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TERM LOAN AGREEMENT
dated as of
September 6, 2000
between
AMERICAN INTERNATIONAL GROUP, INC.
and
HSB GROUP, INC.
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TABLE OF CONTENTS
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ARTICLE I Term Loan.....................................................................................1
Section 1.01. Term Loan and Note...............................................................1
ARTICLE II Interest.....................................................................................1
Section 2.01. Interest on the Loan.............................................................1
Section 2.02. Payment of Interest..............................................................2
Section 2.03. Post Maturity Interest...........................................................2
Section 2.04. Use of Proceeds..................................................................2
ARTICLE III Payments and Prepayments....................................................................2
Section 3.01. Optional Prepayments.............................................................2
Section 3.02. Mandatory Prepayments............................................................2
Section 3.03. Method of Payment................................................................2
ARTICLE IV Representations and Warranties...............................................................3
Section 4.01. Representations and Warranties...................................................3
ARTICLE V Conditions of the Loan........................................................................5
Section 5.01. Conditions of the Loan...........................................................5
ARTICLE VI Covenants....................................................................................6
Section 6.01. Covenants........................................................................6
ARTICLE VII Events of Default; Remedies.................................................................9
Section 7.01. Events of Default................................................................9
ARTICLE VIII Miscellaneous.............................................................................11
Section 8.01. Certain Definitions.............................................................11
Section 8.02. Expenses........................................................................12
Section 8.03. Cumulative Rights and No Waiver.................................................12
Section 8.04. Notices.........................................................................13
Section 8.05. Amendments......................................................................14
Section 8.06. Binding Effect..................................................................14
Section 8.07. Participations..................................................................14
Section 8.08. Disclosure of Information.......................................................15
Section 8.09. APPLICABLE LAW..................................................................15
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Section 8.10. Waiver of Jury Trial............................................................15
Section 8.11. Separability....................................................................15
Section 8.12. Execution in Counterparts.......................................................15
Section 8.13. Merger Agreement................................................................15
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Exhibit A Term Loan Note
Schedule I Opinion of Robert C. Walker, Esq.
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TERM LOAN AGREEMENT (this "Agreement"), dated as of September 6,
2000, between AMERICAN INTERNATIONAL GROUP, INC., a Delaware corporation (the
"Lender"), and HSB GROUP, INC., a Connecticut corporation (the "Company").
WHEREAS, an Agreement and Plan of Merger among the Lender, the
Company and Engine Acquisition Corporation, dated August 17, 2000 (the "Merger
Agreement"), contemplates the retirement of certain Capital Securities (as
defined in Section 8.01); and
WHEREAS, the Lender is prepared to extend the Loan (as hereinafter
defined) to finance such retirement of the Capital Securities;
NOW, THEREFORE, the Lender and the Company hereby agree as
follows:
ARTICLE I
Term Loan
Section 1.01. Term Loan and Note. Subject to the terms and
conditions of this Agreement, the Lender agrees to make a loan (the "Loan") to
the Company on September 14, 2000, or such earlier other date as the parties
hereto may agree (the "Closing Date"), in the principal amount of $315 million.
The obligation of the Company to repay the Loan, with interest thereon as
hereinafter prescribed, shall be evidenced by a promissory note of the Company,
substantially in the form of Exhibit A (the "Note"), payable to the order of the
Lender. The Note shall be dated the Closing Date, shall mature on September 30,
2005 (as such date may be accelerated, the "Maturity Date") and shall bear
interest from the Closing Date on the principal balance thereof at the rate and
payable on the dates provided herein.
ARTICLE II
Interest
Section 2.01. Interest on the Loan. The Loan shall bear interest
on the unpaid principal amount thereof at a rate per annum (on the basis of a
360-day year for the actual number of days involved) equal to a percent per
annum, agreed to by the parties
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on the Closing Date, such rate to be approximately 50 basis points in excess of
the Lender's funding cost for debt of similar maturity to the Loan.
