Capital Securities Certificates.
"Trust Security" means any one of the Common Securities or the Capital
Securities.
"Unrestricted Securities Certificate" has the meaning specified in
Section 5.5(c).
ARTICLE II
CONTINUATION OF THE ISSUER TRUST
SECTION 2.1. Name.
The trust continued hereby shall be known as "HSB Capital I", as such
name may be modified from time to time by the Administrative Trustees following
written notice to the Holders of Trust Securities and the other Issuer Trustees,
in which name the Issuer Trustees (other than the Delaware Trustee) may conduct
the business of the Issuer Trust, make and execute contracts and other
instruments on behalf of the Issuer Trust and sue and be sued.
SECTION 2.2. Office of the Delaware Trustee; Principal Place of
Business.
The address of the Delaware Trustee in the State of Delaware is 300
King Street, Wilmington, DE 19801, or such other address in the State of
Delaware as the Delaware Trustee may designate by written notice to the Holders,
the Depositor, the Property Trustee and the Administrative Trustees. The
principal executive office of the Issuer Trust is c/o HSB Group, Inc., One State
Street, Hartford, Connecticut 06102, Attention: Corporate Secretary.
SECTION 2.3. Initial Contribution of Trust Property; Organizational
Expenses.
The Issuer Trustees acknowledge receipt in trust from the Depositor in
connection with the Original Trust Agreement of the sum of $10, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Issuer Trust as they arise or shall, upon request of any Issuer
Trustee, promptly reimburse such Issuer Trustee for any such expenses paid by
such Issuer Trustee. The Depositor shall make no claim upon the Trust Property
for the payment of such expenses.
SECTION 2.4. Issuance of the Capital Securities.
As of July 10, 1997, the Depositor, on behalf of the Trust and
pursuant to the Original Trust Agreement, executed and delivered the Purchase
Agreement. On the Closing Date, an
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Administrative Trustee, on behalf of the Trust, shall execute in accordance with
Sections 5.2 and 5.3, cause to be authenticated, and deliver to the Capital
Securities Certificates in respect of the Initial Capital Securities, registered
in the name of the nominee of the initial Depository, or in the name of such
Persons as such Initial Purchasers shall have designated, in an aggregate amount
of 110,000 Capital Securities having an aggregate Liquidation Amount of
$110,000,000, against receipt of an aggregate purchase price plus accumulated
distributions from July 15, 1997 on such Capital Securities of $110,000,000,
which amount such Administrative Trustee shall promptly deliver to the Property
Trustee.
SECTION 2.5. Issuance of the Common Securities; Subscription and
Purchase of Debentures.
Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative Trustee, on behalf of the Issuer Trust, shall
execute in accordance with Section 5.2 and 5.3 and the Property Trustee shall
deliver to the Depositor Common Securities Certificates, registered in the name
of the Depositor, evidencing an aggregate of 3,403 Common Securities having an
aggregate Liquidation Amount of $3,403,000 against receipt of the aggregate
purchase price of such Common Securities of $3,403,000 (plus accrued
Distributions, if any), to the Property Trustee. Contemporaneously therewith,
the Depositor shall issue and sell to the Issuer Trust, and the Issuer Trust
shall purchase from the Depositor, Debentures having an aggregate principal
amount equal to $113,403,000 registered in the name of the Property Trustee on
behalf of the Issuer Trust and, in satisfaction of the purchase price for such
Debentures, the Property Trustee, on behalf of the Issuer Trust, shall deliver
to the Depositor the sum of $113,403,000 (plus accrued Distributions, if any)
(being the sum of the amounts delivered to the Property Trustee pursuant to (i)
the second sentence of Section 2.4, and (ii) the first sentence of this Section
2.5).
SECTION 2.6. Continuation of Trust.
The exclusive purposes and functions of the Issuer Trust are (a) to
issue and sell Trust Securities and use the proceeds from such sale to acquire
the Debentures, (b) to make Distributions to holders, and (c) to engage in only
those activities necessary or incidental thereto. The Depositor hereby appoints
the Issuer Trustees as trustees of the Issuer Trust, to have all the rights,
powers and duties to the extent set forth herein, and the respective Issuer
Trustees hereby accept such appointment. The Property Trustee hereby declares
that it will hold the Trust Property in trust upon and subject to the conditions
set forth herein for the benefit of the Issuer Trust and the Holders. The
Administrative Trustees shall have all rights, powers and duties set forth
herein and in accordance with applicable law. The Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities, of the Issuer Trustees set forth herein, except as
required by the Delaware Business Trust Act. The Delaware Trustee shall be one
of the trustees of the Issuer Trust for the sole and limited purpose of
fulfilling the requirements of Section 3807 of the Delaware Business Trust Act
and for taking such actions as are required to be taken by a Delaware trustee
under the Delaware Business Trust Act.
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SECTION 2.7. Authorization to Enter into Certain Transactions.
(a) The Issuer Trustees shall conduct the affairs of the Issuer Trust
in accordance with the terms of this Trust Agreement. Subject to the limitations
set forth in paragraph (b) of this Section 2.7, and in accordance with the
following provisions (i) and (ii), the Property Trustee and the Administrative
Trustees shall have the authority to enter into all transactions and agreements
determined by the Property Trustee and Administrative Trustees to be appropriate
in exercising the authority, express or implied, otherwise granted to such
Issuer Trustees, as the case may be, under this Trust Agreement, and to perform
all acts in furtherance thereof, including the following:
(i) As among the Issuer Trustees, each Administrative Trustee,
acting individually or jointly, shall have the power and authority to
act on behalf of the Issuer Trust with respect to the following
matters:
(A) the issuance and sale of the Trust Securities;
(B) causing the Issuer Trust to enter into, and to execute,
deliver and perform on behalf of the Issuer Trust, the
Certificate Depository Agreement and such other agreements as may
be necessary or desirable in connection with the purposes and
function of the Issuer Trust;
(C) causing the Trust to enter into, and to execute, deliver
and perform on behalf of the Trust, the Registration Rights
Agreement and assisting in the registration of the Capital
Securities, as contemplated by the Registration Rights Agreement,
under the Securities Act and under state securities or blue sky
laws, and the qualifications of this Trust Agreement as a trust
indenture under the Trust Indenture Act;
(D) assisting in compliance with the duties and obligations
of the Issuer Trust under and the Securities Act and under
applicable state securities or blue sky laws (including by means
of registration of the Capital Securities thereunder from time to
time) and the Trust Indenture Act;
(E) assisting in the sending of notices (other than notices
of default) and other information regarding the Trust Securities
and the Debentures to the Holders in accordance with this Trust
Agreement;
(F) consenting to the appointment of a Paying Agent,
authenticating agent and Securities Registrar in accordance with
this Trust Agreement (which consent shall not be unreasonably
withheld);
(G) executing the Trust Securities on behalf of the Issuer
Trust in accordance with this Trust Agreement;
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(H) executing and delivering closing certificates, if any,
pursuant to the Purchase Agreement and application for a taxpayer
identification number for the Issuer Trust;
(I) unless otherwise determined by the Property Trustee or
Holders of at least a Majority in Liquidation Amount of the
Capital Securities or as otherwise required by the Delaware
Business Trust Act or the Trust Indenture Act, executing on
behalf of the Issuer Trust (either acting alone or together with
any other Administrative Trustee) any documents that the
Administrative Trustees have the power to execute pursuant to
this Trust Agreement; and
(J) taking any action incidental to the foregoing as the
Issuer Trustees may from time to time determine is necessary or
advisable to give effect to the terms of this Trust Agreement.
(ii) The Property Trustee shall have the power, duty and
authority to act on behalf of the Issuer Trust with respect to the
following matters:
(A) establishing the Payment Account;
(B) receiving the Debentures;
(C) collecting interest, principal and any other payments
made in respect of the Debentures and the holding of such amounts
in the Payment Account;
(D) distributing through any Paying Agent of amounts
distributable to the Holders in respect of the Trust Securities;
(E) exercising all of the rights, powers and privileges of a
holder of the Debentures;
(F) sending notices of default and other information
regarding the Trust Securities and the Debentures to the Holders
in accordance with this Trust Agreement;
(G) distributing the Trust Property in accordance with the
terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, winding
up the affairs of and liquidating the Issuer Trust and preparing,
executing and filing the certificate of cancellation with the
Secretary of State of the State of Delaware;
(I) after an Event of Default (other than under paragraph
(b), (c), (d) or (e) of the definition of such term if such Event
of Default is by or with respect
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to the Property Trustee) taking of any action incidental to the
foregoing as the Property Trustee may from time to time determine
is necessary or advisable to give effect to the terms of this
Trust Agreement and to protect and conserve the Trust Property
for the benefit of the Holders (without consideration of the
effect of any such action on any particular Holder);
(b) So long as this Trust Agreement remains in effect, the Issuer
Trust (or the Issuer Trustees acting on behalf of the Issuer Trust) shall not
undertake any business, activities or transaction except as expressly provided
herein or contemplated hereby. In particular, the Issuer Trustees, acting in
their capacity as such, shall not (i) acquire any investments or engage in any
activities not authorized by this Trust Agreement, (ii) sell, assign, transfer,
exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust
Property or interests therein, including to Holders, except as expressly
provided herein, (iii) take any action that would reasonably be expected to
cause the Issuer Trust to become taxable as a corporation or classified as other
than a grantor trust for United States Federal income tax purposes, (iv) incur
any indebtedness for borrowed money or issue any other debt, or (v) take or
consent to any action that would result in the placement of a Lien on any of the
Trust Property. The Administrative Trustees shall defend all claims and demands
of all Persons at any time claiming any Lien on any of the Trust Property
adverse to the interest of the Issuer Trust or the Holders in their capacity as
Holders.
(c) In connection with the issue and sale of the Capital Securities,
the Depositor shall have the right and responsibility to assist the Issuer Trust
with respect to, or effect on behalf of the Issuer Trust, the following (and any
actions taken by the Depositor in furtherance of the following prior to the date
of this Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation by the Issuer Trust of an Offering Circular
in relation to the Capital Securities, including any amendments
thereto and the taking of any action necessary or desirable to sell
the Capital Securities in a transaction or a series of transactions
exempt from the registration requirements of the Securities Act;
(ii) the preparation and filing by the Trust with the Commission
and the execution on behalf of the Trust of a registration statement
on the appropriate form in relation to the Capital Securities, as
contemplated by the Registration Rights Agreement, including any
amendments thereto;
(iii) the determination of the States, or other jurisdictions, if
any, in which to take appropriate action to qualify or register for
sale all or part of the Capital Securities and the determination of
any and all such acts, other than actions that must be taken by or on
behalf of the Issuer Trust, and the advice to the Issuer Trustees of
actions they must take on behalf of the Issuer Trust, and the
preparation for execution and filing of any documents to be executed
and filed by the Issuer Trust or on behalf of the Issuer Trust, as the
Depositor deems necessary or advisable in order to comply with the
applicable laws of any such States in connection with the sale of the
Capital Securities;
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(iv) the negotiation of the terms of, and the execution and
delivery of, the Purchase Agreement; and
(v) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct the affairs of
the Issuer Trust and to operate the Issuer Trust so that the Issuer Trust will
not be deemed to be an "investment company" required to be registered under the
Investment Company Act, and will not be taxable as a corporation or classified
as other than a grantor trust for United States Federal income tax purposes and
so that the Debentures will be treated as indebtedness of the Depositor for
United States Federal income tax purposes. In this connection, each
Administrative Trustee and the Holder of the Common Securities are authorized to
take any action, not inconsistent with applicable law, the Certificate of Trust
or this Trust Agreement, that such Administrative Trustee or Holder of the
Common Securities determines in its discretion to be necessary or desirable for
such purposes, as long as such action does not adversely affect in any material
respect the interests of the Holders of the Outstanding Capital Securities. In
no event shall the Issuer Trustees be liable to the Issuer Trust or the Holders
for any failure to comply with this section that results from a change in law or
regulation or in the interpretation thereof.
SECTION 2.8. Assets of Trust.
The assets of the Issuer Trust shall consist of the Trust Property.
SECTION 2.9. Title to Trust Property.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee in trust for the benefit of the Issuer Trust and the
Holders in accordance with this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION 3.1. Payment Account.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and its agents shall have
exclusive control and sole right of withdrawal with respect to the Payment
Account for the purpose of making deposits in and withdrawals from the Payment
Account in accordance with this Trust Agreement. All monies and other property
deposited or held from time to time in the Payment Account shall be held by the
Property Trustee in the Payment Account for the exclusive benefit of the Holders
and for
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distribution as herein provided, including (and subject to) any priority of
payments provided for herein.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest on, and any
other payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 4.1. Distributions.
(a) The Trust Securities represent undivided beneficial interests in
the Trust Property, and distributions ("Distributions"), comprised of (i) the
Distribution Amount, (ii) any Additional Distributions, (iii) any Liquidated
Damages Distribution, (iv) any Additional Sums, and (v) and other payments in
respect of the Debentures, will be made on the Trust Securities on the dates
that payments of interest (including any Additional Interest and Liquidated
Damages, in each case, as defined in the Indenture) are made on the Debentures.
Accordingly:
(i) Distributions on the Trust Securities shall be cumulative,
and shall accumulate whether or not there are funds of the Issuer
Trust available for the payment of Distributions. Distributions shall
accumulate from July 15, 1997, and, except in the event (and to the
extent) that the Depositor exercises its right to defer the payment of
interest on the Debentures pursuant to the Indenture, shall be payable
quarterly in arrears on January 15, April 15, July 15 and October 15
of each year, commencing on October 15, 1997. If any date on which a
Distribution is otherwise payable on the Trust Securities is not a
Business Day, then the payment of such Distribution shall 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 next succeeding Business Day falls within the next calendar
year, such payment will be made on the immediately preceding Business
Day, in each case, with the same force and effect as if made on the
date on which such payment was originally payable (each date on which
distributions are payable in accordance with this Section 4.1(a), a
"Distribution Date").
(ii) The Trust Securities shall be entitled to Distributions
(before giving effect to any Additional Distributions, Liquidated
Damages Distributions and Additional Sums) payable at the variable
Distribution Rate, as in effect from time to time, multiplied by the
Liquidation Amount of the Trust Securities. The amount of
Distributions and Additional Distribution, if any, 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)
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divided by 360. The period beginning on, and including, the date of
original issuance, and ending on, but excluding, the first
Distribution Date, and each successive period beginning on, and
including, a Distribution Date, and ending on, but excluding, the next
succeeding Distribution Date is herein called a "Distribution
period"). Distributions to which holders of Trust Securities are
entitled will accumulate Additional Distributions at the Distribution
Rate, compounded quarterly from the relevant payment date for such
Distributions. The amount of Distributions payable for any period
shall also include any Additional Distributions, Liquidated Damages
Distributions, and Additional Sums, if any are so payable in respect
of such period.
(iii) Distributions on the Trust Securities shall be made by the
Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Issuer Trust has funds
then on hand and available in the Payment Account for the payment of
such Distributions.
(b) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities at the close of business on the
January 1, April 1, July 1 or October 1 (whether or not a Business Day) next
preceding the relevant Distribution Date.
(c) (i) The Issuer Trust shall cause the Distribution Rate, the
Distribution Amount in respect of each Trust Security and the Distribution Date
for each Distribution period to be notified to the Property Trustee, each Paying
Agent appointed by the Issuer Trust and any securities exchange or automated
quotation system on which the Trust Securities are listed or quoted and also to
be notified to the Holders of the Trust Securities in accordance with the
provisions of Section 10.8, in each case as soon as practicable after the
determination thereof but in no event later than the second Business Day after
the Determination Date in respect of such Distribution period.
(ii) All calculations of the Distribution Rate and the
Distribution Amount by or on behalf of the Issuer Trust shall (in the absence of
manifest error) be final and binding on all parties, and all certificates,
communications, opinions, determinations, calculations, quotations and decisions
given, expressed, made or obtained for the purposes of the provisions of this
Section 4.1(c) or the provisions of the Supplemental Indenture relating to the
calculation of the Interest Rate (as defined in the Supplemental Indenture),
whether by the Reference Banks (or any of them) or the Debenture Trustee (in
each case as defined in the Indenture), shall (in the absence of willful
default, bad faith or manifest error) be binding on the Issuer Trust, the
Depositor, the Debenture Trustee and all of the Holders of the Trust Securities,
and no liability shall (in the absence of willful default, bad faith or manifest
error) attach to the Debenture Trustee in connection with the exercise or
non-exercise by it of its powers, duties and discretions.
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SECTION 4.2. Redemption.
(a) On each Debenture Redemption Date and on the stated maturity of
the Debentures, the Issuer Trust will be required to redeem a Like Amount of
Trust Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Security Register. All notices of
redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price or if the Redemption Price cannot be
calculated prior to the time the notice is required to be sent, the
estimate of the Redemption Price provided pursuant to (and as defined
in) the Indenture together with a statement that it is an estimate and
that the actual Redemption Price will be calculated on the third
Business Day prior to the Redemption Date (and, if an estimate is
provided, that a further notice shall be sent of the actual Redemption
Price on the date on which such Redemption Price is calculated);
(iii) the CUSIP number or CUSIP numbers of the Capital Securities
affected;
(iv) if less than all the Outstanding Trust Securities are to be
redeemed, the identification and the aggregate Liquidation Amount of
the particular Trust Securities to be redeemed;
(v) that on the Redemption Date the Redemption Price will become
due and payable upon each such Trust Security to be redeemed and that
Distributions thereon will cease to accumulate on and after such date,
except as provided in Section 4.2(d) below; and
(vi) the place or places where the Trust Securities are to be
surrendered for the payment of the Redemption Price.
The Issuer Trust in issuing the Trust Securities may use "CUSIP" or
"private placement" numbers (if then generally in use), and, if so, the Property
Trustee shall indicate the "CUSIP" or "private placement" numbers of the Trust
Securities in notices of redemption and related materials as a convenience to
Holders; provided that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Trust Securities
or as contained in any notice of redemption and related materials.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Debentures.
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Redemptions of the Trust 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 then on hand and available in the Payment Account for the payment of such
Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of
any Capital Securities, then, by 12:00 noon, New York City time, on the
Redemption Date, subject to Section 4.2(c), the Property Trustee will, with
respect to Book-Entry Capital Securities, irrevocably deposit with the Clearing
Agency for such Book-Entry Capital Securities, to the extent available therefor,
funds sufficient to pay the applicable Redemption Price and will give such
Clearing Agency irrevocable instructions and authority to pay the Redemption
Price to the Holders of the Capital Securities. With respect to Capital
Securities that are not Book-Entry Capital Securities, the Property Trustee,
subject to Section 4.2(c), will irrevocably deposit with the Paying Agent or
Paying Agents, to the extent available therefor, funds sufficient to pay the
applicable Redemption Price and will give the Paying Agent or Paying Agents
irrevocable instructions and authority to pay the Redemption Price to the
Holders of the Capital Securities upon surrender of their Capital Securities
Certificates. Notwithstanding the foregoing, Distributions payable on or prior
to the Redemption Date for any Trust Securities called for redemption shall be
payable to the Holders of such Trust Securities as they appear on the Securities
Register 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 Holders holding Trust Securities so
called for redemption will cease, except the right of such Holders to receive
the Redemption Price and any Distribution payable in respect of the Trust
Securities on or prior to the Redemption Date, but without interest, and such
Securities will cease to be Outstanding. In the event that any date on which any
Redemption Price is payable is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (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 each
case, with the same force and effect as if made on such date. In the event that
payment of the Redemption Price in respect of any Trust Securities called for
redemption is improperly withheld or refused and not paid either by the Issuer
Trust or by the Depositor pursuant to the Guarantee Agreement, Distributions on
such Trust Securities will continue to accumulate, as set forth in Section 4.1,
from the Redemption Date originally established by the Issuer Trust for such
Trust 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.
(e) Subject to Section 4.3(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated pro
rata to the Common Securities and the Capital 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 based upon their respective
Liquidation Amounts not more than 60 days prior to the Redemption Date by the
Property Trustee from the Outstanding Capital Securities not previously called
for redemption, provided that so long as the Capital Securities are in
book-entry-only form, such selection shall be made in accordance with
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the customary procedures for the Clearing Agency for the Capital Securities, and
provided further that, after giving effect to such redemption, no Holder shall
hold Capital Securities with an aggregate Liquidation Amount of less than
$1,000. The Property Trustee shall promptly notify the Securities 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 this 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 that has been or is to be redeemed.
SECTION 4.3. Subordination of Common Securities.
(a) Payment of Distributions (including any Additional Distributions)
on, the Redemption Price of, and the Liquidation Distribution in respect of the
Trust Securities, as applicable, shall be made, subject to Section 4.2(e), pro
rata among the Common Securities and the Capital Securities based on the
Liquidation Amount of the Trust Securities; provided, however, that if on any
Distribution Date, Redemption Date or Liquidation Date any Event of Default
resulting from a Debenture Event of Default specified in Section 5.1(1) or
5.1(2) of the Indenture shall have occurred and be continuing, no payment of any
Distribution (including any Additional Distributions) on, Redemption Price of,
or Liquidation Distribution in respect of any Common Security, and no other
payment on account of the redemption, liquidation or other acquisition of Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions (including any Additional Distributions) on all 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 Outstanding Capital Securities then called for
redemption, or in the case of payment of the Liquidation Distribution the full
amount of such Liquidation Distribution on all Outstanding Capital Securities,
shall have been made or provided for, and all funds immediately available to the
Property Trustee shall first be applied to the payment in full in cash of all
Distributions (including any Additional Distributions) on, the Redemption Price
of or the Liquidation Distribution in respect of the Capital Securities then due
and payable.
(b) In the case of the occurrence of any Event of Default resulting
from any Debenture Event of Default, the Holder of the Common Securities shall
have no right to act with respect to any such Event of Default under this Trust
Agreement until the effects of all such Events of Default with respect to the
Capital Securities have been cured, waived or otherwise eliminated. Until all
such Events of Default under this 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 the Capital Securities and
not on behalf of the Holder of the Common Securities, and only the Holders of
the Capital Securities will have the right to direct the Property Trustee to act
on their behalf.
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SECTION 4.4. Payment Procedures.
Payments of Distributions (including any Additional Distributions) or
of the Redemption Price, Liquidation Amount or any other amounts in respect of
the Capital Securities shall be made by check mailed to the address of the
Person entitled thereto as such address shall appear on the Securities Register
or, if the Capital Securities are held by a Clearing Agency, such Distributions
shall be made to the Clearing Agency in immediately available funds. Payments in
respect of the Common Securities shall be made in such manner as shall be
mutually agreed between the Property Trustee and the Holder of all the Common
Securities.
SECTION 4.5. Tax Returns and Reports.
The Administrative Trustees shall prepare (or cause to be prepared),
at the Depositor's expense, and file all United States Federal, state and local
tax and information returns and reports required to be filed by or in respect of
the Issuer Trust. In this regard, the Administrative Trustees shall (a) prepare
and file (or cause to be prepared and filed) all Internal Revenue Service forms
required to be filed in respect of the Issuer Trust in each taxable year of the
Issuer Trust, and (b) prepare and furnish (or cause to be prepared and
furnished) to each Holder all Internal Revenue Service forms required to be
provided by the Issuer Trust. The Administrative Trustees shall provide the
Depositor and the Property Trustee with a copy of all such returns and reports
promptly after such filing or furnishing. The Issuer Trustees shall comply with
United States Federal withholding and backup withholding tax laws and
information reporting requirements with respect to any payments to Holders under
the Trust Securities.
SECTION 4.6. Payment of Taxes, Duties, Etc. of the Issuer Trust.
Upon receipt under the Debentures of Additional Sums, the Property
Trustee shall promptly pay any taxes, duties or governmental charges of
whatsoever nature (other than withholding taxes) imposed on the Issuer Trust by
the United States or any other taxing authority with respect to which such
Additional Sums were paid.
SECTION 4.7. Payments under Indenture or Pursuant to Direct Actions.
Any amount payable hereunder to any Holder of Capital Securities shall
be reduced by the amount of any corresponding payment such Holder has directly
received pursuant to Section 5.9 of the Indenture or Section 5.16 of this Trust
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ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership.
Upon the creation of the Issuer Trust and the contribution by the
Depositor pursuant to Section 2.3 and until the issuance of the Trust
Securities, and at any time during which no Trust Securities are Outstanding,
the Depositor shall be the sole beneficial owner of the Issuer Trust.
SECTION 5.2. The Trust Securities Certificates.
(a) Unless otherwise set forth herein, the Capital Securities
Certificates shall be issued in fully registered form in minimum denominations
of $1,000 Liquidation Amount and integral multiples of $1,000 in excess thereof,
and the Common Securities Certificates shall be issued in denominations of
$1,000 Liquidation Amount and integral multiples thereof. The consideration
received by the Trust for the issuance of the Trust Securities shall constitute
a contribution to the capital of the Trust and shall not constitute a loan to
the Trust.
Except as otherwise provided herein, owners of beneficial interests in
Global Certificates shall not be entitled to receive physical delivery of
certificated Capital Securities. Purchasers of Initial Capital Securities who
are not QIBs shall receive certificated Initial Capital Securities bearing the
Restricted Securities Legend ("Restricted Certificated Securities"); provided,
however, that upon transfer of such Restricted Certificated Securities to a QIB,
such Restricted Certificated Securities shall, unless the relevant Global
Capital Security has previously been exchanged, be exchanged for an interest in
a Global Capital Security pursuant to the provisions of Section 5.5 hereof.
Restricted Certificated Securities shall include the Restricted Securities
Legend unless removed in accordance with this Section 5.2(a) or Section 5.5(e)
hereof.
Capital Securities initially sold to qualified institutional buyers in
reliance on Rule 144A under the Securities Act ("Rule 144A Capital Securities")
initially will be represented by one or more certificates in registered, global
form with such applicable legends as are provided for in Section 5.5(c), except
as otherwise permitted herein (collectively, the "Restricted Global
Certificate"). Such Global Security shall be registered in the name of DTC or
its nominee and deposited with the Property Trustee, at its Corporate Trust
Office, as custodian for DTC, duly executed by the Issuer Trust and
authenticated by the Property Trustee as hereinafter provided. The aggregate
principal amount of the Restricted Global Certificate may from time to time be
increased or decreased by adjustments made on the records of the Property
Trustee, as custodian for DTC, in connection with a corresponding decrease or
increase in the aggregate principal amount of the Regulation S Global
Certificate or the Unrestricted Global Certificate, as hereinafter provided.
Capital Securities initially sold in offshore transactions in reliance
on Regulation S ("Regulation S Capital Securities") initially will be
represented by one or more certificates in
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registered, global form with such applicable legends as are provided for in
Section 5.14, except as otherwise permitted herein. Such Capital Securities in
global form shall be registered in the name of DTC or its nominee and deposited
with the Property Trustee, at its Corporate Trust Office, as custodian for DTC,
duly executed by the Issuer Trust and authenticated by the Property Trustee as
hereinafter provided, for credit to the respective accounts at DTC of the
depositories for Euroclear or CEDEL. Until such time as the Restricted Period
(as defined below) shall have terminated, such Capital Securities shall be
referred to herein collectively as the "Regulation S Global Certificate." After
such time as the Restricted Period shall have terminated, such Capital
Securities shall be referred to herein collectively as the "Unrestricted Global
Certificate." The aggregate principal amount of the Regulation S Global
Certificate or the Unrestricted Global Certificate may from time to time be
increased or decreased by adjustments made on the records of the Property
Trustee, as custodian for DTC, in connection with a corresponding decrease or
increase in the aggregate principal amount of the Restricted Global Certificate,
as hereinafter provided. As used herein, the term "Restricted Period" means the
period of 40 consecutive days beginning on and including the first day after the
later of (i) the day that the Lead Manager advises the Issuer Trust and the
Property Trustee is the day on which the Capital Securities are first offered to
persons other than distributors (as defined in Regulation S) in reliance on
Regulation S and (ii) the Closing Date.
Capital Securities initially sold to institutional accredited
investors in a manner exempt from the registration requirements of the
Securities Act and not in reliance on Regulation S will be represented by
Capital Securities in registered, certificated form (the "Certificated Capital
Securities") with such applicable legends as are provided for in Section 5.14,
except as otherwise permitted herein; provided, however, that upon transfer of
such Certificated Capital Securities to a qualified institutional buyer, such
Certificated Capital Securities will, unless the Rule 144A Global Liquidated
Certificate has previously been exchanged, be exchanged for an interest in a
Rule 144A Global Capital Security pursuant to the provisions of Section 5.14.
Certificated Capital Securities initially sold to Institutional Accredited
Investors are issuable only in minimum blocks of 100 Capital Securities,
representing $100,000 in aggregate Liquidation Amount and in integral multiples
of $1,000 in excess thereof.
The Trust Securities Certificates shall be executed on behalf of the
Trust by manual or facsimile signature of at least one Administrative Trustee
and authenticated by the Property Trustee. Trust Securities Certificates bearing
the manual or facsimile signatures of individuals who were, at the time when
such signatures shall have been affixed, authorized to sign on behalf of the
Issuer Trust, shall be validly issued and entitled to the benefit of this Trust
Agreement, notwithstanding that such individuals or any of them shall have
ceased to be so authorized prior to the delivery of such Trust Securities
Certificates or did not hold such offices at the date of delivery of such Trust
Securities Certificates. A transferee of a Trust Securities Certificate shall
become a Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to Section 5.5.
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(b) A single Common Security Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
SECTION 5.3. Execution and Delivery of Trust Securities Certificates.
At the Time of Delivery, the Administrative Trustees shall cause Trust
Securities Certificates, in an aggregate Liquidation Amount as provided in
Sections 2.4 and 2.5, to be executed on behalf of the Issuer Trust and delivered
to or upon the written order of the Depositor, executed by an authorized officer
thereof, without further corporate action by the Depositor, in authorized
denominations.
SECTION 5.4. Global Securities; Non-Global Securities; Common
Securities Certificate.
(a) Each Global Certificate authenticated under this Trust Agreement
shall be registered in the name of the Clearing Agency designated by the
Depositor for such Global Certificate or a nominee thereof and delivered to such
Clearing Agency or a nominee thereof or custodian therefor, and each such Global
Certificate shall constitute a Capital Security for all purposes of this Trust
Agreement.
(b) If a Global Certificate is to be exchanged for Certificated
Capital Securities or canceled in whole, it shall be surrendered by or on behalf
of the Clearing Agency, its nominee or custodian to the Property Trustee, as
Securities Registrar, for exchange or cancellation as provided in this Article
5. If any Global Certificate is to be exchanged for Certificated Capital
Securities or cancelled in part, or if another Capital Security is to be
exchanged in whole or in part for a beneficial interest in any Global
Certificate, in each case, as provided in Section 5.4, then either (i) such
Global Certificate shall be so surrendered for exchange or cancellation as
provided in this Article 5 or (ii) the Liquidation Amount thereof shall be
reduced or increased by an amount equal to the portion thereof to be so
exchanged or cancelled, or equal to the principal amount of such Certificated
Capital Security to be so exchanged for a beneficial interest therein, as the
case may be, by means of an appropriate adjustment made on the records of the
Property Trustee, as Securities Registrar, whereupon the Property Trustee, in
accordance with the Applicable Procedures, shall instruct the Clearing Agency or
its authorized representative to make a corresponding adjustment to its records.
Upon any such surrender or adjustment of a Global Certificate, the Property
Trustee shall, subject to Section 5.5 and as otherwise provided in this Article
5, authenticate and deliver any Capital Securities issuable in exchange for such
Global Certificate (or any portion thereof) to or upon the order of, and
registered in such names as may be directed by, the Clearing Agency or its
authorized representative. Upon the request of the Property Trustee in
connection with the occurrence of any of the events specified in the preceding
paragraph, the Depositor shall promptly make available to the Property Trustee a
reasonable supply of Capital Securities that are not in the form of Global
Certificates. The Property Trustee shall be entitled to rely upon any order,
direction or request of the Clearing Agency or its authorized representative
which is given or made pursuant to this Article 5 if such order, direction or
request is given or made in accordance with the Applicable Procedures.
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(c) Every Capital Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global
Certificate or any portion thereof, whether pursuant to this Article 5 or
otherwise, shall be authenticated and delivered in the form of, and shall be, a
Global Certificate, unless such Capital Security is registered in the name of a
Person other than the Clearing Agency for such Global Certificate or a nominee
thereof.
(d) The Clearing Agency or its nominee, as registered owner of a
Global Certificate, shall be the holder of such Global Certificate for all
purposes under the Trust Agreement and the Capital Securities, and owners of
beneficial interests in a Global Certificate shall hold such interests pursuant
to the Applicable Procedures. Accordingly, any such Owner's beneficial interest
in a Global Certificate will be shown only on, and the transfer of such interest
shall be effected only through, records maintained by the Clearing Agency or its
nominee or its participants and such owners of beneficial interests in a Global
Certificate will not be considered the owners or holders of such Global
Certificate for any purpose of this Trust Agreement or the Capital Securities.
The rights of the Owners of a beneficial interest in a Global
Certificate Capital Securities shall be exercised only through the Clearing
Agency and shall be limited to those established by law, the Applicable
Procedures and agreements between such Owners and the Clearing Agency and/or the
Clearing Agency Participants. Solely for the purposes of determining whether the
Holders of the requisite amount of Capital Securities have voted on any matter
provided for in this Trust Agreement, so long as Definitive Capital Securities
Certificates have not been issued in certificated fully registered form, the
Property Trustee and the Administrative Trustees may conclusively rely on, and
shall be protected in relying on, any written instrument (including a proxy)
delivered to such Issuer Trustees by the Clearing Agency setting forth the
Holders' votes or assigning the right to vote on any matter to any other Persons
either in whole or in part.
(e) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
SECTION 5.5. Registration, Transfer and Exchange Generally; Certain
Transfers and Exchanges; Securities Act Legends.
(a) The Administrative Trustees shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 5.9, a register or registers
(the "Securities Register") in which the registrar and transfer agent with
respect to the Trust Securities (the "Securities Registrar"), subject to such
reasonable regulations as it may prescribe, shall provide for the registration
of Capital Securities Certificates and (subject to Section 5.11) Common
Securities Certificates and of transfers and exchanges of Capital Securities
Certificates as herein provided. The Property Trustee is hereby appointed
Securities Registrar for the purpose of registering Capital Securities
Certificates and (subject to Section 5.11) Common Securities and transfers and
exchanges thereof as provided herein.
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Upon surrender for registration of transfer of any Capital Securities
Certificate at the office or agency maintained pursuant to Section 5.9, the
Administrative Trustees or any one of them shall execute and deliver to the
Property Trustee, and the Property Trustee shall deliver, in the name of the
designated transferee or transferees, one or more new Capital Securities
Certificates in authorized denominations of a like aggregate Liquidation Amount
and bearing such restrictive legends as may be required by this Trust Agreement,
dated the date of execution by such Administrative Trustee or Trustees.
At the option of the Holder, Capital Securities Certificates may be
exchanged for other Capital Securities Certificates of the same series of any
authorized denominations, of like tenor and aggregate Liquidation Amount,
bearing such restrictive legends as may be required by this Trust Agreement and
bearing a number not contemporaneously Outstanding, upon surrender of the
Capital Securities Certificates to be exchanged at such office or agency.
Whenever any Capital Securities Certificates are so surrendered for exchange,
the Administrative Trustees or any one of them shall execute and deliver to the
Property Trustee, and the Property Trustee shall deliver, the Capital Securities
Certificates that the Holder making the exchange is entitled to receive.
All Capital Securities issued upon any transfer or exchange of Capital
Securities shall evidence the same interest in the assets of the Issuer Trust,
and be entitled to the same benefits under this Trust Agreement, as the Capital
Securities surrendered upon such transfer or exchange.
The Securities Registrar shall not be required, (i) to issue, register
the transfer of or exchange any Capital Security during a period beginning at
the opening of business 15 days before the day of selection for redemption of
such Capital Securities pursuant to Article IV and ending at the close of
business on the day of mailing of the notice of redemption, or (ii) to register
the transfer of or exchange any Capital Security so selected for redemption in
whole or in part, except, in the case of any such Capital Security to be
redeemed in part, any portion thereof not to be redeemed.
Every Capital Securities Certificate presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to an Administrative
Trustee and the Securities Registrar duly executed by the Holder or such
Holder's attorney duly authorized in writing. Each Capital Securities
Certificate surrendered for registration of transfer or exchange shall be
canceled and subsequently disposed of by the Property Trustee in accordance with
its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Capital Securities Certificates, but the Issuer Trust may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Capital Securities
Certificates.
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(b) Certain Transfers and Exchanges. Notwithstanding any other
provision of this Trust Agreement or the Capital Securities, transfers and
exchanges of Capital Securities and beneficial interests in a Global Certificate
of the kinds specified in this Section 5.5(b) shall be made only in accordance
with this Section 5.5(b).
(i) Restricted Global Certificate to Regulation S Global
Certificate. If the owner of a beneficial interest in the Restricted
Global Certificate wishes at any time to transfer such interest to a
Person who wishes to acquire the same in the form of a beneficial
interest in the Regulation S Global Certificate, such transfer may be
effected in accordance with the provisions of this Clause (b)(i) and
Clause (b)(vii) below and subject to the Applicable Procedures. Upon
receipt by the Property Trustee, as Securities Registrar, of (A) an
order given by the Clearing Agency or its authorized representative
directing that a beneficial interest in the Regulation S Global
Certificate in a specified principal amount be credited to a specified
participant's account and that a beneficial interest in the Restricted
Global Certificate in an equal principal amount be debited from
another specified participant's account and (B) a Regulation S
Certificate, in the form of Annex E hereto (a "Regulation S
Certificate") and satisfactory to the Property Trustee and duly
executed by the owner of such beneficial interest in the Restricted
Global Certificate or his attorney duly authorized in writing, then
the Property Trustee, as Securities Registrar but subject to Clause
(b)(vii) below, shall reduce the share number of the Restricted Global
Certificate and increase the share number of the Regulation S Global
Certificate by such specified principal amount as provided in Section
5.4(b).
(ii) Regulation S Global Certificate to Restricted Global
Certificate. If the owner of a beneficial interest in the Regulation S
Global Certificate wishes at any time to transfer such interest to a
Person who wishes to acquire the same in the form of a beneficial
interest in the Restricted Global Certificate, such transfer may be
effected only in accordance with this Clause (b)(ii) and subject to
the Applicable Procedures. Upon receipt by the Property Trustee, as
Securities Registrar, of (A) an order given by the Clearing Agency or
its authorized representative directing that a beneficial interest in
the Restricted Global Certificate in a specified principal amount be
credited to a specified participant's account and that a beneficial
interest in the Regulation S Global Certificate in an equal principal
amount be debited from another specified participant's account and (B)
if such transfer is to occur during the Restricted Period, a
Restricted Securities Certificate, in the form of Annex F hereto (a
"Restricted Securities Certificate") and satisfactory to the Property
Trustee and duly executed by the owner of such beneficial interest in
the Regulation S Global Certificate or his attorney duly authorized in
writing, then the Property Trustee, as Securities Registrar, shall
reduce the principal amount of the Regulation S Global Certificate and
increase the principal amount of the Restricted Global Certificate by
such specified principal amount as provided in Section 5.4(b).
