AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 18, 1997
REGISTRATION NO. 333-22469
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
HSB GROUP, INC.
(Exact name of registrant as specified in its charter)
Connecticut
(State or other jurisdiction of incorporation or organization)
6133
(Primary Standard Industrial Classification Code Number)
06-1475343
(I.R.S. Employer Identification Number)
One State Street, P.O. Box 5024, Hartford, CT 06102-5024
(860) 722-1866
(Address, including ZIP Code, and telephone number, including area
code, of registrant's principal executive offices)
R. Kevin Price, Corporate Secretary
HSB Group, Inc.
One State Street, P.O. Box 5024, Hartford, CT 06102-5024
(860) 722-1866
(Name, address, including ZIP Code, and telephone number,
including area code, of Agent for Service)
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement has become
effective and all other conditions to the Agreement and Plan of Share Exchange,
described in the enclosed Prospectus and Proxy Statement pursuant to which the
common stock and preferred stock of The Hartford Steam Boiler Inspection and
Insurance Company and HSB Group, Inc. will be exchanged, have been satisfied or
waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
Title of Proposed Proposed
each class of maximum maximum Amount
securities Amount offering aggregate of
to be to be price offering Registration
registered registered per unit price fee(1)
- ---------- ---------- -------- --------- ------------
Common Stock,
no par value 20,041,707 $45.625 $914,402,881 $277,092(2)
(1) Estimated pursuant to Rule 457(f)(1) of the Securities Act of 1933, based
upon the average of the high and low sales price per share of The Hartford Steam
Boiler Inspection and Insurance Company common stock on February 10, 1997 as
reported by the New York Stock Exchange Composite Transactions Reporting System.
(2) Registration fee previously paid.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
[LOGO]
THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY
May __, 1997
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders on
Monday, June 23, 1997 at 3:00 P.M. at our Home Office at One State Street,
Hartford, Connecticut.
At this meeting stockholders will be asked to consider and vote on a
proposal to approve an Agreement and Plan of Share Exchange in connection with
the formation of a new holding company structure as described in more detail in
the attached Prospectus and Proxy Statement. For the reasons stated in the
accompanying materials, the Board of Directors believes that the formation of
such a holding company structure is in the best interests of the Company and its
stockholders and recommends a vote "FOR" this proposal.
Your proxy is very important in making up the total number of shares
necessary to hold the meeting, even though you may own only a few shares.
Whether or not you plan to attend the meeting, please fill out, sign and return
your proxy card in the envelope provided as soon as possible. Your cooperation
is appreciated.
Sincerely,
/s/ Gordon W. Kreh
Gordon W. Kreh
President and
Chief Executive Officer
The Hartford Steam Boiler
Inspection and Insurance Company
One State Street
P.O. Box 5024
Hartford, Connecticut 06102-5024
<PAGE>
NOTICE OF SPECIAL MEETING
May __, 1997
TO THE STOCKHOLDERS:
- --------------------
Notice is hereby given that a Special Meeting of Stockholders of The
Hartford Steam Boiler Inspection and Insurance Company will be held on Monday,
June 23, 1997, at 3:00 P.M., at the office of the Company, One State Street,
Hartford, Connecticut, to consider and act upon a proposal to approve an
Agreement and Plan of Share Exchange pursuant to which shares of common stock of
a newly formed holding company, HSB Group, Inc. ("HSB Group") will be exchanged
on a one-for-one basis for all of the outstanding common stock of the Company,
shares of preferred stock of HSB Group will be exchanged for all of the
outstanding shares of Series B Convertible Preferred Stock of the Company, and
certain other transactions as described herein will be effectuated.
A Prospectus and Proxy Statement to assist you in the consideration of
the foregoing matter is attached.
The Board of Directors has fixed April 25, 1997, at the close of
business, as the record date and time for the determination of the stockholders
entitled to notice of and to vote at said Special Meeting and any adjournment
thereof.
If the proposal to approve the Agreement and Plan of Share Exchange is
adopted, holders of the Company's Common Stock will automatically become holders
of HSB Group, Inc.'s Common Stock. It will not be necessary for you to exchange
your present stock certificates. In the future, as currently issued stock
certificates are presented for exchange or transfer, new certificates will be
issued with the name "HSB Group, Inc.".
As explained in more detail under "Dissenters' Appraisal Rights",
holders of the Company's Common Stock are entitled to assert appraisal rights in
accordance with the procedures set forth in Sections 33-855 through 33-872 of
the Connecticut Business Corporation Act, included with the accompanying
Prospectus and Proxy Statement as Appendix B.
It is hoped that you will be able to attend this meeting. If you cannot,
you are urgently requested to sign and return the enclosed proxy card in the
envelope provided.
By order of the Board of Directors.
/s/ R. K. Price
R. K. PRICE
Corporate Secretary
<PAGE>
THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY
HSB GROUP, INC.
------------------------------
PROSPECTUS AND PROXY STATEMENT
------------------------------
This Prospectus and Proxy Statement is being furnished in connection
with the solicitation of proxies by the Board of Directors of The Hartford Steam
Boiler Inspection and Insurance Company ("Hartford Steam Boiler" or the
"Company") for a Special Meeting of Stockholders of the Company ("Special
Meeting") to be held on June 23, 1997 at 3:00 P.M. at One State Street,
Hartford, Connecticut. This Prospectus and Proxy Statement, together with the
Notice of Special Meeting and proxy card are first being mailed to stockholders
on or about May __, 1997.
At the Special Meeting stockholders will vote on a proposal to approve
an Agreement and Plan of Share Exchange (the "Share Exchange") pursuant to which
shares of common stock of a newly formed holding company, HSB Group, Inc. ("HSB
Group" or "Holding Company"), will be exchanged on a one-for-one basis for all
of the outstanding shares of common stock of the Company, shares of preferred
stock of HSB Group will be exchanged for all of the outstanding Series B
Convertible Preferred Shares of the Company, and certain other transactions as
described herein will be effectuated (the "Restructuring").
This document also serves as the Prospectus of the Holding Company with
respect to the issuance of up to 20,041,707 shares of common stock of the
Holding Company in connection with the Share Exchange.