Section 2.02. Payment of Interest. Interest on the Loan shall be
payable quarterly on the last Business Day of each March, June, September and
December, commencing on the first such date after the Closing Date, and on the
date of any repayment of principal as provided in Section 3.01.
Section 2.03. Post Maturity Interest. After the principal amount
of the Loan shall become due and payable (whether by acceleration or otherwise),
the Loan shall bear interest, payable on demand, at a rate per annum (on the
basis of a 360-day year for the actual number of days involved) equal to 2
percent in excess of the rate per annum specified in Section 2.01.
Section 2.04. Use of Proceeds. The proceeds of the Loan will be
used to retire the Capital Securities.
ARTICLE III
Payments and Prepayments
Section 3.01. Optional Prepayments. The Company shall have the
right, at any time and from time to time, to prepay the Loan, in whole or in
part, without premium or penalty, upon at least three Business Days' notice to
the Lender, specifying the date of prepayment and the amount of prepayment. Such
notice shall be irrevocable and the payment amount specified in such notice
shall be due and payable on the date specified, together with accrued interest
to such date on the amount prepaid. Partial prepayments shall be in a minimum
aggregate principal amount of $50,000,000 or, if greater, an integral multiple
of $25,000,000.
Section 3.02. Mandatory Prepayments. The Company shall prepay the
Loan in whole, and the Note shall become due and payable in full, together with
accrued interest to such date on the amount prepaid, on the earlier of (x) the
Business Day on which the Company terminates the Merger Agreement pursuant to
Section 7.1(b)(iv) thereof and (y) the first Business Day after the thirtieth
day after the Closing Date if the Capital Securities have not been retired on or
prior to such thirtieth day.
Section 3.03. Method of Payment. Each payment and prepayment by
the Company of principal and interest on the Note shall be made to the Lender,
in lawful money of the United States and in immediately available funds, to a
Lender account located in the United States designated by the Lender.
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ARTICLE IV
Representations and Warranties
Section 4.01. Representations and Warranties. The Company
represents and warrants to the Lender that:
(a) Good Standing. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Connecticut and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now
being conducted. The Company is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties make such
qualification or licensing necessary, except where the failure to be so
qualified or licensed or to be in good standing is not, individually or
in the aggregate, reasonably likely to have a Material Adverse Effect on
the Company. As used in this Agreement, the phrase "Material Adverse
Effect on the Company" means a material adverse effect on the condition
(financial or otherwise), properties, business, or results of the
operations of the Company and its subsidiaries (as defined below) taken
as a whole, other than (i) effects caused by changes in general economic
or securities markets conditions, (ii) changes or conditions that affect
the U.S. property-casualty insurance industry in general, (iii) changes
in generally accepted accounting principles, consistently applied
("GAAP") or statutory accounting practices prescribed or permitted by the
applicable insurance regulatory authority and (iv) effects resulting from
the announcement of this Agreement and the transactions contemplated
hereby.
As used in this Agreement, the term "subsidiary" of a party shall
mean any corporation or other entity (including joint ventures,
partnerships and other business associations) in which such party
directly or indirectly owns outstanding capital stock or other voting
securities having the power to elect a majority of the directors or
similar members of the governing body of such corporation or other
entity, or otherwise direct the management and policies of such
corporation or other entity ("Voting Securities").
(b) Each subsidiary of the Company (a "Company Subsidiary") is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation, and has the corporate or
other power and authority necessary for it to own or lease its properties
and assets and to carry on its business as it is now being conducted,
except where the failure to be so
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organized, existing or in good standing or to have such power and
authority is not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on the Company. Each Company Subsidiary is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed or to
be in good standing is not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on the Company.
(c) Power and Authority. The Company has full power and authority
to enter into this Agreement, to issue the Note and to incur and perform
the obligations provided for herein and therein, all of which have been
duly authorized by all proper and necessary action. No consent or
approval of any governmental or administrative authority, instrumentality
or agency that has not been obtained is required as a condition to the
validity of this Agreement or the Note.