(iii) Restricted Non-Global Certificate to Restricted Global
Certificate or Regulation S Global Certificate. If the Holder of a
Restricted Capital Security (other than a Global Certificate) wishes
at any time to transfer all or any portion of such Re-
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stricted Capital Security to a Person who wishes to take delivery
thereof in the form of a beneficial interest in the Restricted Global
Certificate or the Regulation S Global Certificate, such transfer may
be effected only in accordance with the provisions of this Clause
(b)(iii) and Clause (b)(vii) below and subject to the Applicable
Procedures. Upon receipt by the Property Trustee, as Securities
Registrar, of (A) such Restricted Capital Security as provided in
Section 5.5(a) and instructions satisfactory to the Property Trustee
directing that a beneficial interest in the Restricted Global
Certificate or Regulation S Global Certificate in a specified
principal amount not greater than the share amount of such Capital
Security be credited to a specified participant's account and (B) a
Restricted Securities Certificate, if the specified account is to be
credited with a beneficial interest in the Restricted Global
Certificate, or a Regulation S Certificate, if the specified account
is to be credited with a beneficial interest in the Regulation S
Global Certificate, in either case satisfactory to the Property
Trustee and duly executed by such Holder or his attorney duly
authorized in writing, then the Property Trustee, as Securities
Registrar but subject to Clause (b)(vii) below, shall cancel such
Restricted Capital Security (and issue a new Restricted Capital
Security in respect of any untransferred portion thereof) as provided
in Section 5.4(a) and increase the principal amount of the Restricted
Global Certificate or the Regulation S Global Certificate, as the case
may be, by the specified principal amount as provided in Section
5.4(b).
(iv) Regulation S Non-Global Certificate to Restricted Global
Certificate or Regulation S Global Certificate. If the Holder of a
Regulation S Capital Security (other than a Global Certificate) wishes
at any time to transfer all or any portion of such Regulation S
Capital Security to a Person who wishes to acquire the same in the
form of a beneficial interest in the Restricted Global Certificate or
the Regulation S Global Certificate, such transfer may be effected
only in accordance with this Clause (b)(iv) and Clause (b)(vii) below
and subject to the Applicable Procedures. Upon receipt by the Property
Trustee, as Securities Registrar, of (A) such Regulation S Capital
Security as provided in Section 5.5(a) and instructions satisfactory
to the Property Trustee directing that a beneficial interest in the
Restricted Global Certificate or Regulation S Global Certificate in a
specified share amount not greater than the share amount of such
Capital Security be credited to a specified participant's account and
(B) if the transfer is to occur during the Restricted Period and the
specified account is to be credited with a beneficial interest in the
Restricted Global Certificate, a Restricted Securities Certificate
satisfactory to the Property Trustee and duly executed by such Holder
or his attorney duly authorized in writing then the Property Trustee,
as Securities Registrar but subject to Clause (b)(vii) below, shall
cancel such Regulation S Security (and issue a new Regulation S
Security in respect of any untransferred portion thereof) as provided
in Section 5.5(a) and increase the principal amount of the Restricted
Global Certificate or the Regulation S Global Certificate, as the case
may be, by the specified principal amount as provided in Section
5.14(b).
(v) Non-Global Certificate to Non-Global Certificate. A Security
that is not a Global Certificate may be transferred, in whole or in
part, to a Person who takes delivery in the form of another Security
that is not a Global Certificate as provided in Section
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5.13, provided that, if the Security to be transferred in whole or in
part is a Restricted Security, or is a Regulation S Capital Security
and the transfer is to occur during the Restricted Period, then the
Property Trustee shall have received (A) a Restricted Securities
Certificate, satisfactory to the Property Trustee and duly executed by
the transferor Holder or his attorney duly authorized in writing, in
which case the transferee Holder shall take delivery in the form of a
Restricted Security, or (B) a Regulation S Certificate, satisfactory
to the Property Trustee and duly executed by the transferor Holder or
his attorney duly authorized in writing, in which case the transferee
Holder shall take delivery in the form of a Regulation S Capital
Security (subject in every case to Section 5.4(c)).
(vi) Exchanges between Global Certificate and Non-Global
Certificate. A beneficial interest in a Global Certificate may be
exchanged for a Capital Security that is not a Global Certificate as
provided in Section 5.13 to an institution that is an accredited
investor within the meaning of Rule 501(a)(1), (2), (3) or (7) of
Regulation D of the Securities Act of 1933, as amended, provided that,
if such interest is a beneficial interest in the Restricted Global
Certificate, or if such interest is a beneficial interest in the
Regulation S Global Certificate and such exchange is to occur during
the Restricted Period, then such interest shall be exchanged for a
Restricted Security (subject in each case to Section 5.5(c)). A
Capital Security that is not a Global Certificate may be exchanged for
a beneficial interest in a Global Certificate only if (A) such
exchange occurs in connection with a transfer effected in accordance
with Clause (b)(iii) or (iv) above or (B) such Security is a
Regulation S Capital Security and such exchange occurs after the
Restricted Period.
(vii) Regulation S Global Certificate to be Held Through
Euroclear or Cedel during Restricted Period. The Depositor shall use
its best efforts to cause the Clearing Agency to ensure that, until
the expiration of the Restricted Period, beneficial interests in the
Regulation S Global Certificate may be held only in or through
accounts maintained at the Clearing Agency by Euroclear or Cedel (or
by participants acting for the account thereof), and no person shall
be entitled to effect any transfer or exchange that would result in
any such interest being held otherwise than in or through such an
account; provided that this Clause (b)(vii) shall not prohibit any
transfer or exchange of such an interest in accordance with Clause
(b)(ii) or (vi) above.
(c) Securities Act Legends. Rule 144A Securities and Certificated
Capital Securities and their respective Successor Securities shall bear a
Restricted Securities Legend as set forth in Section 5.14, subject to the
following:
(i) subject to the following Clauses of this Section 5.5(c), a
Capital Security or any portion thereof which is exchanged, upon
transfer or otherwise, for a Global Certificate or any portion thereof
shall bear the Securities Act Legend borne by such Global Certificate
while represented thereby;
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(ii) subject to the following Clauses of this Section 5.5(c), a
new Capital Security which is not a Global Certificate and is issued
in exchange for another Capital Security (including,a Global
Certificate) or any portion thereof, upon transfer or otherwise, shall
bear the Securities Act Legend borne by such other Capital Security,
provided that, if such new Capital Security is required pursuant to
Section 5.5(b)(v) or (vi) to be issued in the form of a Restricted
Security, it shall bear a Restricted Securities Legend and, if such
new Capital Security is so required to be issued in the form of a
Regulation S Capital Security, it shall bear a Regulation S Legend;
(iii) Any Capital Securities which are sold or otherwise disposed
of pursuant to an effective registration statement under the
Securities Act (including the Shelf Registration Statement), together
with their Successor Securities shall not bear a Securities Act
Legend; the Depositor shall inform the Property Trustee in writing of
the effective date of any such registration statement registering the
Capital Securities under the Securities Act and shall notify the
Property Trustee at any time when prospectuses may not be delivered
with respect to Capital Securities to be sold pursuant to such
registration statement. The Property Trustee shall not be liable for
any action taken or omitted to be taken by it in good faith in
accordance with the aforementioned registration statement;
(iv) at any time after the Capital Securities may be freely
transferred without registration under the Securities Act or without
being subject to transfer restrictions pursuant to the Securities Act,
a new Capital Security which does not bear a Securities Act Legend may
be issued in exchange for or in lieu of a Capital Security (other than
a Global Certificate) or any portion thereof which bears such a legend
if the Property Trustee has received an Unrestricted Securities
Certificate, in the form of Exhibit G hereto (an "Unrestricted
Securities Certificate") and satisfactory to the Property Trustee and
duly executed by the Holder of such legended Capital Security or his
attorney duly authorized in writing, and after such date and receipt
of such certificate, the Property Trustee shall authenticate and
deliver such a new Capital Security in exchange for or in lieu of such
other Capital Security as provided in this Article 5;
(v) a new Capital Security which does not bear a Securities Act
Legend may be issued in exchange for or in lieu of a Capital Security
(other than a Global Certificate) or any portion thereof which bears
such a legend if, in the Depositor's judgment, placing such a legend
upon such new Capital Security is not necessary to ensure compliance
with the registration requirements of the Securities Act, and the
Property Trustee, at the direction of the Depositor, shall
authenticate and deliver such a new Capital Security as provided in
this Article 5; and
Notwithstanding the foregoing provisions of this Section 5.5(c), a
Successor Security of a Capital Securities that does not bear a particular form
of Securities Act Legend shall not bear such form of legend unless the Depositor
has reasonable cause to believe that such Successor Security is a "restricted
security" within the meaning of Rule 144, in which case the Property Trustee, at
the direction of the Depositor, shall authenticate and deliver a new Capital
Security
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bearing a Restricted Securities Legend in exchange for such Successor Security
as provided in this Article 5.
(d) Any purchaser or Holder of any Capital Securities or any interest
therein will be deemed to have represented by its purchase and holding thereof
that it either (i) is not a Plan or a Plan Asset Entity and is not purchasing
such Capital Securities on behalf of or with "plan assets" of any Plan, or (ii)
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. The Securities Registrar may, and if the Depositor shall so request,
the Securities Registrar shall, before registering for transfer or exchange any
Capital Securities Certificates as provided in Sections 5.2, 5.4 or 5.5 of this
Trust Agreement, (A) require the purchaser or Holder of such Capital Securities
Certificates to confirm that it either (x) is not a Plan, a Plan Asset Entity or
a Person investing "plan assets" of any Plan or (y) is eligible for the
exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14, and
(B) if such purchaser or Holder does not provide such confirmation, require an
Opinion of Counsel or other evidence satisfactory to the Depositor of the
availability to such purchaser or Holder of another applicable exemption with
respect to such purchase or holding.
(e) After a transfer of any Initial Capital Securities during the
period of the effectiveness of, and pursuant to, a Shelf Registration Statement
with respect to the Initial Capital Securities, all requirements pertaining to
legends on such Initial Capital Securities shall cease to apply, the
requirements requiring that any such Initial Capital Securities issued to
certain Holders to be issued in global form shall cease to apply, and
certificated Initial Capital Securities without legends shall be made available
to the Holders of such Initial Capital Securities. Upon the consummation of a
Registered Exchange Offer with respect to the Initial Capital Securities
pursuant to which Holders of Initial Capital Securities are offered Exchange
Capital Securities in exchange for their Initial Capital Securities, all
requirements pertaining to such Initial Capital Securities that Initial Capital
Securities issued to certain Holders be issued in global form shall cease to
apply and certificated Initial Capital Securities with the Restricted Securities
Legend shall be available to Holders of such Initial Capital Securities that do
not exchange their Initial Capital Securities, and Exchange Capital Securities
in certificated form shall be available to Holders that exchange such Initial
Capital Securities in such Registered Exchange Offer.
SECTION 5.6. Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.
If (a) any mutilated Trust Securities Certificate shall be surrendered
to the Securities Registrar, or if the Securities Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Trust
Securities Certificate, and (b) there shall be delivered to the Securities
Registrar and the Administrative Trustees such security or indemnity as may be
required by them to save each of them harmless, then in the absence of notice
that such Trust Securities Certificate shall have been acquired by a bona fide
purchaser, the Administrative Trustees, or any one of them, on behalf of the
Issuer Trust shall execute and make available for delivery, in exchange for or
in lieu of any such mutilated, destroyed, lost or stolen Trust Securities
Certificate, a new Trust Securities Certificate of like class, tenor and
denomination.
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In connection with the issuance of any new Trust Securities Certificate under
this Section 5.6, the Administrative Trustees or the Securities Registrar may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith. Any duplicate Trust
Securities Certificate issued pursuant to this Section 5.6 shall constitute
conclusive evidence of an undivided beneficial interest in the assets of the
Issuer Trust corresponding to that evidenced by the lost, stolen or destroyed
Trust Securities Certificate, as if originally issued, whether or not the lost,
stolen or destroyed Trust Securities Certificate shall be found at any time.
SECTION 5.7. Persons Deemed Holders.
The Issuer Trustees and the Securities Registrar shall each treat the
Person in whose name any Trust Securities Certificate shall be registered in the
Securities Register as the owner of such Trust Securities Certificate for the
purpose of receiving Distributions and for all other purposes whatsoever, and
none of the Issuer Trustees and the Securities Registrar shall be bound by any
notice to the contrary.
SECTION 5.8. Access to List of Holders' Names and Addresses.
Each Holder and each Owner shall be deemed to have agreed not to hold
the Depositor or the Issuer Trustees accountable by reason of the disclosure of
its name and address, regardless of the source from which such information was
derived.
SECTION 5.9. Maintenance of Office or Agency.
The Administrative Trustees shall maintain an office or offices or
agency or agencies where Capital Securities Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Issuer Trustees in respect of the Trust Securities Certificates may be
served. The Administrative Trustees initially designate HSB Group, Inc., One
State Street, Hartford, Connecticut 06102 as its office and agency for such
purposes. The Administrative Trustees shall give prompt written notice to the
Depositor, the Property Trustee and to the Holders of any change in the location
of the Securities Register or any such office or agency.
SECTION 5.10. Appointment of Paying Agents.
The Paying Agent or Agents shall make Distributions to Holders from
the Payment Account and shall report the amounts of such Distributions to the
Property Trustee and the Administrative Trustees. Any Paying Agent shall have
the revocable power to withdraw funds from the Payment Account solely for the
purpose of making the Distributions referred to above. The Administrative
Trustees may revoke such power and remove the Paying Agent in its sole
discretion. The Paying Agent shall initially be the Bank and any co-paying agent
chosen by the Property Trustee and acceptable to the Administrative Trustees and
the Depositor. Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice
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to the Administrative Trustees and the Property Trustee. If the Bank shall no
longer be the Paying Agent or a successor Paying Agent shall resign or its
authority to act be revoked, the Administrative Trustees shall appoint a
successor (which shall be a bank or trust company) that is reasonably acceptable
to the Depositor to act as Paying Agent. Such successor Paying Agent or any
additional Paying Agent shall execute and deliver to the Issuer Trustees an
instrument in which such successor Paying Agent or additional Paying Agent shall
agree with the Issuer Trustees that as Paying Agent, such successor Paying Agent
or additional Paying Agent will hold all sums, if any, held by it for payment to
the Holders in trust for the benefit of the Holders entitled thereto until such
sums shall be paid to such Holders. The Paying Agent shall return all unclaimed
funds to the Property Trustee and upon removal of a Paying Agent such Paying
Agent shall also return all funds in its possession to the Property Trustee. The
provisions of Sections 8.1, 8.3 and 8.6 herein shall apply to the Bank also in
its role as Paying Agent, for so long as the Bank shall act as Paying Agent and,
to the extent applicable, to any other paying agent appointed hereunder. Any
reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise.
SECTION 5.11. Ownership of Common Securities by Depositor.
At the Time of Delivery, the Depositor shall acquire, and thereafter
shall retain, beneficial and record ownership of the Common Securities. Neither
the Depositor nor any successor Holder of the Common Securities may transfer
less than all the Common Securities (except in connection with a redemption
thereof), and the Depositor or any such successor Holder may transfer the Common
Securities only (i) in connection with a consolidation or merger of the
Depositor into another corporation, or any conveyance, transfer or lease by the
Depositor of its properties and assets substantially as an entirety to any
Person, pursuant to Section 8.1 of the Indenture, or (ii) to the Depositor or an
Affiliate of the Depositor in compliance with applicable law (including the
Securities Act and applicable state securities and blue sky laws). To the
fullest extent permitted by law, any attempted transfer of the Common Securities
other than as set forth in the next proceeding sentence shall be void. The
Administrative Trustees shall cause each Common Securities Certificate issued to
the Depositor to contain a legend stating substantially "THIS CERTIFICATE IS NOT
TRANSFERABLE EXCEPT TO THE DEPOSITOR OR AN AFFILIATE OF THE DEPOSITOR IN
COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST AGREEMENT."
SECTION 5.12. Notices to Clearing Agency.
To the extent that a notice or other communication to the Holders is
required under this Trust Agreement, for so long as Capital Securities are
represented by a Book-Entry Capital Securities Certificate, the Issuer Trustees
shall give all such notices and communications specified herein to be given to
the Clearing Agency, and shall have no obligations to the Owners.
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SECTION 5.13. Definitive Capital Securities Certificates.
Notwithstanding any other provision in this Trust Agreement other than
as provided for in Section 5.5, no Global Certificate may be exchanged in whole
or in part for Capital Securities registered, and no transfer of a Global
Certificate in whole or in part may be registered, in the name of any Person
other than the Clearing Agency for such Global Certificate or a nominee thereof
unless (i) such Clearing Agency (A) has notified the Depositor that it is
unwilling or unable to continue as Clearing Agency for such Global Certificate
or (B) has ceased to be a clearing agency registered as such under the
Securities Exchange Act of 1934, as amended, and in either case the Trust and
the Depositor thereupon fails to appoint a successor Clearing Agency, (ii) the
Trust and the Depositor, at their option, notify the Property Trustee in writing
that it elects to cause the issuance of the 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. In all cases, Certificated Capital Securities delivered in exchange for
any Global Certificate or beneficial interests therein will be registered in the
names, and issued in any approved denominations, requested by or on behalf of
the Clearing Agency (in accordance with its customary procedures).
SECTION 5.14. Restrictive Legends.
The Restricted Global Certificate and the Certificated Capital
Securities shall bear the following legend (the "Restricted Securities Legend")
unless the Depositor determines otherwise in accordance with applicable law:
"THE CAPITAL SECURITIES EVIDENCED HEREBY AND ANY JUNIOR
SUBORDINATED DEBENTURES ISSUABLE HEREWITH HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY
ANY INITIAL INVESTOR THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT, (1) TO A
PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR
(4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR (B) BY ANY
INITIAL INVESTOR THAT IS A QUALIFIED INSTITUTIONAL BUYER OR BY ANY
SUBSEQUENT INVESTOR, (1) AS DESCRIBED IN CLAUSE (A) ABOVE OR (2) TO AN
INSTITUTION THAT IS AN ACCREDITED INVESTOR WITHIN THE MENAING OF RULE
501(a)(1), (2), (3 ) OR (7) OF REGULATION D IN A
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TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENT OF THE SECURITIES
ACT, AND, IN EACH CASE (A) AND (B), IN COMPLIANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS. SECURITIES OWNED BY AN INITIAL INVESTOR THAT IS NOT A
QUALIFIED INSTITUTIONAL BUYER MAY NOT BE HELD IN BOOK-ENTRY FORM AND
MAY NOT BE TRANSFERRED WITHOUT CERTIFICATION THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS, AS PROVIDED IN THE TRUST
AGREEMENT REFERRED TO BELOW."
SECTION 5.15. Rights of Holders; Waivers of Past Defaults.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 2.9, and
the Holders shall not have any right or title therein other than the undivided
beneficial interest in the assets of the Issuer Trust conferred by their Trust
Securities and they shall have no right to call for any partition or division of
property, profits or rights of the Issuer Trust except as described below. The
Trust Securities shall be personal property giving only the rights specifically
set forth therein and in this Trust Agreement. The Trust Securities shall have
no preemptive or similar rights and when issued and delivered to Holders against
payment of the purchase price therefor will be fully paid and nonassessable by
the Issuer Trust. The Holders of the Trust Securities, in their capacities as
such, shall 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.
(b) For so long as any Capital Securities remain Outstanding, if, upon
a Debenture Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due and payable, the
Holders of at least 25% in Liquidation Amount of the Capital Securities then
Outstanding shall have the right to make such declaration by a notice in writing
to the Property Trustee, the Depositor and the Debenture Trustee.
At any time after a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as provided in the
Indenture, if the Property Trustee fails to annul any such declaration and waive
such default, the Holders of at least a Majority in Liquidation Amount of the
Capital Securities, by written notice to the Property Trustee, the Depositor and
the Debenture Trustee, may rescind and annul such declaration and its
consequences if:
(i) the Depositor has paid or deposited with the Debenture
Trustee a sum sufficient to pay
(A) all overdue installments of interest on all of the
Debentures,
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(B) any accrued Additional Interest (as defined in the
Indenture) on all of the Debentures,
(C) the principal of (and premium, if any, on) any
Debentures that have become due otherwise than by such
declaration of acceleration and interest and Additional Interest
thereon at the rate borne by the Debentures, and
(D) all sums paid or advanced by the Debenture Trustee under
the Indenture and the reasonable compensation, expenses,
disbursements and advances of the Debenture Trustee and the
Property Trustee, their agents and counsel; and
(ii) all Events of Default with respect to the Debentures, other
than the non-payment of the principal of the Debentures that has
become due solely by such acceleration, have been cured or waived as
provided in Section 5.13 of the Indenture.
The Holders of at least a Majority in Liquidation Amount of the
Capital Securities may, on behalf of the Holders of all the Trust Securities,
waive any past default or Event of Default under the Indenture, except a default
or Event of Default in the payment of principal or interest (unless such default
or Event of 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 or Event of Default in
respect of a covenant or provision that under the Indenture cannot be modified
or amended without the consent of the holder of each outstanding Debenture. No
such rescission shall affect any subsequent default or impair any right
consequent thereon.
Upon receipt by the Property Trustee of written notice declaring such
an acceleration, or rescission and annulment thereof, by Holders of any part of
the Capital Securities, a record date shall be established for determining
Holders of Outstanding Capital Securities entitled to join in such notice, which
record date shall be at the close of business on the day the Property Trustee
receives such notice. The Holders on such record date, or their duly designated
proxies, and only such Persons, shall be entitled to join in such notice,
whether or not such Holders remain Holders after such record date; provided,
that, unless such declaration of acceleration, or rescission and annulment, as
the case may be, shall have become effective by virtue of the requisite
percentage having joined in such notice prior to the day that is 90 days after
such record date, such notice of declaration of acceleration, or rescission and
annulment, as the case may be, shall automatically and without further action by
any Holder be canceled and of no further effect. Nothing in this paragraph shall
prevent a Holder, or a proxy of a Holder, from giving, after expiration of such
90-day period, a new written notice of declaration of acceleration, or
rescission and annulment thereof, as the case may be, that is identical to a
written notice that has been canceled pursuant to the proviso to the preceding
sentence, in which event a new record date shall be established pursuant to the
provisions of this Section 5.16(b).
(c) For so long as any Capital Securities remain Outstanding, to the
fullest extent permitted by law and subject to the terms of this Trust Agreement
and the Indenture, upon a
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Debenture Event of Default specified in Section 5.1(1) or 5.1(2) of the
Indenture, any Holder of Capital Securities shall have the right to institute a
proceeding directly against the Depositor, pursuant to Section 5.9 of the
Indenture, for enforcement of payment to such Holder of any amounts payable in
respect of Debentures having an aggregate principal amount equal to the
aggregate Liquidation Amount of the Capital Securities of such Holder (a "Direct
Action"). Except as set forth in Section 5.15(b) and this Section 5.15(c), the
Holders of Capital Securities shall have no right to exercise directly any right
or remedy available to the holders of, or in respect of, the Debentures.
(d) Except as otherwise provided in paragraphs (a), (b) and (c) of
this Section 5.15, the Holders of at least a Majority in Liquidation Amount of
the Capital Securities may, on behalf of the Holders of all the Trust
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 Trust Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
ARTICLE VI
ACTS OF HOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Voting Rights.
(a) Except as expressly provided in this Trust Agreement and in the
Indenture and as otherwise required by law, no Holder of Capital Securities
shall have any right to vote or in any manner otherwise control the
administration, operation and management of the Issuer Trust or the obligations
of the parties hereto, nor shall anything herein set forth, or contained in the
terms of the Trust Securities Certificates, be construed so as to constitute the
Holders from time to time as partners or members of an association.
(b) So long as any Debentures are held by the Property Trustee on
behalf of the Issuer Trust, the Property Trustee shall not (i) direct the time,
method and place of conducting any proceeding for any remedy available to the
Debenture Trustee, or execute any trust or power conferred on the Property
Trustee with respect to the Debentures, (ii) waive any past default that may be
waived under Section 5.13 of the Indenture, (iii) exercise any right to rescind
or annul a declaration that the principal of all the Debentures shall be due and
payable, or (iv) consent to any amendment, modification or termination of the
Indenture or the Debentures, where such consent shall be required, without, in
each case, obtaining the prior approval of the Holders of at least a Majority in
Liquidation Amount of the Capital Securities, provided, however, that where a
consent under the Indenture would require the consent of each Holder of
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior written consent of each Holder of Capital Securities.
The Property Trustee shall not revoke any action previously authorized or
approved by a vote of the Holders of the Capital Securities,
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except by a subsequent vote of the Holders of the Capital Securities. The
Property Trustee shall notify all Holders of the Capital Securities of any
notice of default received with respect to the 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, at the
expense of the Depositor, obtain an Opinion of Counsel experienced in such
matters to the effect that such action shall not cause the Issuer Trust to be
taxable as a corporation or classified as other than a grantor trust for United
States Federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement provides for, or
the Issuer Trustees otherwise propose to effect, (i) any action that would
adversely affect in any material respect the powers, preferences or special
rights of the Capital Securities, whether by way of amendment to the Trust
Agreement or otherwise, or (ii) the dissolution, winding-up or termination of
the Issuer Trust, other than pursuant to the terms of this Trust Agreement, then
the Holders of Outstanding Capital Securities as a class will be entitled to
vote on such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of the Holders of at least a Majority in
Liquidation Amount of the Capital Securities. Notwithstanding any other
provision of this Trust Agreement, no amendment to this Trust Agreement may be
made if, as a result of such amendment, it would cause the Issuer Trust to be
taxable as a corporation or classified as other than a grantor trust for United
States Federal income tax purposes.
SECTION 6.2. Notice of Meetings.
Notice of all meetings of the Holders of the Capital Securities,
stating the time, place and purpose of the meeting, shall be given by the
Property Trustee pursuant to Section 10.8 to each Holder of Capital Securities,
at such Holder's registered address, at least 15 days and not more than 90 days
before the meeting. At any such meeting, any business properly before the
meeting may be so considered whether or not stated in the notice of the meeting.
Any adjourned meeting may be held as adjourned without further notice.
SECTION 6.3. Meetings of Holders of the Capital Securities.
No annual meeting of Holders is required to be held. The
Administrative Trustees, however, shall call a meeting of the Holders of the
Capital Securities to vote on any matter upon the written request of the Holders
of at least 25% in aggregate Liquidation Amount of the Outstanding Capital
Securities and the Administrative Trustees or the Property Trustee may, at any
time in their discretion, call a meeting of the Holders of the Capital
Securities to vote on any matters as to which such Holders are entitled to vote.
The Holders of at least a Majority in Liquidation Amount of the
Capital Securities, present in person or by proxy, shall constitute a quorum at
any meeting of the Holders of the Capital Securities.
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If a quorum is present at a meeting, an affirmative vote by the
Holders present, in person or by proxy, holding Capital Securities representing
at least a majority of the aggregate Liquidation Amount of the Capital
Securities held by the Holders present, either in person or by proxy, at such
meeting shall constitute the action of the Holders of the Capital Securities,
unless this Trust Agreement requires a greater number of affirmative votes.
SECTION 6.4. Voting Rights.
Holders shall be entitled to one vote for each $1,000 of Liquidation
Amount represented by their Outstanding Trust Securities in respect of any
matter as to which such Holders are entitled to vote.
SECTION 6.5. Proxies, etc.
At any meeting of Holders, any Holder entitled to vote thereat may
vote by proxy, provided that no proxy shall be voted at any meeting unless it
shall have been placed on file with the Administrative Trustees, or with such
other officer or agent of the Issuer Trust as the Administrative Trustees may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of the Property Trustee, proxies may be solicited in
the name of the Property Trustee or one or more officers of the Property
Trustee. Only Holders of record shall be entitled to vote. When Trust Securities
are held jointly by several persons, any one of them may vote at any meeting in
person or by proxy in respect of such Trust Securities, but if more than one of
them shall be present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be cast, such vote
shall not be received in respect of such Trust Securities. A proxy purporting to
be executed by or on behalf of a Holder shall be deemed valid unless challenged
at or prior to its exercise, and the burden of proving invalidity shall rest on
the challenger. No proxy shall be valid more than three years after its date of
execution.
SECTION 6.6. Holder Action by Written Consent.
Any action that may be taken by Holders of Capital Securities at a
meeting may be taken without a meeting if Holders holding at least a Majority in
Liquidation Amount of the Capital Securities entitled to vote in respect of such
action (or such larger proportion thereof as shall be required by any other
provision of this Trust Agreement) shall consent to the action in writing. Any
action that may be taken by the Holder of all the Common Securities may be taken
if such Holder shall consent to the action in writing.
SECTION 6.7. Record Date for Voting and Other Purposes.
For the purposes of determining the Holders who are entitled to notice
of and to vote at any meeting or by written consent, or to participate in any
distribution on the Trust Securities in respect of which a record date is not
otherwise provided for in this Trust Agreement, or for the purpose of any other
action, the Administrative Trustees may from time to time fix a date,
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not more than 90 days prior to the date of any meeting of Holders or the payment
of a distribution or other action, as the case may be, as a record date for the
determination of the identity of the Holders of record for such purposes.
SECTION 6.8. Acts of Holders.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Trust Agreement to be given, made
or taken by Holders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing; and, except as otherwise expressly provided herein,
such action shall become effective when such instrument or instruments are
delivered to an Administrative Trustee. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Trust Agreement and (subject to Section
8.1) conclusive in favor of the Issuer Trustees, if made in the manner provided
in this Section 6.8.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than such signer's
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of such signer's authority. The fact and date of the execution
of any such instrument or writing, or the authority of the Person executing the
same, may also be proved in any other manner that any Issuer Trustee receiving
the same deems sufficient.
The ownership of Trust Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Trust Security shall bind every future Holder
of the same Trust Security and the Holder of every Trust Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Issuer
Trustees, the Depositor or the Issuer Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Trust Security may do so with
regard to all or any part of the Liquidation Amount of such Trust Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation Amount.
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If any dispute shall arise among the Holders or the Issuer Trustees
with respect to the authenticity, validity or binding nature of any request,
demand, authorization, direction, consent, waiver or other Act of such Holder or
Issuer Trustee under this Article VI, then the determination of such matter by
the Property Trustee shall be conclusive with respect to such matter.
SECTION 6.9. Inspection of Records.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Issuer Trust shall be open to inspection by Holders
(and other Issuer Trustees) during normal business hours for any purpose
reasonably related to such Holder's interest as a Holder (or such Issuer
Trustee's service as a Trustee hereunder).
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties of the Property Trustee
and the Delaware Trustee.
The Property Trustee and the Delaware Trustee, each severally on
behalf of and as to itself, hereby represents and warrants for the benefit of
the Depositor and the Holders that:
(a) the Property Trustee is a national banking association with trust
powers, duly organized, validly existing and in good standing under the laws of
the United States;
(b) the Property Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust Agreement
and has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(c) the Delaware Trustee is a Delaware corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware
and satisfies for the Issuer Trust the requirements of Section 3807(a) of the
Delaware Business Trust Act;
(d) the Delaware Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust Agreement
and has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(e) this Trust Agreement has been duly authorized, executed and
delivered by the Property Trustee and the Delaware Trustee and constitutes the
valid and legally binding agreement of each of the Property Trustee and the
Delaware Trustee enforceable against each of them in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer,
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reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles;
(f) the execution, delivery and performance of this Trust Agreement
have been duly authorized by all necessary corporate or other action on the part
of the Property Trustee and the Delaware Trustee and do not require any approval
of stockholders of the Property Trustee and the Delaware Trustee and such
execution, delivery and performance will not (i) violate the Charter or By-laws
of the Property Trustee or the Delaware Trustee, (ii) violate any provision of,
or constitute, with or without notice or lapse of time, a default under, or
result in the creation or imposition of, any Lien on any properties included in
the Trust Property pursuant to the provisions of, any indenture, mortgage,
credit agreement, license or other agreement or instrument to which the Property
Trustee or the Delaware Trustee is a party or by which it is bound, or (iii)
violate any law, governmental rule or regulation of the United States or the
State of Delaware, as the case may be, governing the banking, trust or general
powers of the Property Trustee or the Delaware Trustee (as appropriate in
context) or any order, judgment or decree applicable to the Property Trustee or
the Delaware Trustee;
(g) none of the authorization, execution or delivery by the Property
Trustee or the Delaware Trustee of this Trust Agreement nor the consummation of
any of the transactions by the Property Trustee or the Delaware Trustee, as the
case may be, contemplated herein requires the consent or approval of, the giving
of notice to, the registration with or the taking of any other action with
respect to any governmental authority or agency under any existing law of the
United States or the State of Delaware governing the banking, trust or general
powers of the Property Trustee or the Delaware Trustee, appropriate in context;
and
(h) there are no proceedings pending or, to the best of each of the
Property Trustee's and the Delaware Trustee's knowledge, threatened against or
affecting the Property Trustee or the Delaware Trustee in any court or before
any governmental authority, agency or arbitration board or tribunal that,
individually or in the aggregate, would materially and adversely affect the
Issuer Trust or would question the right, power and authority of the Property
Trustee or the Delaware Trustee, as the case may be, to enter into or perform
its obligations as one of the Issuer Trustees under this Trust Agreement.
SECTION 7.2. Representations and Warranties of Depositor.
The Depositor hereby represents and warrants for the benefit of the
Holders that:
(a) the Trust Securities Certificates issued at the Time of Delivery
on behalf of the Issuer Trust have been duly authorized and will have been duly
and validly executed, issued and delivered by the Issuer Trustees pursuant to
the terms and provisions of, and in accordance with the requirements of, this
Trust Agreement and the Holders will be, as of such date, entitled to the
benefits of this Trust Agreement; and
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(b) there are no taxes, fees or other governmental charges payable by
the Issuer Trust (or the Issuer Trustees on behalf of the Issuer Trust) under
the laws of the State of Delaware or any political subdivision thereof in
connection with the execution, delivery and performance by either Issuer Trustee
of this Trust Agreement.
ARTICLE VIII
THE ISSUER TRUSTEES; PAYING AGENTS
SECTION 8.1. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Issuer Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee,
subject to the Trust Indenture Act. Notwithstanding the foregoing, but subject
to Section 8.1(c) and 8.1(e), no provision of this Trust Agreement shall require
any of the Issuer Trustees to expend or risk its or their own funds or otherwise
incur any financial liability in the performance of any of its or their duties
hereunder, or in the exercise of any of its or their rights or powers, if it or
they shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it or them. Whether or not therein expressly so provided, every provision of
this Trust Agreement relating to the conduct or affecting the liability of or
affording protection to the Issuer Trustees shall be subject to the provisions
of this Section 8.1. Nothing in this Trust Agreement shall be construed to
release an Administrative Trustee from liability for his or her own gross
negligent action, his or her own gross negligent failure to act, or his or her
own wilful misconduct. To the extent that, at law or in equity, an Issuer
Trustee has duties and liabilities relating to the Issuer Trust or to the
Holders, such Issuer Trustee shall not be liable to the Issuer Trust or to any
Holder for such Issuer Trustee's good faith reliance on the provisions of this
Trust Agreement. The provisions of this Trust Agreement, to the extent that they
restrict the duties and liabilities of the Issuer Trustees otherwise existing at
law or in equity, are agreed by the Depositor and the Holders to replace such
other duties and liabilities of the Issuer Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and proceeds
from the Trust Property and only to the extent that there shall be sufficient
revenue or proceeds from the Trust Property to enable the Property Trustee or a
Paying Agent to make payments in accordance with the terms hereof. Each Holder,
by its acceptance of a Trust Security, agrees that it will look solely to the
revenue and proceeds from the Trust Property to the extent legally available for
distribution to it as herein provided and that the Issuer Trustees are not
personally liable to it for any amount distributable in respect of any Trust
Security or for any other liability in respect of any Trust Security. This
Section 8.1(b) does not limit the liability of the Issuer Trustees expressly set
forth elsewhere in this Trust Agreement or, in the case of the Property Trustee,
in the Trust Indenture Act.
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(c) If an Event of Default has occurred and is continuing, the
Property Trustee shall enforce this Trust Agreement for the benefit of the
Holders.
(d) The Property 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 Trust Agreement (including pursuant to Section 10.10), and no implied
covenants shall be read into this Trust Agreement against the Property Trustee.
If an Event of Default has occurred (that has not been cured or waived pursuant
to Section 5.16), the Property Trustee shall exercise such of the rights and
powers vested in it by this Trust 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.
(e) No provision of this Trust Agreement shall be construed to relieve
the Property 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 Property Trustee shall
be determined solely by the express provisions of this Trust
Agreement (including pursuant to Section 10.10), and the Property
Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this
Trust Agreement (including pursuant to Section 10.10); and
(B) in the absence of bad faith on the part of the Property
Trustee, the Property 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 Property Trustee and conforming to the requirements of this
Trust 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 Property
Trustee, the Property Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Trust Agreement.
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Property 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 at least a Majority in
Liquidation Amount of the Capital Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Property
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Trustee, or exercising any trust or power conferred upon the Property
Trustee under this Trust Agreement;
(iv) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and
the Payment Account shall be to deal with such Property in a similar
manner as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on liability
afforded to the Property Trustee under this Trust Agreement and the
Trust Indenture Act;
(v) the Property Trustee shall not be liable for any interest on
any money received by it except as it may otherwise agree with the
Depositor; and money held by the Property Trustee need not be
segregated from other funds held by it except in relation to the
Payment Account maintained by the Property Trustee pursuant to Section
3.1 and except to the extent otherwise required by law; and
(vi) the Property Trustee shall not be responsible for monitoring
the compliance by the Administrative Trustees or the Depositor with
their respective duties under this Trust Agreement, nor shall the
Property Trustee be liable for the default or misconduct of any other
Issuer Trustee or the Depositor;
(f) The Administrative Trustees shall not be responsible for
monitoring the compliance by the Issuer Trustees or the Depositor with their
respective duties under this Trust Agreement, nor shall either Administrative
Trustee be liable for the default or misconduct of any other Issuer Trustee or
the Depositor. The Delaware Trustee shall not be responsible for monitoring
compliance by the Property Trustee, the Administrative Trustees or the Depositor
with their respective duties under this Trust Agreement, nor shall the Delaware
Trustee be liable for the default or misconduct of any other Issuer Trustee or
the Depositor.
SECTION 8.2. Certain Notices.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit, in
the manner and to the extent provided in Section 10.8, notice of such Event of
Default to the Holders and the Administrative Trustee, unless such Event of
Default shall have been cured or waived.
Within five Business Days after the receipt of notice of the
Depositor's exercise of its right to defer the payment of interest on the
Debentures pursuant to the Indenture, the Property Trustee shall transmit, in
the manner and to the extent provided in Section 10.8, notice of such exercise
to the Holders and the Administrative Trustees, unless such exercise shall have
been revoked.
The Property Trustee shall not be deemed to have knowledge of any
Event of Default unless the Property Trustee shall have received written notice,
or a Responsible Officer charged
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with the administration of this Trust Agreement shall have obtained actual
knowledge, of such Event of Default.