---------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------------------
The date of this Prospectus and Proxy Statement is May __, 1997.
i
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission" or "SEC"). Such reports,
proxy statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549-1004 and
at the following Regional Offices of the Commission: Chicago Regional Office,
CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60621-2511; and New York Regional Office, 7 World Trade Center, 13th Floor, New
York, New York 10048. The Commission also maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy statements and other information
that the Company files with the Commission electronically. Copies of such
materials also may be inspected at the New York Stock Exchange, 20 Broad Street,
New York, New York 10005.
HSB Group will become subject to the information reporting requirements
of the Exchange Act after the Restructuring and thus has not made any filings
under the act as yet. If the Restructuring is consummated, the shares of common
stock of HSB Group will be listed on the New York Stock Exchange under the
trading symbol HSB.
HSB Group has filed with the Commission a registration Statement on
Form S-4 (together with any annexes, exhibits and amendments thereto, the
"Registration Statement") under the Securities Act of 1933, as amended, (the
"Securities Act") covering up to 20,041,707 shares of HSB Group common stock.
HSB Group has received exemptions from regulatory approval of the
Restructuring on behalf of the Company and its subsidiaries from the Insurance
Commissioners of the State of Connecticut and the State of Texas. Requests for
approval of the Restructuring before the Secretary of State of the Department of
Trade and Industry in the United Kingdom and the Insurance Commissioner in Hong
Kong are currently pending.
ii
<PAGE>
No person has been authorized to give any information or to make any
representation not contained in or incorporated by reference in this Prospectus
and Proxy Statement, and if given or made, such information or representation
not contained herein must not be relied upon as having been authorized. This
Prospectus and Proxy Statement does not constitute an offer to sell, or the
solicitation of an offer to purchase, any of the securities offered by this
Prospectus and Proxy Statement, or the solicitation of a proxy, in any
jurisdiction to or from any person to or from whom it is unlawful to make such
offer or solicitation of an offer, or proxy solicitation in such jurisdiction.
Neither the delivery of this Prospectus and Proxy Statement nor the issuance or
sale of any securities hereunder shall, under any circumstances, create any
implication that there has been no change in the information set forth herein
since the date hereof or incorporated by reference herein since the date hereof.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the SEC (File No.
0-13300) are incorporated in this Prospectus and Proxy Statement by reference
and made a part hereof:
(i) The Annual Report on Form 10-K for the year ended December 31, 1996; and
(ii) The Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, after the date of
this Prospectus and Proxy Statement and prior to the termination of the offer
made by this Prospectus and Proxy Statement, shall be deemed to be incorporated
in this Prospectus and Proxy Statement by reference and to be a part hereof from
the respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference in this
Prospectus and Proxy Statement shall be deemed to be modified or superseded for
purposes of this Prospectus and Proxy Statement to the extent that a statement
contained herein, or in any subsequently filed document that also is
incorporated or deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or
iii
<PAGE>
superseded to constitute a part of this Prospectus and Proxy Statement.
As described above, this Prospectus and Proxy Statement incorporates documents
by reference which are not presented herein or delivered herewith. These
documents are available without charge upon request delivered to: R. Kevin
Price, Corporate Secretary, The Hartford Steam Boiler Inspection and Insurance
Company, One State Street, P.O. Box 5024, Hartford, Connecticut, 06102-5024. In
order to ensure timely delivery, any request should be made by June 16, 1997.
iv
<PAGE>
TABLE OF CONTENTS
Page
----
General.................................................1
Voting..................................................1
Summary of Share Exchange Proposal......................3
Description of Share Exchange and Restructuring....3
Purposes of Restructuring..........................3
Regulation after the Share Exchange................4
Management of HSB Group............................4
Exchange Listing and Exchange of Stock
Certificates.....................................4
Tax Consequences of Share Exchange.................4
Stockholder Vote Required for Approval.............5
Dissenters' Appraisal Rights.......................5
Regulatory Approvals...............................5
Conditions to the Share Exchange...................5
Risk Factors............................................6
Proposal to Approve Share Exchange......................7
Recommendation of Directors........................7
Description of Share Exchange and Restructuring ...7
Purposes of Restructuring.........................11
Required Regulatory Approvals and other
Regulatory Matters..............................13
Insurance Ratings.................................14
Management after the Share Exchange...............15
Conditions to the Share Exchange..................15
Dividend Policy...................................16
HSB Group Capital Stock and Rights Plan...........18
Comparative Rights of Stockholders................20
Effective Time of Share Exchange..................23
Amendment, Waiver or Termination..................23
Certain Federal Income Tax Consequences...........24
Stock Plans and Other Employee Benefit Plans......24
Automatic Dividend Reinvestment Plan (DRP)
and Payroll Investment Plan (PIP)...............25
Trading of HSB Group Common Stock.................26
Transfer and Dividend Disbursement Agent;
Exchange of Stock Certificates..............26
Dissenters' Appraisal Rights......................26
Financial Statements..............................30
Dividends and Market Price Ranges.................30
Legal Opinions....................................31
Experts...........................................31
v
<PAGE>
Stockholder Vote Required for Approval............31
Deadline for Stockholder Proposals.....................32
Other Matters..........................................32
Appendix A: Agreement and Plan of Share Exchange.....A-1
Appendix B: Connecticut Business Corporation Act:
Dissenters' Rights..................................B-1
Appendix C: Articles of Incorporation of HSB Group,
Inc.................................................C-1
Appendix D: Bylaws of HSB Group, Inc.................D-1
vi
<PAGE>
GENERAL
The enclosed proxy is solicited by the Board of Directors of The
Hartford Steam Boiler Inspection and Insurance Company for use at the Special
Meeting of Stockholders to be held June 23, 1997, and at any and all
adjournments thereof. The Company is a Connecticut corporation and its principal
office is located at One State Street, P.O. Box 5024, Hartford, Connecticut
06102-5024, (860) 722-1866.
Arrangements will be made with brokers, nominees and fiduciaries to
distribute proxy material to their principals, and their postage and clerical
expenses in so doing will be paid by the Company. The entire cost of soliciting
proxies on behalf of management will be borne by the Company. Directors,
officers and regular employees of the Company may solicit proxies personally if
proxies are not received promptly. The Company has retained Corporate Investor
Communications, Inc. ("CIC") to aid in the solicitation of proxies. CIC's fee is
not expected to exceed $4,000 in addition to out-of-pocket expenditures.