(d) Binding Agreement. This Agreement constitutes, and the Note
when issued and delivered pursuant hereto for value received will
constitute, the valid and legally binding obligations of the Company
enforceable in accordance with their terms, 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.
(e) Litigation. There are no proceedings or investigations pending
or, to the knowledge of any Executive Officer, threatened against the
Company or any Company Subsidiary before any court, arbitrator or
governmental or administrative authority, instrumentality or agency that,
in any one case or in the aggregate, could reasonably be expected to have
a Material Adverse Effect on the Company or a material adverse effect on
the Company's ability to perform its obligations under or pursuant to
this Agreement or the Note.
(f) No Conflicts. There is no statute, regulation, rule, order or
judgment, and no provision of any mortgage, indenture, contract or
agreement binding on the Company or affecting its property, that would
conflict with or prevent the execution, delivery or carrying out of the
terms of this Agreement or the Note, and no consents or waivers of other
lenders to the Company are required for the execution, delivery or
carrying out of the terms of this Agreement or the Note.
(g) Financial Statements. The financial statements of the Company
included or incorporated by reference in the Company's most recent report
on Form 10-K and any subsequent reports on Form 10-Q filed by the Company
with
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the Securities and Exchange Commission have been prepared in accordance
with generally accepted accounting principles and fairly present the
financial condition and results of operations of the Company and its
consolidated subsidiaries as of the respective dates thereof (subject, in
the case of such reports on Form 10-Q, to changes resulting from normal
year-end adjustments). There has been (x) no Material Adverse Effect on
the Company since the date of the Merger Agreement and (y) no material
adverse change since the date of the most recent such financial
statements in the financial condition of the Company and its consolidated
subsidiaries which would be likely to impair materially the Company's
ability to perform its obligations hereunder or under the Note.
(h) Pari Passu Obligations. The obligations of the Company
hereunder rank and will at all times rank pari passu with all other
obligations of the Company in respect of its unsecured and unsubordinated
indebtedness for borrowed money.
(i) Regulatory Compliance. The execution and delivery by the
Company of this Agreement and the Note do not constitute a violation of
Regulation U or X of the Board of Governors of the Federal Reserve
System, as now in effect.
ARTICLE V
Conditions of the Loan
Section 5.01. Conditions of the Loan. The obligation of the Lender
to make the Loan on the Closing Date is subject to the following conditions
precedent:
(a) Compliance -- Terms and Covenants. The Company shall be in
compliance with all the terms, covenants and conditions of this Agreement
which are binding upon it and shall not have intentionally violated any
term, covenant and condition of the Merger Agreement.
(b) Compliance -- No Events of Default. There shall exist no Event
of Default and no event which with the giving of notice or the lapse of
time, or both, would constitute an Event of Default.
(c) Compliance -- Representations and Warranties. The
representations and warranties contained in Article IV hereof shall be
true with the same effect as though such representations and warranties
had been made at the time of the Loan, and the Company shall not have
taken any action since the date of the Merger Agreement that could
reasonably have been expected to cause any representation or warranty in
the Merger Agreement to be untrue as of the time of the Loan.
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(d) Opinions of Company Counsel. The Lender shall have received a
favorable written opinion of Robert C. Walker, General Counsel of the
Company, in the form of Schedule I hereto.
(e) The Note. The Lender shall have received the Note duly
executed by the Company.
(f) Merger Agreement Termination. No termination of the Merger
Agreement pursuant to Section 7.1(b)(iv) thereof shall have occurred.
(g) Compliance -- Certificate. The Lender shall have received a
certificate dated the date of the initial Loan and signed by an Executive
Officer of the Company as to the matters set forth in this Section 5.01.