SECTION 8.3. Certain Rights of Property Trustee.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may rely and shall be protected in acting or
refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action,
(ii) in construing any of the provisions of this Trust Agreement the Property
Trustee finds the same ambiguous or inconsistent with any other provisions
contained herein, or (iii) the Property Trustee is unsure of the application of
any provision of this Trust Agreement, then, except as to any matter as to which
the Holders of the Capital Securities are entitled to vote under the terms of
this Trust Agreement, the Property Trustee shall deliver a notice to the
Depositor requesting the Depositor's opinion as to the course of action to be
taken and the Property Trustee shall take such action, or refrain from taking
such action, as the Property Trustee shall be instructed in writing to take, or
to refrain from taking, by the Depositor; provided, however, that if the
Property Trustee does not receive such instructions of the Depositor within ten
Business Days after it has delivered such notice, or such reasonably shorter
period of time set forth in such notice (which to the extent practicable shall
not be less than two Business Days), it may, but shall be under no duty to, take
or refrain from taking such action not inconsistent with this Trust Agreement as
it shall deem advisable and in the best interests of the Holders, in which event
the Property Trustee shall have no liability except for its own bad faith,
negligence or wilful misconduct;
(c) any direction or act of the Depositor contemplated by this Trust
Agreement shall be sufficiently evidenced by an Officers' Certificate;
(d) any direction or act of an Administrative Trustee contemplated by
this Trust Agreement shall be sufficiently evidenced by a certificate executed
by such Administrative Trustee and setting forth such direction or act;
(e) the Property Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or re-registration thereof;
(f) the Property Trustee may consult with counsel (which counsel may
be counsel to the Depositor or any of its Affiliates, and may include any of its
employees) and the advice of such
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counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon and in accordance with such advice; the Property Trustee shall
have the right at any time to seek instructions concerning the administration of
this Trust Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Trust Agreement at the request or
direction of any of the Holders pursuant to this Trust Agreement, unless such
Holders shall have offered to the Property Trustee reasonable security or
indemnity against the costs, expenses and liabilities that might be incurred by
it in compliance with such request or direction; provided that, nothing
contained in this Section 8.3(g) shall be taken to relieve the Property Trustee,
upon the occurrence of an Event of Default, of its obligation to exercise the
rights and powers vested in it by this Trust Agreement;
(h) the Property 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, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other paper or document,
unless requested in writing to do so by one or more Holders, but the Property
Trustee may make such further inquiry or investigation into such facts or
matters as it may see fit;
(i) the Property 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, provided that the Property Trustee shall be responsible for
its own negligence, bad faith or wilful misconduct with respect to selection of
any agent or attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the Property
Trustee (i) may request instructions from the Holders (which instructions may
only be given by the Holders of the same proportion in Liquidation Amount of the
Trust Securities as would be entitled to direct the Property Trustee under the
terms of the Trust Securities in respect of such remedy, right or action), (ii)
may refrain from enforcing such remedy or right or taking such other action
until such instructions are received, and (iii) shall be protected in acting in
accordance with such instructions; and
(k) except as otherwise expressly provided by this Trust Agreement,
the Property Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Trust Agreement.
No provision of this Trust Agreement shall be deemed to impose any
duty or obligation on any Issuer 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 it shall be unqualified
or incompetent in accordance with applicable law, to perform any such act or
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acts, or to exercise any such right, power, duty or obligation. No permissive
power or authority available to any Issuer Trustee shall be construed to be a
duty.
SECTION 8.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Depositor and the Issuer Trust, and the
Issuer Trustees do not assume any responsibility for their correctness. The
Issuer Trustees shall not be accountable for the use or application by the
Depositor of the proceeds of the Debentures.
The Property Trustee may conclusively assume that any funds held by it
hereunder are legally available unless an officer of the Property Trustee
assigned to its Corporate Trust division shall have received written notice from
the Depositor, any Holder or any other Issuer Trustee that such funds are not
legally available.
SECTION 8.5. May Hold Securities.
Any Issuer Trustee or any agent of any Issuer Trustee or the Issuer
Trust, in its individual or any other capacity, may become the owner or pledgee
of Trust Securities and, subject to Sections 8.8 and 8.13 and, except as
provided in the definition of the term "Outstanding" in Article I, may otherwise
deal with the Issuer Trust with the same rights it would have if it were not an
Issuer Trustee or such agent.
SECTION 8.6. Compensation; Indemnity; Fees.
The Depositor agrees:
(a) to pay to each Issuer Trustee and Paying Agent from time to time
such reasonable compensation for all services rendered by them hereunder as may
be agreed by the Depositor and such Issuer Trustee or Paying Agent, as the case
may be, 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);
(b) except as otherwise expressly provided herein, to reimburse each
Issuer Trustee and Paying Agent upon request for all reasonable expenses,
disbursements and advances incurred or made by each Issuer Trustee and Paying
Agent in accordance with any provision of this Trust Agreement (including the
reasonable compensation and the expenses and disbursements of their agents and
counsel), except any such expense, disbursement or advance as may be
attributable to their negligence, bad faith or wilful misconduct; and
(c) to the fullest extent permitted by applicable law, to indemnify
and hold harmless (i) each Issuer Trustee, (ii) each Paying Agent, (iii) any
Affiliate of any Issuer Trustee, (iv) any officer, director, shareholder,
employee, representative or agent of any Issuer Trustee, and (v) any employee or
agent of the Issuer Trust (referred to herein as an "Indemnified Person")
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from and against any loss, damage, liability, tax, penalty, expense or claim of
any kind or nature whatsoever incurred by such Indemnified Person by reason of
the creation, operation or termination of the Issuer Trust or any act or
omission performed or omitted by such Indemnified Person in good faith on behalf
of the Issuer Trust and in a manner such Indemnified Person reasonably believed
to be within the scope of authority conferred on such Indemnified Person by this
Trust 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, bad faith or wilful misconduct with respect to
such acts or omissions.
(d) to the fullest extent permitted by applicable law, the parties
intend that Section 3561 of Title 12 of the Delaware Code shall not apply to the
Issuer Trust and that compensation payable to any Issuer Trustee pursuant to
this Section 8.6 not be subject to review by any court under Section 3560 of
Title 12 of the Delaware Code or otherwise.
The provisions of this Section 8.6 shall survive the termination of
this Trust Agreement and the resignation or removal of any Issuer Trustee.
No Issuer Trustee or Paying Agent may claim any Lien on any Trust
Property as a result of any amount due pursuant to this Section 8.6.
The Depositor, any Issuer Trustee (subject to Section 8.8(a)) and any
Paying Agent may engage in or possess an interest in other business ventures of
any nature or description, independently or with others, similar or dissimilar
to the business of the Issuer Trust, and the Issuer Trust and the Holders of
Trust Securities shall have no rights by virtue of this Trust Agreement in and
to such independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the business of the Issuer
Trust, shall not be deemed wrongful or improper. Neither the Depositor, any
Paying Agent nor any Issuer Trustee shall be obligated to present any particular
investment or other opportunity to the Issuer Trust even if such opportunity is
of a character that, if presented to the Issuer Trust, could be taken by the
Issuer Trust, and the Depositor, any Issuer Trustee or any Paying Agent shall
have the right to take for its own account (individually or as a partner or
fiduciary) or to recommend to others any such particular investment or other
opportunity. Any Issuer Trustee or Paying Agent may engage or be interested in
any financial or other transaction with the Depositor or any Affiliate of the
Depositor, or may act as depository for, trustee or agent for, or act on any
committee or body of holders of, securities or other obligations of the
Depositor or its Affiliates.
SECTION 8.7. Corporate Property Trustee Required; Eligibility of
Issuer Trustees.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall 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. If any such Person publishes reports of condition at least
annually, pursuant to law
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or to the requirements of its supervising or examining authority, then for the
purposes of this Section 8.7 and to the extent permitted by the Trust Indenture
Act, the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Property Trustee with respect to the Trust
Securities shall cease to be eligible in accordance with the provisions of this
Section 8.7, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article. At the time of appointment, the Property
Trustee must have securities rated in one of the three highest rating categories
by a nationally recognized statistical rating organization.
(b) There shall at all times be one or more Administrative Trustees
hereunder. Each Administrative Trustee shall be either a natural person who is
at least 21 years of age or a legal entity that shall act through one or more
persons authorized to bind that entity.
(c) There shall at all times be a Delaware Trustee hereunder. The
Delaware Trustee shall either be (i) a natural person who is at least 21 years
of age and a resident of the State of Delaware, or (ii) a legal entity with its
principal place of business in the State of Delaware and that otherwise meets
the requirements of applicable Delaware law and that shall act through one or
more persons authorized to bind such entity.
SECTION 8.8. Conflicting Interests.
(a) If the Property Trustee has or shall acquire a conflicting
interest within the meaning of the Trust Indenture Act, the Property Trustee
shall either eliminate such interest or resign, to the extent and in the manner
provided by, and subject to the provisions of, the Trust Indenture Act and this
Trust Agreement.
(b) The Guarantee Agreement and the Indenture shall be deemed to be
specifically described in this Trust Agreement for the purposes of clause (i) of
the first proviso contained in Section 310(b) of the Trust Indenture Act.
SECTION 8.9. Co-Trustees and Separate Trustee.
Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property may at the time be located, Depositor and the Administrative Trustees,
by agreed action of the majority of them shall have power to appoint, and upon
the written request of the Administrative Trustee and the Depositor shall for
such purpose join with the Administrative Trustees in the execution, delivery,
and performance of all instruments and agreements necessary or proper to
appoint, one or more Persons approved by the Property Trustee either to act as
co-trustee, jointly with the Property Trustee, of all or any part of such Trust
Property, or to the extent required by law to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section 8.9.
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Any co-trustee or separate trustee appointed pursuant to this Section 8.9 shall
either be (i) a natural person who is at least 21 years of age and a resident of
the United States, or (ii) a legal entity with its principal place of business
in the United States that shall act through one or more persons authorized to
bind such entity. If an Event of Default under the Indenture shall have occurred
and be continuing, the Property Trustee alone shall have the power to make such
appointment.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed by one or more
Administrative Trustees, and the Trust Securities shall be delivered by the
Property Trustee, and all rights, powers, duties, and obligations hereunder in
respect of the custody of securities, cash and other personal property held by,
or required to be deposited or pledged with, the Property Trustee specified
hereunder shall be exercised solely by the Property Trustee and not by such
co-trustee or separate trustee.
(b) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed by the
Property Trustee or by the Property Trustee and such co-trustee or separate
trustee jointly, as shall be provided in the instrument appointing such
co-trustee or separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the Property
Trustee shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and performed by
such co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept the
resignation of or remove any co-trustee or separate trustee appointed under this
Section 8.9, and, in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee shall have power to accept the resignation of,
or remove, any such co-trustee or separate trustee without the concurrence of
the Depositor. Upon the written request of the Property Trustee, the Depositor
shall join with the Property Trustee in the execution, delivery and performance
of all instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee so
resigning or removed may be appointed in the manner provided in this Section
8.9.
(d) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Property Trustee or any other
trustee hereunder.
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(e) The Property Trustee shall not be liable by reason of any act of a
co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
SECTION 8.10. Resignation and Removal; Appointment of Successor.
No resignation or removal of any Issuer Trustee (the "Relevant
Trustee") and no appointment of a successor Issuer Trustee pursuant to this
Article shall become effective until the acceptance of appointment by the
successor Issuer Trustee in accordance with the applicable requirements of
Section 8.11.
Subject to the immediately preceding paragraph, the Relevant Trustee
may resign at any time by giving written notice thereof to the Holders. If the
instrument of acceptance by the successor Issuer Trustee required by Section
8.11 shall not have been delivered to the Relevant Trustee within 60 days after
the giving of such notice of resignation, the Relevant Trustee may petition, at
the expense of the Depositor, any court of competent jurisdiction for the
appointment of a successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Issuer Trustee may be removed at any time by Act of the Holder
of the Common Securities. If a Debenture Event of Default shall have occurred
and be continuing, the Property Trustee or the Delaware Trustee, or both of
them, may be removed at such time by Act of the Holders of a Majority in
Liquidation Amount of the Capital Securities, delivered to the Relevant Trustee
(in its individual capacity and, in the case of the Property Trustee, on behalf
of the Issuer Trust). An Administrative Trustee may only be removed by the
Holder of the Common Securities and may be so removed at any time.
If any Issuer Trustee shall resign, be removed or become incapable of
acting as Issuer Trustee, or if a vacancy shall occur in the office of any
Issuer Trustee for any cause, at a time when no Debenture Event of Default shall
have occurred and be continuing, the Holder of the Common Securities, by Act
delivered to the retiring Issuer Trustee, shall promptly appoint a successor
Issuer Trustee or Issuer Trustees, and such successor Issuer Trustee shall
comply with the applicable requirements of Section 8.11. If the Property Trustee
or the Delaware Trustee shall resign, be removed or become incapable of
continuing to act as the Property Trustee or the Delaware Trustee, as the case
may be, at a time when a Debenture Event of Default shall have occurred and be
continuing, the Holders of Capital Securities, by Act of the Holders of a
Majority in Liquidation Amount of the Capital Securities delivered to the
retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee
or Trustees, and such successor Issuer Trustee shall comply with the applicable
requirements of Section 8.11. If an Administrative Trustee shall resign, be
removed or become incapable of acting as Administrative Trustee, at a time when
a Debenture Event of Default shall have occurred and be continuing, the Holder
of the Common Securities by Act delivered to the Administrative Trustee shall
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promptly appoint a successor Administrative Trustee or Administrative Trustees
and such successor Administrative Trustee or Trustees shall comply with the
applicable requirements of Section 8.11. If no successor Relevant Trustee shall
have been so appointed by the Holder of the Common Securities or the Holders of
a Majority in Liquidation Amount of the Capital Securities, as the case may be,
and accepted appointment in the manner required by Section 8.11, any Holder who
has been a Holder of Trust Securities for at least six months may, on behalf of
such Holder and all others similarly situated, or any other Issuer Trustee, may
petition any court of competent jurisdiction for the appointment of a successor
Relevant Trustee.
The Property Trustee shall give notice of each resignation and each
removal of an Issuer Trustee and each appointment of a successor Issuer Trustee
to all Holders in the manner provided in Section 10.8 and shall give notice to
the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Property
Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, if any Delaware Trustee who is a natural person dies or becomes, in
the opinion of the Depositor, incompetent or incapacitated, the vacancy created
by such death, incompetence or incapacity may be filled by (a) the unanimous act
of the remaining Administrative Trustees if there are at least two of them or
(b) otherwise by the Depositor (with the successor in either case being a Person
who satisfies the eligibility requirement for the Delaware Trustee set forth in
Section 8.7).
SECTION 8.11. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Relevant Trustee,
the retiring Relevant Trustee and each successor Relevant Trustee with respect
to the Trust Securities shall execute and deliver an amendment hereto wherein
each successor Relevant Trustee shall accept such appointment and which (a)
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Issuer Trust, and (b) shall add to or change any of the
provisions of this Trust Agreement as shall be necessary to provide for or
facilitate the administration of the Issuer Trust by more than one Relevant
Trustee, it being understood that nothing herein or in such amendment shall
constitute such Relevant Trustees co-trustees and upon the execution and
delivery of such amendment the resignation or removal of the retiring Relevant
Trustee shall become effective to the extent provided therein and each such
successor Relevant Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Relevant Trustee; but, on request of the Issuer Trust or any successor Relevant
Trustee such retiring Relevant Trustee shall duly assign, transfer and deliver
to such successor Relevant Trustee all Trust Property, all proceeds thereof and
money held by such retiring Relevant Trustee hereunder with respect to the Trust
Securities and the Issuer Trust.
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Upon request of any Issuer Trustee or any such successor Relevant
Trustee, the retiring Relevant Trustee or the Issuer Trust, as the case may be,
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the first or second preceding paragraph, as the case may
be.
No successor Relevant Trustee shall accept its appointment unless at
the time of such acceptance such successor Relevant Trustee shall be qualified
and eligible under this Article.
SECTION 8.12. Merger, Conversion, Consolidation or Succession to
Business.
Any Person into which the Property Trustee or the Delaware Trustee may
be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any Person, succeeding to all or substantially all
the corporate trust business of such Relevant Trustee, shall be the successor of
such Relevant Trustee hereunder, provided that such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
SECTION 8.13. Preferential Collection of Claims Against Depositor or
Issuer Trust.
If and when the Property Trustee shall be or become a creditor of the
Depositor or the Issuer Trust (or any other obligor upon the Capital
Securities), the Property Trustee shall be subject to the provisions of the
Trust Indenture Act regarding the collection of claims against the Depositor or
the Issuer Trust (or any such other obligor).
SECTION 8.14. Property Trustee May File Proofs of Claim.
In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other similar judicial
proceeding relative to the Issuer Trust or any other obligor upon the Trust
Securities or the property of the Issuer Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable and irrespective of whether
the Property Trustee shall have made any demand on the Issuer Trust for the
payment of any past due Distributions) shall be entitled and empowered, to the
fullest extent permitted by law, by intervention in such proceeding or
otherwise:
(a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Trust Securities and to file
such other papers or documents as may be necessary or advisable in order to have
the claims of the Property Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel) and of the Holders allowed in such judicial proceeding, and
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(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Property Trustee and, in the event the
Property Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Property Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel, and any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement adjustment or compensation affecting the
Trust Securities or the rights of any Holder thereof or to authorize the
Property Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 8.15. Reports by Property Trustee.
(a) Not later than 60 days following May 15 of each year commencing
with May 15, 1998, the Property Trustee shall transmit to all Holders in
accordance with Section 10.8, and to the Depositor, a brief report dated as of
the immediately preceding December 31 with respect to:
(i) its eligibility under Section 8.7 or, in lieu thereof, if to
the best of its knowledge it has continued to be eligible under said
Section, a written statement to such effect;
(ii) a statement that the Property Trustee has complied with all
of its obligations under this Trust Agreement during the twelve-month
period (or, in the case of the initial report, the period since the
Closing Date) ending with such December 31 or, if the Property Trustee
has not complied in any material respect with such obligations, a
description of such noncompliance; and
(iii) any change in the property and funds in its possession as
Property Trustee since the date of its last report and any action
taken by the Property Trustee in the performance of its duties
hereunder which it has not previously reported and which in its
opinion materially affects the Trust Securities.
(b) In addition the Property Trustee shall transmit to Holders such
reports concerning the Property Trustee and its actions under this Trust
Agreement as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Property Trustee with each national stock exchange,
the Nasdaq National Market
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or such other interdealer quotation system or self-regulatory organization upon
which the Trust Securities are listed or traded, with the Commission and with
the Depositor.
SECTION 8.16. Reports to the Property Trustee.
Each of the Depositor and the Administrative Trustees on behalf of the
Issuer Trust shall provide to the Property Trustee such documents, reports and
information as required by Section 314 of the Trust Indenture Act (if any) and
the compliance certificate required by Section 314(a) of the Trust Indenture Act
in the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act. The Depositor and the Administrative Trustees on behalf of the
Issuer Trust shall annually file with the Property Trustee a certificate
specifying whether such Person is in compliance with all of the terms and
covenants applicable to such Person hereunder.
SECTION 8.17. Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrative Trustees on behalf of the
Issuer Trust shall provide to the Property Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Trust Agreement that
relate to any of the matters set forth in Section 314(c) of the Trust Indenture
Act. Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
SECTION 8.18. Number of Issuer Trustees.
(a) The initial number of Issuer Trustees shall be five, provided that
the Property Trustee and the Delaware Trustee may be the same Person if the
Property Trustee satisfies the applicable requirements.
(b) If an Issuer Trustee ceases to hold office for any reason, a
vacancy shall occur. The vacancy shall be filled with an Issuer Trustee
appointed in accordance with Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of an Issuer Trustee shall not
operate to annul, dissolve or terminate the Issuer Trust.
SECTION 8.19. Delegation of Power.
(a) Any Administrative Trustee, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 such
Administrative Trustee's power for the purpose of executing any documents
contemplated in Section 2.7(a), including any registration statement or
amendment thereto filed with the Commission, or making any other governmental
filing; and
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(b) The Administrative Trustees shall have power to delegate from time
to time to such of their number or to the Depositor the doing of such things and
the execution of such instruments either in the name of the Issuer Trust or the
names of the Administrative Trustees or otherwise as the Administrative Trustees
may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of this Trust Agreement.
SECTION 8.20. Appointment of Administrative Trustees.
(a) The Administrative Trustee shall initially be Saul L. Basch, R.
Kevin Price and Robert C. Walker, and their successors shall be appointed by the
Holder of all the Common Securities. The Administrative Trustees may resign or
be removed by the Holder of all the Common Securities at any time. Upon any
resignation or removal of an Administrative Trustee, the Depositor shall appoint
a successor Administrative Trustee. If at any time there is no Administrative
Trustee, the Property Trustee or any Holder who has been a Holder of Trust
Securities for at least six months may petition any court of competent
jurisdiction for the appointment of one or more Administrative Trustees.
(b) Whenever a vacancy in the number of Administrative Trustees shall
occur, until such vacancy is filled by the appointment of an Administrative
Trustee in accordance with this Section 8.20, the Administrative Trustees in
office, regardless of their number (and notwithstanding any other provision of
this Agreement), shall have all the powers granted to the Administrative
Trustees and shall discharge all the duties imposed upon the Administrative
Trustees by this Trust Agreement.
(c) Notwithstanding the foregoing or any other provision of this Trust
Agreement, if any Administrative Trustee who is a natural person dies or
becomes, in the opinion of the Holder of all the Common Securities, incompetent
or incapacitated, the vacancy created by such death, incompetence or incapacity
may be filled by the unanimous act of the remaining Administrative Trustees, if
there were at least two of them prior to such vacancy, and by the Depositor, if
there were not two such Administrative Trustees immediately prior to such
vacancy (with the successor being a Person who satisfies the eligibility
requirement for Administrative Trustees set forth in Section 8.7).
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
SECTION 9.1. Dissolution Upon Expiration Date.
Unless earlier dissolved, the Issuer Trust shall automatically
dissolve on July 15, 2047 (the "Expiration Date"), and shall thereafter be
terminated by filing a Certificate of Cancellation with the Secretary of State
of the State of Delaware, following the distribution of the Trust Property in
accordance with Section 9.4.
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SECTION 9.2. Early Dissolution.
The first to occur of any of the following events is an "Early
Termination Event" upon the occurrence of which the Trust shall be dissolved:
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Holder of all the Common Securities;
(b) the written direction to the Property Trustee from the Holder of
all the Common Securities at any time to dissolve the Issuer Trust and to
distribute the Debentures to Holders in exchange for the Capital Securities
(which direction is optional and wholly within the discretion of the Holder of
all the Common Securities);
(c) the redemption of all of the Capital Securities in connection with
the redemption of all the Debentures; and
(d) the entry of an order for dissolution of the Issuer Trust by a
court of competent jurisdiction.
SECTION 9.3. Termination.
The respective obligations and responsibilities of the Issuer Trustees
and the Issuer Trust created and continued hereby shall terminate upon the
latest to occur of the following: (a) the distribution by the Property Trustee
to Holders of all amounts required to be distributed hereunder upon the
liquidation of the Issuer Trust pursuant to Section 9.4, or upon the redemption
of all of the Trust Securities pursuant to Section 4.2; (b) the payment of any
expenses owed by the Issuer Trust; and (c) the discharge of all administrative
duties of the Administrative Trustees, including the performance of any tax
reporting obligations with respect to the Issuer Trust or the Holders.
SECTION 9.4. Liquidation.
(a) If an Early Termination Event specified in clause (a), (b) or (d)
of Section 9.2 occurs or upon the Expiration Date, 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 Section 3808(e) of the Delaware
Business Trust Act and any other applicable law, to each Holder a Like Amount of
Debentures, subject to Section 9.4(d). Notice of liquidation shall be given by
the Property Trustee by first-class mail, postage prepaid mailed not less than
30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust
Securities at such Holder's address appearing in the Securities Register. All
such notices of liquidation shall:
(i) state the Liquidation Date;
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(ii) state that from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics by
which Holders may exchange Trust Securities Certificates for
Debentures, or if Section 9.4(d) applies receive a Liquidation
Distribution, as the Property Trustee and the Administrative Trustees
shall deem appropriate.
(b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect
the liquidation of the Issuer Trust and distribution of the Debentures to
Holders, the Property Trustee, either itself acting as exchange agent or through
the appointment of a separate exchange agent, shall establish a record date for
such distribution (which shall be not more than 45 days prior to the Liquidation
Date) and establish such procedures as it shall deem appropriate to effect the
distribution of Debentures in exchange for the Outstanding Trust Securities
Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates representing a Like Amount of Debentures will be
issued to Holders of Trust Securities Certificates, upon surrender of such Trust
Securities Certificates to the exchange agent for exchange, (iii) any Trust
Securities Certificates not so surrendered for exchange will be deemed to
represent a Like Amount of Debentures bearing accrued and unpaid interest in an
amount equal to the accumulated and unpaid Distributions on such Trust
Securities Certificates until such certificates are so surrendered (and until
such certificates are so surrendered, no payments of interest or principal will
be made to Holders of Trust Securities Certificates with respect to such
Debentures), and (iv) all rights of Holders holding Trust Securities will cease,
except the right of such Holders to receive Debentures upon surrender of Trust
Securities Certificates.
(d) If, upon dissolution of the Trust, notwithstanding the other
provisions of this Section 9.4, whether because of an order for dissolution
entered by a court of competent jurisdiction or otherwise, distribution of the
Debentures in the manner provided herein is determined by the Property Trustee
not to be practical, or if an Early Termination Event specified in clause (c) of
Section 9.2 occurs, the Trust Property shall be liquidated by the Property
Trustee in such manner as the Property Trustee determines. In such event, in
connection with the winding-up of the Issuer Trust, 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 Section 3808(e) of the Delaware Business Trust Act and other
applicable law, an amount equal to the Liquidation Amount per Trust Security
plus accumulated and unpaid Distributions thereon to the date of payment (such
amount being the "Liquidation Distribution"). If, upon any such winding up, the
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, subject to the next succeeding sentence, the amounts payable
by the Issuer Trust on the Trust Securities shall be paid on a pro rata basis
(based upon Liquidation Amounts). The Holder of all the Common Securities will
be entitled to receive
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Liquidation Distributions upon any such winding-up pro rata (determined as
aforesaid) with Holders of Capital Securities, except that, if a Debenture Event
of Default specified in Section 5.1(1) or 5.1(2) of the Indenture has occurred
and is continuing, the Capital Securities shall have a priority over the Common
Securities as provided in Section 4.3.
SECTION 9.5. Mergers, Consolidations, Amalgamations or Replacements of
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 corporation or other body, except pursuant
to this Section 9.5. The Issuer Trust may, at the request of the Holder of all
the Common Securities and, with the consent of the Administrative Trustees, but
without the consent of the Holders of the Outstanding Trust Securities, the
Property Trustee, or the Delaware Trustee, 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 have the same priority as the
Capital Securities with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) a trustee of such successor entity possessing the
same powers and duties as the Property Trustee is appointed to hold the
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 that then assigns a rating to the Capital
Securities, (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, and (vii) the
Depositor or its permitted successor or transferee 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 Agreement. Notwithstanding the foregoing, the Issuer Trust
shall not, except with the consent of holders of all of the 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
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entity to be taxable as a corporation or classified as other than a grantor
trust for United States Federal income tax purposes.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Holders.
Except as set forth in Section 9.2, the death, incapacity,
dissolution, termination or bankruptcy of any Person having an interest,
beneficial or otherwise, in Trust Securities shall not operate to annul,
dissolve or terminate this Trust Agreement, nor entitle the legal
representatives, successors or heirs of such Person or any Holder for such
person, to claim an accounting, take any action or bring any proceeding in any
court for a partition or winding up of the arrangements contemplated hereby, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
SECTION 10.2. Amendment.
(a) This Trust Agreement may be amended from time to time by the
Property Trustee, the Administrative Trustees and the Holder of the Common
Securities, without the consent of the Delaware Trustee or any Holder of the
Capital Securities, (i) to cure any ambiguity, correct or supplement any
provision herein that may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising under
this Trust Agreement, which shall not be inconsistent with the other provisions
of this Trust Agreement, or (ii) to modify, eliminate or add to any provisions
of this Trust Agreement to such extent as shall be necessary to ensure that the
Issuer Trust will not be taxable as a corporation or will be classified as a
grantor trust for United States Federal income tax purposes 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, that in either case (i) or (ii) such action shall not
adversely affect in any material respect the interests of the Delaware Trustee
or any Holder.
(b) Except as provided in Section 10.2(c) hereof, any provision of
this Trust Agreement may be amended by the Property Trustee, the Administrative
Trustees and the Holder of the Common Securities, without the consent of the
Delaware Trustee, and with (i) the consent of Holders of at least a Majority in
Liquidation Amount of the 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 cause the Issuer Trust to be taxable as a corporation or as
other than a grantor trust for United States Federal income tax purposes or
affect the Issuer Trust's exemption from status as an "investment company" under
the Investment Company Act.
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(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Holder, this 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 to institute suit for the
enforcement of any such payment on or after such date; and notwithstanding any
other provision herein, without the unanimous consent of the Holders, this
paragraph (c) of this Section 10.2 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Issuer Trustee shall enter into or consent to any amendment to this Trust
Agreement that would cause the Issuer Trust to fail or cease to qualify for the
exemption from status as an "investment company" under the Investment Company
Act or to be taxable as a corporation or to be classified as other than a
grantor trust for United States Federal income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
(i) without the consent of the Depositor and the Administrative Trustees, this
Trust Agreement may not be amended in a manner that imposes any additional
obligation on the Depositor or the Administrative Trustees, and (ii) without the
consent of the Delaware Trustee, this Trust Agreement may not be amended in a
manner that imposes any additional obligation on the Delaware Trustee.
(f) In the event that any amendment to this Trust Agreement is made,
the Administrative Trustees or the Property Trustee shall promptly provide to
the Depositor a copy of such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement that affects its
own rights, duties or immunities under this Trust Agreement. The Property
Trustee shall be entitled to receive an Opinion of Counsel and an Officers'
Certificate stating that any amendment to this Trust Agreement is in compliance
with this Trust Agreement.
SECTION 10.3. Separability.
In case any provision in this Trust Agreement or in the Trust
Securities Certificates 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.
SECTION 10.4. Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
HOLDERS, THE ISSUER TRUST, THE DEPOSITOR AND THE ISSUER TRUSTEES WITH RESPECT TO
THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED
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BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS. THE PROVISIONS OF SECTION 3540 OF TITLE 12 OF THE DELAWARE CODE
SHALL NOT APPLY TO THIS TRUST.
To the fullest extent permitted by Delaware law, there shall not be
applicable to the Issuer Trust, the Issuer Trustees or this Trust Agreement any
provisions of law (whether statutory or common) of the State of Delaware
pertaining to trusts (other than the Delaware Business Trust Act) that relate to
or regulate in a manner inconsistent with the terms hereof (a) the filing with
any court or governmental body or agent of trustee accounts or schedules of
trustee fees and charges, (b) affirmative requirements to post bonds for
trustees, officers, agents or employees of a trust, (c) the acquisition, holding
or disposition of any property, (d) the allocation of receipts and expenditures
between income and principal, (e) restrictions or limitation on the permissible
nature, amount or concentration of trust investment or requirements relating to
the titling, storage or other manner of holding or investing trust assets, or
(f) the establishment of fiduciary or other standards of responsibility or
limitations on the acts or powers of trustees that are inconsistent (whether
more or less restrictive) with this provision.
SECTION 10.5. Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security shall be a day
that is not a Business Day, then such payment need not be made on such date but
may be made on the next succeeding day that is a Business Day (except as
otherwise provided in Sections 4.1(a) and 4.2(d)), with the same force and
effect as though made on the date fixed for such payment, and no Distributions
shall accumulate on such unpaid amount for the period after such date.
SECTION 10.6. Successors.
This Trust Agreement shall be binding upon and shall inure to the
benefit of any successor to the Depositor, the Issuer Trust and any Issuer
Trustee, including any successor by operation of law. Except in connection with
a consolidation, merger or sale involving the Depositor that is permitted under
Article VIII of the Indenture and pursuant to which the assignee agrees in
writing to perform the Depositor's obligations hereunder, the Depositor shall
not assign its obligations hereunder.
SECTION 10.7. Headings.
The Article and Section headings are for convenience only and shall
not affect the construction of this Trust Agreement.
SECTION 10.8. Reports, Notices and Demands.
(a) Any report, notice, demand or other communication that by any
provision of this Trust Agreement is required or permitted to be given or served
to or upon any Holder or the Depositor may be given or served in writing by
deposit thereof, first-class postage prepaid, in
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the United States mail, hand delivery or facsimile transmission, in each case,
addressed, (a) in the case of a Holder of Capital Securities, to such Holder as
such Holder's name and address may appear on the Securities Register; and (b) in
the case of the Holder of the Common Securities or the Depositor, to HSB Group,
Inc., One State Street, Hartford, Connecticut 06102, Attention: Corporate
Secretary, facsimile no.: (860) 493-1038, or to such other address as may be
specified in a written notice by the Holder of the Common Securities or the
Depositor, as the case may be, to the Property Trustee. Such notice, demand or
other communication to or upon a Holder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission. Such notice, demand or other communication to or upon the
Depositor shall be deemed to have been sufficiently given or made only upon
actual receipt of the writing by the Depositor.
(b) Any notice, demand or other communication that by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Issuer Trust or any Issuer Trustee may be given or served in writing by
deposit thereof, first-class postage prepaid, in the United States mail, hand
delivery or facsimile transmission, in each case, addressed, (a) in the case of
the Property Trustee to The First National Bank of Chicago, One First National
Plaza, Suite 0126, Chicago, Illinois 60670-0126, Attention: Corporate Trust
Services Division; (b) with respect to the Delaware Trustee, Attention: First
Chicago Delaware Inc., 300 King Street, Wilmington, Delaware 19801, Attention:
Michael J. Majchrzak; (c) in the case of the Administrative Trustees, to them at
the address above for notices to the Depositor, marked "Attention:
Administrative Trustees of HSB Capital I"; and (d) in the case of the Issuer
Trust, to its principal executive office specified in Section 2.2, with a copy
to each of the Property Trustee, the Delaware Trustee and the Administrative
Trustees, or, in each such case, to such other address as may be specified in a
written notice by the applicable Person to the Property Trustee, the Depositor
and the Holders. Such notice, demand or other communication to or upon the
Property Trustee, the Delaware Trustee, the Administrative Trustees or the
Issuer Trust shall be deemed to have been sufficiently given or made only upon
actual receipt of the writing by the Property Trustee, the Delaware Trustee,
such Administrative Trustees or the Issuer Trust, as the case may be.
SECTION 10.9. Agreement Not to Petition.
Each of the Issuer Trustees and the Depositor agree for the benefit of
the Holders that, until at least one year and one day after the Issuer Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Issuer Trust under any bankruptcy,
insolvency, reorganization or other similar law (including the United States
Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in the
commencement of any proceeding against the Issuer Trust under any Bankruptcy
Law. The Property Trustee and the Depositor agree, for the benefit of Holders,
that if the Depositor or any Issuer Trustee takes action in violation of this
Section 10.9, then at the expense of the Depositor, the Property Trustee or
Depositor, as the case may be, shall file an answer with the bankruptcy court or
otherwise properly contest the filing of such petition by the Depositor against
the Issuer Trust or the commencement of such action and raise the defense that
the Depositor has agreed in
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writing not to take such action and should be estopped and precluded therefrom
and such other defenses, if any, as counsel for the Issuer Trustees or the
Issuer Trust may assert.
SECTION 10.10. Trust Indenture Act; Conflict with Trust Indenture Act.
(a) Prior to the time a Registration Statement, with respect to the
Capital Securities, shall be declared effective as contemplated by the
Registration Rights Agreement, the Trust Indenture Act that are required or
deemed to be part of this Trust Agreement pursuant to the terms herein and
shall, to the extent applicable, be governed by such provisions. The Trust
Agreement shall be subject to and governed by the Trust Indenture Act upon (i)
the consummation of the exchange offer pursuant to the Registration Rights
Agreement or (ii) the effectiveness of a Registration Statement with respect to
the Capital Securities. Until such time, the Trust Indenture Act shall not apply
to this Trust Agreement.
(b) The Property Trustee shall be the only Issuer Trustee which is a
trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required or deemed to be included in this
Trust Agreement by any of the provisions of the Trust Indenture Act, such
required or deemed provision shall control. If any provision of this Trust
Agreement modifies or excludes any provision of the Trust Indenture Act which
may be so modified or excluded, the latter provision shall be deemed to apply to
this Trust Agreement as so modified or excluded, as the case may be.
SECTION 10.11. Acceptance of Terms of Trust Agreement, Guarantee
Agreement and Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN
BY OR ON BEHALF OF A HOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR
FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE
BY THE HOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY
OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT, THE GUARANTEE AGREEMENT
AND THE INDENTURE, AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS
OF THE GUARANTEE AGREEMENT AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT
OF THE ISSUER TRUST, SUCH HOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS
OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE
ISSUER TRUST AND SUCH HOLDER AND SUCH OTHERS.
This Trust 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.
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SECTION 10.12. Registration Rights. The Holders of the Capital
Securities, are entitled to the benefits of the Registration Rights Agreement,
including the right to receive Liquidated Damages Distributions determined by
reference to Liquidated Damages (as defined in the Indenture) under certain
circumstances.
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IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Trust Agreement as of the day and year first above written.
HSB GROUP, INC.
as Depositor
By:______________________
Name:
Title:
First National Bank of Chicago
as Property Trustee
By:_________________________
Name:
Title:
First Chicago Delaware Inc.
as Delaware Trustee
HSB Capital I
By:_________________________
Name: Saul L. Basch
as Administrative Trustee
By:_________________________
Name: R. Kevin Price
as Administrative Trustee
By:_________________________
Name: Robert C. Walker
as Administrative Trustee
<PAGE>
Exhibit A
[CERTIFICATE OF TRUST]
A-1
<PAGE>
Exhibit B
[CERTIFICATE DEPOSITORY AGREEMENT]
B-1
<PAGE>
Exhibit C
[Form of Common Securities Certificate]
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO THE DEPOSITOR OR AN
AFFILIATE OF THE DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND
SECTION 5.11 OF THE TRUST AGREEMENT.
Certificate Number Aggregate Liquidation Amount
C-__ $________
Certificate Evidencing Common Securities
of
HSB Capital I
Global Floating Rate Common Securities
(liquidation amount $1,000 per Common Security)
HSB Capital I, a statutory business trust created under the laws of the
State of Delaware (the "Issuer Trust"), hereby certifies that [NAME OF HOLDER]
(the "Holder") is the registered owner of __________ (____) common securities
(aggregate Liquidation Amount ______________________ ($__________) of the Issuer
Trust representing common undivided beneficial interests in the assets of the
Issuer Trust and designated the Global Floating Rate Common Securities
(liquidation amount $1,000 per Common Security) (the "Common Securities").
Except in accordance with Section 5.11 of the Trust Agreement (as defined below)
the Common Securities are not transferable and any attempted transfer hereof
other than in accordance therewith shall be void. The designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Common Securities are set forth in, and this certificate and the Common
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 Delaware 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 Common Securities
as set forth therein. The Issuer Trust will furnish a copy of the Trust
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.