VOTING
It is intended that only the proposal described in the accompanying
Notice be presented at the meeting. The Connecticut Business Corporation Act
provides that only the business described in the notice of a special meeting of
stockholders may be conducted at such meeting.
You are urged to read this Prospectus and Proxy Statement and to fill
in, date, sign and return the enclosed form of proxy. The giving of a proxy does
not affect your right to vote should you attend the meeting and the proxy may be
revoked at any time before it is voted, except as outlined in the section
captioned "Dissenters' Appraisal Rights" located on page 26. Properly executed
proxies not revoked will be voted as specified.
Abstentions and broker non-votes are included in the total number of
shares represented for matters to be voted upon at the meeting for quorum
purposes; however, they will have the effect of a vote AGAINST the proposal to
approve the Share Exchange.
-1-
<PAGE>
Only holders of Company Common Stock and Company Series B Convertible
Preferred Stock of record at the close of business on April 25, 1997 are
entitled to notice of, and to vote at, the meeting. Each stockholder of record
on such date is being mailed the Notice, Prospectus and Proxy Statement and
Proxy card on or about May __, 1997. On April 25, 1997, there were x outstanding
shares of Company Common Stock, each entitled to one vote, and 2,000 outstanding
shares of Company Series B Convertible Preferred Stock (all of which are held by
General Reinsurance Corporation), each entitled to 199 votes. The directors and
executive officers of the Company as a group own less than x of the issued and
outstanding shares of Company Common Stock and none of the Preferred Stock.
-2-
<PAGE>
SUMMARY OF SHARE EXCHANGE PROPOSAL
The following is a summary of certain information regarding the proposed
Agreement and Plan of Share Exchange and related transactions comprising the
Restructuring contained or incorporated by reference in this Prospectus and
Proxy Statement and is qualified in its entirety by the more detailed
information contained or incorporated by reference herein. For more detailed
information concerning the Restructuring see "Proposal to Approve Share
Exchange" on page 7.
The Board of Directors unanimously recommends that you vote "FOR" the Proposal
to Approve the Agreement and Plan of Share Exchange.
Description of Share Exchange and Restructuring
- -----------------------------------------------
HSB Group was incorporated to become the holding company of, and the
direct owner of, the Company and certain of the Company's subsidiaries. Certain
other subsidiaries of the Company will continue to be directly held by the
Company. The organizational charts on page 10 show the structure of the Company
before and after the proposed Restructuring. The Restructuring will be
effectuated by a share exchange whereby each share of common stock, no par
value, of the Company ("Company Common Stock"), outstanding immediately prior to
the effective time of the exchange will be exchanged for one share of common
stock, no par value, of HSB Group ("HSB Group Common Stock"), and each share of
Series B Convertible Preferred Stock of the Company ("Company Preferred Stock")
will be exchanged for one share of Series B Convertible Preferred Stock of HSB
Group, having the same rights and preferences ("HSB Group Preferred Stock"). As
a result, following the exchange, all outstanding shares of Company Common Stock
and Company Preferred Stock will be held by the Holding Company, and all
outstanding shares of the Holding Company will be owned by the holders of the
Company Common Stock and Company Preferred Stock, respectively, that were
outstanding immediately prior to the effective time of the exchange.
Purposes of Restructuring
- -------------------------
The Restructuring will provide greater operating and financial
flexibility in connection with certain
-3-
<PAGE>
investments, business operations and financing activities than is available
under the current structure. Holding company structures are frequently used when
an organization conducts regulated and unregulated lines of businesses and are
commonly found in the insurance industry.
Regulation after the Share Exchange
- -----------------------------------
After the Share Exchange, the Company will continue to be subject to
regulation by the Insurance Commissioner of the State of Connecticut and other
regulatory authorities in jurisdictions within which the Company continues to
transact business. Such regulations include provisions that will impose
restrictions on certain transactions among the Company, HSB Group and their
affiliates.
Management of HSB Group
- -----------------------
The directors of HSB Group, upon consummation of the Share Exchange,
will be the same persons who presently serve as directors of the Company and the
executive officers of HSB Group will consist of the current executive officers
of the Company.
Exchange Listing and Exchange of Stock Certificates
- ---------------------------------------------------
It is anticipated that the HSB Group Common Stock to be received by the
Company's common stockholders in the Share Exchange will be listed on the New
York Stock Exchange under the trading symbol HSB effective as of the
consummation of the Share Exchange. This will enable stockholders of the Company
to trade the HSB Group Common Stock which they receive in the Share Exchange
without interruption.
It will not be necessary for stockholders to exchange their Company
Common Stock certificates for HSB Group Common Stock certificates. Certificates
representing Company Common Stock will automatically represent the corresponding
shares of HSB Group Common Stock upon consummation of the Share Exchange.
Tax Consequences of Share Exchange
- ----------------------------------
It is a condition to the consummation of the Share Exchange that the
Company receive an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, tax
counsel for the
-4-
<PAGE>
Company, to the effect that, based upon certain representations, among other
things, the holders of the Company Common Stock and Company Preferred Stock will
recognize no gain or loss upon the exchange of their shares of Company Common
Stock and Company Preferred Stock solely for shares of HSB Group Common Stock
and HSB Group Preferred Stock, respectively.
Stockholder Vote Required for Approval
- --------------------------------------
Approval of the proposed Share Exchange will require the approval of
two-thirds of all outstanding shares of Company Common Stock and Company
Preferred Stock voting together as a single class.
Dissenters' Appraisal Rights
- ----------------------------
Holders of Company Common Stock and Company Preferred Stock will have
the right to have their shares appraised and be paid the fair value of their
shares. Stockholders who wish to exercise their dissenters' rights must follow
carefully the procedures described on page 30 herein under the caption
"Dissenters' Appraisal Rights". Failure to do so could result in the loss of
such rights.