ARTICLE VI
Covenants
Section 6.01. Covenants. Until payment in full of the Note and
performance of all other obligations of the Company hereunder:
(a) Financial Statements and Other Reports and Information. The
Company will furnish to the Lender:
(i) within 60 days after the end of each quarterly fiscal
period in each fiscal year of the Company (other than the last
quarter in any fiscal year), a consolidated statement of financial
condition of the Company and its subsidiaries as at the end of
such period, prepared in accordance with GAAP and certified,
subject to changes resulting from subsequent audit adjustments, by
an officer of the Company with responsibility for financial
matters;
(ii) within 90 days after the end of each fiscal year of
the Company, a consolidated statement of financial condition of
the Company and its subsidiaries as at the end of such year, and a
consolidated condensed statement of revenues and expenses of the
Company and its subsidiaries for such year, such financial
statements to be audited by and accompanied by an opinion of
independent certified public accountants of nationally-recognized
standing selected by the Company, which opinion shall state that
such financial statements have been prepared in accordance with
GAAP consistently applied (except as otherwise stated in such
opinion)
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and that the audit by such accountants in connection with such
financial statements has been made in accordance with generally
accepted auditing standards;
(iii) forthwith upon any Executive Officer of the Company
obtaining any knowledge of any condition or event which
constitutes or which, after notice or lapse of time or both, would
constitute an Event of Default, a certificate executed by an
Executive Officer specifying the nature and period of existence
thereof and what action the Company has taken or is taking or
proposes to take with respect thereto;
(iv) together with each delivery of financial statements
pursuant to subdivisions (i) and (ii) above, a certificate
executed by an Executive Officer stating that the signer has
reviewed the terms of this Agreement and the Note and has made, or
caused to be made under his or her supervision, a review of the
transactions and condition of the Company and the Company's
Subsidiaries during the accounting period covered by such
financial statements and that such review has not disclosed the
existence during such accounting period, and that the signer does
not have knowledge of the existence as of the date of such
certificate, of any condition or event which constitutes an Event
of Default or which, after notice or lapse of time or both, would
constitute an Event of Default or, if any such condition or event
existed or exists, specifying the nature and period of the
existence thereof and what action the Company has taken or is
taking or proposes to take with respect thereto;
(v) together with each delivery of financial statements
pursuant to subdivision (ii), a letter, by the independent
certified public accountants reporting thereon, (1) stating that
they have examined and reported upon the financial statements
delivered pursuant to subdivision (ii), (2) stating that for the
purposes of such letter they have read this Agreement insofar as
it relates to accounting matters and (3) stating that during the
course of their audit, they have not obtained any knowledge of any
condition or event which constitutes an Event of Default or which,
after notice or lapse of time or both, would constitute an Event
of Default or, if their audit has disclosed such condition or
event, specifying the nature and the period of existence thereof
(but such accountants shall not be liable, directly or indirectly,
to anyone for failure to obtain knowledge of any such condition or
event); and
(vi) forthwith upon any Executive Officer of the Company
obtaining any knowledge of an event that could reasonably be
expected to
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result in the Company terminating the Merger Agreement pursuant to
Section 7.1(b)(iv) thereof, a certificate executed by an Executive
Officer specifying that such an event has occurred, providing a
description of such event and what action the Company has taken or
is taking or proposes to take with respect thereto; and
(vii) such additional financial information, reports or
statements as the Lender may from time to time reasonably request
consistent with the Company's policies with respect to similar
borrowings.
(b) Taxes. The Company will pay and discharge all taxes,
assessments and governmental charges and levies upon it, its income and its
properties prior to the date on which penalties are attached thereto, unless
such taxes, assessments, governmental charges or levies shall be contested in
good faith by appropriate proceedings and the Company shall have set aside
adequate reserves with respect thereto (segregated to the extent required by
GAAP).
(c) Continued Existence. The Company will preserve and keep in
full force and effect its corporate existence in its jurisdiction of
incorporation and will not directly or indirectly sell, lease or otherwise
dispose of all or substantially all of its properties or assets or consolidate
with or merge into any other Person, or permit any other Person to consolidate
or merge with it; provided, that (x) the Company may sell, lease or otherwise
dispose of all or substantially all of its properties or assets to, or may
consolidate with or merge into, a Successor Entity (as such term is defined in
Section 8.06) and (y) the Company may permit any other Person to merge or
consolidate with the Company if the Company is the survivor and if immediately
after giving effect to such transaction there is no Event of Default and no
event which upon notice or lapse of time, or both, would constitute an Event of
Default.