Terms used but not defined herein have the meanings set forth in the
Trust Agreement.
C-1
<PAGE>
IN WITNESS WHEREOF, one of the Administrative Trustees of the Issuer
Trust has executed this certificate this 15th day of July, 1997.
HSB CAPITAL I
By:___________________
Name:
Administrative Trustee
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities referred to in the
within-mentioned Trust Agreement
THE FIRST NATIONAL BANK OF CHICAGO, as Property Trustee
By:______________________________________
Name:
Title:
<PAGE>
Exhibit D
[Form of Capital Securities Certificate]
[IF THE CAPITAL SECURITIES CERTIFICATE IS TO BE A GLOBAL CAPITAL
SECURITIES CERTIFICATE, INSERT--THIS CAPITAL SECURITIES CERTIFICATE IS A GLOBAL
CAPITAL SECURITIES CERTIFICATE WITHIN THE MEANING OF THE TRUST AGREEMENT
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A CLEARING AGENCY OR A
NOMINEE OF A CLEARING AGENCY. THIS CAPITAL SECURITIES CERTIFICATE IS
EXCHANGEABLE FOR CAPITAL SECURITIES CERTIFICATES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE TRUST AGREEMENT AND MAY NOT BE TRANSFERRED EXCEPT
AS A WHOLE BY THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A
NOMINEE OF THE CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE
CLEARING AGENCY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE TRUST
AGREEMENT.
UNLESS THIS CAPITAL SECURITY CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO HSB CAPITAL I OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CAPITAL SECURITY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR 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 A PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
[IF THE CAPITAL SECURITIES CERTIFICATE IS TO EVIDENCE A RESTRICTED
CAPITAL SECURITY, INSERT -- THE CAPITAL SECURITIES EVIDENCED HEREBY AND ANY
JUNIOR SUBORDINATED DEBENTURES ISSUABLE HEREWITH HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY ANY INITIAL INVESTOR THAT
IS NOT A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT, (1) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRA-
D-1
<PAGE>
TION STATEMENT OR (B) BY ANY INITIAL INVESTOR THAT IS A QUALIFIED INSTITUTIONAL
BUYER OR BY ANY SUBSEQUENT INVESTOR, (1) AS DESCRIBED IN CLAUSE (A) ABOVE OR (2)
TO AN INSTITUTION THAT IS AN ACCREDITED INVESTOR WITHIN THE MENAING OF RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENT OF THE SECURITIES ACT, AND, IN EACH CASE (A) AND (B),
IN COMPLIANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES AND OTHER JURISDICTIONS. SECURITIES OWNED BY AN INITIAL INVESTOR THAT IS
NOT A QUALIFIED INSTITUTIONAL BUYER MAY NOT BE HELD IN BOOK-ENTRY FORM AND MAY
NOT BE TRANSFERRED WITHOUT CERTIFICATION THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS, AS PROVIDED IN THE TRUST AGREEMENT REFERRED TO BELOW.]
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 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
P-__ $_______
CUSIP NO. 40428QAAO
Certificate Evidencing Capital Securities
of
HSB Capital I
D-2
<PAGE>
Global Floating Rate Capital Securities, Series A
(liquidation amount $1,000 per Capital Security)
HSB Capital I, a statutory business trust created under the laws of the
State of Delaware (the "Issuer Trust"), hereby certifies that
_____________________________ (the "Holder") is the registered owner of
_________________ (____) capital securities (aggregate Liquidation Amount
____________________ ($________)) 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 A (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 Agreement
(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 Delaware 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 Guarantee Agreement, dated as of July
15, 1997 (the "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
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.
D-3
<PAGE>
IN WITNESS WHEREOF, one of the Administrative Trustees of the Issuer Trust
has executed this certificate this 15th day of July, 1997.
HSB CAPITAL I
By:_______________________
Name:
Administrative Trustee
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities referred to in the
within-mentioned Trust Agreement
THE FIRST NATIONAL BANK OF CHICAGO, as Property Trustee
By:________________________________
Name:
Title:
D-4
<PAGE>
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, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
D-5
<PAGE>
Exhibit E
[Form of Regulation S Certificate]
REGULATION S CERTIFICATE
(For transfers pursuant to Sections 5.5(b)(i), (iii) and (v)
of the Trust Agreement)
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, IL 60670-0126
Attention: Corporate Trust Services Division
Re: Global Floating Rate Capital Securities
of HSB Capital I (the "Securities")
-----------------------------------
Reference is made to the Amended and Restated Trust Agreement,
dated as of July 15, 1997 (the "Trust Agreement"), among HSB Group, Inc. (the
"Company"), First National Bank of Chicago as Property Trustee and the
Administrative Trustees named therein. Terms used herein and defined in the
Trust Agreement or in Regulation S or Rule 144 under the U.S. Securities Act of
1933 (the "Securities Act") are used herein as so defined.
This certificate relates to _________ shares of Securities,
which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ________________________
CERTIFICATE No(s). __________________
The Person in whose name this certificate is executed below
(the "Undersigned") hereby certifies that either (i) it is the sole beneficial
owner of the Specified Securities or (ii) it is acting on behalf of all the
beneficial owners of the Specified Securities and is duly authorized by them to
do so. Such beneficial owner or owners are referred to herein collectively as
the "Owner." If the Specified Securities are represented by a Global
Certificate, they are held through the Clearing Agency or participant in the
name of the Undersigned, as or on behalf of the Owner. If the Specified
Securities are not represented by a Global Certificate, they are registered in
the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form of
a Regulation S Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, it is being effected in
accordance with Rule 904 or Rule 144 under the Securities Act and with all
applicable securities
E-1
<PAGE>
laws of the states of the United States and other jurisdictions. Accordingly,
the Owner hereby further certifies as follows:
(1) Rule 904 Transfers. If the transfer is being effected in
accordance with Rule 904:
(A) the Owner is not a distributor of the Securities, an
affiliate of the Company or any such distributor or a person acting on
behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made to a
person in the United States;
(C) either:
(i) at the time the buy order was originated, the Transferee
was outside the United States or the Owner and any person acting
on its behalf reasonably believed that the Transferee was outside
the United States, or
(ii) the transaction is being executed in, on or through the
facilities of the Eurobond market, as regulated by the
Association of International Bond Dealers, or another designated
offshore securities market and neither the Owner nor any person
acting on its behalf knows that the transaction has been
prearranged with a buyer in the United States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any affiliate thereof;
(E) if the Owner is a dealer in securities or has received a
selling concession, fee or other remuneration in respect of the
Specified Securities, and the transfer is to occur during the
Restricted Period, then the requirements of Rule 904(c)(1) have been
satisfied; and
(F) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
(2) Rule 144 Transfers. If the transfer is being effected pursuant to
Rule 144:
(A) the transfer is occurring after a holding period of at least
one year (computed in accordance with paragraph (d) of Rule 144) has
lapsed since the Specified Securities were last acquired from the
Trust or from an affiliate of the Trust, whichever is later, and is
being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period of at least
two years has elapsed since the Specified Securities were last
acquired from the Trust or from an affiliate of the Trust, whichever
is later, and the Owner is not, and during the preceding three months
has not been, an affiliate of the Trust.
E-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Trust and the Purchasers.
Dated: ___________
(Print the name of the Undersigned, as such term is defined in the
second paragraph of this certificate)
By:
Name:
Title:
(If the Undersigned is a corporation, partnership or fiduciary, the
title of the person signing on behalf of the Undersigned must be
stated.)
E-3
<PAGE>
Exhibit F
[Form of Restricted Securities Certificate]
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to Sections 5.5(b)(ii), (iii), (iv)
and (v) of the Trust Agreement)
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, IL 60670-0126
Attention: Corporate Trust Services Division
Re: Global Floating Rate Capital Securities
of HSB Capital I (the "Securities")
Reference is made to the Amended and Restated Trust Agreement,
dated as of July 15, 1997 (the "Trust Agreement"), among HSB Group, Inc. (the
"Company"), The First National Bank of Chicago as Property Trustee and the
Administrative Trustees named therein. Terms used herein and defined in the
Trust Agreement or in Regulation S or Rule 144 under the U.S. Securities Act of
1933 (the "Securities Act") are used herein as so defined.
This certificate relates to _________ shares of Securities,
which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ________________________
CERTIFICATE No(s). __________________
The Person in whose name this certificate is executed below
(the "Undersigned") hereby certifies that either (i) it is the sole beneficial
owner of the Specified Securities or (ii) it is acting on behalf of all the
beneficial owners of the Specified Securities and is duly authorized by them to
do so. Such beneficial owner or owners are referred to herein collectively as
the "Owner." If the Specified Securities are represented by a Global
Certificate, they are held through the Clearing Agency or participant in the
name of the Undersigned, as or on behalf of the Owner. If the Specified
Securities are not represented by a Global Certificate, they are registered in
the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form of
a Restricted Security. In connection
F-1
<PAGE>
with such transfer, the Owner hereby certifies that, unless such transfer is
being effected pursuant to an effective registration statement under the
Securities Act, it is being effected in accordance with Rule 144A or Rule 144
under the Securities Act and all applicable securities laws of the states of the
United States and other jurisdictions. Accordingly, the Owner hereby further
certifies as follows:
(1) Rule 144A Transfers. If the transfer is being effected in
accordance with Rule 144A:
(A) the Specified Securities are being transferred to a person
that the Owner and any person acting on its behalf reasonably believe
is a "qualified institutional buyer" within the meaning of Rule 144A,
acquiring for its own account or for the account of a qualified
institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner
may be relying on Rule 144A in connection with the transfer; and
(2) Rule 144 Transfers. If the transfer is being effected pursuant to
Rule 144:
(A) the transfer is occurring after a holding period of at least
one year (computed in accordance with paragraph (d) of Rule 144) has
elapsed since the Specified Securities were last acquired from the
Trust or from an affiliate of the Trust, whichever is later, and is
being effected in accordance with the applicable amount, manner of
sale, and notice requirements of rule 144; or
(B) the transfer is occurring after a holding period of at least
two years has elapsed since the Specified Securities were last
acquired from the Trust or from an affiliate of the Trust, whichever
is later, and the Owner is not, and during the preceding three months
has not been, an affiliate of the Trust.
(3) Regulation S Transfers. If the transfer is being effected in
accordance with Regulation S:
(A) the transfer is being made to a person who is not a U.S.
person; or
(B) the transferee is not acquiring such Specified Securities for
the account or benefit of any U.S. person.
F-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and benefit of the Trust and the Purchasers.
Dated:___________________________
(Print the name of the Undersigned, as such term is defined in the
second paragraph of this certificate.)
By:__________________________
Name:
Title:
(If the Undersigned is a corporation, partnership or fiduciary, the
title of the person signing on behalf of the Undersigned must be
stated.)
F-3
<PAGE>
EXHIBIT G -- Form of Unrestricted
Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to Section 5.5(c))
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, IL 60670-0126
Attention: Corporate Trust Services Division
Re: Global Floating Rate Capital Securities of HSB Group, Inc. (the
"Securities")
Reference is made to the Amended and Restated Trust Agreement, dated as
of July 15, 1997 (the "Trust Agreement"), among HSB Group, Inc. (the "Company"),
The First National Bank of Chicago as Property Trustee and the Administrative
Trustees named therein. Terms used herein and defined in the Trust Agreement or
in Regulation S or Rule 144 under the U.S. Securities Act of 1933 (the
"Securities Act") are used herein as so defined.
This certificate relates to ___________ shares of Securities, which are
evidenced by the following certificate(s) (the "Specified Securities"):
CUSIP No(s). _____________________
CERTIFICATE No(s). _______________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner."
If the Specified Securities are represented by a Global Certificate, they are
held through the Clearing Agency or participant in the name of the Undersigned,
as or on behalf of the Owner. If the Specified Securities are not represented by
a Global Certificate, they are registered in the name of the Undersigned as or
on behalf of the Owner.
0128995.06-01S7a
G-1
<PAGE>
HSB GROUP, INC.
to
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
---------------------------
JUNIOR SUBORDINATED INDENTURE
Dated as of July 15, 1997
---------------------------
<PAGE>
HSB GROUP, INC.
Reconciliation and tie between the Trust Indenture Act of 1939
(including cross-references to provisions of Section 310 to and including 317
which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended
by the Trust Reform Act of 1990, are a part of and govern the Indenture whether
or not physically contained therein) and the Junior Subordinated Indenture,
dated as of July 15, 1997.
TRUST INDENTURE ACT SECTION INDENTURE SECTION
(ss.) 310 (a)(1),(2) and (5)............................... 6.9
(a)(3)........................................... Not Applicable
(a)(4)........................................... Not Applicable
(b).............................................. 6.8
................................................. 6.10
(c).............................................. Not Applicable
(ss.) 311 (a).............................................. 6.13(a)
(b).............................................. 6.13(b)
(b) (2).......................................... 7.3(a)(2)
................................................. 7.3(a)(2)
(ss.) 312 (a).............................................. 7.1
................................................. 7.2(a)
(b).............................................. 7.2(b)
(c).............................................. 7.2(c)
(ss.) 313 (a).............................................. 7.3(a)
(b).............................................. 7.3(b)
(c).............................................. 7.3(a), 7.3(b)
(d).............................................. 7.3(c)
(ss.) 314 (a) (1), (2) and (3)........................... 7.4
(a) (4).......................................... 10.5
(b).............................................. Not Applicable
(c)(1)........................................... 1.2
(c)(2)........................................... 1.2
(c)(3)........................................... Not Applicable
(d).............................................. Not Applicable
(e).............................................. 1.2
(f).............................................. Not Applicable
(ss.) 315 (a)............................................ 6.1(a)
(b).............................................. 6.2
................................................. 7.3(a)(6)
(c).............................................. 6.1(b)
(d).............................................. 6.1(c)
(d)(1)........................................... 6.1(a)(1)
<PAGE>
(d)(2)............................................ 6.1(c)(2)
(d)(3)............................................ 6.1(c)(3)
(e)............................................... 5.14
(ss.) 316 (a)............................................... 1.1
(a)(1)(A)......................................... 5.12
(a)(1)(B)......................................... 5.13
(a)(2)............................................ Not Applicable
(b)............................................... 5.8
(c)............................................... 1.4(f)
(ss.) 317 (a)(1)............................................ 5.3
(a)(2)............................................ 5.4
(b)............................................... 10.3
(ss.) 318 (a)............................................... 1.7
- --------------------
Note:This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Junior Subordinated Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions.............................................. 1
SECTION 1.2. Compliance Certificate and Opinions...................... 12
SECTION 1.3. Forms of Documents Delivered to Trustee.................. 12
SECTION 1.4. Acts of Holders.......................................... 13
SECTION 1.5. Notices, Etc to Trustee and Corporation.................. 15
SECTION 1.6. Notice to Holders; Waiver................................ 15
SECTION 1.7. Conflict with Trust Indenture Act........................ 16
SECTION 1.8. Effect of Headings and Table of Contents................. 16
SECTION 1.9. Successors and Assigns................................... 16
SECTION 1.10. Separability Clause...................................... 16
SECTION 1.11. Benefits of Indenture.................................... 17
SECTION 1.12. Governing Law............................................ 17
SECTION 1.13. Non-Business Days........................................ 17
ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally.......................................... 17
SECTION 2.2. Form of Face of Security................................. 18
SECTION 2.3. Form of Reverse of Security.............................. 21
SECTION 2.4. Additional Provisions Required in Global Security........ 24
SECTION 2.5. Form of Trustee's Certificate of Authentication.......... 25
SECTION 2.6. Form of Trustee's Certificate of Authentication ..........25
ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms.......................................... 26
SECTION 3.2. Denominations............................................ 29
SECTION 3.3. Execution, Authentication, Delivery and Dating........... 29
SECTION 3.4. Temporary Securities..................................... 32
SECTION 3.5. Global Securities........................................ 32
- i -
<PAGE>
SECTION 3.6. Registration, Transfer and Exchange Generally; Certain
Transfers and Exchanges; Securities Act Legends.......... 34
SECTION 3.7. Mutilated, Destroyed, Lost and Stolen Securities......... 42
SECTION 3.8. Payment of Interest and Additional Interest; Interest
Rights Preserved..................................... 43
SECTION 3.9. Persons Deemed Owners.................................... 45
SECTION 3.10. Cancellation............................................. 45
SECTION 3.11. Computation of Interest.................................. 45
SECTION 3.12. Deferrals of Interest Payment Dates...................... 46
SECTION 3.13. Right of Set-Off......................................... 47
SECTION 3.14. Agreed Tax Treatment..................................... 47
SECTION 3.15. Shortening of Stated Maturity............................ 47
SECTION 3.16. CUSIP Numbers............................................ 47
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.................. 48
SECTION 4.2. Application of Trust Money............................... 49
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default........................................ 49
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment....... 50
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement
by Trustee.......................................... 52
SECTION 5.4. Trustee May File Proofs of Claim......................... 53
SECTION 5.5. Trustee May Enforce Claim Without Possession
of Securities............................................ 54
SECTION 5.6. Application of Money Collected........................... 54
SECTION 5.7. Limitation on Suits...................................... 54
SECTION 5.8. Unconditional Right of Holders to Receive Principal,
Premium and Interest; Direct Action by Holders
of Capital Securities................................ 55
SECTION 5.9. Restoration of Rights and Remedies....................... 55
SECTION 5.10. Rights and Remedies Cumulative........................... 56
SECTION 5.11. Delay or Omission Not Waiver............................. 56
SECTION 5.12. Control by Holders....................................... 56
SECTION 5.13. Waiver of Past Defaults.................................. 57
- ii -
<PAGE>
SECTION 5.14. Undertaking for Costs.................................... 57
SECTION 5.15. Waiver of Usury, Stay or Extension Laws.................. 58
ARTICLE VI
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities...................... 58
SECTION 6.2. Notice of Defaults....................................... 59
SECTION 6.3. Certain Rights of Trustee................................ 59
SECTION 6.4. Not Responsible for Recitals or Issuance
of Securities............................................ 60
SECTION 6.5. May Hold Securities...................................... 61
SECTION 6.6. Money Held in Trust...................................... 61
SECTION 6.7. Compensation and Reimbursement........................... 61
SECTION 6.8. Disqualification; Conflicting Interests.................. 62
SECTION 6.9. Corporate Trustee Required; Eligibility.................. 62
SECTION 6.10. Resignation and Removal; Appointment of Successor........ 63
SECTION 6.11. Acceptance of Appointment by Successor................... 64
SECTION 6.12. Merger, Conversion, Consolidation or Succession
to Business.............................................. 65
SECTION 6.13. Preferential Collection of Claims Against Corporation.... 65
SECTION 6.14. Appointment of Authenticating Agent...................... 66
ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE AND CORPORATION
SECTION 7.1. Corporation to Furnish Trustee Names and
Addresses of Holders................................ 67
SECTION 7.2. Preservation of Information, Communications
to Holders.............................................. 68
SECTION 7.3. Reports by Trustee...................................... 68
SECTION 7.4. Reports by Corporation.................................. 68
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Corporation May Consolidate, Etc., Only
on Certain Terms......................................... 69
SECTION 8.2. Successor Corporation Substituted........................ 70
- iii -
<PAGE>
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures Without Consent of Holders....... 70
SECTION 9.2. Supplemental Indentures with Consent of Holders.......... 72
SECTION 9.3. Execution of Supplemental Indentures..................... 73
SECTION 9.4. Effect of Supplemental Indentures........................ 73
SECTION 9.5. Conformity with Trust Indenture Act...................... 73
SECTION 9.6. Reference in Securities to Supplemental Indentures....... 74
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest............... 74
SECTION 10.2. Maintenance of Office or Agency.......................... 74
SECTION 10.3. Money for Security Payments to be Held in Trust.......... 75
SECTION 10.4. Statement as to Compliance............................... 76
SECTION 10.5. Waiver of Certain Covenants.............................. 76
SECTION 10.6. Additional Sums.......................................... 77
SECTION 10.7. Additional Covenants..................................... 77
SECTION 10.8. Original Issue Discount. ................................ 78
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Applicability of This Article............................ 79
SECTION 11.2. Election to Redeem; Notice to Trustee.................... 79
SECTION 11.3. Selection of Securities to be Redeemed................... 79
SECTION 11.4. Notice of Redemption..................................... 80
SECTION 11.5. Deposit of Redemption Price.............................. 81
SECTION 11.6. Payment of Securities Called for Redemption.............. 81
SECTION 11.7. Right of Redemption of Securities Initially Issued
to an Issuer Trust....................................... 82
- iv -
<PAGE>
ARTICLE XII
SINKING FUNDS
SECTION 12.1. Applicability of Article................................. 82
SECTION 12.2. Satisfaction of Sinking Fund Payments
with Securities.......................................... 82
SECTION 12.3. Redemption of Securities for Sinking Fund................ 83
ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 13.1. Securities Subordinate to Senior Indebtedness............ 84
SECTION 13.2. No Payment When Senior Indebtedness in Default;
Payment Over of Proceeds Upon Dissolution, Etc........... 85
SECTION 13.3. Payment Permitted If No Default.......................... 86
SECTION 13.4. Subrogation to Rights of Holders of
Senior Indebtedness...................................... 87
SECTION 13.5. Provisions Solely to Define Relative Rights.............. 87
SECTION 13.6. Trustee to Effectuate Subordination...................... 88
SECTION 13.7. No Waiver of Subordination Provisions.................... 88
SECTION 13.8. Notice to Trustee........................................ 88
SECTION 13.9. Reliance on Judicial Order or Certificate
of Liquidating Agent..................................... 89
SECTION 13.10. Trustee Not Fiduciary for Holders of
Senior Indebtedness...................................... 89
SECTION 13.11. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's Rights........... 89
SECTION 13.12. Article Applicable to Paying Agents...................... 90
ARTICLE XIV
EXPENSES
SECTION 14.1. Payment of Expenses by the Corporation................... 90
SECTION 14.2. Term of Agreement........................................ 90
SECTION 14.3. Waiver of Notice......................................... 91
SECTION 14.4. No Impairment............................................ 91
SECTION 14.5. Enforcement.............................................. 91
SECTION 14.6. Subrogation.............................................. 91
SECTION 14.7. Amendment................................................ 92
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JUNIOR SUBORDINATED INDENTURE, dated as of July 15, 1997, between HSB
GROUP, INC., a Connecticut corporation (the "Corporation"), having its principal
office at One State Street, Hartford, Connecticut, and The First National Bank
of Chicago, a national banking association, as Trustee (the "Trustee").
RECITALS OF THE CORPORATION
WHEREAS, the Corporation has duly authorized the execution and delivery
of this Indenture to provide for the issuance from time to time of its unsecured
junior subordinated debt securities in series (the "Securities") of
substantially the tenor hereinafter provided, including Securities issued to
evidence loans made to the Corporation with the proceeds from the issuance from
time to time by one or more business trusts (each an "Issuer Trust") of
preferred undivided beneficial interests in the assets of such Issuer Trusts
(the "Capital Securities") and common undivided interests in the assets of such
Issuer Trusts (the "Common Securities"), and to provide the terms and conditions
upon which the Securities are to be authenticated, issued and delivered; and
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Corporation, in accordance with its terms, have been done.
NOW THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities or of any
series thereof, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions.
For all purposes of this Indenture, 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;
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(c) The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation";
(d) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles;
(e) Whenever the context may require, any gender shall be
deemed to include the others;
(f) 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 Indenture; and
(g) The words "hereby", "herein", "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or other subdivision.
"Act" when used with respect to any Holder has the meaning specified
in Section 1.4.
"Additional Interest" means the interest, if any, that shall accrue on
any interest on the Securities of any series the payment of which has not been
made on the applicable Interest Payment Date or that has been deferred during an
Extension Period, and that shall accrue at the rate per annum specified or
determined as specified in such Security.
"Additional Sums" has the meaning specified in Section 10.6.
"Additional Taxes" means any additional taxes, duties and other
governmental charges to which an Issuer Trust has become subject from time to
time as a result of a Tax Event.
"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.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Security, in each case to the
extent applicable to such transaction and as in effect from time to time.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.
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"Bankruptcy Code" means Title 11 of the United States Code or any
successor statute thereto, in each case as amended from time to time.
"Board of Directors" means the board of directors of the Corporation or
the Executive Committee of the board of directors of the Corporation (or any
other committee of the board of directors of the Corporation performing similar
functions) or a committee designated by the board of directors of the
Corporation (or such committee), comprised of two or more members of the board
of directors of the Corporation or officers of the Corporation, or both.
"Board Resolution" means a copy of a resolution certified by the
Corporate Secretary or an Assistant Secretary of the Corporation to have been
duly adopted by the Board of Directors, or officers of the Corporation to which
authority to act on behalf of the Board of Directors has been delegated, and to
be in full force and effect on the date of such certification, and delivered to
the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii)
a day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed, or (iii) a day on which the
Corporate Trust Office of the Trustee, or, with respect to Securities of a
series initially issued to an Issuer Trust for so long as such Securities are
held by such Issuer Trust, the Corporate Trust Office (as defined in the related
Trust Agreement) of the Property Trustee or the Delaware Trustee under the
related Trust Agreement, is closed for business.
"Capital Securities" has the meaning specified in the first recital of
this Indenture.
"CEDEL" means Centrale de Livraison de Valeurs Mobilieres, S.A., or
its successor.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or if at any time after the
execution of this instrument such Securities and Exchange Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties on such date.
"Common Securities" has the meaning specified in the first recital of
this Indenture.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered.
"Corporation" includes a corporation, association, company, limited
liability company, joint-stock company or business trust.
"Corporation" means the Person named as the "Corporation" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Corporation" shall mean such successor corporation.
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"Corporation Request" and "Corporation Order" mean, respectively, a
written request or order signed in the name of the Corporation by its Chief
Executive Officer, its President, one of its Senior Vice Presidents, Vice
Presidents and by its Chief Financial Officer, Treasurer, Controller, its
Corporate Secretary or an Assistant Secretary, and delivered to the Trustee.
"Debt" means, with respect to any Corporation, whether recourse is to
all or a portion of the assets of such Corporation and whether or not contingent
and without duplication, (i) every obligation of such Corporation for money
borrowed; (ii) every obligation of such Corporation 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 such Corporation with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of
such Corporation; (iv) every obligation of such Corporation 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 such Corporation; (vi) all
indebtedness of the Corporation, whether incurred on or prior to the date of
this 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, such
Corporation has guaranteed or is responsible or liable for, directly or
indirectly, as obligor or otherwise.
"Defaulted Interest" has the meaning specified in Section 3.8.
"Definitive Security" means a Security that does not contain the legend
set forth in Section 2.4.
"Delaware Trustee" means, with respect to any Issuer Trust, the Person
identified as the "Delaware Trustee" in the related Trust Agreement, solely in
its capacity as Delaware Trustee of such Issuer Trust under such Trust Agreement
and not in its individual capacity, or its successor in interest in such
capacity, or any successor Delaware trustee appointed as therein provided.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary by the Corporation pursuant to
Section 3.1 with respect to such series (or any successor thereto).
"Discount Security" means any security that provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2.
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"Distributions", with respect to the Trust Securities issued by an
Issuer Trust, means amounts payable in respect of such Trust Securities as
provided in the related Trust Agreement and referred to therein as
"Distributions".
"Dollar" or "$" means the currency of the United States of America
that, as at the time of payment, is legal tender for the payment of public and
private debts.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
Office, or its successor as operator of the Euroclear System.
"Event of Default", unless otherwise specified with respect to a series
of Securities as contemplated by Section 3.1, has the meaning specified in
Article V.
"Exchange Act" means the Securities Exchange Act of 1934 or any
successor statute thereto, in each case as amended from time to time.
"Exchange Offer" has the meaning specified in the Registration Rights
Agreement.
"Exchange Security" means a Security issued pursuant to and having the
rights provided therefor in this Indenture, including the right to receive
Interest Payments as provided herein, and to be issued hereunder in connection
with the offer to exchange the Initial Securities for a new series of debentures
of the Corporation as contemplated by the Registration Rights Agreement.
"Expiration Date" has the meaning specified in Section 1.4.
"Extension Period" has the meaning specified in Section 3.12.
"Global Security" means a Security in the form prescribed in Section
2.4 evidencing all or part of a series of Securities, issued to the Depositary
for such series or its nominee, and registered in the name of such Depositary or
its nominee.
"Guarantee Agreement" means, with respect to any Issuer Trust, the
Guarantee Agreement executed by the Corporation for the benefit of the Holders
of the Capital Securities issued by such Issuer Trust, as modified, amended or
supplemented from time to time.
"Holder" means a Person in whose name a Security is registered in the
Securities Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of each particular series of Securities established
as contemplated by Section 3.1.
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"Initial Security" means a Security issued pursuant to and having the
rights provided therefor in this Indenture, including the right to receive
Interest Payments to the extent provided herein, and designated as Junior
Subordinated Securities.
"Institutional Accredited Investor" means an accredited investor within
the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act.
"Interest Payment Date" means, as to each series of Securities, the
Stated Maturity of an installment of interest on such Securities.
"Issuer Trust" has the meaning specified in the first recital of this
Indenture.
"Maturity" when used with respect to any Security means the date on
which the principal of such Security or any installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind specified in
Section 5.1(3).
"Officers' Certificate" means a certificate signed by its Chief
Executive Officer, the President or a Senior Vice President, and by the Chief
Financial Officer, Treasurer or the Corporate Secretary or Assistant Secretary,
of the Corporation and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for or an employee of the Corporation or any Affiliate of the
Corporation.
"Original Issue Date" means the date of issuance specified as such in
each Security.
"Outstanding" means, when used in reference to any Securities, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment money in the necessary
amount has been theretofore deposited with the Trustee or any Paying
Agent in trust for the Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which other
Securities have been authenticated and delivered or that have been paid
pursuant to Section 3.7, unless proof satisfactory to the Trustee is
presented that any such Securities are held by Holders in whose hands
such Securities are valid, binding and legal obligations of the
Corporation;
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provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Corporation or any other obligor upon the Securities or any Affiliate of
the Corporation or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities that the Trustee knows to be so owned shall
be so disregarded. Securities so owned that have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Corporation or any other obligor upon the Securities or
any Affiliate of the Corporation or such other obligor. Upon the written request
of the Trustee, the Corporation shall furnish to the Trustee promptly an
Officers' Certificate listing and identifying all Securities, if any, known by
the Corporation to be owned or held by or for the account of the Corporation or
any other obligor on the Securities, or any Affiliate of the Corporation or such
obligor, and subject to the provisions of Section 6.1, the Trustee shall be
entitled to accept such Officers' Certificate as conclusive evidence of the
facts therein set forth and of the fact that all Securities not listed therein
are Outstanding for the purpose of any such determination. Notwithstanding
anything herein to the contrary, Securities of any series initially issued to an
Issuer Trust that are owned by such Issuer Trust shall be deemed to be
Outstanding notwithstanding the ownership by the Corporation or an Affiliate of
any beneficial interest in such Issuer Trust.
"Paying Agent" means the Trustee or any Person authorized by the
Corporation to pay the principal of (or premium, if any) or interest on, or
other amounts in respect of, any Securities on behalf of the Corporation.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Place of Payment" means, with respect to the Securities of any series,
the place or places where the principal of (and premium, if any) and interest
(including any Additional Interest) on the Securities of such series are payable
pursuant to Section 3.1.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security. For the purposes of this definition, any security
authenticated and delivered under Section 3.7 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Proceeding" has the meaning specified in Section 13.2.
"Property Trustee" means, with respect to any Issuer Trust, the Person
identified as the "Property Trustee" in the related Trust Agreement, solely in
its capacity as Property Trustee of
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such Issuer Trust under such Trust Agreement and not in its individual capacity,
or its successor in interest in such capacity, or any successor property trustee
appointed as therein provided.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture or the terms of such Security.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture or the terms of such Security.
"Registered Exchange Offer" has the meaning specified in the
Registration Rights Agreement.
"Registration Rights Agreement" means a Registration Rights Agreement
among the Corporation, an Issuer Trust, and one or more initial purchasers, as
such agreement may be amended, modified or supplemented from time to time in
accordance with the terms thereof relating to the exchange and registration
rights for capital securities of a Trust and a series of Securities.
"Regular Record Date" for the interest payable on any Interest Payment
Date with respect to the Securities of a series means, unless otherwise provided
pursuant to Section 3.1 with respect to Securities of such series, the day that
is fifteen days next preceding such Interest Payment Date (whether or not a
Business Day).
"Regulation D" means Regulation D under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Regulation S Certificate" has the meaning specified in Section 3.6
hereof.
"Regulation S Global Certificate" has the meaning specified in Section
3.6.
"Regulation S Security" means all Securities required pursuant to
Section 3.7 to bear a Regulation S Legend. Such term includes the Regulation S
Global Certificate.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the controller
or any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular matter, any other officer
to whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Restricted Definitive Securities" has the meaning specified in
Section 3.3.
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"Restricted Global Security" has the meaning specified in Section 3.3.
"Restricted Period" means the 40-day period following the last original
issue date of the Securities.
"Restricted Securities" means all Securities, including Global
Securities, for which is required pursuant to Section 2.8(c) to bear a
Restricted Securities Legend.
"Restricted Securities Legend" has the meaning specified in Section 2.4.
"Restricted Security" means each Security required to bear the
Restricted Securities Legend.
"Rights Plan" means a plan of the Corporation providing for the
issuance by the Corporation to all holders of its common stock of rights
entitling the holders thereof to subscribe for or purchase shares of any class
or series of capital stock of the Corporation, which rights are (i) deemed to be
transferred with such shares of such common stock and (ii) also issued in
respect of future issuances of such common stock, in each case until the
occurrence of a specified event or events.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"Rule 144A Information" shall be such information with respect to the
Corporation as is specified pursuant to Rule 144A(d)(4) under the Securities Act
or any successor provision thereto, in each case as amended from time to time.
"Rule 144A Securities" has the meaning specified in Section 2.6.
"Securities Act" means the Securities Act of 1933 or any successor
statute thereto, in each case as amended from time to time.
"Securities Act Legend" means a Restricted Securities Legend or a
Regulation S Legend.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.6.
"Security" means any debt security authenticated and delivered under
this Indenture.
"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 Corporation whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt of the Corporation, whether incurred on or prior to the date
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of this Indenture or hereafter 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 Securities or
to other Debt that is pari passu with, or subordinated to, the Securities,
provided, however, that Senior Indebtedness shall not be deemed to include (a)
any Debt of the Corporation that, when incurred and without respect to any
election under Section 1111(b) of the Bankruptcy Reform Act of 1978, was without
recourse to the Corporation, (b) any Debt of the Corporation to any of its
Subsidiaries, (c) any Debt of the Corporation to any Person who is an employee
of the Corporation and (d) any Securities.
"Shelf Registration Statement" has the meaning assigned thereto in the
Registration Rights Agreement.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.8.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof (or premium, if any) or interest (including any
Additional Interest) thereon, means the date specified pursuant to the terms of
such Security as the fixed date on which the principal of such Security or such
installment of principal (or premium, if any) or interest (including any
Additional Interest) is due and payable, as such date may be shortened as
provided pursuant to the terms of such Security and this Indenture, in the case
of the Stated Maturity of any Security, and subject to the deferral of any such
date during any Extension Period, in the case of any instalment of interest.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Corporation or by
one or more other Subsidiaries, or by the Corporation and one or more other
Subsidiaries. For purposes of this definition, "voting stock" means stock that
ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency.
"Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security. For the purposes of this definition, any Security
authenticated and delivered under Section 3.7 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Tax Event" means the receipt by an Issuer Trust of an Opinion of
Counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced proposed 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
the Capital Securities of such Issuer Trust, there
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is more than an insubstantial risk that (i) such Issuer Trust is, or within 90
days of the delivery of such Opinion of Counsel will be, subject to United
States federal income tax with respect to income received or accrued on the
corresponding series of Securities issued by the Corporation to such Issuer
Trust, (ii) interest payable by the Corporation on such corresponding series of
Securities is not, or within 90 days of the delivery of such Opinion of Counsel
will not be, deductible by the Corporation, in whole or in part, for United
States federal income tax purposes, or (iii) such Issuer Trust is, or within 90
days of the delivery of such Opinion of Counsel will be, subject to more than a
de minimis amount of other taxes, duties or other governmental charges.
"Trust Agreement" means, with respect to any Issuer Trust, the trust
agreement or other governing instrument of such Issuer Trust.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that if
the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture
Act" means the Trust Indenture Act of 1939 as so amended.
"Trust Securities" means the Common Securities and the Capital
Securities.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument, solely in its capacity as such Trustee and not in
its individual capacity, until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder and,
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
SECTION 1.2. Compliance Certificate and Opinions.
Upon any application or request by the Corporation to the Trustee to
take any action under any provision of this Indenture, the Corporation shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent (including covenants compliance with which constitutes a condition
precedent), if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent (including covenants
compliance with which constitutes a condition precedent), if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than the
certificates provided pursuant to Section 10.4) shall include:
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(1) a statement by each individual signing such certificate or
opinion that such individual has read such covenant or condition and
the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions of
such individual contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he or
she has made such examination or investigation as is necessary to
enable him or her to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of such
individual, such condition or covenant has been complied with.
SECTION 1.3. Forms of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons may certify or give an opinion as to other matters,
and any of such Persons may certify or give an opinion as to such matters
contained in one or several documents.
Any certificate or opinion of an officer of the Corporation may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate, opinion or representations
with respect to matters upon which his or her certificate or opinion is based
are erroneous. Any such certificate or Opinion of Counsel may be based, insofar
as it relates to factual matters, upon a certificate or opinion of, or
representations by, one or more officers of the Corporation stating that the
information with respect to such factual matters is in the possession of the
Corporation, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate, opinion or representations with respect to
matters upon which his or her certificate or opinion is based are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given to or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by
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an agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
is or are delivered to the Trustee, and, where it is hereby expressly required,
to the Corporation. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Holders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.1) conclusive in
favor of the Trustee and the Corporation, if made in the manner provided in this
Section 1.4.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to such notary the execution thereof.
Where such execution is by a Person acting in other than such Persons's
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of such Person's authority.
(c) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner that the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
(d) The ownership of Securities shall be proved by the Securities
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon the
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or suffered to be done by the Trustee or the Corporation in
reliance thereon, whether or not notation of such action is made upon such
Security.
(f) The Corporation may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series, provided that the
Corporation may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next succeeding paragraph.
If any record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date, provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
by Holders of the requisite principal amount of Outstanding Securities of such
series on such record date. Nothing in this paragraph shall be construed to
prevent the Corporation from setting a new record date for any action for which
a record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be canceled and of no effect), and nothing in this
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paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Corporation, at its own expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Trustee in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 1.6.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to join
in the giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 5.2, (iii) any request to institute
proceedings referred to in Section 5.7(2), or (iv) any direction referred to in
Section 5.12, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date, provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be canceled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Corporation's expense, shall
cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Corporation in writing and to each
Holder of Securities of the relevant series in the manner set forth in Section
1.6.