Regulatory Approvals
- --------------------
The Company has received exemptions relating to approval of the
Restructuring from the Insurance Commissioners of the State of Connecticut and
the State of Texas. Requests for approval of the Restructuring are currently
pending before the Secretary of State of the Department of Trade and Industry in
the United Kingdom and the Insurance Commissioner in Hong Kong. Receipt of such
exemptions is a condition to the consummation of the Share Exchange.
Conditions to the Share Exchange
- --------------------------------
The obligation of the Company and HSB Group to consummate the Share
Exchange is subject to various conditions, including, but not limited to:
(i) obtaining the required approval of the Company's stockholders;
-5-
<PAGE>
(ii) the approval or exemption of the insurance regulatory authorities in
Connecticut, Texas, the United Kingdom and Hong Kong; (iii) the effectiveness of
the Registration Statement; (iv) authorization for listing HSB Group Common
Stock on the New York Stock Exchange; (v) receipt of an opinion from tax counsel
for the Company that the Share Exchange constitutes a tax-free transaction under
the Internal Revenue Code of 1986, as amended, to the stockholders of the
Company upon their exchange of Company stock solely for HSB Group stock; (vi)
receipt of an opinion as to the legality of the HSB Group Common Stock and HSB
Group Preferred Stock issuable in connection with the Share Exchange; and (vii)
the absence of any injunction prohibiting or restricting in any manner the Share
Exchange or the operation of HSB Group, the Company or any of their subsidiaries
after consummation of such Share Exchange.
Risk Factors
- ------------
The future performance of HSB Group Common Stock cannot be assured. Following
the consummation of the Restructuring, HSB Group will be able to issue
securities or incur debt for the purpose of financing or investing in business
activities in which the Company or its insurance company affiliates are not
involved, and therefore, prior insurance regulatory approval will not be
necessary. Moreover, HSB Group through its non-insurance subsidiaries may enter
into businesses in which the Company and its subsidiaries are not presently
engaged. Such business activities may involve a greater degree of risk or
investment concentration than would generally be permitted if such business
activities were engaged in by a regulated insurance company. Engaging in
business activities with greater risk may or may not have an adverse impact on
the future performance of HSB Group's Common Stock.
-6-
<PAGE>
PROPOSAL TO APPROVE SHARE EXCHANGE
The following description is qualified in its entirety by reference to
the Agreement and Plan of Share Exchange attached hereto as Appendix A, certain
provisions of the Connecticut Business Corporation Act relating to the rights of
dissenting stockholders attached hereto as Appendix B, the restated Articles of
Incorporation of HSB Group attached hereto as Appendix C, and the Bylaws of HSB
Group attached hereto as Appendix D. The transactions described below, including
those contemplated by and carried out in connection with the Agreement and Plan
of Share Exchange are sometimes referred to herein as the "Restructuring".
Recommendation of Directors
- ---------------------------
The Board of Directors of the Company and HSB Group have each approved
the Restructuring which, among other things, provides for the acquisition of all
outstanding shares of Company Common Stock in exchange for an equal number of
shares of HSB Group Common Stock and the acquisition of all outstanding shares
of Company Preferred Stock in exchange for an equal number of shares of HSB
Group Preferred Stock pursuant to Section 33-816 of the Connecticut General
Statutes. All of the 2,000 outstanding shares of Company Preferred Stock are
held by General Reinsurance Corporation. General Reinsurance has indicated that
it intends to vote in favor of the proposal to approve the Share Exchange.
For the reasons discussed below in "Purposes of Restructuring", the Board of
Directors of the Company believes that the proposed Share Exchange is in the
best interests of the Company and its stockholders. Accordingly, the Board of
Directors unanimously recommends that stockholders vote FOR the proposal to
approve the Agreement and Plan of Share Exchange.
Description of Share Exchange and Restructuring
- -----------------------------------------------
HSB Group is a newly incorporated Connecticut corporation with its
principal offices at One State Street, Hartford, Connecticut 06102-5024,
telephone (860) 722-1866. It was formed at the direction of the Board of
Directors of the Company for the purpose of effecting the Share Exchange,
-7-
<PAGE>
and therefore it has no operating history. There will be certain one-time and
other ongoing costs incurred in connection with the Restructuring such as
administrative expenses, registration fees and franchise and other taxes.
However, such costs, which will be borne by the Company, are not expected to be
material.
If the Share Exchange is approved by stockholders, and all other
conditions contained in the Agreement and Plan of Share Exchange are satisfied,
subject to the exercise and perfection of dissenters' appraisal rights
(described below under the caption "Dissenters' Appraisal Rights") at the
effective time of the Share Exchange (the "Effective Time"), (a) each share of
Company Common Stock outstanding immediately prior to the Effective Time will be
exchanged for one share of HSB Group Common Stock, (b) each share of Company
Preferred Stock outstanding immediately prior to the Effective Time will be
exchanged for one share of HSB Group Preferred Stock (which series will have
substantially identical rights and preferences as Company Preferred Stock). In
addition, at the Effective Time each share of HSB Group Common Stock (all of
which are currently held by the Company) which is outstanding immediately prior
to the Effective Time will be canceled and restored to the status of an
authorized but unissued share of HSB Group Common Stock.
As a result immediately following the Effective Time, all outstanding
shares of Company Common Stock and Company Preferred Stock will be held by HSB
Group, and all of the outstanding shares of HSB Group Common Stock and HSB Group
Preferred Stock will be owned by the holders of shares of Company Common Stock
and Company Preferred Stock, respectively, of the Company that were outstanding
immediately prior to the Effective Time.
Following the Share Exchange, the consolidated financial position and
consolidated results of operations of HSB Group should be identical to those of
the Company immediately prior to the exchange. As part of the Restructuring, the
Company will be transferring certain of its engineering subsidiaries to HSB
Group as a dividend on the Company Common Stock held by HSB Group. (See charts
below for organizational structures before and after the Restructuring.) Such
subsidiaries currently comprise an immaterial amount of the consolidated assets,
-8-
<PAGE>
and provide an immaterial portion of the consolidated revenues and net income of
the Company. HSB Group will obtain funds to invest in such subsidiaries, as well
as to acquire or create new subsidiaries, primarily from dividends paid to HSB
Group on the shares of Company Common Stock it will own following the Share
Exchange, borrowings by HSB Group from third parties, the Company or its
subsidiaries, and any dividends HSB Group may receive from any of its
subsidiaries other than the Company. There can be no assurance, however, as to
the availability of such borrowings or amount of earnings available to be paid
as dividends to HSB Group by any of its subsidiaries, including the Company. In
addition, certain of the transactions described above in which the Company is a
party, may, depending on the nature and amount of the transaction, be subject to
insurance regulatory restrictions, or in some cases, prior approval. (See
"Required Regulatory Approvals and other Regulatory Matters" on page 13.)