(d) Inspection. The Company will permit the Lender to have one or
more of its officers or employees, or any other persons designated by the Lender
and reasonably acceptable to the Company, visit and inspect, under the guidance
of the Company, any of the properties of the Company or any Company Subsidiary,
and to discuss the Company's or any Company Subsidiary's affairs, finances and
accounts with appropriate officers of the Company; provided, however, that the
Lender shall use its reasonable efforts to minimize the impact of such visits
and inspections on the operations of the Company or any Company Subsidiary.
(e) Funding of Employee Benefit Plans. The Company will comply in
all material respects with the funding requirements of the Employee Retirement
Income Security Act of 1974 with respect to employee benefit plans for its
employees.
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(f) Regulatory Compliance. The Company and the Company
Subsidiaries will comply with all statutes, regulations, orders and other
regulatory requirements the noncompliance with which would materially and
adversely affect its ability to conduct its business as presently or hereafter
conducted or result in a Material Adverse Effect on the Company.
(g) Ownership and Control of HSBIIC and HSBIICC. The Company will
cause HSBIIC and HSBIICC to remain Company Subsidiaries and will continue to own
directly, or indirectly through one or more wholly-owned subsidiaries, all of
the Voting Securities of HSBIIC and HSBIICC, free and clear of all liens, claims
and encumbrances other than (x) liens for taxes, assessments or other
governmental charges or levies which are not yet due or are payable without
penalty or of which the amount, applicability or validity is being contested by
the Company in good faith by appropriate proceedings and the Company shall have
set aside on its books adequate reserves with respect thereto (segregated to the
extent required by GAAP), or (y) the liens of any judgment, if such judgment is
being contested by the Company in good faith by appropriate proceedings and the
Company shall have set aside on its books adequate reserves with respect thereto
(segregated to the extent required by GAAP).
ARTICLE VII
Events of Default; Remedies
Section 7.01. Events of Default. If any one or more of the
following events (each, an "Event of Default") shall have occurred and be
continuing:
(a) if default shall be made in the due and punctual payment of
the principal of the Note, when and as the same shall become due and
payable, whether at the maturity thereof, by acceleration, by notice of
prepayment, by mandatory prepayment or otherwise; or
(b) if default shall be made in the due and punctual payment of
any interest on the Note, when and as such interest installment shall
become due and payable, and such default shall have continued for five
Business Days; or
(c) if any representation or warranty made by the Company in this
Agreement or any certificate or financial statement delivered hereunder
or thereunder shall prove to have been false or misleading in any
material respect on the date as of which made; or
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(d) if default shall be made by the Company in the performance of
or compliance in any material respect with any other term contained in
this Agreement and such default shall not have been remedied within 30
days; or
(e) if the Company or any Company Subsidiary shall fail to make
any payment at maturity, including any applicable grace period, on any
bond, debenture, note or other evidence of indebtedness for money
borrowed by the Company or such Company Subsidiary (other than
non-recourse indebtedness and the Note) ("Debt") having a principal
amount in excess of $5,000,000 in the aggregate for the Company and all
Company Subsidiaries for a period of 30 days, or if a default shall have
occurred with respect to any Debt having a principal amount in excess of
$5,000,000 in the aggregate for the Company and all Company Subsidiaries
which default results in the acceleration of such Debt without such Debt
having been discharged or such acceleration having been cured, waived,
rescinded or annulled for a period of 30 days; or
(f) if an involuntary case or other proceeding shall be commenced
against the Company, HSBIIC or HSBIICC seeking liquidation,
reorganization or other relief with respect to it or its debts under any
applicable Federal or State bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, conservatorship, receivership or similar law
now or hereafter in effect or seeking the appointment of a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official
of it or any substantial part of its property, and such involuntary case
or other proceeding shall remain undismissed and unstayed, or an order or
decree approving or ordering any of the foregoing shall be entered and
continued unstayed and in effect, in any such event, for a period of 60
days; or
(g) if the Company, HSBIIC or HSBIICC shall commence a voluntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium,