With respect to any record date set pursuant to this Section 1.4, the
party hereto that sets such record date may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day, provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities of the relevant series in the manner set forth in
Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section
1.4, the party hereto that set such record date shall be deemed to have
initially designated the 180th day after such record date as the Expiration Date
with respect thereto, subject to its right to change the Expiration Date as
provided in this paragraph. Notwithstanding the foregoing, no Expiration Date
shall be later than the 180th day after the applicable record date.
(g) Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
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SECTION 1.5. Notices, Etc. to Trustee and Corporation.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder, any holder of Capital
Securities or the Corporation shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with the
Trustee at its Corporate Trust office, or
(2) the Corporation by the Trustee, any Holder or any holder
of Capital Securities shall be sufficient for every purpose (except as
otherwise provided in Section 5.1) hereunder if in writing and mailed,
first-class postage prepaid, to the Corporation addressed to it at the
address of its principal office specified in the first paragraph of
this Indenture or at any other address previously furnished in writing
to the Trustee by the Corporation.
SECTION 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Securities
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. If, by reason of the suspension
of or irregularities in regular mail service or for any other reason, it shall
be impossible or impracticable to mail notice of any event to Holders when said
notice is required to be given pursuant to any provision of this Indenture or of
the relevant Securities, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 1.7. Conflict with Trust Indenture Act.
Prior to the time a Registration Statement with respect to the first
relevant series of Securities shall be declared effective as contemplated by a
Registration Rights Agreement, the Trust Indenture Act shall apply as a matter
of contract to this Indenture for purposes of interpretation, construction and
defining the rights and obligations hereunder, and this Indenture, the
Corporation and the 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 Indenture
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were qualified under that Act on the date hereof. Upon such a Registration
Statement being declared effective, this Agreement should be subject to the
Trust Indenture Act. Except as otherwise expressly provided herein, if and to
the extent that any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by any of Sections 310 to 317, inclusive, of the Trust
Indenture Act through operation of Section 318(c) thereof, such imposed duties
shall control.
SECTION 1.8. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.9. Successors and Assigns.
All covenants and agreements in this Indenture by the Corporation shall
bind its successors and assigns, whether so expressed or not.
SECTION 1.10. Separability Clause.
If any provision in this Indenture or in the Securities 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.
SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors and
assigns, the holders of Senior Indebtedness, the Holders of the Securities and,
to the extent expressly provided in Sections 5.2, 5.8, 5.9, 5.11, 5.13, 9.1 and
9.2 the holders of Capital Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 1.13. Non-Business Days.
If any Interest Payment Date, Redemption Date or Stated Maturity shall
not be a Business Day, then (notwithstanding any other provision of this
Indenture or the Securities) payment of principal of (and premium, if any) or
interest (including any Additional Interest) or other amounts in respect of such
Security need not be made on such date, but may be made on the next succeeding
Business Day (and no interest shall accrue in respect of the amounts whose
payment is so delayed for the period from and after such Interest Payment Date,
Redemption Date or
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Stated Maturity, as the case may be, until such next succeeding Business Day)
except that, if such Business Day falls 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 Interest Payment Date or
Redemption Date or at the Stated Maturity).
ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally.
The Securities of each series and the Trustee's certificate of
authentication shall be in substantially the forms set forth in this Article, or
in such other form or forms as shall be established by or pursuant to a Board
Resolution or in one or more indentures supplemental hereto, in each case with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with applicable tax laws or the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such securities, as evidenced by their execution of the
Securities. If the form of Securities of any series is established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Corporate Secretary or an Assistant Secretary
of the Corporation and delivered to the Trustee at or prior to the delivery of
the Corporation Order contemplated by Section 3.3 with respect to the
authentication and delivery of such Securities.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such securities.
SECTION 2.2. Form of Face of Security.
HSB GROUP, INC.
Junior Subordinated Debentures
No. _____________ $__________
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
_______________, or registered assigns, the principal sum of __________ Dollars
on _________, ____ [if the Security is a Global Security, then insert, if
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applicable--, or such other principal amount represented hereby as may be set
forth in the records of the Securities Registrar hereinafter referred to in
accordance with the Indenture] [; provided that the Corporation may shorten the
Stated Maturity of the principal of this Security to a date not earlier than
__________, in the circumstances described on the reverse hereof]. The
Corporation further promises to pay interest on said principal sum from
___________, ____ or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, [monthly][quarterly][semi-annually]
[if applicable, insert-(subject to deferral as set forth herein)] in arrears on
[insert applicable Interest Payment Dates] of each year, commencing ________,
____, at the rate of ___% per annum, [if applicable insert--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 [if
applicable, insert-- ; provided that any overdue principal, premium or
Additional Sums and any overdue installment of interest shall bear Additional
Interest at the rate of ___% per annum (to the extent that the payment of such
interest shall be legally enforceable), compounded
[monthly][quarterly][semi-annually], from the dates such amounts are due until
they are paid or made available for payment, and such interest shall be payable
on demand]. The amount of interest payable for any period less than a full
interest period shall be computed on the basis of a 360-day year of twelve
30-day months and the actual days elapsed in a partial month in such period. The
amount of interest payable for any full interest period shall be computed by
dividing the applicable rate per annum by [twelve/four/two]. 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 [if applicable
insert--, which shall be the [____________ or ____________] (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.
[If applicable, insert--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 ____ consecutive [monthly][quarterly][semi-annual] interest
payment periods with respect to each deferral period (each an "Extension
Period") [if applicable, insert--, during which Extension Periods the
Corporation shall have the right to make partial payments of interest on any
Interest Payment Date, and] 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 [if Stated Maturity can be
shortened or extended, insert--, as then in effect,] and no such Extension
Period may end
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on a date other than an Interest Payment Date; and provided further, however,
that during any such Extension Period, the Corporation shall not (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 the Securities (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 Corporation'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
____ consecutive [monthly][quarterly][semi-annual] 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 ____%
per annum, compounded [monthly][quarterly][semi-annually] 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
Security would be payable but for such deferral [if applicable, insert--or so
long as such Securities are held by [insert name of applicable Issuer Trust], 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 [insert Place of Payment], 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 [if applicable, insert--; 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].
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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:
Title:
Attest:
_____________________________________________
[Corporate Secretary or Assistant Secretary]
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), to which 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
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Securities are, and are to be, authenticated and delivered. This Security is one
of the series designated on the face hereof [if applicable, insert--, limited in
aggregate principal amount to
$ -----------].
All terms used in this Security that are defined in the Indenture [if
applicable, insert--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 [insert name of Issuer Trust] (the "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 [if applicable,
insert--or the Trust Agreement, as the case may be].
[If applicable, insert--The Corporation may at any time, at its option,
on or after _______, __ 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 [if
applicable, insert-- (including any Additional Interest)] to but excluding the
date fixed for redemption.]
[If applicable, insert--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 [insert formula].
[If the Security is subject to redemption of any kind, insert--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.]
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.
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
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or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
[If the Security is not a Discount Security, insert--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) [if applicable, insert--,
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.]
[If the Security is a Discount Security, insert--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 an amount of principal of 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) [if applicable, insert--,
provided that, if upon an Event of Default, the Trustee or such Holders fail to
declare such principal amount of 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]. The principal amount payable upon such acceleration shall be equal to
[insert formula for determining the amount]. Upon any such declaration, such
amount of the principal of and the accrued interest (including any Additional
Interest) on such Securities 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. Upon payment (i) of the amount of principal so
declared due and payable and (ii) of interest on any overdue principal, premium
and interest (in each case to the extent that the payment of such interest shall
be legally enforceable), all of the Corporation's obligations in respect of the
payment of the principal of and premium and interest, if any, on this Security
shall terminate.]
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 [if applicable, insert--(including any
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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
transferees.
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. 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.
SECTION 2.4. Restrictive Legends.
(a) Restricted Global Securities and Restricted Definitive
Securities shall bear the following legend (the "Restricted Securities Legend")
unless the Corporation determines otherwise in accordance with applicable law:
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"THE JUNIOR SUBORDINATED DEBENTURES EVIDENCED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (A) BY ANY INITIAL INVESTOR THAT IS NOT A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT, (1) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER ACQUIRING FOR ITS OWN ACCOUNT OR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR
(4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR (B) BY ANY
INITIAL INVESTOR THAT IS A QUALIFIED INSTITUTIONAL BUYER OR BY ANY
SUBSEQUENT INVESTOR, (1) AS DESCRIBED IN CLAUSE (A) ABOVE OR (2) TO AN
INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENT OF THE SECURITIES ACT AND, IN EACH CASE (A)
AND (B), IN COMPLIANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. AS DESCRIBED IN
CLAUSE (A) ABOVE OR (2) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITH
THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D IN A
TRANSACTION EXEMPT FROM REGISTRATION REQUIREMENT OF SECURITIES OWNED BY
AN INITIAL INVESTOR THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER MAY NOT
BE HELD IN BOOK- ENTRY FORM AND MAY NOT BE TRANSFERRED WITHOUT
CERTIFICATION THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS, AS PROVIDED IN THE INDENTURE REFERRED TO BELOW."
SECTION 2.5. Additional Provisions Required in Global Security.
Unless otherwise specified as contemplated by Section 3.1, any Global
Security issued hereunder shall, in addition to the provisions contained in
Sections 2.2 and 2.3, bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR
SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY
OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY,
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
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SECTION 2.6. Form of Trustee's Certificate of Authentication.
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:
------------
as Trustee
By:______________________
Authorized Officer
ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms.
The aggregate principal amount of Securities that may be authenticated
and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 3.3,
set forth or determined in the manner provided in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of a series:
(a) the title of the securities of such series, which shall
distinguish the Securities of the series from all other
Securities;
(b) the limit, if any, upon the aggregate principal amount of
the Securities of such series that may be authenticated and delivered
under this Indenture (except for Securities authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of,
other Securities of the series pursuant to Section 3.4, 3.5, 3.6, 3.7,
9.6 or 11.6 and except for any Securities that, pursuant to Section
3.3, are deemed never to have been authenticated and delivered
hereunder); provided, however, that the authorized aggregate principal
amount of such series may be increased above such amount by a Board
Resolution to such effect;
(c) the Person to whom any interest (including any Additional
Interest) on a Security of the series shall be payable, if other than
the Person in whose name that
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security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest;
(d) the Stated Maturity or Maturities on which the principal
of the Securities of such series is payable or the method of
determination thereof, and any dates on which or circumstances under
which, the Corporation shall have the right to shorten such Stated
Maturity or Maturities;
(e) the rate or rates, if any, at which the Securities of such
series shall bear interest, if any, the rate or rates at which and
extent to which Additional Interest, if any, shall be payable in
respect of any Securities of such series, the date or dates from which
any such interest or Additional Interest shall accrue, the Interest
Payment Dates on which such interest shall be payable, the right,
pursuant to Section 3.12 or as otherwise set forth therein, of the
Corporation to defer or extend an Interest Payment Date, and the
Regular Record Date for the interest payable on any Interest Payment
Date or the method by which any of the foregoing shall be determined;
(f) the place or places where the principal of (and premium,
if any) and interest (including any Additional Interest) on the
Securities of such series shall be payable, the place or places where
the Securities of such series may be presented for registration of
transfer or exchange, any restrictions that may be applicable to any
such transfer or exchange in addition to or in lieu of those set forth
herein, and the place or places where notices and demands to or upon
the Corporation in respect of the Securities of such series may be
made;
(g) the period or periods within or the date or dates on
which, the price or prices at which and the terms and conditions upon
which, if any, the Securities of such series may be redeemed, in whole
or in part, at the option of the Corporation, and if other than by a
Board Resolution, the manner in which any election by the Corporation
to redeem such Securities shall be evidenced;
(h) the obligation or the right, if any, of the Corporation to
redeem, repay or purchase the Securities of such series pursuant to any
sinking fund, amortization or analogous provisions, or at the option of
a Holder thereof, and the period or periods within which, the price or
prices at which, the currency or currencies (including currency unit or
units) in which and the other terms and conditions upon which
Securities of the series shall be redeemed, repaid or purchased, in
whole or in part, pursuant to such obligation;
(i) the denominations in which any Securities of such series
shall be issuable, if other than denominations of $1,000 and any
integral multiple thereof;
(j) if other than Dollars, the currency or currencies
(including any currency unit or units) in which the principal of (and
premium, if any) and interest (including any
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Additional Interest) on the Securities of the series shall be payable,
or in which the Securities of the series shall be denominated and the
manner of determining the equivalent thereof in Dollars for purposes of
the definition of Outstanding;
(k) the additions, modifications or deletions, if any, in
the covenants of the Corporation set forth herein with respect to
the Securities of such series;
(l) if other than the principal amount thereof, the portion of
the principal amount of Securities of such series that shall be payable
upon declaration of acceleration of the Maturity thereof;
(m) if the principal amount payable at the Stated Maturity of
any Securities of the series will not be determinable as of any one or
more dates prior to the Stated Maturity, the amount that shall be
deemed to be the principal amount of such Securities as of any such
date for any purpose thereunder or hereunder, including the principal
amount thereof that shall be due and payable upon any Maturity other
than the Stated Maturity or that shall be deemed to be Outstanding as
of any date prior to the Stated Maturity (or, in any such case, the
manner in which such amount deemed to be the principal amount shall be
determined);
(n) the additions or changes, if any, to this Indenture with
respect to the Securities of such series as shall be necessary to
permit or facilitate the issuance of the Securities of such series in
bearer form, registrable or not registrable as to principal, and with
or without interest coupons;
(o) any index or indices used to determine the amount of
payments of principal of and premium, if any, on the Securities of such
series or the manner in which such amounts will be determined;
(p) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global
Securities and, in such case, the respective Depositories for such
Global Securities, the form of any legend or legends that shall be
borne by any such Global Security in addition to or in lieu of that set
forth in Section 2.4 and any circumstances in addition to or in lieu of
those set forth in Section 3.5 in which any such Global Security may be
exchanged in whole or in part for Securities registered, and any
transfer of such Global Security in whole or in part may be registered,
in the name or names of Persons other than the Depositary for such
Global Security or a nominee thereof;
(q) the appointment of any Paying Agent or Agents for the
Securities of such series;
(r) the terms of any right to convert or exchange Securities
of such series into any other securities or property of the
Corporation, and the additions or changes, if any, to this
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Indenture with respect to the Securities of such series to permit or
facilitate such conversion or exchange;
(s) if such Securities are to be issued to an Issuer Trust,
the form or forms of the Trust Agreement and Guarantee Agreement
relating thereto;
(t) if other than as set forth herein, the relative degree, if
any, to which the Securities of the series shall be senior to or be
subordinated to other series of Securities in right of payment, whether
such other series of Securities are Outstanding or not;
(u) the additions, modifications or deletions, if any, in the
Events of Default that apply to any Securities of the series and any
change in the right of the Trustee or the requisite Holders of such
Securities to declare the principal amount thereof due and payable
pursuant to Section 5.2 and
(v) any other terms of the Securities of such series (which
terms shall not be inconsistent with the provisions of this Indenture,
except as permitted by Section 9.1(6)).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided herein or in
or pursuant to such Board Resolution and set forth, or determined in the manner
provided, in such Officers' Certificate or in any indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Corporate Secretary or an Assistant Secretary of the
Corporation and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate setting forth the terms of the series.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article XIII.
SECTION 3.2. Denominations.
The Securities of each series shall be in registered form without
coupons and shall be issuable in denominations of $1,000 and any integral
multiple thereof, unless otherwise specified as contemplated by Section 3.1.
SECTION 3.3. Execution, Authentication and Dating.
(a) Execution, Authentication and Dating generally. The Securities
shall be executed on behalf of the Corporation by its Chief Executive Officer,
its President or one of its Senior Vice Presidents and attested by its Corporate
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
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Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Corporation shall bind the
Corporation, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities. At any time and from
time to time after the execution and delivery of this Indenture, the Corporation
may deliver Securities of any series executed by the Corporation to the Trustee
for authentication, together with a Corporation Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Corporation
Order shall authenticate and deliver such Securities. If the form or terms of
the Securities of the series have been established by or pursuant to one or more
Board Resolutions as permitted by Sections 2.1 and 3.1, in authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Opinion of
Counsel stating,
(1) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 2.1, that such
form has been established in conformity with the provisions of this
Indenture;
(2) if the terms of such Securities have been established by
or pursuant to Board Resolution as permitted by Section 3.1, that such
terms have been established in conformity with the provisions of this
Indenture; and
(3) that such Securities, when authenticated and delivered by
the Trustee and issued by the Corporation in the manner and subject to
any conditions specified in such Opinion of Counsel, will constitute
valid and legally binding obligations of the Corporation, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issuance of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner that
is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and of the preceding
paragraphs, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.1 or the Corporation Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraphs at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
Each Security shall be dated the date of its authentication.
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No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder. Notwithstanding the foregoing, if any Security shall have
been authenticated and delivered hereunder but never issued and sold by the
Corporation, and the Corporation shall deliver such Security to the Trustee for
cancellation as provided in Section 3.10, for all purposes of this Indenture
such Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
(b) Form of Securities at Initial Issuance. Unless otherwise determined
by the Corporation, the provisions in this Section 3.3(b) shall apply to
Securities of a Series sold in transaction exempt from registration under the
Securities Act. Securities initially sold to qualified institutional buyers in
reliance on Rule 144A under the Securities Act ("Rule 144A Securities")
initially will be represented by one or more certificates in registered, global
form with such applicable legends as are provided for in Sections 2.4 and 2.5,
except as otherwise permitted herein (collectively, the "Restricted Global
Certificate"). Such Global Security shall be registered in the name of the
Depositary or its nominee and deposited with the Trustee, at its Corporate Trust
Office, as custodian for the Depositary, duly executed by the Corporation and
authenticated by the Trustee. The aggregate principal amount of the Restricted
Global Certificate may from time to time be increased or decreased by
adjustments made on the records of the Depositary or the Trustee, as custodian
for the Depositary, in connection with (i) a corresponding decrease or increase
in the aggregate principal amount of, if so provided with respect to Securities
of a series, the Regulation S Global Security or the Unrestricted Global
Security, as hereinafter provided or (ii) transfer to persons taking delivery of
a transfer in the form of a Definitive Security, as provided for herein.
Securities initially sold in offshore transactions in reliance on
Regulation S ("Regulation S Securities") initially will be represented by one or
more certificates in registered, global form with such applicable legends as the
Corporation may determine in accordance with applicable law, except as otherwise
permitted herein. Such Securities in global form shall be registered in the name
of the Depositary or its nominee and deposited with the Trustee, at its
Corporate Trust Office, as custodian for the Depositary, duly executed by the
Corporation and authenticated by the Trustee as hereinafter provided, for credit
to the respective accounts at the Depositary of the depositories for Euroclear
or CEDEL. Until such time as the Restricted Period (as defined below) shall have
terminated, such Securities shall be referred to herein collectively as the
"Regulation S Global Security." After such time as the Restricted Period shall
have terminated, such Securities shall be referred to herein collectively as the
"Unrestricted Global Security." The aggregate principal amount of the Regulation
S Global Security or the Unrestricted Global Security may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary, in connection with (i) a corresponding decrease or
increase in the aggregate principal amount of the Restricted Global Security, as
hereinafter provided or (ii) transfers to persons taking delivery of transfer in
the form of a Definitive
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Security, as provided for herein. As used herein, the term "Restricted Period"
means the period of 40 consecutive days beginning on and including the first day
after the later of (i) the day that the Lead Manager advises the Corporation and
the Trustee is the day on which the Securities of a Series are first offered to
persons other than distributors (as defined in Regulation S) in reliance on
Regulation S and (ii) the closing date in respect of Securities of such series.
Securities initially sold to institutional accredited investors in a
manner exempt from the registration requirements of the Securities Act and not
in reliance on Regulation S will be represented by Securities in registered,
certificated form (the "Restricted Definitive Securities") with such applicable
legends as are provided for in Section 2.4, except as otherwise permitted
herein; provided, however, that (i) upon transfer of such Definitive Securities
to a qualified institutional buyer, such Definitive Securities will, unless the
Restricted Global Certificate has previously been exchanged, be exchanged for an
interest in a Restricted Global Certificate pursuant to the provisions herein or
(ii) upon transfer of such Definitive Security to a purchaser in reliance on
Regulation S, such Definitive Security will be exchanged for an interest in
Regulatory S Global Security or an Unrestricted Global Security, as the case may
be, pursuant to the provisions herein. Definitive Securities initially sold to
Institutional Accredited Investors are issuable only in minimum blocks of 100
Securities, representing $100,000 in aggregate principal amount and in integral
multiples of $1,000 in excess thereof.
SECTION 3.4. Temporary Securities.
Pending the preparation of definitive Securities of any series, the
Corporation may execute, and upon Corporation Order the Trustee shall
authenticate and deliver, temporary Securities that are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any denomination,
substantially of the tenor of the definitive Securities of such series in lieu
of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Corporation will
cause definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities, the temporary Securities
shall be exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Corporation designated for that
purpose without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities, the Corporation shall execute and the Trustee
shall authenticate and deliver in exchange therefor one or more definitive
Securities of the same series of any authorized denominations, of like tenor and
aggregate principal amount, bearing such restrictive legends as may be required
by this Indenture and bearing a number not contemporaneously outstanding. Until
so exchanged, the temporary Securities of any series shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities of
such series.
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SECTION 3.5. Global Securities.
(a) Each Global Security issued under this Indenture shall be
registered in the name of the Depositary designated by the Corporation for such
Global Security or a nominee thereof and delivered to such Depositary or a
nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(b) Other than as provided for in Section 3.6, no Global Security may
be exchanged in whole or in part for Definitive Securities, and no transfer of a
Global Security in whole or in part may be registered, in the name of any Person
other than the Depositary for such Global Security or a nominee thereof unless
(i) such Depositary advises the Trustee in writing that such Depositary is no
longer willing or able to properly discharge its responsibilities as Depositary
with respect to such Global Security, and the Corporation is unable to locate a
qualified successor, (ii) the Corporation executes and delivers to the Trustee a
Corporation Order stating that the Corporation elects to terminate the
book-entry system through such Depositary or (iii) an Event of Default occurs
and is continuing. Upon the occurrence of any event specified in clause (i),
(ii) or (iii) above, the Securities Registrar shall notify the applicable
Depositary and instruct such Depositary to notify all beneficial owners of
Global Securities of the occurrence of such event and of the availability of the
definitive Securities to beneficial owners of such Securities requesting the
same; provided, however, that no Securities shall be issued in any denomination
less than the minimum authorized denomination therefor.
(c) If any Global Security is to be exchanged in whole for other
Securities or canceled in whole, it shall be surrendered by or on behalf of the
applicable Depositary or its nominee to the Securities Registrar for exchange or
cancellation as provided in this Article III. If any Global Security is to be
exchanged for other Securities or canceled in part, or if another Security is to
be exchanged in whole or in part for a beneficial interest in any Global
Security, then either (i) such Global Security shall be so surrendered for
exchange or cancellation as provided in this Article III or (ii) the principal
amount thereof shall be reduced, subject to Section 3.6, or increased by an
amount equal to the portion thereof to be so exchanged or canceled, or equal to
the principal amount of such other Security to be so exchanged for a beneficial
interest therein, as the case may be, by means of an appropriate adjustment made
on the records of the Securities Registrar with notice to the Trustee, whereupon
the Trustee, in accordance with the Applicable Procedures, shall instruct such
Depositary or its authorized representative to make a corresponding adjustment
to its records. Upon any such surrender or adjustment of a Global Security by
the Depositary, accompanied by registration instructions, the Trustee shall,
subject to Section 3.5(b) and as otherwise provided in this Article III,
authenticate and deliver any Securities issuable in exchange for such Global
Security (or any portion thereof) in accordance with the instructions of the
Depositary; provided, however, that no Securities shall be issued in any
denomination less than the minimum authorized denomination therefor. Neither the
Securities Registrar nor the Trustee shall be liable for any delay in delivery
of such instructions and may conclusively rely on, and shall be fully protected
in relying on, such instructions.
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(d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Article III, Section 9.6 or 11.6 or otherwise,
shall be authenticated and delivered in the form of, and shall be, a Global
Security, unless such Security is registered in the name of a Person other than
the Depositary for such Global Security or a nominee thereof.
(e) Securities distributed to holders of Global Capital Securities (as
defined in the applicable Trust Agreement) upon the dissolution of an Issuer
Trust shall be distributed in the form of one or more Global Securities
registered in the name of a Depositary or its nominee, and deposited with the
Securities Registrar, as custodian for such Depositary, or with such Depositary,
for credit by the Depositary to the respective accounts of the beneficial owners
of the Securities represented thereby (or such other accounts as they may
direct). Securities distributed to holders of Capital Securities other than
Global Capital Securities upon the dissolution of an Issuer Trust shall not be
issued in the form of a Global Security or any other form intended to facilitate
book-entry trading in beneficial interests in such Securities.
(f) As provided in Section 3.9, the Depositary for a Global Security or
its nominee, as the registered owner of a Global Security, shall be the Holder
of such Global Security for all purposes under this Indenture and the
Securities, and owners of beneficial interests in a Global Security shall hold
such interests pursuant to the Applicable Procedures. The Securities Registrar
and the Trustee shall be entitled to deal with the Depositary for such Global
Security for all purposes of this Indenture relating to the Global Security
(including the payment of the principal amount of (and premium, if any) and
interest (including Additional Interest) on such Global Security and the giving
of instructions or directions by or to beneficial owners of the Securities
represented thereby) as the sole Holder of the Securities represented thereby
and shall have no obligation to such beneficial owners. Neither the Corporation,
the Trustee nor the Securities Registrar shall have any liability in respect of
any transfers effected by the Depositary.
(g) The rights of owners of beneficial interests in a Global Security
shall be exercised only through the Depositary for such Global Security and
shall be limited to those established by law, the Applicable Procedures and
agreements between such beneficial owners and the Depositary and/or its Agent
Members.
SECTION 3.6. Registration, Transfer and Exchanges.
(a) Registration, Transfer and Exchange Generally. The Corporation
shall cause to be kept at the Corporate Trust Office of the Trustee a register
or registers (the "Securities Register") in which the registrar and transfer
agent with respect to the Securities (the "Securities Registrar"), subject to
such reasonable regulations as it may prescribe, shall provide for the
registration of Securities and of transfers and exchanges of Securities as
herein provided. The Trustee is hereby appointed Securities Registrar for the
purpose of registering Securities and transfers and exchanges of Securities as
herein provided.
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Upon surrender for registration of transfer of any Security at the
office or agency of the Corporation designated for that purpose, the Corporation
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of the same
series of any authorized denominations, of like tenor and aggregate principal
amount, bearing such restrictive legends as may be required by this Indenture
and bearing a number not contemporaneously outstanding.
At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any authorized denominations, of like tenor and
aggregate principal amount, bearing such restrictive legends as may be required
by this Indenture and bearing a number not contemporaneously outstanding, upon
surrender of the Securities to be exchanged at such office or agency. Whenever
any Securities are so surrendered for exchange, the Corporation shall execute,
and the Trustee shall authenticate and deliver, the Securities that the Holder
making the exchange is entitled to receive.
All Securities issued upon any transfer or exchange of Securities shall
be the valid obligations of the Corporation, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange.
Neither the Corporation, the Trustee nor the Securities Registrar shall
be required, pursuant to the provisions of this Section 3.6, (i) to issue,
register the transfer of or exchange any Security of any series during a period
beginning at the opening of business 15 days before the day of selection for
redemption of Securities of that series pursuant to Article XI and ending at the
close of business on the day of mailing of the notice of redemption, or (ii) to
register the transfer of or exchange any Security so selected for redemption in
whole or in part, except, in the case of any such Security to be redeemed in
part, any portion thereof not to be redeemed.
Every Security presented or surrendered for registration of transfer or
exchange shall (if so required by the Corporation or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Corporation and the Securities Registrar, duly executed by
the Holder thereof or such Holder's attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Securities, but the Corporation may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Securities.
(b) Registration, Transfer, and Exchange; Global Securities and
Definitive Securities. This Section 3.6(b) shall govern transfers and exchanges
of Securities of a series in which (1) no Securities of such series are sold in
reliance on Regulation S or (2), if Securities are sold in reliance on
Regulation S, such Securities are not represented by a Global Security.
(i) Transfer and Exchange of Definitive Securities. When
Definitive Securities are presented to the Securities Registrar with a
request:
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(1) to register the transfer of such Definitive Securities;
or
(2) to exchange such Definitive Securities for Definitive
Securities in an equal aggregate principal amount of Definitive
Securities of other authorized denominations
the Securities Registrar shall register the transfer or make the
exchange as requested if its reasonable requirements for such
transaction are met; provided, however, that the Definitive
Securities surrendered for transfer or exchange:
(A) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the
Trustee and the Securities Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing; and
(B) in the case of Restricted Securities that are Definitive
Securities, are being transferred or exchanged either pursuant to
an effective registration statement under the Securities Act, or
pursuant to clause (1), (2) or (3) below and are accompanied by
the following additional information and documents, as
applicable:
(1) if such Restricted Securities are being delivered to the
Securities Registrar by a Holder for registration in the name of
such Holder, without transfer, a Restricted Security Certificate
in the form attached hereto as Exhibit A (a "Restricted Security
Transfer Certificate"); or
(2) if such Restricted Securities are being transferred to
the Company or to a QIB in accordance with Rule 144A under the
Securities Act, a Restricted Security Transfer Certificate
certification to that effect; or
(3) if such Restricted Securities are being transferred (w)
pursuant to an exemption from registration in accordance with
Rule 144 under the Securities Act or (x) to an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act that is acquiring the
security for its own account, or for the account of such an
institutional accredited investor, in each case in a minimum
principal amount of the Securities of $100,000 for investment
purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities
Act and, in the case of (x), together with (I) a certification to
that effect and (II) if the Corporation or the Securities
Registrar so requests, an Opinion of Counsel reasonably
acceptable to the Corporation and to the Securities Registrar to
the effect that such transfer is in compliance with the
Securities Act.
(ii) Restrictions of Transfer of a Definitive Security For a
Beneficial Interest in a Global Security. A Definitive Security may
not be exchanged for a beneficial interest
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in a Global Security except upon satisfaction of the requirements set
forth below. Upon receipt by the Trustee of a Definitive Security,
duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Trustee, together with:
(i) if such Definitive Security is a Restricted Security
being transferred to a QIB; and
(ii) whether or not such Definitive Security is a Restricted
Security, written instructions directing the Trustee to make, or
to direct the custodian to make, an adjustment on its books and
records with respect to such Global Security to reflect an
increase in the aggregate principal amount of the Securities
represented by the Global Security,
then the Trustee shall cancel such Definitive Security and cause,
or direct the Security Custodian to cause, in accordance with the
standing instructions and procedures existing between the
Depositary and the Securities Custodian, the aggregate principal
amount of Securities represented by the Global Security to be
increased accordingly. If no Global Securities are then
outstanding, the Corporation shall issue and the Trustee shall
authenticate, upon written order of the Corporation, in the form
of an Officers' Certificate, a new Global Security in the
appropriate principal amount.
Neither the Trustee nor the Securities Registrar has duties to
obtain certificates or other documentation with respect to the
transfer or exchange between or among any Depositary
participants, members or beneficial owners in any global security
and shall have no liability or responsibility with respect to the
legality thereof.
(iii) Transfer and Exchange of Global Securities. The
transfer and exchange of Global Securities or beneficial
interests therein shall be effected through the Depositary, in
accordance with this Indenture (including applicable restrictions
on transfer set forth herein, if any) and the procedures of the
Depositary therefor.
(iv) Transfer of a Beneficial Interest in a Global Security
For a Definitive Security.
(i) Any person having a beneficial interest in a
Global Security that is being transferred or exchanged either
pursuant to an effective registration statement under the
Securities Act or pursuant to clause (ii) may upon request,
and it accompanied by the information specified below,
exchange such beneficial interest for a Definitive Security of
the same aggregate principal amount.
(ii) In the case of a beneficial interest in a
Global Security which is a Restricted Security and during such
time as a registration statement with respect to such
Securities is not effective, if such beneficial interest is
being transferred
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(w) pursuant to an exemption from registration in accordance
with Rule 144 under the Securities Act, or (x) to an
institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act that is
acquiring the security for its own account, or for the account
of such an institutional accredited investor, in each case in
a minimum principal amount of the Securities of $100,000, for
investment purposes and not with a view to, or for offer or
sale in connection with, any distribution in violation of the
Securities Act, and, in the case of (x), together with
certification to that effect then the Trustee or the
Securities Custodian, at the direction of the Trustee, shall
cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities
Custodian, the aggregate principal amount of the Global
Security to be reduced on its books and records and, following
such reduction, the Corporation shall execute and the Trustee
shall authenticate and deliver to the transferee a Definitive
Security.
(iii) Definitive Securities issued in exchange for
a beneficial interest in a Global Security pursuant to this
Section 3.6(b)(iv) shall be registered in such names and in
such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall
deliver such Definitive Securities to the Persons in whose
names such Securities are so registered in accordance with the
written instructions of the Depositary.
(v) Restrictions on Transfer and Exchange of Global
Securities. Notwithstanding any other provisions of this Indenture, a
Global Security may not be transferred as a whole except by the
Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or an other nominee of the Depositary or
by the Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary.
(c) Certain Transfers and Exchanges; Rule 144A and Regulation
S Issuances. This Section 3.6(c) shall govern transfer and exchanges of
Securities of a series in which any Securities of such series are sold to
non-U.S. persons in offshore transactions in reliance upon Regulation S and such
Securities sold are represented by a Global Security.
(i) Restricted Global Security to Regulation S
Global Security. If the owner of a beneficial interest in the
Restricted Global Security wishes at any time to transfer such interest
to a Person who wishes to acquire the same in the form of a beneficial
interest in the Regulation S Global Security, such transfer may be
effected in accordance with the provisions of this Clause (c)(i) and
Clause (b)(vii) below and subject to the Applicable Procedures. Upon
receipt by the Trustee, as Securities Registrar, of (A) an order given
by the Clearing Agency or its authorized representative directing that
a beneficial interest in the Regulation S Global Security in a
specified principal amount be credited to a specified participant's
account and that a beneficial interest in the Restricted
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Global Security in an equal principal amount be debited from another
specified participant's account and (B) a Regulation S Transfer
Certificate in the Form of Exhibit B.1 hereto (a "Regulation S Transfer
Certificate"), satisfactory to the Trustee and duly executed by the
owner of such beneficial interest in the Restricted Global Security or
his attorney duly authorized in writing, then the Trustee, as
Securities Registrar but subject to Clause (c)(vii) below, shall reduce
the share number of the Restricted Global Security and increase the
share number of the Regulation S Global Security by such specified
principal amount.
(ii) Regulation S Global Security to Restricted Global
Security. If the owner of a beneficial interest in the Regulation S
Global Security wishes at any time to transfer such interest to a
Person who wishes to acquire the same in the form of a beneficial
interest in the Restricted Global Security, such transfer may be
effected only in accordance with this Clause (c)(ii) and subject to the
Applicable Procedures. Upon receipt by the Trustee, as Securities
Registrar, of (A) an order given by the Clearing Agency or its
authorized representative directing that a beneficial interest in the
Restricted Global Security in a specified principal amount be credited
to a specified participant's account and that a beneficial interest in
the Regulation S Global Security in an equal principal amount be
debited from another specified participant's account and (B) if such
transfer is to occur during the Restricted Period, a Restricted
Securities Transfer Certificate in the Form of Exhibit B.2 hereto (a
"Restricted Securities Transfer Certificate"), satisfactory to the
Trustee and duly executed by the owner of such beneficial interest in
the Regulation S Global Security or his attorney duly authorized in
writing, then the Trustee, as Securities Registrar, shall reduce the
principal amount of the Regulation S Global Security and increase the
principal amount of the Restricted Global Security by such specified
principal amount.
(iii) Restricted Definitive Security to Restricted
Global Security or Regulation S Global Security. If the Holder of a
Restricted Definitive Securities wishes at any time to transfer all or
any portion of such Restricted Definitive Securities to a Person who
wishes to take delivery thereof in the form of a beneficial interest in
the Restricted Global Security or the Regulation S Global Security,
such transfer may be effected only in accordance with the provisions of
this Clause (c)(iii) and Clause (c)(vii) below and subject to the
Applicable Procedures. Upon receipt by the Trustee, as Securities
Registrar, of (A) certificates representing such Restricted Definitive
Securities as provided in Section and instructions satisfactory to the
Trustee directing that a beneficial interest in the Restricted Global
Security or Regulation S Global Security in a specified principal
amount not greater than the share amount of such Security be credited
to a specified participant's account and (B) a Restricted Securities
Security, if the specified account is to be credited with a beneficial
interest in the Restricted Global Security, or a Regulation S Security,
if the specified account is to be credited with a beneficial interest
in the Regulation S Global Security, in either case satisfactory to the
Trustee and duly executed by such Holder or his attorney duly
authorized in writing, then the Trustee, as Securities Registrar but
subject to Clause (c)(vii) below, shall cancel such Restricted
Definitive
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Security (and issue a new Restricted Definitive Security in respect of
any untransferred portion thereof) as provided in Section 3.6(a) and
increase the principal amount of the Restricted Global Security or the
Regulation S Global Security, as the case may be, by the specified
principal amount.
(iv) Regulation S Non-Global Certificate to
Restricted Global Certificate or Regulation S Global Certificate. If
the Holder of a Regulation S Security (other than a Global Certificate)
wishes at any time to transfer all or any portion of such Regulation S
Security to a Person who wishes to acquire the same in the form of a
beneficial interest in the Restricted Global Security or the Regulation
S Global Security, such transfer may be effected only in accordance
with this Clause (c)(iv) and Clause (c)(vii) below and subject to the
Applicable Procedures. Upon receipt by the Trustee, as Securities
Registrar, of (A) such Regulation S Security as provided in Section
2.8(a) and instructions satisfactory to the Trustee directing that a
beneficial interest in the Restricted Global Security or Regulation S
Global Security in a specified share amount not greater than the share
amount of such Security be credited to a specified participant's
account and (B) if the transfer is to occur during the Restricted
Period and the specified account is to be credited with a beneficial
interest in the Restricted Global Security, a Restricted Securities
Security satisfactory to the Trustee and duly executed by such Holder
or his attorney duly authorized in writing then the Trustee, as
Securities Registrar but subject to Clause (c)(vii) below, shall cancel
such Regulation S Security (and issue a new Regulation S Securities in
respect of any untransferred portion thereof) as provided in Section
3.6(a) and increase the principal amount of the Restricted Global
Security or the Regulation S Global Security, as the case may be, by
the specified principal amount.
(v) Non-Global Security to Non-Global Security. A
Security that is not a Global Security may be transferred, in whole or
in part, to a Person who takes delivery in the form of another Security
that is not a Global Security as provided in Section 2.9, provided
that, if the Security to be transferred in whole or in part is a
Restricted Security, or is a Regulation S Security and the transfer is
to occur during the Restricted Period, then the Trustee shall have
received (A) a Restricted Securities Transfer Certificate, satisfactory
to the Trustee and duly executed by the transferor Holder or his
attorney duly authorized in writing, in which case the transferee
Holder shall take delivery in the form of a Restricted Security, or (B)
a Regulation S Transfer Certificate, satisfactory to the Trustee and
duly executed by the transferor Holder or his attorney duly authorized
in writing, in which case the transferee Holder shall take delivery in
the form of a Regulation S Security (subject in every case to Section
3.6(d)).