In addition to the transfer of certain of the Company's engineering
subsidiaries to HSB Group, in order to streamline operations, Radian Corporation
will be merged into the Company shortly following the Restructuring. (Radian
Corporation currently conducts no business operations and has no assets other
than its 40% interest in Radian International LLC.) The following charts
represent the current corporate structure of the Company and the proposed
structure after the Restructuring is completed.
-9-
<PAGE>
Current
- -------
The Hartford Steam Boiler Inspection and Insurance Company
| | |
| | |
Domestic and Foreign | |
Insurance Subsidiaries Engineering Services Radian
and Investment Subsidiaries Subsidiaries Corporation
|
Radian International
LLC (40% owned)
After Restructuring
- -------------------
HSB Group, Inc.
| |
| |
Engineering The Hartford Steam Boiler Inspection
Services and Insurance Company
Subsidiaries | |
| |
Domestic Radian International LLC
and Foreign (40% owned)
Insurance
Subsidiaries
and Investment
Subsidiaries
-10-
<PAGE>
Other subsidiaries or assets of the Company may be transferred to HSB
Group or subsidiaries of HSB Group in the future, consistent with the purposes
of the Restructuring described below and subject to the insurance regulatory
restrictions summarized under "Required Regulatory Approvals and other
Regulatory Matters" on page 13.
Purposes of Restructuring
- -------------------------
The Board of Directors and management of the Company believe it is in
the best interests of the Company and its stockholders to approve the formation
of the holding company structure described herein. Holding company structures
are frequently used when an organization conducts regulated and unregulated
lines of businesses and are commonly found in the insurance industry.
Currently, as an insurance company, Hartford Steam Boiler's operations
are regulated in many respects by the insurance authorities of the jurisdictions
within which it conducts business. Among other things, such regulations address
the nature and amount of business that can be written, the type and
concentration of permitted investments, and the nature and extent of
transactions, including dividends and loans, that can be entered into between an
insurer and an affiliate without prior regulatory approval. While such
regulations advance the insurance regulators' objective of safeguarding the
financial security of insurance companies for the benefit of policyholders, they
also could constrain the ability of the Company to compete effectively in other
non-insurance activities. For example, many of the competitors of the Company's
engineering services business are not insurance companies and therefore are not
subject to similar constraints.
The holding company structure proposed by management and the Board
would provide greater operating and financial flexibility in connection with
certain financing activities, investments and business operations than is
available under the current structure where a regulated insurance company is the
parent company. In particular, the proposed structure would advance the Board's
goal of enhancing shareholder value through the development or acquisition of
engineering service businesses. The Restructuring will give the Company greater
flexibility to develop or acquire such businesses with fewer regulatory
constraints thereby providing more
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opportunities for increased earnings. For example, capital raising at the
holding company level could be used to create or acquire such businesses and to
support their future operations, as well as the operations of current
non-insurance subsidiaries, without affecting the surplus position of the
Company. Moreover, the ability to raise capital without prior regulatory
approval would allow the Company to compete on a more level playing field with
other potential acquirors who are not subject to insurance regulatory
constraints.
Additionally, HSB Group would not be subject to the limitations on
investments currently imposed upon the Company and its insurance company
subsidiaries pursuant to the insurance laws of the various jurisdictions under
which they are regulated. The Company does not have any present plans to
diversify into businesses or make investments that would not be permitted or
that would exceed current restrictions. However, the Board of Directors believes
that the proposed holding company structure will provide it with enhanced
flexibility and efficiency to facilitate any such diversification or investment
in the future. It is currently contemplated that such diversification or
investment would be consistent with the Company's business concept of applying
engineering and technology to help design risk management and loss prevention
programs for organizations that rely on equipment.
Management has considered changing its organizational structure in the
past to separate its regulated insurance activities from certain of its
unregulated engineering services. Now however, having a more flexible
organizational structure will be of increased significance in the event that the
Company exercises its option to sell its interest in Radian International LLC to
The Dow Chemical Company ("Dow") on or after December 31, 1997 pursuant to the
terms of its joint venture agreement with Dow. In view of the current business
climate for environmental consulting services, the Company will be evaluating
its sale option, as well as other alternatives, involving Radian International
during 1997. Having the proposed Restructuring in place in the event that the
Company decides to exercise its sale option will provide the Company with more
flexibility to utilize the sale proceeds in a manner that the Board and
management believe will enhance shareholder value.
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<PAGE>
In addition, future investments or newly acquired or created
subsidiaries that would create a charge against risk-based capital under the
insurance laws if held by the Company could be held by HSB Group without
affecting the Company's risk-based capital calculations.
Required Regulatory Approvals and other Regulatory Matters
- ----------------------------------------------------------
The Company and HSB Group have filed for and received an exemption from
regulatory approval of the Restructuring on behalf of the Company and its
subsidiaries with the Insurance Commissioner of the State of Connecticut, the
Company's domiciliary state.
In addition, because the Company has insurance subsidiaries domiciled
in Texas and the United Kingdom, and a branch office in Hong Kong, the Company
and HSB Group are required to file requests for approval or exemptions therefrom
with the Insurance Commissioner of the Texas Department of Insurance, the
Secretary of State of the Department of Trade and Industry in the United Kingdom
and the Insurance Commissioner of Hong Kong. An exemption from approval has been
granted by the Texas Insurance Commissioner. The other requests are still
pending; however, the Company expects that such approvals will be granted and is
unaware of any grounds for such regulatory authorities to withhold such
approvals.