conservatorship, receivership or other similar law or any other case or
proceeding to be adjudicated a bankrupt or insolvent, or shall consent to
the entry of a decree or order for relief in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization, conservatorship, receivership or other similar law or to
the commencement of any bankruptcy or insolvency case or proceeding
against it, or if it shall file a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law, or
consent to the filing of such petition or to the appointment of or taking
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possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official for it, or any substantial part of its
property, or shall make an assignment for the benefit of creditors, or
admit in writing its inability to pay its debts generally as they become
due, or shall take corporate action in furtherance of any such action; or
(h) if a final judgment which, with other final judgments against
the Company and Company Subsidiaries, exceeds an aggregate of $5,000,000
shall be rendered against the Company or any Company Subsidiary by a
court of competent jurisdiction in the United States and if, within 60
days after the entry thereof, such judgment shall not have been
discharged or satisfied or execution thereof stayed pending appeal, or
if, within 60 days after the expiration of any stay, such judgment shall
not have been discharged or satisfied;
then and in any such event the Lender may at its option, exercised by written
notice given at any time (unless all Events of Default shall theretofore have
been remedied) to the Company declare the Note to be due and payable, whereupon
the same shall mature and become payable, together with interest accrued
thereon, without the necessity of any presentment, demand, protest or further
notice, all of which are hereby waived by the Company; provided, that upon the
happening of any event specified in clause (f) or (g) above all amounts owing
hereunder and under the Note shall automatically become immediately due and
payable, all without declaration or any notice to the Company.
ARTICLE VIII
Miscellaneous
Section 8.01. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings.
"Business Day" means any day on which commercial Lenders are open
for business (including dealings in dollar deposits) in New York City.
"Capital Securities" means the (i) $300,000,000 principal amount
of the Convertible Capital Securities (liquidation amount $1,000 per Capital
Security) issued by HSB Capital II and guaranteed by the Company, and (ii)
$300,000,000 principal amount of the 7.0% Convertible Subordinated Deferrable
Interest Debentures due December 31, 2017, issued by the Company.
"Closing Date" has the meaning specified in Section 1.01.
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"Company Subsidiary" has the meaning specified in Section 4.01(b).
"Debt" has the meaning specified in Section 7.01(e).
"Event of Default" has the meaning specified in Section 7.01.
"Executive Officer" means any of the Chief Executive Officer,
President, Chief Operating Officer, Chief Financial Officer, Principal
Accounting Officer, Treasurer or General Counsel of the Company.
"GAAP" has the meaning specified in Section 4.01(a).
"HSBIIC" means The Hartford Steam Boiler Inspection and Insurance
Company and any entity or entities in whatever form that succeed to all or
substantially all of such company's assets and business.
"HSBIICC" means The Hartford Steam Boiler Inspection and Insurance
Company of Connecticut and any entity or entities in whatever form that succeed
to all or substantially all of such company's assets and business.
"Loan" has the meaning specified in Section 1.01.
"Material Adverse Effect on the Company" has the meaning specified
in Section 4.01(a).
"Maturity Date" has the meaning specified in Section 1.01.
"Merger Agreement" has the meaning specified in the recitals
hereto.
"Note" has the meaning specified in Section 1.02.
"Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Subsidiary" has the meaning specified in Section 4.01(a).
"Successor Entity" has the meaning specified in Section 8.06.
"Voting Securities" has the meaning specified in Section 4.01(a).
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Section 8.02. Expenses. The Company agrees, in the case of an
Event of Default, to pay all reasonable expenses incurred by the Lender in
connection with the enforcement of any provision of this Agreement and the
collection of the Note.
Section 8.03. Cumulative Rights and No Waiver. Each and every
right granted to the Lender hereunder or under any other document delivered
hereunder or in connection herewith, or allowed it by law or equity, shall be
cumulative and may be exercised from time to time. No failure on the part of the
Lender to exercise, and no delay in exercising, any right will operate as a
waiver thereof, nor will any single or partial exercise of any right preclude
any other or future exercise thereof or the exercise of any other right.
