Exhibit 4.3
HSB GROUP, INC.
7.0% Convertible Subordinated Deferrable Interest Debentures due December 31,
2017
THE CONVERTIBLE SUBORDINATED INTEREST DEFERRABLE DEBENTURES EVIDENCED HEREBY AND
THE COMMON STOCK ISSUABLE UPON THEIR CONVERSION HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN WHOLE OR IN PART
(BUT IF IN PART, IN AMOUNTS NOT LESS THAN $10,000,000 IN PRINCIPAL AMOUNT) AND
ONLY IN COMPLIANCE WITH THE REQUIREMENTS OF THE U.S. SECURITIES ACT OF 1933, AS
AMENDED, OR PURSUANT TO AN APPLICABLE EXCEMPTION THEREFROM.
No. R-1 $309,300,000
HSB GROUP, INC., a Connecticut corporation (hereinafter called the
"Corporation", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to The
First National Bank of Chicago, as Property Trustee, pursuant to the Trust
Agreement of HSB Capital II, dated as of December 31, 1997, or registered
assigns, the principal sum of Three Hundred Nine Million Three Hundred Thousand
($309,300,000) Dollars on December 31, 2017; provided that the Corporation may
shorten the Stated Maturity of the principal of this Security to a date not
earlier than December 31, 2012 in the circumstances described on the reverse
hereof. The Corporation further promises to pay interest on said principal sum
from December 31, 1997 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually (subject to deferral
as set forth herein) in arrears on January 15 and July 15 of each year,
commencing January 15, 1998, at the rate of 7.0% per annum, 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. 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 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, which shall be the January 1 or July
1 (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for shall forthwith cease to be payable to the Holder on such Regular Record
Date and may either be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities 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 Security may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in said Indenture.
So long as no Event of Default has occurred and is continuing, the Corporation
shall have the right, at any time during the term of this Security, from time to
time to defer the payment of interest on this Security for up to ten consecutive
semi-annual interest payment periods with respect to each deferral period (each
an "Extension Period"), 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; provided, however, that no Extension Period shall extend
beyond the Stated Maturity of the principal of this Security as then in effect,
and no such Extension Period may end on a date other than an Interest Payment
Date; 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 ten consecutive semi-annual interest payment
periods, and shall not 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 then due on any Interest Payment Date, the Corporation may elect
to begin a new Extension Period, subject to the above conditions. 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 or so long as such Securities are held by HSB
Capital II, at least one Business Day prior to the earlier of (i) the next
succeeding date on which Distributions on the Capital Securities of such Issuer
Trust would be payable but for such deferral, and (ii) the date on which the
Property Trustee of such Issuer Trust is required to give notice to holders of
such Capital Securities of the record date or the date such Distributions are
payable.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Corporation maintained for
that purpose in New York, New York or Chicago, Illinois, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Corporation payment of interest may be made (i) by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Securities Register, or (ii) by wire transfer in immediately available funds at
such place and to such account as may be designated by the Person entitled
thereto as specified in the Securities Register.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and ranks pari passu with HSB Group,
Inc.'s Global Floating Rate Junior Subordinated Debentures, Series B, 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: /s/ Saul L. Basch
Name: Saul L. Basch
Title: Senior Vice President,
Treasurer and Chief
Financial Officer
Attest:
/s/ Roberta A. O'Brien
Assistant Corporate Secretary
SECTION 2.3. Form of Reverse of Security.
This Security is a duly authorized issue of securities of the
Corporation (herein called the "Securities"), limited in aggregate principal
amount to $309,300,000, issued under the Indenture, dated as of December 31,
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 Securities are, and are to
be, authenticated and delivered.
All terms used in this Security that are defined in the Indenture or in
the Trust Agreement, dated as of December 31, 1997 (as modified, amended or
supplemented from time to time, the "Trust Agreement"), relating to HSB Capital
II (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 or
the Trust Agreement, as the case may be.
The Corporation may at any time, at its option, (i) on or after
December 31, 2004 or (ii) for a reason specified in Article XI of the Indenture,
in both cases 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 to but
excluding the Redemption Date fixed for redemption.
Under limited circumstances, Employers Reinsurance Corporation may, at
its option and subject to the terms and conditions of Article XI of the
Indenture, require the Corporation to redeem this Security in whole, at a
Redemption Price as stated in Section 11.8 of the Indenture.
In addition, upon the occurrence and during the continuation of a Tax
Event in respect of the Issuer Trust, the Corporation may, at its option, at any
time within 90 days of the occurrence and during the continuation of such Tax
Event, redeem this Security, in whole but not in part, subject to the terms and
conditions of Article XI of the Indenture, at a Redemption Price equal to 100%
of the principal amount of the 7.0% Convertible Subordinated Deferrable Interest
Debentures so redeemed plus accrued and unpaid interest thereon to the date of
redemption.
In the event of redemption of this Security in part only, a new
Security or Securities 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 to be affected by such supplemental indenture. The
Indenture also contains provisions permitting Holders of specified percentages
in principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all Securities, to waive compliance by the Corporation with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, if an Event
of Default with respect to the Securities 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 may declare
the principal amount of all the Outstanding Securities to be due and payable
immediately, by a notice in writing to the Corporation (and to the Trustee if
given by Holders), provided that, if upon an Event of Default, the Trustee or
such Holders fail to declare the principal of all the Outstanding Securities 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
on all the Securities shall become immediately due and payable, provided that
the payment of such principal and interest on such Securities shall remain
subordinated to the extent provided in Article XII of the Indenture.
Subject to the terms and conditions set forth in Article XIII of the
Indenture, this Security is convertible, at the option of the Holder, into
shares of Common Stock.
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 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 like tenor, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $10,000,000 and any integral multiple of $100,000 in excess
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, Securities are exchangeable for a like aggregate principal amount of
Securities and of like tenor of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Corporation may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Corporation, the Trustee and any agent of the Corporation or the Trustee may
treat the Person in whose name this Security is registered as the owner hereof
for all purposes, whether or not this Security be overdue, and neither the
Corporation, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Corporation and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States Federal, state and local
tax purposes it is intended that this Security constitute indebtedness.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
The Trustee's certificates of authentication shall be in substantially the
following form:
This is one of the Securities referred to in the within-mentioned Indenture.
Dated: December 31, 1997
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
By: /s/ Steve M. Husbands
Authorized Officer