Neither the Company nor HSB Group is aware of any other regulatory
approvals that are necessary in order to consummate the Restructuring other than
the filing of the Articles of Share Exchange with the Secretary of State of
Connecticut. If the requisite regulatory approvals are not received, the
Restructuring will not be effectuated. All expenses of the Company in connection
with the Restructuring, whether consummated or not, will be borne by the
Company.
Following the consummation of the Restructuring, the Company will
continue to be a Connecticut-domiciled insurance company and as such, will be
subject to regulation and examination by the Insurance Commissioner of the State
of Connecticut. The Company and its insurance subsidiaries will also continue to
be subject to regulation by the insurance commissioners or other insurance
regulatory
-13-
<PAGE>
authorities in the jurisdictions in which the Company and its subsidiaries
transact the business of insurance.
Because the Company currently has insurance subsidiaries, the Company
and its affiliates are already considered to be part of an insurance holding
company system regulated under the insurance holding company laws of Connecticut
and certain other jurisdictions. Among other things, such laws require that
transactions between insurance company members of the system and their
affiliates be on fair and reasonable terms and that certain transactions,
including dividends paid by the insurance company members exceeding prescribed
limits, receive the prior approval of the applicable insurance regulatory
authority. The Restructuring will result in the addition of HSB Group to the
holding company system. Therefore, dividends or other distributions on the
Company Common Stock paid to HSB Group or certain transactions between HSB Group
and the Company or any of its insurance subsidiaries may require prior
regulatory approval.
The Company and HSB Group as Connecticut corporations will also be
governed by the general corporate laws of the State of Connecticut.
Insurance Ratings
- -----------------
The Company currently has a financial condition rating from A. M. Best
Company ("Best's") of A+. Best's ratings are based upon a comprehensive review
of a company's financial performance which is supplemented by certain data,
including responses to Best's questionnaires, quarterly filings with the
National Association of Insurance Commissioners, state insurance department
examination reports, loss reserve reports, annual reports and reports filed with
the Commission. Best's undertakes a quantitative evaluation based upon
profitability, leverage/capitalization and liquidity and a qualitative
evaluation based upon the company's book of business or spread of risk,
appropriateness and quality of reinsurance, the quality, diversification and
estimated market value of its assets, the adequacy of its loss reserves and
policyholders' surplus, the capital structure of the company and its holding
company, if present, the experience and integrity of its management, and the
company's market presence. Best's rating classifications are as follows: A++ and
A+
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(Superior), A and A- (Excellent), B++ and B+ (Very Good), B and B- (Adequate),
C++ and C+ (Fair), C and C- (Marginal), D (Very Vulnerable), E (Under State
Supervision) and F (In Liquidation).
Based on discussions with officials at Best's, management of the
Company does not believe that Best's will alter its current rating of the
Company as a result of the Restructuring. However, until the normal rating
process is completed in June, 1997, there can be no assurance that the Company's
rating will not be altered following the Restructuring.
A Best's rating is not a recommendation to buy, sell or hold
securities. It may be withdrawn or revised at any time and it should be
evaluated independently of any other rating that may be assigned to the Company
or HSB Group.
Management after the Share Exchange
- -----------------------------------
Following the Restructuring, each director of the Company will become a
director of HSB Group, each for the then-current term to which he or she was
elected by the stockholders of the Company. Therefore, four directors will hold
office until the first annual meeting of stockholders of HSB Group which is
expected to take place in April 1998; four directors will hold office until the
1999 annual meeting of stockholders of HSB Group; and three directors will hold
office until the 2000 annual meeting of stockholders of HSB Group.
The present executive officers of the Company will serve as executive
officers of HSB Group following the Restructuring.
Conditions to the Share Exchange
- --------------------------------
The obligation of the Company and HSB Group to consummate the Share
Exchange is subject to various conditions (certain of which may be waived, as
described below under the caption "Amendment, Waiver or Termination"),
including, but not limited to: (i) obtaining the required approval of the
Company's stockholders as described below under the caption "Stockholder Vote
Required for Approval";
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<PAGE>
(ii) the approval or exemption of the insurance regulatory authorities in
Connecticut, Texas, the United Kingdom and Hong Kong, or any other consents,
approvals or exemptions necessary or appropriate for the consummation of the
Restructuring, each such consent, exemption or approval to be in form and
substance satisfactory to the Company. (The Company is aware of no such
consents, approvals or exemptions which are required other than those of
Connecticut, Texas, the United Kingdom and Hong Kong); (iii) the effectiveness
of the Registration Statement under the Securities Act relating to the HSB Group
Common Stock to be issued or reserved for issuance in connection with the
Agreement and Plan of Share Exchange; (iv) authorization for listing, on
official notice of issuance, of the HSB Group Common Stock on the New York Stock
Exchange; (v) receipt of an opinion from Skadden, Arps, Slate, Meagher & Flom
LLP, tax counsel for the Company, covering the matters set forth below under the
caption "Certain Federal Income Tax Consequences"; (vi) receipt of an opinion of
counsel as to the legality of HSB Group Common Stock and HSB Group Preferred
Stock issuable in connection with the Agreement and Plan of Share Exchange; and
(vii) the absence of any injunction prohibiting or restricting in any manner the
Share Exchange or the operation of HSB Group, the Company or any of their
subsidiaries after consummation of such Share Exchange.
Dividend Policy
- ---------------
HSB Group does not currently, nor will it following the Restructuring,
conduct directly any business from which it will derive revenues other than the
possible performance of certain management, accounting, financial, legal,
administrative and other support services and operations relating to the
business conducted by the Company, its insurance subsidiaries and certain other
subsidiaries of HSB Group. HSB Group will fund its own operations with amounts
paid by its subsidiaries for the provision of such services, from sales of
securities or debt incurred by HSB Group and from dividends paid to HSB Group on
the stock it holds in the Company and its other subsidiaries.
For the foreseeable future, dividends on HSB Group Common Stock and HSB
Group Preferred Stock will primarily
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<PAGE>
depend on the ability of the Company to pay dividends to HSB Group. Payment of
dividends by the Company will be dependent upon the operating results, capital
requirements, financial condition and regulatory requirements of the Company and
its subsidiaries.