Section 8.04. Notices. Any communication, demand or notice to be
given hereunder or with respect to the Note will be duly given when delivered in
writing or sent by tested telex to a party at its address as indicated below.
A communication, demand or notice given pursuant to this Section
8.04 shall be addressed:
If to the Company, at
HSB Group, Inc.
P.O. Box 5024
One State Street
Hartford, CT 06102-5024
Attention: Robert Walker, Esq.
Facsimile: 860-722-5710
With a concurrent copy (which shall
not serve as notice to the Company) to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention: Thomas H. Kennedy
Facsimile: 917-777-2526
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If to the Lender, at
American International Group, Inc.
70 Pine Street
New York, New York 10270
Attention: General Counsel
Facsimile: 212-425-2175
With a concurrent copy (which shall not serve as
notice to the Lender) to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Michael M. Wiseman
Stephen M. Kotran
Facsimile: 212-558-3588
Section 8.05. Amendments. This Agreement may only be amended in a
writing executed by the Lender and the Company.
Section 8.06. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the Company and the Lender and their respective
successors and assigns; provided, however, that the Company may not assign any
of its rights or delegate any of its obligations hereunder or under the Note
without the prior written consent of the Lender, except that the Company may
assign all of its rights and delegate all of its obligations hereunder and under
the Note to a Successor Entity without the prior written consent of the Lender.
"Successor Entity" means an entity in whatever form that succeeds to all or
substantially all of the Company's assets and business and that assumes all of
the Company's obligations hereunder and under the Note by contract or by
operation of law. Upon any such delegation and assumption, the Company shall be
relieved of and fully discharged from all obligations hereunder and under the
Note, whether such obligations arose before or after such delegation and
assumption. The Lender shall have the right to assign its rights and delegate
all of its obligations to any subsidiary of the Lender. Any assignment purported
to be made in contravention of this Section shall be null and void.
Section 8.07. Participations. The Lender shall have the right to
grant participations (to be evidenced by one or more participation agreements or
certificates of participation) in all or any portion of the Note at any time and
from time to time to one or more subsidiaries of the Lender or commercial banks;
provided, however, that the Lender
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<PAGE> 19
shall obtain the prior written consent of the Company to any such participation
to a party other than a subsidiary of the Lender, which consent will not be
unreasonably withheld.
Section 8.08. Disclosure of Information. The Company authorizes
the Lender to disclose any information relating to the Company which has been
furnished to the Lender by the Company in connection with this Agreement to any
prospective assignee or participant in connection with an assignment or
participation permissible pursuant to Section 8.06 and 8.07.
SECTION 8.09. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED
STATES OF AMERICA.
Section 8.10. Waiver of Jury Trial. EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 8.10.
Section 8.11. Separability. In case any one or more of the
provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
Section 8.12. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by the different parties hereto on
separate counterparts, each of which when so executed and delivered shall be an
original, and all the counterparts shall together constitute one and the same
instrument.
Section 8.13. Merger Agreement. The Lender acknowledges that
execution and performance of this Term Loan Agreement does not violate the
Merger Agreement.
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<PAGE> 20
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first above written.
AMERICAN INTERNATIONAL GROUP, INC.
By:/s/ Howard I. Smith
----------------------------------------------
Title: Executive Vice President & Chief
Financial Officer
By:/s/ Eric N. Litzky
----------------------------------------------
Title: Assistant Secretary
HSB GROUP, INC.