(vi) Exchanges between Global Security and
Non-Global Security. A beneficial interest in a Global Security may be
exchanged for a Security that is not a Global Security as provided in
Section 2.9 to an institution that is an accredited investor within the
meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D of the
Securities Act of 1933, as amended, provided that, if such interest is
a beneficial interest in the Restricted Global Security, or if such
interest is a beneficial interest in the Regulation S Global
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Security and such exchange is to occur during the Restricted Period,
then such interest shall be exchanged for a Restricted Definitive
Security (subject in each case to Section 3.6(d)). A Security that is
not a Global Security may be exchanged for a beneficial interest in a
Global Certificate only if (A) such exchange occurs in connection with
a transfer effected in accordance with Clause (c)(iii) or (iv) above or
(B) such Security is a Regulation S Security and such exchange occurs
after the Restricted Period.
(vii) Regulation S Global Security to be Held
Through Euroclear or Cedel during Restricted Period. The Depositor
shall use its best efforts to cause the Clearing Agency to ensure that,
until the expiration of the Restricted Period, beneficial interests in
the Regulation S Global Security may be held only in or through
accounts maintained at the Clearing Agency by Euroclear or Cedel (or by
participants acting for the account thereof), and no person shall be
entitled to effect any transfer or exchange that would result in any
such interest being held otherwise than in or through such an account;
provided that this Clause (b)(vii) shall not prohibit any transfer or
exchange of such an interest in accordance with Clause (b)(ii) or (vi)
above.
(d) Securities Act Legends. Except as set forth below, all Securities
shall bear a Restricted Securities Legend:
(i) subject to the following Clauses of this Section 3.6(d), a
Security or any portion thereof that is exchanged, upon transfer or
otherwise, for a Global Security or any portion thereof shall bear the
Restricted Securities Legend;
(ii) subject to the following Clauses of this Section 3.6(d),
a new Security that is not a Global Security and is issued in exchange
for another Security (including a Global Security) or any portion
thereof, upon transfer or otherwise, shall bear a Restricted Securities
Legend by such other Security, provided that, if such new Security is
required pursuant to Section 3.6 to be issued in the form of a
Restricted Security, it shall bear a Restricted Securities Legend and,
if such new Security is so required to be issued in the form of a
Regulation S Capital Security, it shall bear a Regulation S Legend;
(iii) Any Securities which are sold or otherwise disposed of
pursuant to an effective registration statement under the Securities
Act, including the Shelf Registration Statement or a Registration
Statement providing for an Exchange Offer, together with their
Successor Securities shall not bear a Securities Act Legend; the
Depositor shall inform the Trustee in writing of the effective date of
any such registration statement registering the Securities under the
Securities Act and shall notify the Trustee at any time when
prospectuses may not be delivered with respect to Securities to be sold
pursuant to such registration statement. The Trustee shall not be
liable for any action taken or omitted to be taken by it in good faith
in accordance with the aforementioned registration statement;
(iv) at any time after the Securities may be freely
transferred without registration under the Securities Act or without
being subject to transfer restrictions pursuant to the
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Securities Act, a new Security which does not bear a Securities Act
Legend may be issued in exchange for or in lieu of a Security (other
than a Global Certificate) or any portion thereof which bears such a
legend if the Trustee has received an Unrestricted Securities Transfer
Certificate in the form of Exhibit B.3 hereto (an "Unrestricted
Securities Transfer Certificate"), satisfactory to the Trustee and duly
executed by the Holder of such legended Security or his attorney duly
authorized in writing, and after such date and receipt of such
certificate, the Trustee shall authenticate and deliver such a new
Security in exchange for or in lieu of such other Security as provided
in this Article 2;
(v) a new Security that does not bear a Restricted Securities
Legend may be issued in exchange for or in lieu of a Restricted
Security or any portion thereof that bears such a legend if, in the
Corporation's sole judgment, placing such a legend upon such new
Security is not and will not be necessary to ensure compliance with the
registration requirements of the Securities Act, and the Trustee, at
the written direction of the Corporation in the form of an Officers'
Certificate, shall authenticate and deliver such a new Security as
provided in this Article III;
(vi) notwithstanding the foregoing provisions of this Section
3.6(d), a Successor Security of a Security that does not bear a
Restricted Securities Legend shall not bear such form of legend unless,
in the Corporation's sole judgement such Successor Security is a
"restricted security" within the meaning of Rule 144 under the
Securities Act, in which case the Trustee, at the written direction of
the Corporation in the form of an Officers' Certificate, shall
authenticate and deliver a new Security bearing a Restricted Securities
Legend in exchange for such Successor Security as provided in this
Article III; and
(vii) Securities distributed to a holder of Capital Securities
upon dissolution of an Issuer Trust shall bear a Restricted Securities
Legend if the Capital Securities so held bear a similar legend.
The Corporation shall inform the Trustee in writing of the effective
date of any registration statement registering any Securities under the
Securities Act. The Trustee shall not be liable for any action taken or omitted
to be taken by it in good faith in accordance with the aforementioned
registration statement.
SECTION 3.7. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee together with
such security or indemnity as may be required by the Corporation or the Trustee
to save each of them harmless, the Corporation shall execute and the Trustee
shall authenticate and deliver in exchange therefor a new Security of the same
series, of like tenor and aggregate principal amount, bearing the same legends,
and bearing a number not contemporaneously outstanding.
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If there shall be delivered to the Corporation and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security, and (ii) such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to the Corporation or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Corporation shall execute and upon its request the Trustee shall authenticate
and deliver, in lieu of any such destroyed, lost or stolen Security, a new
Security of the same series, of like tenor and aggregate principal amount,
bearing the same legends as such destroyed, lost or stolen Security, and bearing
a number not contemporaneously outstanding.
If any such mutilated, destroyed, lost or stolen Security has become or
is about to become due and payable, the Corporation in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section 3.7, the
Corporation may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Corporation, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to the same benefits of this Indenture equally and proportionately with
any and all other Securities of the same series duly issued hereunder.
The provisions of this Section 3.7 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.8. Payment of Interest and Additional Interest; Interest
Rights Preserved.
Interest (including any Additional Interest) on any Security of any
series that is payable, and is punctually paid or duly provided for, on any
Interest Payment Date, shall be paid to the Person in whose name that Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest in respect of Securities of such
series, except that, unless otherwise provided in the Securities of such series,
interest (including any Additional Interest) payable on the Stated Maturity of
the principal of a Security shall be paid to the Person to whom principal is
paid. The initial payment of interest on any Security of any series that is
issued between a Regular Record Date and the related Interest Payment Date shall
be payable as provided in such Security or in the Board Resolution pursuant to
Section 3.1 with respect to the related series of Securities.
Any interest on any Security that is due and payable, but is not timely
paid or duly provided for, on any Interest Payment Date for Securities of such
series (herein called "Defaulted Interest"), shall forthwith cease to be payable
to the registered Holder on the relevant Regular
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Record Date by virtue of having been such Holder, and such Defaulted Interest
may be paid by the Corporation, at its election in each case, as provided in
Clause (1) or (2) below:
(1) The Corporation may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such series in
respect of which interest is in default (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Corporation shall notify
the Trustee in writing of the amount of Defaulted Interest proposed to
be paid on each Security and the date of the proposed payment, and at
the same time the Corporation shall deposit with the Trustee an amount
of money equal to the aggregate amount proposed to be paid in respect
of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as provided in this Clause
(1). Thereupon the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest, which shall be not more than 15
days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Corporation of such Special Record Date and, in the name and at the
expense of the Corporation, shall cause notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder of a Security of
such series at the address of such Holder as it appears in the
Securities Register not less than 10 days prior to such Special Record
Date. The Trustee may, in its discretion, in the name and at the
expense of the Corporation, cause a similar notice to be published at
least once in a newspaper, customarily published in the English
language on each Business Day and of general circulation in the Borough
of Manhattan, The City of New York, but such publication shall not be a
condition precedent to the establishment of such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names the
Securities of such series (or their respective Predecessor Securities)
are registered on such Special Record Date and shall no longer be
payable pursuant to the following Clause (2).
(2) The Corporation may make payment of any Defaulted Interest
in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities of the series in
respect of which interest is in default may be listed and, upon such
notice as may be required by such exchange (or by the Trustee if the
Securities are not listed), if, after notice given by the Corporation
to the Trustee of the proposed payment pursuant to this Clause (2),
such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 3.8, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, that were carried by such other Security.
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SECTION 3.9. Persons Deemed Owners.
The Corporation, the Trustee and any agent of the Corporation or the
Trustee shall treat the Person in whose name any Security is registered as the
owner of such Security for the purpose of receiving payment of principal of and
(subject to Section 3.8) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Corporation, the Trustee nor any agent of the Corporation or the Trustee shall
be affected by notice to the contrary.
No holder of any beneficial interest in any Global Security held on its
behalf by a Depositary shall have any rights under this Indenture with respect
to such Global Security, and such Depositary may be treated by the Corporation,
the Trustee and any agent of the Corporation or the Trustee as the owner of such
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Corporation, the Trustee or any agent of the
Corporation or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by a Depositary or impair, as between a
Depositary and such holders of beneficial interests, the operation of customary
practices governing the exercise of the rights of the Depositary (or its
nominee) as Holder of any Security.
SECTION 3.10. Cancellation.
All Securities surrendered for payment, redemption, transfer or
exchange shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee, and any such Securities and Securities surrendered
directly to the Trustee for any such purpose shall be promptly canceled by it.
The Corporation may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder that the Corporation
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities canceled as provided in this
Section 3.10, except as expressly permitted by this Indenture. All canceled
Securities shall be destroyed by the Trustee and the Trustee shall deliver to
the Corporation a certificate of such destruction.
SECTION 3.11. Computation of Interest.
Except as otherwise specified as contemplated by Section 3.1 for
Securities of any series, interest on the Securities of each series for any
partial period shall be computed on the basis of a 360-day year of twelve 30-day
months and the actual number of days elapsed in any partial month in such
period, and interest on the Securities of each series for a full period shall be
computed by dividing the rate per annum by the number of interest periods that
together constitute a full twelve months.
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SECTION 3.12. Deferrals of Interest Payment Dates.
If specified as contemplated by Section 2.1 or Section 3.1 with respect
to the Securities of a particular series, 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 such series, from time to time to defer the payment of
interest on such Securities for such period or periods as may be specified as
contemplated by Section 3.1 (each, an "Extension Period"), during which
Extension Periods the Corporation shall, if so specified as contemplated by
Section 3.1, have the right to make partial payments of interest (including any
Additional Interest) on any Interest Payment Date. No Extension Period shall end
on a date other than an Interest Payment Date. At the end of any such Extension
Period the Corporation shall pay all interest then accrued and unpaid on the
Securities (together with Additional Interest thereon, if any, at the rate
specified for the Securities of such series, to the extent permitted by
applicable law); provided, however, that no Extension Period shall extend beyond
the Stated Maturity of the principal of the Securities of such series; and
provided further, however that during any such Extension Period, the Corporation
shall not (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 the Securities of such series or 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 the Securities of such series (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
Agreement and (d) purchases of common stock related to the issuance of common
stock or rights under any of the Corporation's or any Subsidiary of the
Corporation's 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 Event of Default has occurred and is
continuing, and provided further that no Extension Period shall exceed the
period or periods specified in such Securities, extend beyond the Stated
Maturity of the principal of such Securities 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 (including 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
(including any Additional 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 Period shall bear
Additional Interest as and to the extent as may be specified as contemplated by
Section 3.1. The Corporation shall give the Holders of the Securities of such
series and the Trustee notice of its election to begin any such Extension Period
at least one Business Day prior to the next succeeding Interest Payment Date on
which interest on Securities of such series would be payable but for such
deferral or, with respect to any Securities of a series issued to an Issuer
Trust, so long as any such Securities are held by such Issuer Trust, at least
one Business Day prior to the earlier of (i) the next succeeding date on
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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.
The Trustee shall promptly give notice of the Corporation's election to
begin any such Extension Period to the Holders of the Outstanding Securities of
such series.
SECTION 3.13. Right of Set-Off.
With respect to the Securities of a series initially issued to an
Issuer Trust, notwithstanding anything to the contrary herein, the Corporation
shall have the right to set off any payment it is otherwise required to make in
respect of any such Security to the extent the Corporation has theretofore made,
or is concurrently on the date of such payment making, a payment under the
Guarantee Agreement relating to such Security or to a holder of Capital
Securities pursuant to an action undertaken under Section 5.8 of this Indenture.
SECTION 3.14. Agreed Tax Treatment.
Each Security issued hereunder shall provide that the Corporation and,
by its acceptance of a Security or a beneficial interest therein, the Holder of,
and any Person that acquires a beneficial interest in, such Security agree that
for United States federal, state and local tax purposes it is intended that such
Security constitutes indebtedness.
SECTION 3.15. Shortening of Stated Maturity.
If specified as contemplated by Section 2.1 or Section 3.1 with respect
to the Securities of a particular series, the Corporation shall have the right
to shorten the Stated Maturity of the principal of the Securities of such series
at any time to any date.
SECTION 3.16. CUSIP Numbers.
The Corporation in issuing the Securities may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption and other similar or related materials as a convenience to
Holders; provided that any such notice or other materials may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption or other materials
and that reliance may be placed only on the other identification numbers printed
on the Securities, and any such redemption shall not be affected by any defect
in or omission of such numbers.
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ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall, upon Corporation Request, cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for and as otherwise provided
in this Section 4.1) and the Trustee, on demand of and at the expense of the
Corporation, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A)(1) all Securities theretofore authenticated and
delivered (other than (i) Securities that have been
destroyed, lost or stolen and that have been replaced or
paid as provided in Section 3.7 and (ii) Securities for
whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Corporation and
thereafter repaid to the Corporation or discharged from such
trust, as provided in Section 10.3) have been delivered to
the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to
the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year of the date of
deposit, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by
the Trustee in the name, and at the expense, of the
Corporation,
and the Corporation, in the case of subclause (B)(i), (ii) or (iii)
above, has deposited or caused to be deposited with the Trustee as
trust funds in trust for such purpose an amount in the currency or
currencies in which the Securities of such series are payable
sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation,
for principal (and premium, if any) and interest (including any
Additional Interest) to the date of such deposit (in the case of
Securities that have become due and payable) or to the Stated Maturity
or Redemption Date, as the case may be;
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(2) the Corporation has paid or caused to be paid all other
sums payable hereunder by the Corporation; and
(3) the Corporation has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Corporation to the Trustee under Section 6.7, the obligations
of the Trustee to any Authenticating Agent under Section 6.14 and, if money
shall have been deposited with the Trustee pursuant to subclause (B) of Clause
(1) of this Section 4.1, the obligations of the Trustee under Section 4.2 and
the last paragraph of Section 10.3 shall survive.
SECTION 4.2. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by the Trustee, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Corporation acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest (including any Additional Interest) for the payment of which
such money or obligations have been deposited with or received by the Trustee.
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default.
"Event of Default", wherever used herein with respect to the Securities
of any series, means any one of the following events (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), except as may be specified pursuant to Section 3.1:
(1) default in the payment of any interest (including any
Additional Interest) upon any Security of that series when it becomes
due and payable, and continuance of such default for a period of 30
days (subject to the deferral of any due date in respect of any
interest (including Additional Interest) in the case of an Extension
Period); or
(2) default in the payment of the principal of (or premium,
if any, on) any Security of that series at its Maturity; or
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(3) failure on the part of the Corporation duly to observe or
perform any other of the covenants or agreements on the part of the
Corporation in the Securities of that series or in this Indenture for a
period of 90 days after the date on which written notice of such
failure, requiring the Corporation to remedy the same and stating that
such notice is a "Notice of Default" shall have been given by
registered or certified mail to the Corporation by the Trustee or to
the Corporation and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Outstanding Securities of that
series; or
(4) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Corporation a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization of the Corporation under the Bankruptcy Code or any
other similar applicable Federal or State law, which decree or order
shall have continued undischarged and unstayed for a period of 60 days;
or the entry of a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of the Corporation or of its
property, or for the winding up or liquidation of its affairs, which
decree or order shall have continued undischarged and unstayed for a
period of 60 days; or
(5) the commencement by the Corporation of voluntary
proceedings to be adjudicated a bankrupt, or the consent by the
Corporation to the filing of a bankruptcy proceeding against it, or the
filing by the Corporation of a petition or answer or consent seeking
reorganization under the Bankruptcy Code or any other similar Federal
or State law, or the consent by the Corporation to the filing of any
such petition, or the consent by the Corporation to the appointment of
a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of it or of its property, or the making by the Corporation
of an assignment for the benefit of creditors, or the admission by the
Corporation in writing of its inability to pay its debts generally as
they become due; or
(6) any other Event of Default provided with respect to
Securities of that series.
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.1(4) or 5.1(5)) with respect to Securities of any 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 that series may declare the principal amount (or, if
the Securities of that series are Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all the
Securities of that 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, in the case of the Securities of a series issued to an Issuer Trust, if,
upon an Event of Default, the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities of such series fail to declare
the principal of all the Outstanding Securities of such series (or specified
portion thereof) to be immediately due and payable, the holders of at least 25%
in aggregate Liquidation Amount (as defined in the related Trust Agreement) of
the
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related series of Capital Securities issued by such Issuer Trust 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 such principal
amount (or specified portion thereof) of and the accrued interest (including any
Additional Interest) on all the Securities of such series shall become
immediately due and payable. If an Event of Default specified in Section 5.1(4)
or 5.1(5) with respect to Securities of any series at the time Outstanding
occurs, the principal amount of all the Securities of such series (or, if the
Securities of such series are Discount Securities, such portion of the principal
amount of such Securities as may be specified by the terms of that series) and
the accrued interest (including any Additional Interest) on all the Securities
of such series shall automatically, and without any declaration or other action
on the part of the Trustee or any Holder, become immediately due and payable.
Payment of principal (and premium, if any) and interest (including any
Additional Interest) on such Securities shall remain subordinated to the extent
provided in Article XIII notwithstanding that such amount shall become
immediately due and payable as herein provided.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article V provided, the Holders of a majority in aggregate principal amount of
the Outstanding Securities of that series, by written notice to the Corporation
and the Trustee, may rescind and annul such declaration and its consequences if:
(1) the Corporation has paid or deposited with the Trustee a sum
sufficient to pay:
(A) all overdue installments of interest on all Securities of
such series,
(B) any accrued Additional Interest on all Securities of such
series,
(C) the principal of (and premium, if any, on) any Securities of
such series that have become due otherwise than by such declaration of
acceleration, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
that has become due solely by such acceleration, have been cured or waived
as provided in Section 5.13.
In the case of Securities of a series initially issued to an Issuer
Trust, if the Holders of such Securities fail to annul such declaration and
waive such default, the holders of a Majority in Liquidation Amount of the
Capital Securities (as defined in the related Trust Agreement) issued by such
Issuer Trust shall also have the right to rescind and annul such declaration and
its
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consequences by written notice to the Corporation and the Trustee, subject to
the satisfaction of the conditions set forth in Clauses (1) and (2) above of
this Section 5.2.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Corporation covenants that if:
(1) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security of any series when
such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Corporation will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal (and premium, if any), including any sinking
fund payment or analogous obligations, and interest (including any Additional
Interest), and, in addition thereto, all amounts owing to the Trustee under
Section 6.7.
If the Corporation fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, and may prosecute such proceeding to judgment or final decree, and may
enforce the same against the Corporation or any other obligor upon such
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Corporation or any other
obligor upon the Securities, wherever situated.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Corporation or any other obligor upon the Securities
or the property of the Corporation or of such other obligor or their creditors,
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(a) the Trustee (irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether
the Trustee shall have made any demand on the Corporation for the
payment of overdue principal (or premium, if any) or interest
(including any Additional Interest)) shall be entitled and empowered,
by intervention in such proceeding or otherwise,
(1) to file and prove a claim for the whole amount
of principal (and premium, if any) and interest (including any
Additional Interest) owing and unpaid in respect of the
Securities and to file such other papers or documents as may
be necessary or advisable and to take any and all actions as
are authorized under the Trust Indenture Act in order to have
the claims of the Holders and any predecessor to the Trustee
under Section 6.7 allowed in any such judicial proceedings;
and
(2) in particular, the Trustee shall be authorized
to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same in
accordance with Section 5.6; and
(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial
proceeding is hereby authorized by each Holder to make such payments to
the Trustee for distribution in accordance with Section 5.6, and in the
event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due to it and
any predecessor Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.
SECTION 5.5. Trustee May Enforce Claim Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, subject to
Article XIII and after provision for the payment of all the amounts owing the
Trustee and any predecessor Trustee under Section 6.7, its agents and counsel,
be for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
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SECTION 5.6. Application of Money Collected.
Any money or property collected or to be applied by the Trustee with
respect to a series of Securities pursuant to this Article V shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money or property on account of principal (or premium,
if any) or interest (including any Additional Interest), upon presentation of
the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 6.7;
SECOND: Subject to Article XIII, to the payment of the amounts
then due and unpaid upon Securities of such series for principal (and
premium, if any) and interest (including any Additional Interest) in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such series of Securities
for principal (and premium, if any) and interest (including any
Additional Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 5.7. Limitation on Suits.
Subject to Section 5.8, no Holder of any Securities of any series shall
have any right to institute any proceeding, judicial or otherwise, with respect
to this Indenture or for the appointment of a receiver, assignee, trustee,
liquidator or sequestrator (or other similar official) or for any other remedy
hereunder, unless:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities
of that series;
(2) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Securities of that series shall have made
written request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
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(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Securities of
that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal,
Premium and Interest; Direct Action by Holders of Capital Securities.
Notwithstanding any other provision in this Indenture, the Holder of
any Security of any series shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any) and
(subject to Sections 3.8 and 3.12) interest (including any Additional Interest)
on such Security on the respective Stated Maturities expressed in such Security
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder. In the case of Securities of a series issued
to an Issuer Trust, any registered holder of the series of Capital Securities
issued by such Issuer Trust shall have the right, upon the occurrence of an
Event of Default described in Section 5.1(1) or 5.1(2), to institute a suit
directly against the Corporation for enforcement of payment to such holder of
principal of (premium, if any) and (subject to Sections 3.8 and 3.12) interest
(including any Additional Interest) on the Securities having a principal amount
equal to the aggregate Liquidation Amount (as defined in the related Trust
Agreement) of such Capital Securities held by such holder.
SECTION 5.9. Restoration of Rights and Remedies.
If the Trustee, any Holder or any holder of Capital Securities issued
by any Issuer Trust has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee, such Holder or such
holder of Capital Securities, then and in every such case the Corporation, the
Trustee, such Holders and such holder of Capital Securities shall, subject to
any determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee, such Holder and such holder of Capital Securities shall continue as
though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
Except as otherwise provided in the last paragraph of Section 3.7, no
right or remedy herein conferred upon or reserved to the Trustee or the Holders
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter
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existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee, any Holder of any Security or any
holder of any Capital Security to exercise any right or remedy accruing upon any
Event of Default with respect to the Securities of the related series shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein.
Every right and remedy given by this Article V or by law to the Trustee
or to the Holders and the right and remedy given to the holders of Capital
Securities by Section 5.8 may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee, the Holders or the holders of Capital
Securities, as the case may be.
SECTION 5.12. Control by Holders.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee, with
respect to the Securities of such series, provided that:
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall have
the right to decline to follow such direction if a Responsible Officer or
Officers of the Trustee shall, in good faith, determine that the proceeding
so directed would be unjustly prejudicial to the Holders not joining in any
such direction or would involve the Trustee in personal liability.
SECTION 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities of any series affected thereby and, in the case of
any Securities of a series initially issued to an Issuer Trust, the holders of a
Majority in Liquidation Amount of the Capital Securities (as defined in the
related Trust Agreement) issued by such Issuer Trust may waive any past default
or Event of Default hereunder and its consequences with respect to such series
except a default:
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(1) in the payment of the principal of (or premium, if any) or
interest (including any Additional Interest) on any Security of such
series (unless such default has been cured and the Corporation has paid
to or deposited with the Trustee a sum sufficient to pay all matured
installments of interest (including any Additional Interest) and all
principal of (and premium, if any, on) all Securities of that series
due otherwise than by acceleration), or
(2) in respect of a covenant or provision hereof that under
Article IX cannot be modified or amended without the consent of each
Holder of any Outstanding Security of such series affected.
Any such waiver shall be deemed to be on behalf of the Holders of all
the Securities of such series or, in the case of a waiver by holders of Capital
Securities issued by such Issuer Trust, by the holders of all the Capital
Securities issued by such Issuer Trust.
Upon any such waiver, 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 Indenture; but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
SECTION 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security,
by its acceptance thereof, shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.14 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder or group of Holders holding in the
aggregate more than 10% in aggregate principal amount of the Outstanding
Securities of any series, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or interest
(including any Additional Interest) on any Security on or after the respective
Stated Maturities expressed in such Security.
SECTION 5.15. Waiver of Usury, Stay or Extension Laws.
The Corporation covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any usury, stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Corporation (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein
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granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such certificates or opinions
that by any provisions hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this
Indenture.
(b) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct except that:
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section 6.1;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(3) the 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 Holders pursuant to Section 5.12 relating to the
time, method and place of conducting any proceeding for any
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remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture with respect to the
Securities of a series.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.1.
SECTION 6.2. Notice of Defaults.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Securities of any series, the Trustee shall transmit by mail to all Holders of
Securities of such series, as their names and addresses appear in the Securities
Register, notice of such default, unless such default shall have been cured or
waived; provided, however, that, except in the case of a default in the payment
of the principal of (or premium, if any) or interest (including any Additional
Interest) on any Security of such series, the 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
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of Securities of such series; and provided further,
however, that, in the case of any default of the character specified in Section
5.1(3), no such notice to Holders of Securities of such series shall be given
until at least 30 days after the occurrence thereof. For the purpose of this
Section 6.2, the term "default" means any event that is, or after notice or
lapse of time or both would become, an Event of Default with respect to
Securities of such series.
SECTION 6.3. Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, Security or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Corporation mentioned herein shall
be sufficiently evidenced by a Corporation Request or Corporation Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
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(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of such counsel
or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities that might be incurred by it in complying with such
request or direction;
(f) the 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,
Security or other paper or document, but the Trustee in its discretion may make
such inquiry or investigation into such facts or matters as it may see fit; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed by it with due care
hereunder.
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Corporation, and neither the Trustee nor any Authenticating Agent assumes
any responsibility for their correctness. The Trustee makes no representations
as to the validity or sufficiency of this Indenture or of the Securities.
Neither the Trustee nor any Authenticating Agent shall be accountable for the
use or application by the Corporation of the Securities or the proceeds thereof.
SECTION 6.5. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Securities
Registrar or any other agent of the Corporation, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Corporation with the same rights it
would have if it were not Trustee, Authenticating Agent, Paying Agent,
Securities Registrar or such other agent.
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SECTION 6.6. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law (including the Trust
Indenture Act). The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Corporation.
SECTION 6.7. Compensation and Reimbursement.
The Corporation agrees
(1) to pay to the Trustee from time to time such reasonable
compensation for all services rendered by it hereunder in such amounts
as the Corporation and the Trustee shall agree 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);
(2) to reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture (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
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel) incurred without negligence, wilful misconduct or bad faith,
arising out of or in connection with the acceptance or administration
of this trust or the performance of its duties hereunder, including the
costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its powers or
duties hereunder. This indemnification shall survive the termination of
this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(4) or 5.1(5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Code.
SECTION 6.8. Disqualification; Conflicting Interests.
(a) The Trustee for the Securities of any series issued hereunder shall
be subject to the provisions of Section 310(b) of the Trust Indenture Act.
Nothing herein shall prevent the Trustee from filing with the Commission the
application referred to in the second to last paragraph of said Section 310(b).
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(b) The Trust Agreement and the Guarantee Agreement with respect to
each Issuer Trust shall be deemed to be specifically described in this Indenture
for the purposes of clause (i) of the first proviso contained in Section 310(b)
of the Trust Indenture Act.
SECTION 6.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be:
(a) a corporation organized and doing business under the laws
of the United States of America or of any State or Territory thereof or
the District of Columbia, authorized under such laws to exercise
corporate trust powers and subject to supervision or examination by
Federal, State, Territorial or District of Columbia authority, or
(b) a corporation or other Person organized and doing business
under the laws of a foreign government that is permitted to act as
Trustee pursuant to a rule, regulation or order of the Commission,
authorized under such laws to exercise corporate trust powers, and
subject to supervision or examination by authority of such foreign
government or a political subdivision thereof substantially equivalent
to supervision or examination applicable to United States institutional
trustees,
in either case having at the time of 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. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purposes of this Section 6.9 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. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.9, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article VI. Neither the Corporation nor any Person directly or indirectly
controlling, controlled by or under common control with the Corporation shall
serve as Trustee for the Securities of any series issued hereunder.
SECTION 6.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article VI shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Corporation. If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
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(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of such series, delivered to the
Trustee and to the Corporation.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Corporation or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and shall
fail to resign after written request therefor by the Corporation or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Corporation, acting pursuant to the authority of
a Board Resolution, may remove the Trustee with respect to the Securities of all
series issued hereunder, or (ii) subject to Section 5.14, any Holder who has
been a bona fide Holder of a Security for at least six months may, on behalf of
such Holder and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to the Securities of
all series issued hereunder and the appointment of a successor Trustee or
Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause with
respect to the Securities of one or more series, the Corporation, by a Board
Resolution, shall promptly appoint a successor Trustee with respect to the
Securities of that or those series. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor Trustee
with respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in aggregate principal amount of the Outstanding
Securities of such series delivered to the Corporation and the retiring Trustee,
the successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee with respect to the Securities of such
series and supersede the successor Trustee appointed by the Corporation. If no
successor Trustee with respect to the Securities of any series shall have been
so appointed by the Corporation or the Holders and accepted appointment in the
manner hereinafter provided, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, subject to Section 5.14, on
behalf of such Holder and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of such series.
(f) The Corporation shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with
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respect to the Securities of any series by mailing written notice of such event
by first-class mail, postage prepaid, to the Holders of Securities of such
series as their names and addresses appear in the Securities Register. Each
notice shall include the name of the successor Trustee with respect to the
Securities of such series and the address of its Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Corporation and to the retiring Trustee
an instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on the
request of the Corporation or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Corporation,
the retiring Trustee and each successor Trustee with respect to the Securities
of one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Corporation or any successor Trustee,
such retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
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(c) Upon request of any such successor Trustee, the Corporation shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all rights, powers and trusts referred to
in paragraph (a) or (b) of this Section 6.11, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article VI.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article VI,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. If any Securities shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated, and if any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.
SECTION 6.13. Preferential Collection of Claims Against Corporation.
If and when the Trustee shall be or become a creditor of the
Corporation (or any other obligor upon the Securities), the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding the collection of
claims against the Corporation (or any such other obligor).
SECTION 6.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect
to one or more series of Securities, which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series issued upon original
issue and upon exchange, registration of transfer or partial redemption thereof
or pursuant to Section 3.7, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or to the Trustee's certificate of authentication, such reference shall
be deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent or the Authenticating Agent's certificate of authentication
set forth for this Section 6.14. Each Authenticating Agent shall be acceptable
to the Corporation and shall at all times be a corporation organized and doing
business under the laws of the United States of America or of any State or
Territory thereof or the District of
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Columbia, authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of not less than $50,000,000 and subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such Authenticating Agent publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section 6.14
and to the extent permitted by the Trust Indenture Act, the combined capital and
surplus of such Authenticating Agent shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published. If
at any time an Authenticating Agent shall cease to be eligible in accordance
with the provisions of this Section 6.14, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section 6.14.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent, shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
qualified and eligible under this Section 6.14, without the execution or filing
of any paper or any further act on the part of the Trustee or the Authenticating
Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Corporation. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Corporation. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.14, the Trustee may appoint a successor
Authenticating Agent, which shall be acceptable to the Corporation and shall
give notice of such appointment in the manner provided in Section 1.6 to all
Holders of Securities of the series with respect to which such Authenticating
Agent will serve. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provision of this Section 6.14.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section 6.14, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 6.7.
If an appointment with respect to one or more series is made pursuant
to this Section 6.14, the Securities of such series may have endorsed thereon,
in addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
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This is one of the Securities of the series designated therein referred
to in the within mentioned Indenture.
Dated: ___________________
------------,
as Trustee
By:_______________________,
As Authenticating Agent
By:________________________
Authorized Officer
ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE AND CORPORATION
SECTION 7.1. Corporation to Furnish Trustee Names and Addresses of
Holders.
The Corporation will furnish or cause to be furnished to the Trustee:
(a) quarterly, on or before January 1, April 1, July 1 or
October 1 of each year, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of a
date not more than 15 days prior to the delivery thereof, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Corporation of any such
request, a list of similar form and content 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 Corporation and has not otherwise been received by the Trustee in its
capacity as Securities Registrar.
SECTION 7.2. Preservation of Information, Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
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(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided in the
Trust Indenture Act.
(c) Every Holder of Securities, by its acceptance thereof, agrees with
the Corporation and the Trustee that neither the Corporation nor the Trustee nor
any agent of either of them shall be held accountable by reason of the
disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.
SECTION 7.3. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act, at the times and in the manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals of not
more than 12 months shall be transmitted no later than July 15 in each calendar
year, commencing with the first July 15 after the first issuance of Securities
under this Indenture.
(c) If this Indenture shall have been qualified under the Trust
Indenture Act, a copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each securities exchange
upon which any Securities are listed and also with the Commission. The
Corporation will notify the Trustee when any Securities are listed on any
securities exchange.
SECTION 7.4. Reports by Corporation.
The Corporation shall file with the Trustee and with the Commission,
and transmit to the Holders, such information, documents and other reports, and
such summaries thereof, as may be required pursuant to the Trust Indenture Act
at the times and in the manner provided in the Trust Indenture Act; provided
that any such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act shall be
filed with the Trustee within 15 days after the same is required to be filed
with the Commission. At any time when the Corporation is not subject to Section
13 or 15(d) of the Exchange Act, upon the request of a Holder or beneficial
owner of a Security, the Corporation shall promptly furnish Rule 144A
Information, or cause such information to be furnished, to such Holder or
beneficial owner or to a prospective purchaser of such Security designated by
such Holder or beneficial owner in order to permit compliance by such Holder or
beneficial owner with Rule 144A under the Securities Act in connection with the
resale of such Security by such Holder or beneficial owner; provided, however,
that the Corporation shall not be required to furnish such information at any
time to a prospective purchaser located outside the United States who is not a
"U.S. person" within the meaning of Regulation S under the Securities Act. The
Corporation also shall comply with the other provisions of Trust Indenture Act
Section 314(a), provided, however, that the Corporation shall be required,
pursuant to this Section 7.4, to provide any document, report or
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other information to the Commission only if this Indenture shall have been
qualified under the Trust Indenture Act.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Corporation May Consolidate, Etc., Only on Certain Terms.
The Corporation 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 Corporation or convey, transfer or lease its properties and assets
substantially as an entirety to the Corporation, unless:
(1) if the Corporation shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the corporation formed by
such consolidation or into which the Corporation is merged or the
Person that acquires by conveyance or transfer, or that leases, the
properties and assets of the Corporation substantially as an entirety
shall be a corporation, partnership or trust organized and existing
under the laws of the United States of America or any State thereof or
the District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the
principal of (and premium, if any) and interest (including any
Additional Interest) on all the Securities of every series and the
performance of every covenant of this Indenture on the part of the
Corporation to be performed or observed;
(2) immediately after giving effect to such transaction, no
Event of Default, and no event that, after notice or lapse of time, or
both, would constitute an Event of Default, shall have occurred and be
continuing; and
(3) the Corporation has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and any such
supplemental indenture comply with this Article VIII and that all
conditions precedent herein provided for relating to such transaction
have been complied with; and the Trustee, subject to Section 6.1, may
rely upon such Officers' Certificate and Opinion of Counsel as
conclusive evidence that such transaction complies with this Section
8.1.
SECTION 8.2. Successor Corporation Substituted.
Upon any consolidation or merger by the Corporation with or into any
other Person, or any conveyance, transfer or lease by the Corporation of its
properties and assets substantially as
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an entirety to any Person in accordance with Section 8.1, the successor
corporation formed by such consolidation or into which the Corporation is merged
or to which such conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Corporation
under this Indenture with the same effect as if such successor Person had been
named as the Corporation herein; and in the event of any such conveyance,
transfer or lease, the Corporation shall be discharged from all obligations and
covenants under this Indenture and the Securities.
Such successor Person may cause to be executed, and may issue either in
its own name or in the name of the Corporation, any or all of the Securities
issuable hereunder that theretofore shall not have been signed by the
Corporation and delivered to the Trustee; and, upon the order of such successor
Person instead of the Corporation and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Securities that previously shall have been signed and
delivered by the officers of the Corporation to the Trustee for authentication
pursuant to such provisions and any Securities that such successor Person
thereafter shall cause to be executed and delivered to the Trustee on its behalf
for the purpose pursuant to such provisions. All the Securities so issued shall
in all respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture.
In case of any such consolidation, merger, conveyance, transfer or
lease, such changes in phraseology and form may be made in the Securities
thereafter to be issued as may be appropriate.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Corporation, when authorized by
a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to
the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Corporation, and the assumption by any such successor of the covenants
of the Corporation contained herein and in the Securities contained; or
(2) to convey, transfer, assign, mortgage or pledge any
property to or with the Trustee or to surrender any right or power
herein conferred upon the Corporation; or
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(3) to establish the form or terms of Securities of any
series as permitted by Sections 2.1 or 3.1; or
(4) to add to the covenants of the Corporation for the benefit
of the Holders of all or any series of Securities (and if such
covenants are to be for the benefit of less than all series of
Securities, stating that such covenants are expressly being included
solely for the benefit of the series specified) or to surrender any
right or power herein conferred upon the Corporation; or
(5) to add any additional Events of Default for the benefit of
the Holders of all or any series of Securities (and if such additional
Events of Default are to be for the benefit of less than all series of
Securities, stating that such additional Events of Default are
expressly being included solely for the benefit of the series
specified); or
(6) to change or eliminate any of the provisions of this
Indenture, provided that any such change or elimination shall (a)
become effective only when there is no Security Outstanding of any
series created prior to the execution of such supplemental indenture
that is entitled to the benefit of such provision or (b) not apply to
any Outstanding Securities; or
(7) to cure any ambiguity, to correct or supplement any
provision herein that may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture, provided that such
action pursuant to this clause (7) shall not adversely affect the
interest of the Holders of Securities of any series in any material
respect or, in the case of the Securities of a series issued to an
Issuer Trust and for so long as any of the corresponding series of
Capital Securities issued by such Issuer Trust shall remain
outstanding, the holders of such Capital Securities; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 6.11(b); or
(9) to comply with the requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the
Trust Indenture Act.