Under Connecticut law, a corporation may not make a distribution to
stockholders if, after giving effect thereto, the corporation would not be able
to pay its debts as they become due in the usual course of business or the
corporation's total assets would be less than the sum of its total liabilities
plus, unless the articles of incorporation permit otherwise, the amount that
would be needed, if any, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those receiving the
distribution. Additionally, under Connecticut insurance law, an insurance
company cannot pay a dividend, without prior approval of the Insurance
Commissioner, that exceeds its earned surplus, as determined under statutory
accounting practices, or which, when combined with that of other dividends or
distributions made within the prior twelve months, exceeds the greater of (i)
ten percent of the company's surplus with respect to policyholders as of the
December 31st last preceding; or (ii) the net income for the twelve-month period
ending on the December 31st last preceding. Under Connecticut insurance law, at
least ten days' prior notice of any dividend or distribution is required to be
given to the Insurance Commissioner. The Commissioner may order that such
dividends or distributions not be paid if payment would cause the insurance
company's surplus to be inadequate or could lead to a hazardous financial
condition.
It is currently contemplated that, subject to the rights of holders of
any outstanding shares of HSB Group Preferred Stock, HSB Group will pay
quarterly dividends on its common stock at a rate at least equal to the current
rate of $.57 per share on Company Common Stock. During 1997, payment of such
dividends by the Company to its stockholders will require the prior approval of
the Connecticut Insurance Commissioner, as described above. In addition, there
can be no assurance that following the Restructuring dividends will be paid or
will continue to be paid at historical levels based on the aforementioned
factors and statutory restrictions, the factors listed under "Risk Factors" on
page 6, or other factors.
-17-
<PAGE>
HSB Group Capital Stock and Rights Plan
- ---------------------------------------
The authorized capital stock of HSB Group will consist of 50,000,000
shares of HSB Group Common Stock and 500,000 shares of HSB Group Preferred
Stock, the provisions of which are included in the Amended and Restated Articles
of Incorporation of HSB Group attached to this Prospectus and Proxy Statement as
Appendix C. Reference is made to Appendix C for the complete terms of HSB
Group's Articles of Incorporation as they will be in effect as of the Effective
Time of the Share Exchange. Also see the description of stockholders' rights
described under the caption "Comparative Stockholders' Rights" below.
At the Record Date, x shares of Company Common Stock and 2,000 shares of
Company Preferred Stock were outstanding; x shares of Company Common Stock were
reserved for issuance pursuant to the 1995 Stock Option Plan, the Long-Term
Incentive Plan, the Directors Stock and Deferred Compensation Plan, the Service
Award Plan, the Thrift Incentive Plan and the conversion of the Company
Preferred Stock; and 250,000 shares of Series A Junior Participating Preferred
Stock were reserved for issuance pursuant to a Rights Agreement, dated as of
November 28, 1988 between the Company and The First National Bank of Boston (the
"Rights Plan").
For each outstanding share of Company Common Stock, the Company has
distributed one right (each a "Right") to purchase from the Company, one-two
hundredth of a share of Series A Junior Participating Preferred Stock pursuant
to the Rights Plan. If the Restructuring is approved and consummated, HSB Group
will assume the Company's rights and obligations under the Rights plan, and
Rights to purchase Series A Junior Participating Preferred Stock will become
Rights to purchase HSB Group Series A Junior Participating Preferred Stock.
The following is a description of the principal provisions of the
Rights Plan and the Rights distributed by the Company. The Rights expire on
November 28, 1998.
No separate Rights certificates of the Company have been distributed,
and none will be distributed until the earlier of (i) 10 business days following
a public
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<PAGE>
announcement that a person or group of affiliated or associated persons has been
determined by the Board to be an Acquiring Person; or (ii) 10 business days (or
such later date as may be determined by the Board of Directors) following the
commencement of a tender offer or exchange offer that would result in a person
or group becoming an Acquiring Person. "Acquiring Person" means any person who,
together with its affiliates and associates is or becomes the beneficial holder,
directly or indirectly, of (i) 20 percent or more of the voting stock of the
Company; or (ii) a substantial amount of Company Common Stock (but no less than
10 percent) and whose acquisition of such stock the Board determines is
detrimental to the best long-term interests of the Company and its stockholders.
The date any person becomes an Acquiring Person is the "Stock Acquisition Date."
If a person becomes an Acquiring Person (except pursuant to certain
offers which the Board determines to be fair to, and in the best interests of,
the stockholders and the Company), each holder of a Right, except the Acquiring
Person, will thereafter have the right to receive, upon exercise of the Right,
Common Stock (or in certain circumstances, cash, property or other securities of
the Company) having a value equal to two times the exercise price of $110. All
Rights that are, or (under certain circumstances) were, beneficially owned by
any Acquiring Person will be null and void. However, Rights are not exercisable
for a period of 10 business days after the Stock Acquisition Date, during which
period they may be redeemed by the Company at a price of $.01 per Right.
If at any time following the Stock Acquisition Date, (i) the Company is
acquired in a merger or other business combination transaction in which it is
not the surviving corporation (other than transactions with certain Company
subsidiaries and other than a merger following an offer which the Board
determines to be fair); or (ii) 50 percent or more of the assets, cash flow or
earning power of the Company is sold or transferred (other than to certain
Company subsidiaries), each holder of a Right (except Rights which previously
have been voided, as set forth above) shall thereafter have the right to
receive, upon exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the Right.
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<PAGE>
Comparative Rights of Stockholders
- ----------------------------------
The Company and HSB Group are both Connecticut corporations. After the
Effective Time, holders of Company Common Stock will become holders of HSB Group
Common Stock, and holders of the Company's Preferred Stock will become holders
of HSB Group's Preferred Stock, and their rights will be governed by the
Articles of Incorporation and Bylaws of HSB Group, instead of the Company's
Charter and Bylaws. HSB Group's Articles of Incorporation have been prepared in
accordance with the Connecticut Business Corporation Act ("CBCA") and give HSB
Group broad corporate powers to engage in any lawful activity for which a
corporation may be formed under the laws of the State of Connecticut. The
Company's powers are more narrow and are limited to those specifically set forth
in its Charter. The Charter permits the Company to write boiler and machinery
and other lines of insurance and reinsurance, other than life and endowment
insurance and annuity contracts, and to perform inspections and render
inspection and engineering services in connection with the design, construction,
maintenance or operation of boilers, machinery or any equipment regardless of
whether policies of insurance are issued in connection therewith.