By:/s/ Saul L. Basch
----------------------------------------------
Title: Senior Vice President, Treasurer
& Chief Financial Officer
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<PAGE> 21
EXHIBIT A
TERM LOAN NOTE
$315,000,000 September__, 2000
HSB GROUP, INC., a Connecticut corporation (the "Company"), for
value received, hereby promises to pay to the order of AMERICAN INTERNATIONAL
GROUP, INC. (the "Lender"), by wire transfer of immediately available funds in
United States dollars to the account of the Lender specified by the Lender in
the United States on the Maturity Date (as defined in the Agreement specified
below), the principal sum of $315,000,000 or, if less, the aggregate unpaid
principal amount of the Loan made by the Lender to the Company pursuant to the
Agreement (as hereinafter defined). This Note shall bear interest on the unpaid
principal amount hereof, payable at a rate per annum (on the basis of a 360-day
year for the actual number of days involved) equal to [___%], or, as applicable,
at the higher rate provided in Section 2.03 of the Agreement, and on the dates
set forth in the Agreement.
If this Note becomes due and payable on a day which is not a
Business Day (as defined in the Agreement), the maturity hereof shall be
extended to the next succeeding Business Day, and interest shall be payable
hereon at the rate herein specified during such extension.
The Company waives presentment, demand, protest or other notice of
any kind.
This Note is the Note referred to in a Term Loan Agreement, dated
as of September__, 2000, between the Company and the Lender (the "Agreement"),
and is entitled to the benefits provided therein. This Note is subject to
optional and mandatory prepayment in whole or in part and its maturity is
subject to acceleration upon the terms provided in the Agreement.
HSB GROUP, INC.
By:
----------------------------------------------
Title:
<PAGE> 22
SCHEDULE I
[Letterhead of Robert C. Walker, Esq.]
[September __, 2000]
American International Group, Inc.
70 Pine Street
New York, New York 10270
Ladies and Gentlemen:
I have acted as counsel to HSB Group, Inc., a Connecticut
corporation (the "Company"), in connection with the Company's execution and
delivery of the Term Loan Agreement dated as of [September __, 2000] (said
Agreement being herein referred to as the "Agreement"), between the Company, as
borrower, and you, as lender, and the Company's execution and delivery to you of
its Note thereunder. Terms used herein which are defined in the Agreement have
the meanings herein as therein defined unless the context hereof requires
otherwise. In this connection, I have examined such records, certificates and
other documents and such questions of law as I have considered necessary or
appropriate for the purposes of this opinion, and on the basis of such
examination advise you that, in my opinion:
1. The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Connecticut
and has all requisite power and authority to own and operate its
properties and to carry on its business as now being conducted.
2. The Company has all requisite power and authority to enter into
the Agreement, to make the borrowings provided for therein, to execute
and deliver the Note and to perform its obligations under the Agreement
and under the Note; and all necessary proceedings on its part to duly
authorize such action have been taken.
<PAGE> 23
3. The Agreement has been duly and validly authorized, executed
and delivered by the Company and constitutes a valid and legally binding
agreement of the Company enforceable in accordance with its terms,
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.
4. The Note has been duly and validly authorized, executed and
delivered by the Company and constitutes a valid and legally binding
obligation of the Company, enforceable in accordance with the terms
thereof and of the Agreement, 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.
5. The execution and delivery by the Company of the Agreement and
the Note do not violate any provision of the Amended and Restated
Certificate of Incorporation or By-laws of the Company.
6. No consent or approval of any governmental or administrative
authority, instrumentality or agency is required as a condition to the
validity of the Agreement or the Note; and there is no statute, rule or
regulation which prevents the execution, delivery or carrying out by the
Company of the Agreement or the Note.
7. To the best of my knowledge and after due inquiry, there is no
litigation or governmental proceeding or investigation pending or
threatened against the Company or any subsidiary before any court or
administrative agency which could reasonably be expected to result in any
material adverse change in the financial condition of the Company and its
subsidiaries taken as a whole.
The foregoing opinion is limited to the Federal laws of the United
States, the laws of the States of New York and Connecticut, and I am expressing
no opinion as to the effect of the laws of any other jurisdiction.
In rendering the foregoing opinion, I have, with your approval,
relied as to certain matters on information obtained from public officials and
officers of the Company and other sources believed by me to be responsible, and
I have assumed that the signatures on all documents examined by me are genuine.
Very truly yours,