SECTION 9.2. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities of each series affected
by such supplemental indenture, by Act of said Holders delivered to the
Corporation and the Trustee, the Corporation, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental
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hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders of Securities of such series under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each Outstanding Security of each series affected
thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest (including any Additional Interest) on, any
Security, or reduce the principal amount thereof or the rate of
interest thereon or any premium payable upon the redemption thereof, or
reduce the amount of principal of a Discount Security that would be due
and payable upon a declaration of acceleration of the Maturity thereof
pursuant to Section 5.2, or change the place of payment where, or the
coin or currency in which, any Security or interest (including any
Additional Interest) thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or
(2) reduce the percentage in aggregate principal amount of the
Outstanding Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section 9.2, Section
5.13 or Section 10.5, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each Security
affected thereby;
provided further, however, that, in the case of Securities of a series issued to
an Issuer Trust, so long as any of the corresponding series of Capital
Securities issued by such Issuer Trust remains outstanding, (i) no such
amendment shall be made that adversely affects the holders of such Capital
Securities in any material respect, and no termination of this Indenture shall
occur, and no waiver of any Event of Default or compliance with any covenant
under this Indenture shall be effective, without the prior consent of the
holders of at least a Majority in Liquidation Amount of such Capital Securities
(as defined in the related Trust Agreement) unless and until the principal of
(and premium, if any, on) the Securities of such series and all accrued and
(subject to Section 3.12) unpaid interest (including, subject to Section 3.12,
any Additional Interest) thereon have been paid in full, and (ii) no amendment
shall be made to Section 5.8 of this Indenture that would impair the rights of
the holders of Capital Securities issued by any Issuer Trust provided therein
without the prior consent of the holders of each such Capital Security then
outstanding unless and until the principal of (and premium, if any, on) the
Securities of such series and all accrued and (subject to Section 3.12) unpaid
interest (including, subject to Section 3.12, any Additional Interest) thereon
have been paid in full.
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A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture that has expressly been included solely for
the benefit of one or more particular series of Securities or any corresponding
series of Capital Securities of an Issuer Trust that holds the Securities of any
series, or that modifies the rights of the Holders of Securities of such series
or holders of such Capital Securities of such corresponding series with respect
to such covenant or other provision, shall be deemed not to affect the rights
under this Indenture of the Holders of Securities of any other series or holders
of Capital Securities of any other series.
It shall not be necessary for any Act of Holders under this Section 9.2
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
SECTION 9.3. Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any
supplemental indenture permitted by this Article IX or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 6.1) shall be fully protected in relying upon,
an Officers' Certificate and an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture, and
that all conditions precedent herein provided for relating to such action have
been complied with. The Trustee may, but shall not be obligated to, enter into
any such supplemental indenture that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article IX,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 9.6. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX may, and shall if required by
the Corporation, bear a notation in form approved by the Corporation as to any
matter provided for in such supplemental indenture. If the Corporation shall so
determine, new Securities of any series so modified as to conform, in the
opinion of the Corporation, to any such supplemental indenture may be prepared
and executed by the Corporation and authenticated and delivered by the Trustee
in exchange for Outstanding Securities of such series.
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ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest.
The Corporation covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of (and premium,
if any) and interest (including any Additional Interest) on the Securities of
that series in accordance with the terms of such Securities and this Indenture.
SECTION 10.2. Maintenance of Office or Agency.
The Corporation will maintain in each Place of Payment for any series
of Securities an office or agency where Securities of that series may be
presented or surrendered for payment, where Securities of that series may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Corporation in respect of the Securities of that series
and this Indenture may be served. The Corporation initially appoints the
Trustee, acting through its Corporate Trust Office, as its agent for said
purposes. The Corporation will give prompt written notice to the Trustee of any
change in the location of any such office or agency. If at any time the
Corporation shall fail to maintain such office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Corporation hereby appoints the Trustee as its agent to receive
all such presentations, surrenders, notices and demands.
The Corporation may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all of such purposes, and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Corporation of its obligation to maintain an office or agency in
each Place of Payment for Securities of any series for such purposes. The
Corporation will give prompt written notice to the Trustee of any such
designation and any change in the location of any such office or agency.
SECTION 10.3. Money for Security Payments to be Held in Trust.
If the Corporation shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of (or premium, if any) or interest (including any Additional
Interest) on any of the Securities of such series, segregate and hold in trust
for the benefit of the Persons entitled thereto a sum sufficient to pay the
principal (or premium, if any) or interest (including any Additional Interest)
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
failure so to act.
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Whenever the Corporation shall have one or more Paying Agents, it will,
prior to 10:00 a.m., New York City time, on each due date of the principal of
(or premium, if any) or interest (including any Additional Interest) on any
Securities, deposit with a Paying Agent a sum sufficient to pay the amount so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such amount, and (unless such Paying Agent is the Trustee) the
Corporation will promptly notify the Trustee of its failure so to act.
The Corporation will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 10.3,
that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal
of (and premium, if any) and interest (including any Additional
Interest) on the Securities of a series in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Corporation
(or any other obligor upon such Securities) in the making of any
payment of principal (or premium, if any) or interest (including any
Additional Interest) in respect of any Security of any series;
(3) at any time during the continuance of any default with
respect to a series of Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums so held in trust by such
Paying Agent with respect to such series; and
(4) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent.
The Corporation may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Corporation Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Corporation or such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which such sums were held by the
Corporation or such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Corporation in trust for the payment of the principal of (or premium, if
any) or interest (including any Additional Interest) on any Security and
remaining unclaimed for two years after such principal (or premium, if any) or
interest (including any Additional Interest) has become due and payable shall
(unless otherwise required by mandatory provision of applicable escheat or
abandoned or unclaimed property law) be paid on Corporation Request to the
Corporation, or (if then held by the Corporation) shall (unless otherwise
required by mandatory provision of applicable escheat or abandoned or unclaimed
property law) be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the
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Corporation for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Corporation as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Corporation cause to be published once, in a newspaper published
in the English language, customarily published on each Business Day and of
general circulation in the Borough of Manhattan, The City of New York, notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the
Corporation.
SECTION 10.4. Statement as to Compliance.
The Corporation shall deliver to the Trustee, within 120 days after the
end of each fiscal year of the Corporation ending after the date hereof, an
Officers' Certificate covering the preceding calendar year, stating whether or
not to the best knowledge of the signers thereof the Corporation is in default
in the performance, observance or fulfillment of or compliance with any of the
terms, provisions, covenants and conditions of this Indenture, and if the
Corporation shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge. For the purpose of this Section
10.4, compliance shall be determined without regard to any grace period or
requirement of notice provided pursuant to the terms of this Indenture.
SECTION 10.5. Waiver of Certain Covenants.
Subject to the rights of holders of Capital Securities specified in
Section 9.2, if any, the Corporation may omit in any particular instance to
comply with any covenant or condition provided pursuant to Section 3.1, 9.1(3)
or 9.1(4) with respect to the Securities of any series, if before or after the
time for such compliance the Holders of at least a majority in aggregate
principal amount of the Outstanding Securities of such series shall, by Act of
such Holders, either waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver shall extend to
or affect such covenant or condition except to the extent so expressly waived,
and, until such waiver shall become effective, the obligations of the
Corporation in respect of any such covenant or condition shall remain in full
force and effect.
SECTION 10.6. Additional Sums.
In the case of the Securities of a series initially issued to an Issuer
Trust, so long as no Event of Default has occurred and is continuing and except
as otherwise specified as contemplated by Section 2.1 or Section 3.1, if (i) an
Issuer Trust is the Holder of all of the Outstanding Securities of such series,
and (ii) a Tax Event has occurred and is continuing in respect of such Issuer
Trust, the Corporation shall pay to such Issuer Trust (or its permitted
successor under the related Trust Agreement) for so long as such Issuer Trust
(or its permitted successor) is the registered holder of the Outstanding
Securities of such series, together with any payment of principal of (or
premium, if any) or interest (including any Additional Interest) on
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such Securities, such additional sums as may be necessary in order that the
amount of Distributions (including any Additional Amounts (as defined in such
Trust Agreement)) then payable by such Issuer Trust in respect of the related
Capital Securities and Common Securities in accordance with the terms thereof
shall not be reduced as a result of any Additional Taxes arising from such Tax
Event (the "Additional Sums"). Whenever in this Indenture or the Securities
there is a reference in any context to the payment of principal of (or premium,
if any) or interest (including any Additional Interest) on the Securities, such
mention shall be deemed to include mention of the payments of the Additional
Sums provided for in this paragraph to the extent that, in such context,
Additional Sums are, were or would be payable in respect thereof pursuant to the
provisions of this paragraph, and any express mention of the payment of
Additional Sums (if applicable) in any provision hereof shall not be construed
as excluding Additional Sums in those provisions hereof where such express
mention is not made; provided, however, that the deferral of the payment of
interest pursuant to Section 3.12 or the terms of the Securities shall not defer
the payment of any Additional Sums that may be due and payable.
SECTION 10.7. Additional Covenants.
The Corporation covenants and agrees with each Holder of Securities of
each series that it shall not, and it shall not permit any Subsidiary of the
Corporation to, (x) declare or pay any dividends or distributions on, or redeem
purchase, acquire or make a liquidation payment with respect to, any shares of
the Corporation's capital stock, or (y) 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 the Securities of such series or 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 the Securities of such series (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
Agreement and (d) purchases of common stock related to the issuance of common
stock or rights under any of the Corporation's or any Subsidiary of the
Corporation's benefit plans for their directors, officers or employees if at
such time (i) there shall have occurred any event of which the Corporation has
actual knowledge that (A) with the giving of notice or the lapse of time, or
both, would constitute an Event of Default and (B) in respect of which the
Corporation shall not have taken reasonable steps to cure, (ii) if the
Securities of such series are held by an Issuer Trust, the Corporation shall be
in default with respect to its payment of any obligations under the Guarantee
Agreement relating to the Capital Securities issued by such Issuer Trust, or
(iii) the Corporation shall have given notice of its selection of an Extension
Period with respect to the Securities of such series as provided herein and
shall not have rescinded such notice, or such Extension Period, or any extension
thereof, shall be continuing.
The Corporation also covenants with each Holder of Securities of a
series issued to an Issuer Trust (i) to hold, directly or indirectly, 100% of
the Common Securities of such Issuer Trust, provided that any permitted
successor of the Corporation hereunder may succeed to the
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Corporation's ownership of such Common Securities, (ii) as holder of such Common
Securities, not to voluntarily terminate, wind-up or liquidate such Issuer
Trust, other than (a) in connection with a distribution of the Securities of
such series to the holders of the related Capital Securities in liquidation of
such Issuer Trust, or (b) in connection with certain mergers, consolidations or
amalgamations permitted by the related Trust Agreement, and (iii) to use its
reasonable efforts, consistent with the terms and provisions of such Trust
Agreement, to cause such Issuer Trust to continue to be classified as a grantor
trust and not to be taxable as a corporation for United States federal income
tax purposes.
SECTION 10.8. Original Issue Discount.
For each year during which any Securities that were issued with
original issue discount are Outstanding, the Corporation shall furnish to each
Paying Agent in a timely fashion such information as may be reasonably requested
by each Paying Agent in order that such Paying Agent may prepare the information
that it is required to report for such year on Internal Revenue Service Forms
1096 and 1099 pursuant to Section 6049 of the Internal Revenue Code of 1986, as
amended. Such information shall include the amount of original issue discount
includable in income for each $1,000 of principal amount at Stated Maturity of
Securities Outstanding during such year.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Applicability of This Article.
Redemption of Securities of any series (whether by operation of a
sinking fund or otherwise) as permitted or required by any form of Security
issued pursuant to this Indenture shall be made in accordance with such form of
Security and this Article XI; provided, however, that if any provision of any
such form of Security shall conflict with any provision of this Article XI, the
provision of such form of Security shall govern. Except as otherwise set forth
in the form of Security for such series, each Security of a series shall be
subject to partial redemption only in integral multiples of $1,000.
SECTION 11.2. Election to Redeem; Notice to Trustee.
The election of the Corporation to redeem any Securities shall be
evidenced by or pursuant to a Board Resolution. In case of any redemption at the
election of the Corporation, the Corporation shall, not less than 45 nor more
than 60 days prior to the Redemption Date (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee and, in the case of Securities
of a series held by an Issuer Trust, the Property Trustee under the related
Trust Agreement, of such date and of the principal amount of Securities of the
applicable series to be redeemed and provide the additional information required
to be included in the notice or notices
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contemplated by Section 11.4; provided that in the case of any series of
Securities initially issued to an Issuer Trust, for so long as such Securities
are held by such Issuer Trust, such notice shall be given not less than 45 nor
more than 75 days prior to such Redemption Date (unless a shorter notice shall
be satisfactory to the Property Trustee under the related Trust Agreement). In
the case of any redemption of Securities prior to the expiration of any
restriction on such redemption provided in the terms of such Securities, the
Corporation shall furnish the Trustee with an Officers' Certificate and an
Opinion of Counsel evidencing compliance with such restriction.
SECTION 11.3. Selection of Securities to be Redeemed.
If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of a portion of the principal amount of any Security of such series,
provided that the unredeemed portion of the principal amount of any Security
shall be in an authorized denomination (which shall not be less than the minimum
authorized denomination) for such Security.
The Trustee shall promptly notify the Corporation in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed. For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security that has been or is to be
redeemed.
SECTION 11.4. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at the address of such Holder
as it appears in the Securities Register, provided that in the case of any
series of Securities initially issued to an Issuer Trust, for so long as such
Securities are held by such Issuer Trust, such notice shall be given not less
than 45 nor more than 75 days prior to such Redemption Date (unless a shorter
notice shall be satisfactory to the Property Trustee under the related Trust
Agreement).
With respect to Securities of each series to be redeemed, each notice
of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price or, if the Redemption Price cannot be
calculated prior to the time the notice is required to be sent, an
estimate of the Redemption Price together with a statement that it is
an estimate and that the actual Redemption Price will be calculated on
the third Business Day prior to the Redemption Date (and, if such an
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estimate of the Redemption Price is given, a subsequent notice shall be
given as set forth above on the date that such Redemption Price is
calculated setting forth the actual Redemption Price);
(c) if less than all Outstanding Securities of such particular
series are to be redeemed, the identification (and, in the case of
partial redemption, the respective principal amounts) of the particular
Securities to be redeemed;
(d) that on the Redemption Date, the Redemption Price will
become due and payable upon each such Security or portion thereof, and
that interest (including any Additional Interest) thereon, if any,
shall cease to accrue on and after said date;
(e) the place or places where such Securities are to be
surrendered for payment of the Redemption Price;
(f) that the redemption is for a sinking fund, if such is
the case;
(g) such other provisions as may be required in respect of
the terms of a particular series of Securities.
Notice of redemption of Securities to be redeemed at the election of
the Corporation shall be given by the Corporation or, at the Corporation's
request, by the Trustee in the name and at the expense of the Corporation and
shall be irrevocable. The notice if mailed in the manner provided above shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
SECTION 11.5. Deposit of Redemption Price.
Prior to 10:00 a.m., New York City time, on the Redemption Date
specified in the notice of redemption given as provided in Section 11.4, the
Corporation will deposit with the Trustee or with one or more Paying Agents (or,
if the Corporation is acting as its own Paying Agent, the Corporation will
segregate and hold in trust as provided in Section 10.3) an amount of money
sufficient to pay the Redemption Price of, and any accrued interest (including
any Additional Interest) on, all the Securities (or portions thereof) that are
to be redeemed on that date.
SECTION 11.6. Payment of Securities Called for Redemption.
If any notice of redemption has been given as provided in Section 11.4,
the Securities or portion of Securities with respect to which such notice has
been given shall become due and payable on the date and at the place or places
stated in such notice at the applicable Redemption Price, together with accrued
interest (including any Additional Interest) to the Redemption Date. On
presentation and surrender of such Securities at a Place of Payment in said
notice specified,
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the said Securities or the specified portions thereof shall be paid and redeemed
by the Corporation at the applicable Redemption Price, together with accrued
interest (including any Additional Interest) to the Redemption Date; provided,
however, that, unless otherwise specified as contemplated by Section 3.1,
installments of interest (including any Additional Interest) whose Stated
Maturity is on or prior to the Redemption Date will be payable to the Holders of
such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant record dates according to their terms and
the provisions of Section 3.8.
Upon presentation of any Security redeemed in part only, the
Corporation shall execute and the Trustee shall authenticate and deliver to the
Holder thereof, at the expense of the Corporation, a new Security or Securities
of the same series, of authorized denominations, in aggregate principal amount
equal to the unredeemed portion of the Security so presented and having the same
Original Issue Date, Stated Maturity and terms.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of (and premium, if any, on)
such Security shall, until paid, bear interest from the Redemption Date at the
rate prescribed therefor in such Security.
SECTION 11.7. Right of Redemption of Securities Initially Issued to an
Issuer Trust.
In the case of Securities of a series initially issued to an Issuer
Trust, except as otherwise specified as contemplated by Section 3.1, the
Corporation, at its option, may redeem such Securities (i) on or after the date
specified in such Security, in whole at any time or in part from time to time,
or (ii) upon the occurrence and during the continuation of a Tax Event in whole
(but not in part) at any time within 90 days following the occurrence and during
the continuation of such Tax Event at a Redemption Price specified in such
Security, together with accrued interest (including any Additional Interest) to
but excluding the Redemption Date.
If less than all the Securities of any such series are to be redeemed,
the aggregate principal amount of such Securities remaining Outstanding after
giving effect to such redemption shall be sufficient to satisfy any provisions
of the Trust Agreement related to the Issuer Trust to which such Securities were
issued, including any requirement in such Trust Agreement as to the minimum
Liquidation Amount (as defined in such Trust Agreement) of Capital Securities
that may be held by a holder of Capital Securities thereunder.
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ARTICLE XII
SINKING FUNDS
SECTION 12.1. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of any series except as otherwise specified as
contemplated by Section 3.1 for such Securities.
The minimum amount of any sinking fund payment provided for by the
terms of any Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any sinking fund payment in excess of such minimum
amount that is permitted to be made by the terms of such Securities of any
series is herein referred to as an "optional sinking fund payment". If provided
for by the terms of any Securities of any series, the cash amount of any sinking
fund payment may be subject to reduction as provided in Section 12.2. Each
sinking fund payment shall be applied to the redemption of Securities of any
series as provided for by the terms of such Securities.
SECTION 12.2. Satisfaction of Sinking Fund Payments with Securities.
In lieu of making all or any part of a mandatory sinking fund payment
with respect to any Securities of a series in cash, the Corporation may at its
option, at any time no more than 16 months and no less than 45 days prior to the
date on which such sinking fund payment is due, deliver to the Trustee
Securities of such series (together with the unmatured coupons, if any,
appertaining thereto) theretofore purchased or otherwise acquired by the
Corporation, except Securities of such series that have been redeemed through
the application of mandatory or optional sinking fund payments pursuant to the
terms of the Securities of such series, accompanied by a Corporation Order
instructing the Trustee to credit such obligations and stating that the
Securities of such series were originally issued by the Corporation by way of
bona fide sale or other negotiation for value; provided that the Securities to
be so credited have not been previously so credited. The Securities to be so
credited shall be received and credited for such purpose by the Trustee at the
Redemption Price for such Securities, as specified in the Securities so to be
redeemed, for redemption through operation of the sinking fund and the amount of
such sinking fund payment shall be reduced accordingly.
SECTION 12.3. Redemption of Securities for Sinking Fund.
Not less than 45 days prior to each sinking fund payment date for any
series of Securities, the Corporation will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
such Securities pursuant to the terms of such Securities, the portion thereof,
if any, that is to be satisfied by payment of cash in the currency in which the
Securities of such series are payable (except as provided pursuant to Section
3.1) and the portion thereof, if any, that is to be satisfied by delivering and
crediting Securities pursuant to
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Section 12.2, and will also deliver to the Trustee any Securities to be so
delivered. Such Officers' Certificate shall be irrevocable and upon its delivery
the Corporation shall be obligated to make any cash payment or payments referred
to therein, on or before the succeeding sinking fund payment date. If the
Corporation fails to deliver such Officers' Certificate (or, as required by this
Indenture, the Securities and coupons, if any, specified in such Officers'
Certificate) by the due date therefor, the sinking fund payment due on the
succeeding sinking fund payment date for such series shall be paid entirely in
cash and shall be sufficient to redeem the principal amount of the Securities of
such series subject to a mandatory sinking fund payment without the right to
deliver or credit securities as provided in Section 12.2 and without the right
to make the optional sinking fund payment with respect to such series at such
time.
Any sinking fund payment or payments (mandatory or optional) made in
cash plus any unused balance of any preceding sinking fund payments made with
respect to the Securities of any particular series shall be applied by the
Trustee (or by the Corporation, if the Corporation is acting as its own Paying
Agent) on the sinking fund payment date on which such payment is made (or, if
such payment is made before a sinking fund payment date, on the sinking fund
payment date immediately following the date of such payment) to the redemption
of Securities of such series at the Redemption Price specified in such
Securities with respect to the sinking fund. Any and all sinking fund moneys
with respect to the Securities of any particular series held by the Trustee (or,
if the Corporation is acting as its own Paying Agent, segregated and held in
trust as provided in Section 10.3) on the last sinking fund payment date with
respect to Securities of such series and not held for the payment or redemption
of particular Securities of such series shall be applied by the Trustee (or, by
the Corporation, if the Corporation is acting as its own Paying Agent), together
with other moneys, if necessary, to be deposited (or segregated) sufficient for
the purpose, to the payment of the principal of the Securities of such series at
Maturity. The Trustee shall select the Securities to be redeemed upon such
sinking fund payment date in the manner specified in Section 11.3 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Corporation in the manner provided in Section 11.4. Such notice having
been duly given, the redemption of such Securities shall be made upon the terms
and in the manner stated in Section 11.6. On or before each sinking fund payment
date, the Corporation shall pay to the Trustee (or, if the Corporation is acting
as its own Paying Agent, the Corporation shall segregate and hold in trust as
provided in Section 10.3) in cash a sum in the currency in which Securities of
such series are payable (except as provided pursuant to Section 3.1) equal to
the principal (and premium, if any) and any interest (including any Additional
Interest) accrued to the Redemption Date for the Securities or portions thereof
to be redeemed on such sinking fund payment date pursuant to this Section 12.3.
Neither the Trustee nor the Corporation shall redeem any Securities of
a series with sinking fund monies or mail any notice of redemption of Securities
of such series by operation of the sinking fund for such series during the
continuance of a default in payment of interest (including any Additional
Interest), if any, on any Securities of such series or of any Event of Default
(other than an Event of Default occurring as a consequence of this paragraph)
with respect to the Securities of such series, except that if the notice of
redemption shall have been provided in accordance with the provisions hereof,
the Trustee (or the Corporation, if the
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Corporation is acting as its own Paying Agent) shall redeem such Securities if
cash sufficient for that purpose shall be deposited with the Trustee (or
segregated by the Corporation) for that purpose in accordance with the terms of
this Article XII. Except as aforesaid, any monies in the sinking fund for such
series at the time when any such default or Event of Default shall occur and any
monies thereafter paid into such sinking fund shall, during the continuance of
such default or Event of Default, be held as security for the payment of the
principal of (and premium, if any) and interest (including any Additional
Interest) on the Securities of such series; provided, however, that if such
default or Event of Default shall have been cured or waived as provided herein,
such monies shall thereafter be applied on the next sinking fund payment date
for the Securities of such series on which such monies may be applied pursuant
to the provisions of this Section 12.3.
ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 13.1. Securities Subordinate to Senior Indebtedness.
The Corporation covenants and agrees, and each Holder of a Security, by
its acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article XIII, the payment of the
principal of (and premium, if any) and interest (including any Additional
Interest) on each and all of the Securities of each and every series are hereby
expressly made subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness.
SECTION 13.2. No Payment When Senior Indebtedness in Default; Payment
Over of Proceeds Upon Dissolution, Etc.
If the Corporation shall default in the payment of any principal of (or
premium, if any) or interest 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, upon written notice of such
default to the Corporation by the holders of Senior Indebtedness or any trustee
therefor, unless and until such default shall have been cured or waived or shall
have ceased to exist, no direct or indirect payment (in cash, property or
securities, by set-off or otherwise) shall be made or agreed to be made on
account of the principal of (or premium, if any) or interest (including any
Additional Interest) on any of the Securities, or in respect of any redemption,
repayment, retirement, purchase or other acquisition of any of the Securities.
In the event of (a) any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment, composition or other similar
proceedings relating to the Corporation, its creditors or its property, (b) any
proceeding for the liquidation, dissolution or other winding up of the
Corporation, voluntary or involuntary, whether or not involving insolvency or
bankruptcy proceedings, (c) any assignment by the Corporation for the benefit of
creditors or (d) any other
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marshaling of the assets of the Corporation (each such event, if any, herein
sometimes referred to as a "Proceeding"), 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 to any Holder of any of the
Securities on account thereof. Any payment or distribution, whether in cash,
securities or other property (other than securities of the Corporation 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 these
subordination provisions with respect to the indebtedness evidenced by the
Securities, 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), that would otherwise (but for these
subordination provisions) be payable or deliverable in respect of the Securities
of any series 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 Proceeding) shall have been paid in full.
In the event of any Proceeding, after payment in full of all sums owing
with respect to Senior Indebtedness, the Holders of the Securities, together
with the holders of any obligations of the Corporation ranking on a parity with
the Securities, shall be entitled to be paid from the remaining assets of the
Corporation the amounts at the time due and owing on account of unpaid principal
of (and premium, if any) and interest (including any Additional Interest) on the
Securities 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 any obligations of the Corporation ranking junior to the Securities and
such other obligations.
If, notwithstanding the foregoing, any payment or distribution of any
character or any security, whether in cash, securities or other property (other
than securities of the Corporation 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 these subordination provisions with respect to
the indebtedness evidenced by the Securities, 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 the Trustee or any Holder in contravention of any of the terms
hereof and before all Senior Indebtedness (including any interest thereon
accruing after the commencement of any Proceeding) 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 (including any interest thereon accruing after the
commencement of any Proceeding) in full. If the Trustee or any Holder fails to
endorse or assign any such payment, distribution or security, each holder of
Senior Indebtedness is hereby irrevocably authorized to endorse or assign the
same.
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The Trustee and the Holders shall take such action (including the
delivery of this Indenture to an agent for the holders of Senior Indebtedness or
consent to the filing of a financing statement with respect hereto) as may, in
the opinion of counsel designated by the holders of a majority in principal
amount of the Senior Indebtedness at the time outstanding, be necessary or
appropriate to assure the effectiveness of the subordination effected by these
provisions.
The provisions of this Section 13.2 shall not impair any rights,
interests, remedies or powers of any secured creditor of the Corporation in
respect of any security interest the creation of which is not prohibited by the
provisions of this Indenture.
The securing of any obligations of the Corporation, otherwise ranking
on a parity with the Securities or ranking junior to the Securities, shall not
be deemed to prevent such obligations from constituting, respectively,
obligations ranking on a parity with the Securities or ranking junior to the
Securities.
SECTION 13.3. Payment Permitted If No Default.
Nothing contained in this Article XIII or elsewhere in this Indenture
or in any of the Securities shall prevent (a) the Corporation, at any time,
except during the pendency of the conditions described in the first paragraph of
Section 13.2 or of any Proceeding referred to in Section 13.2, from making
payments at any time of principal of (and premium, if any) or interest
(including any Additional Interest) on the Securities, or (b) the application by
the Trustee of any moneys deposited with it hereunder to the payment of or on
account of the principal of (and premium, if any) or interest (including any
Additional Interest) on the Securities or the retention of such payment by the
Holders, if, at the time of such application by the Trustee, it did not have
knowledge that such payment would have been prohibited by the provisions of this
Article XIII.
SECTION 13.4. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all amounts due or to become due on
all Senior Indebtedness, or the provision for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior
Indebtedness, the Holders of the Securities shall be subrogated to the extent of
the payments or distributions made to the holders of such Senior Indebtedness
pursuant to the provisions of this Article XIII (equally and ratably with the
holders of all indebtedness of the Corporation that by its express terms is
subordinated to Senior Indebtedness of the Corporation to substantially the same
extent as the Securities are subordinated to the Senior Indebtedness and is
entitled to like rights of subrogation by reason of any payments or
distributions made to holders of such Senior Indebtedness) to the rights of the
holders of such Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Senior Indebtedness until the
principal of (and premium, if any) and interest (including any Additional
Interest) on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders of the
Securities or the Trustee would be entitled
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except for the provisions of this Article XIII, and no payments over pursuant to
the provisions of this Article XIII to the holders of Senior Indebtedness by
Holders of the Securities or the Trustee, shall, as among the Corporation, its
creditors other than holders of Senior Indebtedness, and the Holders of the
Securities, be deemed to be a payment or distribution by the Corporation to or
on account of such Senior Indebtedness.
SECTION 13.5. Provisions Solely to Define Relative Rights.
The provisions of this Article XIII are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article XIII or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, as between the Corporation and
the Holders of the Securities, the obligations of the Corporation, which are
absolute and unconditional, to pay to the Holders of the Securities the
principal of (and premium, if any) and interest (including any Additional
Interest) on the Securities as and when the same shall become due and payable in
accordance with their terms; (b) affect the relative rights against the
Corporation of the Holders of the Securities and creditors of the Corporation
other than their rights in relation to the holders of Senior Indebtedness; or
(c) prevent the Trustee or the Holder of any Security (or to the extent
expressly provided herein, the holder of any Capital Security) from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, including filing and voting claims in any Proceeding, subject to the
rights, if any, under this Article XIII of the holders of Senior Indebtedness to
receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder.
SECTION 13.6. Trustee to Effectuate Subordination.
Each Holder of a Security, by its acceptance thereof, authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination provided
in this Article XIII and appoints the Trustee such Holder's attorney-in-fact for
any and all such purposes.
SECTION 13.7. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the
Corporation or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Corporation with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof that any such
holder may have or be otherwise charged with.
Without in any way limiting the generality of the immediately preceding
paragraph, the holders of Senior Indebtedness may, at any time and from to time,
without the consent of or notice to the Trustee or the Holders of the Securities
of any series, without incurring responsibility to such Holders and without
impairing or releasing the subordination as provided
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in this Article XIII or the obligations hereunder of such Holders to the holders
of Senior Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Corporation and any other Person.
SECTION 13.8. Notice to Trustee.
The Corporation shall give prompt written notice to the Trustee of any
fact known to the Corporation that would prohibit the making of any payment to
or by the Trustee in respect of the Securities. Notwithstanding the provisions
of this Article or any other provision of this Indenture, the Trustee shall not
be charged with knowledge of the existence of any facts that would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Corporation or a holder of Senior Indebtedness or from any trustee, agent or
representative therefor; provided, however, that if the Trustee shall not have
received the notice provided for in this Section 13.8 at least two Business Days
prior to the date upon which by the terms hereof any monies may become payable
for any purpose (including the payment of the principal of (and premium, if any,
on) or interest (including any Additional Interest) on any Security), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such monies and to apply the same to
the purpose for which they were received and shall not be affected by any notice
to the contrary that may be received by it within two Business Days prior to
such date.
Subject to the provisions of Section 6.1, the Trustee shall be entitled
to rely on the delivery to it of a written notice by a Person representing
himself or herself to be a holder of Senior Indebtedness (or a trustee or
attorney-in-fact therefor) to establish that such notice has been given by a
holder of Senior Indebtedness (or a trustee or attorney-in-fact therefor). If
the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Article XIII, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article XIII, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 13.9. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Corporation referred
to in this Article XIII, the Trustee, subject to the provisions of Section 6.1,
and the Holders of the Securities shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in
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which any Proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of creditors,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Holders of Securities, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
the Senior Indebtedness and other indebtedness of the Corporation, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article XIII.
SECTION 13.10. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee, in its capacity as trustee under this Indenture, shall not
be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and
shall not be liable to any such holders if it shall in good faith mistakenly pay
over or distribute to Holders of Securities or to the Corporation or to any
other Person cash, property or securities to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article XIII or otherwise.
SECTION 13.11. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XIII with respect to any Senior Indebtedness
that may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder.
SECTION 13.12. Article Applicable to Paying Agents.
If at any time any Paying Agent other than the Trustee shall have been
appointed by the Corporation and be then acting hereunder, the term "Trustee" as
used in this Article shall in such case (unless the context otherwise requires)
be construed as extending to and including such Paying Agent within its meaning
as fully for all intents and purposes as if such Paying Agent were named in this
Article in addition to or in place of the Trustee.
ARTICLE XIV
EXPENSES
SECTION 14.1. Payment of Expenses by the Corporation.
The Corporation hereby irrevocably and unconditionally
guarantees to each person or entity to whom any Issuer Trust is now or hereafter
becomes indebted or liable (the "Expense Beneficiaries") the full payment, when
and as due, of any and all Expense Obligations (as hereinafter defined) to such
Expense Beneficiaries. As used herein, "Expense Obligations" means any costs,
expenses or liabilities of any Issuer Trust, other than obligations of an Issuer
Trust to pay
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to holders of any Capital Securities or other similar interests in such Issuer
Trust the amounts due such holders pursuant to the terms of the Capital
Securities or such other similar interests, as the case may be. This Article XIV
is intended to be for the benefit of, and to be enforceable by, all such Expense
Beneficiaries, whether or not such Expense Beneficiaries have received notice
hereof.
SECTION 14.2. Term of Agreement.
This Article XIV shall terminate and be of no further force
and effect with respect to holders of securities of an Issuer Trust upon the
later of (a) the date on which full payment has been made of all amounts payable
to all holders of all the Capital Securities (whether upon redemption,
liquidation, exchange or otherwise) of such Issuer Trust and (b) the date on
which there are no Expense Beneficiaries remaining; provided, however, that this
Article XIV shall continue to be effective or shall be reinstated, as the case
may be, with respect to such Issuer Trust, if at any time any holder of Capital
Securities of such Issuer Trust or any Expense Beneficiary must restore payment
of any sums paid under the Capital Securities of such Issuer Trust, under any
Expense Obligation, under the guarantee agreement by the Corporation in favor of
holders of Capital Securities of such Issuer Trust or under this Article XIV for
any reason whatsoever. Subject to the terms of this Article XIV, the obligations
of the Corporation under this Article XIV are continuing, irrevocable,
unconditional and absolute.
SECTION 14.3. Waiver of Notice.
The Corporation hereby waives notice of acceptance of the agreements
contained in this Article XIV and of any Expense Obligation to which it applies
or may apply, and the Corporation hereby waives presentment, demand for payment,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
SECTION 14.4. No Impairment.
The obligations, covenants, agreements and duties of the Corporation
under this Article XIV shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or
any portion of the Expense Obligations or for the performance of any
other obligation under, arising out of, or in connection with, the
Expense Obligations;
(b) any failure, omission, delay or lack of diligence on the part
of the Expense Beneficiaries to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Expense Beneficiaries with
respect to the Expense Obligations or any action on the part of the
Issuer Trust granting indulgence or extension of any kind; or
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(c) the voluntary or involuntary liquidation, dissolution, sale
of any collateral, receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement, composition
or readjustment of debt of, or other similar proceedings affecting,
the Trust or any of the assets of the Issuer Trust.
There shall be no obligation of the Expense Beneficiaries to give notice to, or
obtain the consent of, the Corporation with respect to the happening of any of
the foregoing.
SECTION 14.5. Enforcement.
An Expense Beneficiary may enforce this Article directly
against the Corporation and the Corporation waives any right or remedy to
require that any action be brought against the Trust or any other person or
entity before proceeding against the Corporation.
SECTION 14.6. Subrogation.
The Corporation shall be subrogated to all (if any) rights of the Trust
in respect of any amounts paid to the Expense Beneficiaries by the Corporation
under this Article XIV with respect to the applicable Issuer Trust; provided,
however, that the Corporation 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 Article XIV, if, at
the time of any such payment, any amounts are due and unpaid under this Article
XIV.
SECTION 14.7. Amendment.
So long as there remains any Expense Beneficiary or any
Capital Securities of an Issuer Trust are outstanding, this Article XIV shall
not be modified or amended in any manner adverse to such Expense Beneficiary of
such Issuer Trust or to the holders of the Capital Securities of such Issuer
Trust without the written consent of such Expense Beneficiary or such holders,
as applicable.
This Indenture 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed and attested, all as of the day and year first above written.
HSB GROUP, INC.
By:_________________________
Name: Saul L. Basch
Title: Senior Vice President,
Chief Financial
Officer, Treasurer
Attest:
By: _______________________
Corporate Secretary
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
By:________________________
Name:
Title:
Attest:
By: _______________________
<PAGE>
Exhibit A -- Form of Restricted
Securities Transfer Certificate
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to Section 3.6(b) of
the Indenture referred to below)
[-------------------------],
as Securities Registrar
[address]
Re: Junior Subordinated Debenture of HSB Group, Inc. (the
"Securities")
Reference is made to the Junior Subordinated Indenture, dated as of
July __, 1997 (the "Indenture"), between HSB Group, Inc., a Connecticut
corporation, and ____________, as Trustee. Terms used herein and defined in the
Indenture or in Regulation S, Rule 144A or Rule 144 under the U.S. Securities
Act of 1933 (the "Securities Act") are used herein as so defined.
This certificate relates to $__________ aggregate principal
amount of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
CURRENTLY IN BOOK-ENTRY FORM: Yes ___ No ___ (check one)
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through a Depositary or an Agent Member in the name of the Undersigned, as or on
behalf of the Owner. If the Specified Securities are not represented by a Global
Security, they are registered in the name of the Undersigned, as or on behalf of
the Owner.
The Owner has requested that the Specified Securities be transferred to
another person (the "Transferee") who will take delivery in the form of a
Restricted Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, it is being effected in
accordance with Rule 144A, Rule 904 of Regulation S or Rule 144 under the
Securities Act and all applicable securities laws of the states of the United
States and other jurisdictions. Accordingly, the Owner hereby further certifies
as follows:
A-1
<PAGE>
(1) Rule 144A Transfers. If the transfer is being effected in
accordance with Rule 144A:
(A) the Specified Securities are being transferred to a
person that the Owner and any person acting on its behalf
reasonably believe is a "qualified institutional buyer" within
the meaning of Rule 144A, acquiring for its own account or for
the account of a qualified institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the
Owner may be relying on Rule 144A in connection with the
transfer; and
(2) Rule 904 Transfers. If the transfer is being effected in
accordance with Rule 904:
(A) the Owner is not a distributor of the Securities, an
affiliate of the Corporation or any such distributor or a person
acting in behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made to a
person in the United States;
(C) either;
(i) at the time the buy order was originated, the
Transferee was outside the United States or the Owner and
any person acting on its behalf reasonably believed that the
Transferee was outside the United States, or
(ii) the transaction is being executed in, on or
through the facilities of the Eurobond market, as regulated
by the Association of International Bond Dealers, or another
designated offshore securities market and neither the Owner
nor any person acting on its behalf knows that the
transaction has been prearranged with a buyer in the United
States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any affiliate thereof; and
(E) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
(3) Rule 144 Transfers. If the transfer is being effected
pursuant to Rule 144:
A-2
<PAGE>
(A) the transfer is occurring after a holding period of at
least one year (computed in accordance with paragraph (d) of Rule
144) has elapsed since the date the Specified Securities were
acquired from the Corporation or from an affiliate (as such term
is defined in Rule 144) of the Corporation, whichever is later,
and is being effected in accordance with the applicable amount,
manner of sale and notice requirements of paragraphs (e), (f) and
(h) of Rule 144; or
(B) the transfer is occurring after a holding period by the
Owner of at least three years has elapsed since the date the
Specified Securities were acquired from the Corporation or from
an affiliate (as such term is defined in Rule 144) of the
Corporation, whichever is later, and the Owner is not, and during
the preceding three months has not been, an affiliate of the
Corporation.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Corporation and the Purchasers (as defined in the
Trust Agreement relating to the Issuer Trust to which the Securities were
initially issued).
Dated: __________________________________________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By:_______________________________________
Name:
Title:
(If the Undersigned is a corporation,
partnership or fiduciary, the title of the
person signing on behalf of the
Undersigned must be stated.)
A-3
<PAGE>
EXHIBIT B.1 -- Form of Regulation S
Transfer Certificate
REGULATION S CERTIFICATE
(For transfers pursuant to Sections 3.6(c)(i), (iii) and (v) of the Indenture)
First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Attention: Corporate Trust Department
Re: Global Floating Rate Junior Subordinated Debentures (the
--------------------------------------------------------
"Securities")
-------------
Reference is made to the Indenture, dated as of July 15, 1997,
between HSB Group. Inc. (the "Company") and The First National Bank of Chicago
as Trustee (the "Trustee"). Terms used herein and defined in the Indenture or in
Regulation S or Rule 144 under the U.S. Securities Act of 1933 (the "Securities
Act") are used herein as so defined.
This certificate relates to _________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ________________________
CERTIFICATE No(s). __________________
The Person in whose name this certificate is executed below
(the "Undersigned") hereby certifies that either (i) it is the sole beneficial
owner of the Specified Securities or (ii) it is acting on behalf of all the
beneficial owners of the Specified Securities and is duly authorized by them to
do so. Such beneficial owner or owners are referred to herein collectively as
the "Owner". If the Specified Securities are represented by a Global
Certificate, they are held through the Clearing Agency or participant in the
name of the Undersigned, as or on behalf of the Owner. If the Specified
Securities are not represented by a Global Certificate, they are registered in
the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form of
a Regulation S Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, it is being
B.1-1
<PAGE>
effected in accordance with Rule 904 or Rule 144 under the Securities Act and
with all applicable securities laws of the states of the United States and
other jurisdictions. Accordingly, the Owner hereby further certifies as follows:
(1) Rule 904 Transfers. If the transfer is being effected in
accordance with Rule 904:
(A) the Owner is not a distributor of the Securities, an
affiliate of the Company or any such distributor or a person acting on
behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made to a
person in the United States;
(C) either:
(i) at the time the buy order was originated, the Transferee
was outside the United States or the Owner and any person acting
on its behalf reasonably believed that the Transferee was outside
the United States, or
(ii) the transaction is being executed in, on or through the
facilities of the Eurobond market, as regulated by the
Association of International Bond Dealers, or another designated
offshore securities market and neither the Owner nor any person
acting on its behalf knows that the transaction has been
prearranged with a buyer in the United States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any affiliate thereof;
(E) if the Owner is a dealer in securities or has received a
selling concession, fee or other remuneration in respect of the
Specified Securities, and the transfer is to occur during the
Restricted Period, then the requirements of Rule 904(c)(1) have been
satisfied; and
(F) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
(2) Rule 144 Transfers. If the transfer is being effected pursuant to
Rule 144:
(A) the transfer is occurring after a holding period of at least
one year (computed in accordance with paragraph (d) of Rule 144) has
lapsed since the Specified Securities were last acquired from the
Company or from an affiliate of the Company, whichever is later, and
is being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
B.1-2
<PAGE>
(B) the transfer is occurring after a holding period of at least
two years has elapsed since the Specified Securities were last
acquired from the Trust or from an affiliate of the Company, whichever
is later, and the Owner is not, and during the preceding three months
has not been, an affiliate of the Company.
B.1-3
<PAGE>
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and the Purchasers.
Dated: ___________
(Print the name of the Undersigned, as such term is defined in the second
paragraph of this certificate)
By:
Name:
Title:
(If the Undersigned is a corporation, partnership or
fiduciary, the title of the person signing on behalf of the
Undersigned must be stated.)
B.1-4
<PAGE>
EXHIBIT B.2 -- Form of Restricted
Securities Transfer Certificate
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to Sections 3.6(c)(ii), (iii), (iv) and
(v) of the Trust Agreement)
First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Attention: Corporate Trust Department
Re: Global Floating Rate Junior Subordinated Debentures (the
-------------------------------------------------------
"Securities")
----------
Reference is made to the Indenture, dated as of July 15, 1997,
between HSB Group. Inc. (the "Company") and The First National Bank of Chicago
as Trustee (the "Trustee"). Terms used herein and defined in the Indenture or in
Regulation S or Rule 144 under the U.S. Securities Act of 1933 (the "Securities
Act") are used herein as so defined.
This certificate relates to _________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ________________________
CERTIFICATE No(s). __________________
The Person in whose name this certificate is executed below
(the "Undersigned") hereby certifies that either (i) it is the sole beneficial
owner of the Specified Securities or (ii) it is acting on behalf of all the
beneficial owners of the Specified Securities and is duly authorized by them to
do so. Such beneficial owner or owners are referred to herein collectively as
the "Owner". If the Specified Securities are represented by a Global
Certificate, they are held through the Clearing Agency or participant in the
name of the Undersigned, as or on behalf of the Owner. If the Specified
Securities are not represented by a Global Certificate, they are registered in
the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form of
a Restricted Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, it is being effected in
accordance with Rule 144A or Rule 144 under the Securities Act and all
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<PAGE>
applicable securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies as follows:
(1) Rule 144A Transfers. If the transfer is being effected in
accordance with Rule 144A:
(A) the Specified Securities are being transferred to a person
that the Owner and any person acting on its behalf reasonably believe
is a "qualified institutional buyer" within the meaning of Rule 144A,
acquiring for its own account or for the account of a qualified
institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner
may be relying on Rule 144A in connection with the transfer; and
(2) Rule 144 Transfers. If the transfer is being effected
pursuant to Rule 144:
(A) the transfer is occurring after a holding period of at
least one year (computed in accordance with paragraph (d) of Rule
144) has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and is being effected in accordance with the
applicable amount, manner of sale, and notice requirements of
rule 144; or
(B) the transfer is occurring after a holding period of at
least two years has elapsed since the Specified Securities were
last acquired from the Company or from an affiliate of the
Company, whichever is later, and the Owner is not, and during the
preceding three months has not been, an affiliate of the Company.
(3) Regulation S Transfers. If the transfer is being effected in
accordance with Regulation S:
(A) the transfer is being made to a person who is not a U.S.
person; or
(B) the transferee is not acquiring such Specified
Securities for the account or benefit of any U.S. person.
This certificate and the statements contained herein are made for your
benefit and benefit of the Trust and the Purchasers.
Dated:___________________________
(Print the name of the Undersigned, as such term is defined in the
second paragraph of this certificate.)
B.2-2
<PAGE>
By:__________________________
Name:
Title:
(If the Undersigned is a corporation, partnership or fiduciary, the
title of the person signing on behalf of the Undersigned must be
stated.)
B.2-3
<PAGE>
EXHIBIT B.3 -- Form of Unrestricted
Securities Transfer Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to Section
2.7(c) of the Indenture )
First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Attention: Corporate Trust Department
Re: Global Floating Rate Junior Subordinated Debentures (the
"Securities")
Reference is made to the Indenture, dated as of July 15, 1997,
between HSB Group. Inc. (the "Company") and The First National Bank of Chicago
as Trustee (the "Trustee"). Terms used herein and defined in the Indenture or in
Regulation S or Rule 144 under the U.S. Securities Act of 1933 (the "Securities
Act") are used herein as so defined.
This certificate relates to ________________ shares of Securities,
which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ____________________________
CERTIFICATE No(s). ______________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Certificate, they are
held through the Clearing Agency or participant in the name of the Undersigned,
as or on behalf of the Owner. If the Specified Securities are not represented by
a Global Certificate, they are registered in the name of the Undersigned as or
on behalf of the Owner.
The Owner has requested that the Specified Securities be exchanged for
Securities bearing no Securities Act Legend pursuant to Section 5.4(c) of the
Trust Agreement. In connection with such exchange, the Owner hereby certifies
that the exchange is occurring after a holding period of at least two years
(computed in accordance with paragraph (d) of Rule 144) has elapsed since the
Specified Securities were last acquired from the Trust or
B.3-1
<PAGE>
from an affiliate of the Trust, whichever is later, and the Owner is not, and
during the preceding three months has not been, an affiliate of the Trust. The
Owner also acknowledges that any future transfers of the Specified Securities
must comply with all applicable securities laws of the states of the United
States and other jurisdictions.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Trust and the Purchasers.
Dated:___________________________________
(Print the name of the Undersigned, as such term is defined in
the second paragraph of this certificate.)
By:____________________________
Name:
Title:
(If the Undersigned is a corporation, partnership or
fiduciary, the title of the person signing on behalf of the
Undersigned must be stated.)
0129012.07-01S7a
B.3-2
<PAGE>
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 July 15, 1997
---------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.................................................... 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application............................... 5
SECTION 2.2. List of Holders................................................ 5
SECTION 2.3. Reports by the Guarantee Trustee............................... 6
SECTION 2.4. Periodic Reports to the Guarantee Trustee...................... 6
SECTION 2.5. Evidence of Compliance with Conditions Precedent............... 6
SECTION 2.6. Events of Default; Waiver...................................... 6
SECTION 2.7. Event of Default; Notice....................................... 7
SECTION 2.8. Conflicting Interests.......................................... 7
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Guarantee Trustee..................... 7
SECTION 3.2. Certain Rights of Guarantee Trustee............................ 9
SECTION 3.3. Compensation; Fees............................................. 10
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.1. Guarantee Trustee; Eligibility................................. 11
SECTION 4.2. Appointment, Removal and Resignation of
the Guarantee Trustee....................................................... 12
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<PAGE>
ARTICLE V
GUARANTEE
SECTION 5.1. Guarantee...................................................... 13
SECTION 5.2. Waiver of Notice and Demand.................................... 13
SECTION 5.3. Obligations Not Affected....................................... 13
SECTION 5.4. Rights of Holders.............................................. 14
SECTION 5.5. Guarantee of Payment........................................... 14
SECTION 5.6. Subrogation.................................................... 14
SECTION 5.7. Independent Obligations........................................ 15
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.1. Subordination.................................................. 15
SECTION 6.2. Pari Passu Guarantees.......................................... 15
ARTICLE VII
TERMINATION
SECTION 7.1. Termination.................................................... 16
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Successors and Assigns......................................... 16
SECTION 8.2. Amendments..................................................... 16
SECTION 8.3. Notices........................................................ 16
SECTION 8.4. Exchange Offer................................................. 17
SECTION 8.5. Benefit........................................................ 17
SECTION 8.6. Governing Law.................................................. 18
SECTION 8.7. Counterparts................................................... 18
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<PAGE>
GUARANTEE AGREEMENT, dated as of July15, 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
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 A
(liquidation amount $1,000 per capital security) (the "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, the Capital Securities will be issued by the Issuer Trust and
the proceeds thereof, together with the proceeds from the issuance of the Issuer
Trust's Common Securities (as defined herein), will be used to purchase the
Debentures (as defined in the Trust Agreement) of the Guarantor, which
Debentures will be deposited with The First National Bank of Chicago, as
Property Trustee under the Trust Agreement, as trust assets; and
WHEREAS, as an incentive for the Holders to purchase Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth herein, to pay to the Holders of the Capital Securities the
Guarantee Payments (as defined herein) on the terms and conditions set forth
herein.
WHEREAS, the Guarantor is executing and delivering a guarantee
agreement (the "Common Securities Guarantee"), with substantially identical
terms to this 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 Initial Capital
Securities and the Exchange Capital Securities to receive Guarantee Payments
under this Guarantee Agreement and the Exchange Capital Securities Guarantee, as
the case may be.
NOW, THEREFORE, in consideration of the purchase of Capital Securities
by each Holder, which purchase the Guarantor hereby acknowledges will benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders from time to time.
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.
For all purposes of this 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 Guarantee Agreement; and
(f) The words "hereby", "herein", "hereof" and "hereunder" and other
words of similar import refer to this 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.
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<PAGE>
"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 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 Guarantee Agreement.
"Exchange Capital Securities Guarantee" has the meaning specified in
Section 8.4 hereof.
"Guarantee Agreement" means this 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 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 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 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 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 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 Guarantee Agreement, and thereafter means each
such Successor Guarantee Trustee.
"Guarantor" has the meaning specified in the first paragraph of this
Guarantee Agreement.
"Holder" means any Holder (as defined in the Trust Agreement) of any
Capital Securities; provided, however, that in determining whether the holders
of the requisite percentage of Capital Securities have given any request,
notice, consent or waiver hereunder, "Holder" shall not include the Guarantor,
the Guarantee Trustee, or any Affiliate of the Guarantor or the Guarantee
Trustee.
"Indenture" means the Junior Subordinated Indenture, dated as of July
__, 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.
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<PAGE>
"Initial Capital Securities" has the meaning specified in the Recitals
to the Guarantee Agreement.
"Issuer Trust" has the meaning specified in the first paragraph of
this Guarantee Agreement.
"List of Holders" has the meaning specified in Section 2.2(a).
"Majority in Liquidation Amount of the Capital Securities" means,
except as provided by the Trust Indenture Act, Capital Securities representing
more than 50% of the aggregate Liquidation Amount (as defined in the Trust
Agreement) of all 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 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
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<PAGE>
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 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 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 Guarantee Agreement for purposes of
interpretation, construction and defining the rights and obligations hereunder,
and this 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 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
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
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<PAGE>
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 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 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
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 Capital
Securities may, by vote, on behalf of the Holders of all the 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 Guarantee Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
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<PAGE>
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
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 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 Guarantee Agreement shall be held by the Guarantee Trustee for
the benefit of the Holders, and the Guarantee Trustee shall not transfer this
Guarantee Agreement to any Person except 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 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
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duties as are specifically set forth in this Guarantee Agreement (including
pursuant to Section 2.1), and no implied covenants shall be read into this
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 Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act or its own 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 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 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 Guarantee Agreement; but in the case
of any such certificates or opinions that by any provision
hereof or of the Trust Indenture Act are specifically required
to be furnished to the Guarantee Trustee, the Guarantee
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this
Guarantee Agreement.
(ii) The Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the
Guarantee Trustee, unless it shall be proved that the Guarantee Trustee
was negligent in ascertaining the pertinent facts upon which such
judgment was made.
(iii) The Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in Liquidation Amount of the 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 Guarantee Agreement.
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(iv) Subject to Sections 3.1(b) and 3.1(d), no provision of
this Guarantee Agreement shall require the Guarantee Trustee to expend
or risk its own funds or otherwise incur personal financial liability
in the performance of any of its duties or in the exercise of any of
its rights or powers, if the Guarantee Trustee shall have reasonable
grounds for believing that the repayment of such funds or liability is
not reasonably assured to it under the terms of this Guarantee
Agreement or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 3.2. 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 Guarantee Agreement shall be sufficiently evidenced by an
Officers' Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting to take
any action hereunder, the Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on its
part, request and rely upon an Officers' Certificate which, upon
receipt of such request from the Guarantee Trustee, shall be promptly
delivered by the Guarantor.
(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 Guarantee Agreement from any
court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder unless such Holder
shall have provided to the Guarantee Trustee such adequate security and
indemnity as would satisfy a reasonable person in the position of the
Guarantee Trustee against the costs, expenses (including attorneys'
fees and expenses) and liabilities that might be incurred by it in
complying with such request or direction,
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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 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 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 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
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or made by the Guarantee Trustee in accordance with any provision of
this 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 "IndemnifiedPerson"), 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
Guarantee Agreement or any act or omission performed or omitted by such
Indemnified Person in good faith and in manner such Indemified Person
reasonably believed to be within the scope of authority conferred on
such Indemnified Person by this Guarantee Agreement, except that no
Indemnified Person shall be entitled to be indemnified in respect of
any loss, 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 Guarantee
Agreement.
The provisions of this Section 3.3 shall survive the termination of
this 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
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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.
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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 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 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 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 Capital Securities or the extension
of time for the performance of any other obligation under, arising out
of, or in connection with, the Capital Securities;
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Capital Securities, or any action on the part of the
Issuer Trust granting indulgence or extension of any kind;
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(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
Capital Securities;
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred;
(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 Guarantee Agreement
will be deposited with the Guarantee Trustee to be held for the benefit of the
Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee
Agreement on behalf of the Holders; (iii) the Holders of a Majority in
Liquidation Amount of the 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 Guarantee Agreement or exercising any trust
or power conferred upon the Guarantee Trustee under this Guarantee Agreement;
and (iv) any Holder may institute a legal proceeding directly against the
Guarantor to enforce its rights under this Guarantee Agreement without first
instituting a legal proceeding against the Guarantee Trustee, the Issuer Trust
or any other Person.
SECTION 5.5. Guarantee of Payment.
This Guarantee Agreement creates a guarantee of payment and not of
collection. This Guarantee Agreement will not be discharged except by payment of
the Guarantee Payments in full (without duplication of amounts theretofore paid
by the Issuer 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 Guarantee
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Agreement; provided, however, that the Guarantor shall not (except to the extent
required by mandatory provisions of law) be entitled to enforce or exercise any
rights which it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under this
Guarantee Agreement, if, at the time of any such payment, any amounts are due
and unpaid under this Guarantee Agreement. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.7. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer Trust with respect to the Capital
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.1. Subordination.
The obligations of the Guarantor under this 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 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); (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 Guarantee Agreement or with any obligation that ranks
pari passu with the obligations of the Guarantor under this Guarantee Agreement.
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ARTICLE VII
TERMINATION
SECTION 7.1. Termination.
This 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 Capital Securities, (ii) the distribution of Debentures to the
Holders in exchange for all of the 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 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
Capital Securities or this Guarantee Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Successors and Assigns.
All guarantees and agreements contained in this Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Capital
Securities then outstanding. 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 Guarantee Agreement may only be amended with the
prior approval of the Holders of not less than a Majority in Liquidation Amount
of the 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:
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(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. Exchange Offer.
In the event an Exchange Offer Registration Statement (as defined in
the Registration Rights Agreement) becomes effective and the Issuer Trust issues
any Exchange Capital Securities in the Exchange Offer, the Guarantor will enter
into a new capital securities guarantee agreement (the "Exchange Capital
Securities Guarantee"), in substantially the same form as this Guarantee
Agreement, with respect to the Exchange Capital Securities.
SECTION 8.5. Benefit.
This Guarantee Agreement is solely for the benefit of the Holders and
is not separately transferable from the Capital Securities.
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SECTION 8.6. Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 8.7. Counterparts.
This 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.
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IN WITNESS WHEREOF, the parties hereto have caused this 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
<PAGE>
---------------------------------------------------------
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FIRST SUPPLEMENTAL INDENTURE
between
HSB GROUP, INC.
and
THE FIRST NATIONAL BANK OF CHICAGO
Dated as of July 15, 1997
-------------------------------------------------------------
-------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Definition of Terms........................................... 2
ARTICLE II
GENERAL TERMS AND CONDITIONS OF THE SECURITIES
SECTION 2.1. Designation and Principal Amount.............................. 3
SECTION 2.2. Maturity...................................................... 3
SECTION 2.3. Form and Payment.............................................. 4
SECTION 2.4. Global Security............................................... 4
SECTION 2.5. Interest...................................................... 5
ARTICLE III
REDEMPTION OF THE SECURITIES
SECTION 3.1. Tax Event Redemption.......................................... 8
SECTION 3.2. Optional Redemption by Corporation............................ 8
SECTION 3.3. No Sinking Fund............................................... 9
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1. Extension of Interest Payment Period.......................... 9
ARTICLE V
ORIGINAL ISSUE OF SECURITIES
SECTION 5.1. Original Issue of Securities.................................. 10
ARTICLE VI
RIGHT TO SHORTEN MATURITY
SECTION 6.1. Right to Shorten Maturity..................................... 10
SECTION 6.2. Form of Securities............................................ 10
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Ratification of Indenture..................................... 10
SECTION 7.2. Trustee Not Responsible for Recitals.......................... 11
SECTION 7.3. Governing Law................................................. 11
SECTION 7.4. Separability.................................................. 11
SECTION 7.5. Counterparts.................................................. 11
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of July 15, 1997 (the
"First Supplemental Indenture"), between HSB Group, Inc., a Delaware corporation
(the "Corporation"), and The First National Bank of Chicago, as trustee (the
"Trustee"), under the Indenture dated as of July 15, 1997 between the
Corporation and the Trustee (the "Indenture").
WHEREAS, the Corporation executed and delivered the Indenture
to the Trustee to provide for the future issuance of the Corporation's unsecured
junior subordinated debt securities to be issued from time to time in one or
more series as might be determined by the Corporation under the Indenture, in an
unlimited aggregate principal amount which may be authenticated and delivered as
provided in the Indenture;
WHEREAS, pursuant to the terms of the Indenture, the
Corporation desires to provide for the establishment of a new series of its
Securities to be known as its Floating Rate Junior Subordinated Deferrable
Interest Debentures, Series A (the "Securities"), the form and substance of such
Securities and the terms, provisions and conditions thereof to be set forth as
provided in the Indenture and this First Supplemental Indenture;
WHEREAS, HSB Capital I, a Delaware statutory business trust
(the "Trust"), has offered to the public $110,000,000 aggregate liquidation
amount of its Global Floating Rate Capital Securities, Series A (the "Capital
Securities"), representing undivided beneficial interests in the assets of the
Trust and proposes to invest the proceeds from such offering, together with the
proceeds of the issuance and sale by the Trust to the Corporation of $3,403,000
aggregate liquidation amount of its Global Floating Rate Common Securities, in
$113,403,000 aggregate principal amount of the Securities; and
WHEREAS, the Corporation has requested that the Trustee
execute and deliver this First Supplemental Indenture pursuant to Article 3 of
the Indenture and all requirements necessary to make this First Supplemental
Indenture a valid instrument in accordance with its terms, and to make the
Securities, when executed by the Corporation and authenticated and delivered by
the Trustee, the valid obligations of the Corporation, have been performed, and
the execution and delivery of this First Supplemental Indenture has been duly
authorized in all respects:
NOW THEREFORE, in consideration of the purchase and acceptance
of the Securities by the Holders thereof, and for the purpose of setting forth,
as provided in the Indenture, the form and substance of the Securities and the
terms, provisions and conditions thereof, the Corporation covenants and agrees
with the Trustee as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Definition of Terms.
Unless the context otherwise requires:
(a) a term defined in the Indenture has the same meaning
when used in this First Supplemental Indenture;
(b) a term defined anywhere in this First Supplemental
Indenture has the same meaning throughout;
(c) the singular includes the plural and vice versa;
(d) a reference to a Section or Article is to a Section or
Article of this First Supplemental Indenture;
(e) headings are for convenience of reference only and do
not affect interpretation;
(f) the following terms have the meanings given to them in
the Trust Agreement: (i) Business Day; (ii) Clearing Agency;
(iii) Delaware Trustee; (iv) Property Trustee; (v) Property
Trustee Account; (vi) Capital Securities; (vii) Adminis- trative
Trustees; (viii) Tax Event; and (ix) Purchase Agreement;
(g) the following terms have the meanings given to them in
this Section 1.1(g):
"Additional Interest" shall have the meaning set forth in
Section 4.1.
"Additional Sums" shall have the meaning set forth in
Section 2.5.
"Depositary", with respect to the Securities, means The
Depository Trust Corporation or such other successor Clearing
Agency.
"Dissolution Event" means the liquidation of the Trust by
the Administrative Trustees in accordance with the Trust
Agreement, and the distribution of the Securities held by the
Property Trustee to the holders of the Trust Securities issued by
the Trust pro rata in accordance with the Trust Agreement.
"Interest" shall have the meaning set forth in Section 2.5.
"Lead Manager" means Goldman, Sachs & Co.
2
<PAGE>
"Liquidated Damages" has the meaning ascribed to such terms
in the registration Rights Agreement.
"Maturity Date" shall mean July 15, 2027.
"Non Book-Entry Securities" shall have the meaning set forth
in Section 2.4.
"Purchase Agreement" means the Purchase Agreement naming the
Corporation, the Trust, and the Initial Purchasers named therein
providing for the purchase of the Capital Securities.
"Redemption Price" shall mean, with respect to any
redemption of the Securities pursuant to Article III hereof, an
amount in cash equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest thereon, including
Additional Interest, Additional Sums, if any, and Liquidated
Damages, if any, to the date of such redemption.
"Registration Rights Agreement" shall mean the Exchange and
Registration Rights Agreement among the Corporation, the Trust,
and the Initial purchasers named in the Purchase Agreement
providing for the registration and exchange of the Capital
Securities, the Securities, and the Guarantees.
"Trust Securities" shall mean the Capital Securities and the
Common Securities, collectively.
ARTICLE II
GENERAL TERMS AND CONDITIONS OF THE SECURITIES
SECTION 2.1. Designation and Principal Amount.
There is hereby authorized a series of Securities designated
the "Global Floating Rate Junior Subordinated Debentures, Series A", limited in
aggregate principal amount to $113,403,000, which amount shall be as set forth
in any written order of the Corporation for the authentication and delivery of
Securities pursuant to Section 3.03 of the Indenture.
SECTION 2.2. Maturity.
The Maturity Date (which shall constitute the Stated Maturity
of the Securities for purposes of the Indenture) shall be the date on which the
Securities mature and on which the principal thereof shall be due and payable
together with all accrued and unpaid interest thereon (including Additional
Interest and Additional Sums, if any).
3
<PAGE>
SECTION 2.3. Form and Payment.
Except as provided in Section 2.4, the Securities shall be
issued in fully registered certificated form without interest coupons in minimum
denominations of $1,000 and in integral multiples thereof. Principal and
interest on the Securities issued in certificated form will be payable, the
transfer of such Securities will be registrable and such Securities will be
exchangeable for Securities bearing identical terms and provisions at the office
or agency of the Corporation as set forth in the last sentence of Section 10.2
of the Indenture; provided, however, that payment of interest may be made, at
the option of the Corporation, by check mailed to the Holder at such address as
shall appear in the Security Register or by wire transfer to an account
designated by a Holder in writing not less than ten days prior to the date of
payment. The Corporation selects each of the City of New York, New York as the
Place of Payment for the Securities and hereby appoints The First National Bank
of Chicago as Securities Registrar for the Securities. Notwithstanding the
foregoing, so long as the Holder of any Securities is the Property Trustee, the
payment of the principal of and interest (including Additional Interest and
Additional Sums, if any) on such Securities held by the Property Trustee will be
made at such place and to such account as may be designated by the Property
Trustee.
SECTION 2.4. Global Security.
(a) In connection with a Dissolution Event,
(i) the Securities in certificated form may be
presented to the Trustee by the Property Trustee in exchange for a
Global Security in an aggregate principal amount equal to the aggregate
principal amount of all outstanding Securities, to be registered in the
name of the Depositary, or its nominee, and delivered by the Trustee to
or upon the order of the Depositary for crediting to the accounts of
its participants pursuant to the instructions of the Administrative
Trustees. The Corporation upon any such presentation shall execute a
Global Security in such aggregate principal amount and deliver the same
to the Trustee for authentication and delivery in accordance with the
Indenture and this First Supplemental Indenture. Payments on the
Securities issued as a Global Security will be made to the Depositary;
and
(ii) if any Capital Securities are held in non
book-entry certificated form, the Securities in certificated form may
be presented to the Trustee by the Property Trustee and any Definitive
Capital Securities will be deemed to represent beneficial interests in
Securities presented to the Trustee by the Property Trustee having an
aggregate
4
<PAGE>
principal amount equal to the aggregate liquidation amount of the
Definitive Capital Securities until such Capital Securities are
presented to the Security Registrar for transfer or reissuance at which
time such Capital Securities will be cancelled and a Security,
registered in the name of the holder of the Capital Securities or the
transferee of the holder of such Capital Securities, as the case may
be, with an aggregate principal amount equal to the aggregate
liquidation amount of the Capital Securities cancelled, will be
executed by the Corporation and delivered to the Trustee for
authentication and delivery in accordance with the Indenture and this
First Supplemental Indenture. Upon the issuance of such Securities,
Securities with an equivalent aggregate principal amount that were
presented by the Property Trustee to the Trustee will be deemed to have
been cancelled.
(b) A Global Security may be transferred, in whole but not in
part, only to another nominee of the Depositary, or to a successor Depositary
selected or approved by the Corporation or to a nominee of such successor
Depositary.
SECTION 2.5. Interest.
(a) Each Security will bear interest at the Interest Rate (as
defined below) from July 15, 1997 until the principal thereof becomes due and
payable, and on any overdue principal at the Interest Rate and (to the extent
that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the Interest Rate, compounded quarterly,
payable (subject to the provisions of Article Four) quarterly in arrears on
January 15, April 15, July 15 and October 15 of each year commencing on October
15, 1997, to the Person in whose name such Security or any predecessor Security
is registered, at the close of business on the January 1, April 1, July 1 and
October 1 prior to the applicable Interest Payment Date. 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. The term "interest" as used herein shall include quarterly interest
payments, Additional Interest, Liquidated Damages and Additional Sums (as
defined below), as applicable.
(b) The Interest Rate in respect of the Securities will be a
variable rate per annum of LIBOR, determined as described below, plus a margin
of 0.91%. 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
5
<PAGE>
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
appears 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
6
<PAGE>
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 The First National Plaza #0126,
Chicago Illinois 60670-0126 (telephone (800) 524-9472).
The term "Interest Period" means each period beginning on, and
including, any Interest Payment Date, and ending on, but excluding, the next
succeeding Interest Payment Date, and each successive period beginning on, and
including, an Interest Payment Date and ending on, but excluding, the next
succeeding Interest Payment Date.
The Interest Rate for any Interest Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.
All percentages resulting from any calculations referred to in
this First Supplemental Indenture will be rounded, if necessary, to the nearest
multiple of 1/100 of 1% and all U.S. dollar amounts used in or resulting from
such calculations will be rounded to the nearest cent (with one-half cent or
more being rounded upwards).
(c) The Calculation Agent shall, as soon as practicable after
11:00 a.m., London time, on each Determination Date, determine the Interest Rate
and calculate the amount of Interest payable in respect of the following
Interest Period and inform the Trustee and the Paying Agent and, if any
Securities are held by the Property Trustee, the Property Trustee. The amount of
interest so payable in respect of such period shall be calculated by applying
the Interest Rate to the principal amount outstanding at the commencement of the
Interest Period, multiplying each such amount by the actual number of days in
the Distribution Period concerned (which actual number of days shall include the
first day but exclude the last day of such Determination Period) divided by 360
and rounding the resultant figure to the nearest cent (with one-half cent or
more being rounded upwards). Unless otherwise provided by the Trustee, the
Paying Agent will calculate the amount of interest payable on the Securities in
respect of the following Interest Period. The determination of the Interest Rate
by the Calculation Agent and the amount of interest payable by Paying Agent will
(in the absence of wilful default, bad faith or manifest error) be final,
conclusive and binding on all concerned. None of the Trustee, the Paying Agent,
the Calculation Agent, the Trust or the Corporation (or any of their
7
<PAGE>
respective officers, directors, agents, beneficiaries, employees or affiliates)
shall have any liability to any person for (i) the selection of any Reference
Bank or (ii) any inability to retain major banks in the London interbank market,
in the case of the Calculation Agent, which is caused by circumstances beyond
its reasonable control.
Upon the request of a holder of a Capital Security, the
Property Trustee will provide the Distribution Rate then in effect and, if
determined, the Distribution Rate for the next Distribution Period with respect
to the Capital Securities.
(d) All certificates, communications, opinions,
determinations, calculations, quotations and decisions given, expressed, made or
obtained for the purposes of the provisions relating to the payment and
calculation of interest on the Securities, whether by the Reference Banks (or
any of them) or the Calculation Agent, Trustee or Paying Agent, will (in the
absence of wilful default, bad faith or manifest error) be binding on the Trust,
the Corporation, the Trustee and all of the holders of the Securities, and no
liability will (in the absence of wilful default, bad faith or manifest error)
attach to the Calculation Agent, Trustee or Paying Agent in connection with the
exercise or non-exercise by any of them of their powers, duties and discretion.
(e) In the event that any date on which interest is payable on
the Securities is not a Business Day, then payment of interest payable on such
date will be made on the next succeeding day which is a Business Day, 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 such date (each date on which interest is
actually payable, an "Interest Payment Date").
ARTICLE III
REDEMPTION OF THE SECURITIES
SECTION 3.1. Tax Event Redemption.
If a Tax Event has occurred and is continuing then, the
Corporation shall have the right, within 90 days following the occurrence of
such Tax Event, to redeem the Securities, in whole, but not in part, for cash at
the Redemption Price.
SECTION 3.2. Optional Redemption by Corporation.
Subject to the provisions of Article Four of the Indenture,
except as otherwise may be specified in this First Supplemental Indenture, the
Corporation shall have the right to redeem the Securities, in whole or in part,
from time to time, on
8
<PAGE>
or after July 15, 2007, at the Redemption Price. Pursuant to this paragraph will
be made upon not less than 30 days nor more than 60 days notice to the Holders
of the Securities. If the Securities are only partially redeemed pursuant to
this Section 3.2, the Securities will be redeemed pro rata or by lot or by any
other method utilized by the Securities Registrar; provided, that if at the time
of redemption the Securities are registered as a Global Security, the Depositary
shall determine, in accordance with its procedures, the principal amount of such
Securities beneficially held by each Holder of Securities to be redeemed.
SECTION 3.3. No Sinking Fund.
The Securities are not entitled to the benefit of any sinking
fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1. Extension of Interest Payment Period.
Subject to Section 3.12 of the Indenture, the Corporation
shall have the right, at any time and from time to time during the term of the
Securities, to defer payments of interest by extending the interest payment
period of such Securities for an Extension Period not exceeding 20 consecutive
quarters, during which Extension Period no interest shall be due and payable;
provided that no Extension Period may extend beyond the Maturity Date or end on
a date other than an Interest Payment Date. To the extent permitted by
applicable law, interest, the payment of which has been deferred because of the
extension of the interest payment period pursuant to this Section 4.1, will bear
interest thereon at the Interest Rate compounded quarterly for each quarter of
the Extension Period ("Additional Interest"). At the end of the Extension
Period, the Corporation shall pay all interest accrued and unpaid on the
Securities, including any Additional Sums, Additional Interest and Liquidated
Damages, if applicable, that shall be payable to the Holders of the Securities
in whose names the Securities are registered in the Security Register on the
record date relating to the Interest Payment Date on which the Extension Period
ends. Before the termination of any Extension Period, the Corporation may
further defer payments of interest by further extending such period, provided
that such period, together with all such further extensions thereof, shall not
exceed 20 consecutive quarters, or extend beyond the Maturity Date of the
Securities or end on a date other than an Interest Payment Date. Upon the
termination of any Extension Period and the payment of all Additional Interest
then due, the Corporation may commence a new Extension Period, subject to the
foregoing requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof.
9
<PAGE>
ARTICLE V
ORIGINAL ISSUE OF SECURITIES
SECTION 5.1. Original Issue of Securities.
Securities in the aggregate principal amount of $113,403,000
may, upon execution of this First Supplemental Indenture, be executed by the
Corporation and delivered to the Trustee for authentication as provided in
Sections 3.1 and 3.3 of the Indenture.
ARTICLE VI
RIGHT TO SHORTEN MATURITY
SECTION 6.1. Right to Shorten Maturity.
Upon the occurrence and during the continuation of a Tax
Event, the Corporation may, at its option, shorten the Stated Maturity of the
Securities 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 the Securities will be deductible for U.S. federal income tax purposes.
Upon the exercise of the right to shorten the Stated Maturity of the Securities,
the Corporation will not have the right to redeem the Securities prior to the
new Stated Maturity upon the occurrence of a Tax Event or to further shorten the
maturity of the Securities.
SECTION 6.2. Form of Securities.
The Securities may be distributed under certain circumstances
to purchases of Capital Securities. If so distributed, unless the Securities are
otherwise registered under the Securities Act, such Securities shall bear the
same legends and be subject to the same restrictions applicable to the Capital
Securities.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Ratification of Indenture.
The Indenture, as supplemented by this First Supplemental
Indenture, is in all respects ratified and confirmed, and this First
Supplemental Indenture shall be deemed part of the Indenture in the manner and
to the extent herein and therein provided.
10
<PAGE>
SECTION 7.2. Trustee Not Responsible for Recitals.
The recitals herein contained are made by the Corporation and
not by the Trustee, and the Trustee assumes no responsibility for the
correctness thereof. The Trustee makes no representation as to the validity or
sufficiency of this First Supplemental Indenture.
SECTION 7.3. Governing Law.
This First Supplemental Indenture and each Security shall be
construed in accordance with and governed by the laws of the State of New York.
SECTION 7.4. Separability.
In case any one or more of the provisions contained in this
First Supplemental Indenture or in the Securities shall for any reason be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
First Supplemental Indenture or of the Securities, but this First Supplemental
Indenture and the Securities shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein or therein.
SECTION 7.5. Counterparts.
This First Supplemental Indenture may be executed in any
number of counterparts each of which shall be an original; but such counterparts
shall together constitute but one and the same instrument.
SECTION 7.6. Registration Rights Agreement.
Holders of the Securities are entitled to the benefits of the
Registration Rights Agreement.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed and attested, as of the day and year
first above written.
HSB GROUP, INC.
By________________________________
Name: Saul L. Basch
Title: Senior Vice President,
Treasurer and Chief Finan-
cial Officer
Attest:
By:___________________
Corporate Secretary
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By________________________________
Name:
Title:
Attest:
By:___________________
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements filed herewith and is qualified in its entirety by
referenct to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<DEBT-HELD-FOR-SALE> 248
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 286
<MORTGAGE> 11
<REAL-ESTATE> 0
<TOTAL-INVEST> 544
<CASH> 104<F1>
<RECOVER-REINSURE> 148
<DEFERRED-ACQUISITION> 44
<TOTAL-ASSETS> 1181
<POLICY-LOSSES> 282
<UNEARNED-PREMIUMS> 296
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 52
0
20<F2>
<COMMON> 10
<OTHER-SE> 340
<TOTAL-LIABILITY-AND-EQUITY> 1181
117
<INVESTMENT-INCOME> 9
<INVESTMENT-GAINS> 3
<OTHER-INCOME> 15
<BENEFITS> 51
<UNDERWRITING-AMORTIZATION> 20
<UNDERWRITING-OTHER> 51
<INCOME-PRETAX> 22
<INCOME-TAX> 6
<INCOME-CONTINUING> 16
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16
<EPS-PRIMARY> .80<F3>
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>Cash includes short-term investments.
<F2>Convertible redeemable preferred stock classified at mezzanine level on
Consolidated Statements of Financial Position.
<F3>Per common share.
</FN>
</TABLE>