Except as described above with respect to the powers of each entity and
below with respect to certain other matters, HSB Group's Articles of
Incorporation and Bylaws and the Company's Charter and Bylaws are substantially
similar. A copy of HSB Group's Articles of Incorporation and Bylaws,
substantially in the form to be in effect immediately prior to the Effective
Time are attached hereto as Appendices C and D, respectively.
Certain differences between the rights of holders of HSB Group Common
Stock and HSB Group Preferred Stock are summarized below. Some of these
differences arise out of the passage of the CBCA effective January 1, 1997 which
replaced the Connecticut Stock Corporation Act ("CSCA"). According to the
official legislative history, the provisions of the CBCA were designed to be
consistent with current business practices and replace many of the outmoded
rules contained in the CSCA. The current provisions of the Company's Charter are
grandfathered (i.e., the existing provisions remain in effect despite any
conflict with the CBCA) under the new law. However, HSB Group was incorporated
after January 1, 1997 and its articles of
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<PAGE>
incorporation and bylaws were drafted in accordance with the provisions of the
CBCA. Although the Company believes that the CBCA is more modern and complete
than the CSCA, the timing and purpose of the Share Exchange is not related to
the adoption of the CBCA by the Connecticut legislature.
Dividends. Under the CBCA, a corporation may not make a distribution to
shareholders if, after giving effect thereto, the corporation would not be able
to pay its debts as they become due in the usual course of business or the
corporation's total assets would be less than the sum of its total liabilities
plus, unless the articles of incorporation permit otherwise, the amount that
would be needed, if any, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution. Additionally, under Connecticut insurance laws (which are
applicable to the Company, but not HSB Group) an insurance company cannot pay a
dividend, without prior approval of the Insurance Commissioner, which exceeds
its earned surplus, as determined under statutory accounting practices, or
which, when combined with that of other dividends or distributions made within
the prior twelve months, exceeds the greater of (i) ten percent of the company's
surplus with respect to policyholders as of the December 31st last preceding; or
(ii) the net income for the twelve-month period ending on the December 31st last
preceding. Under Connecticut insurance laws at least ten days' prior notice of
any dividend or distribution is required to be given to the Insurance
Commissioner. The Commissioner may order that such dividends or distributions
not be paid if payment would cause the insurance company's surplus to be
inadequate or could lead to a hazardous financial condition. Following the
Restructuring, it is anticipated that at least for the foreseeable future, the
principal source of earnings for HSB Group will be the dividends paid by the
Company which will continue to be subject to the regulatory restrictions,
including prior approval in some cases, described above.
Size of the Board of Directors. The CSCA provided that a corporation have a
minimum of three directors. The statute further provided that the number of
directorships could be fixed by the bylaws of the corporation or that the bylaws
could specify a minimum and maximum number of directorships, with the number of
directorships at any given time to be fixed by a resolution of the stockholders
or the directors.
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<PAGE>
The CBCA requires a minimum of one director and provides that the number of
directorships can be specified in, or fixed in accordance with, the articles of
incorporation or bylaws of the corporation. In accordance with the CSCA, the
Company's Charter and Bylaws provide that the board shall consist of no less
than nine nor more than fourteen directors, the exact number to be determined
from time to time by resolution adopted by a majority of the directors. The
Articles of Incorporation and Bylaws of HSB Group adopt the more flexible
approach permitted by the CBCA and provide that the number of directors will be
determined from time to time by resolution of a majority of the Board of
Directors. The number of directors at the Effective Time of the Restructuring
will be the same number of directors serving on the Company's Board immediately
prior to the Restructuring.
Indemnification. The scope of indemnification of directors under the CSCA was
mandatory and could not be varied by the certificate of incorporation, bylaws or
agreement. Therefore, the Company's Charter and Bylaws are silent on the scope
of indemnification. As permitted by the CSCA, the Company has secured insurance
which provides broader indemnification of directors than was required under the
CSCA. Under the CBCA, there is more limited mandatory indemnification and the
permissive scope of indemnification is defined. HSB Group's Articles of
Incorporation provide that the corporation will indemnify directors to the
fullest extent permitted under the law. The CBCA permits a corporation to
indemnify its directors against liability (including judgments, settlements,
penalties and fines) if such individual acted in good faith, reasonably believed
that his or her conduct was in the corporation's best interests and, in the case
of criminal proceedings, had no reasonable cause to believe his or her conduct
was unlawful. In a proceeding by or in the right of the corporation, the
corporation may indemnify a director only for reasonable expenses, and may not
indemnify a director who is adjudged liable to the corporation. Indemnification
of such expenses is mandatory when a director is successful in the defense of
any proceeding. The CBCA also permits a corporation to pay or reimburse the
reasonable expenses incurred by a director who is a party to an action, suit or
proceeding (whether civil, criminal, administrative or investigative) in advance
of the final disposition of such action, suit or proceeding provided that (i)
such director affirms in writing such
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<PAGE>
director's good faith belief that the standard of conduct required under the
statute has been met; (ii) such director furnishes a written undertaking to
repay the corporation if it is ultimately determined that such standard has not
been met; and (iii) a determination is made pursuant to the statute that the
facts then known would not preclude indemnification under the statute. Provision
for such advance of expenses in accordance with the CBCA is included in HSB
Group's Articles of Incorporation. As permitted by the CBCA, HSB Group will
continue to secure insurance which provides broader indemnification of directors
than is required under the CBCA.
Effective Time of Share Exchange
- --------------------------------
The Effective Time of the Share Exchange will be the time that the
Articles of Share Exchange relating to the Share Exchange are filed under
Section 33-819 of the Connecticut General Statutes with the Secretary of State
of Connecticut. Assuming approval of the Share Exchange by stockholders of the
Company and the satisfaction or waiver of the other conditions to the Share
Exchange, it is presently anticipated that the Articles of Share Exchange will
be filed as soon as practicable after the special meeting.
Amendment, Waiver or Termination
- --------------------------------
The Board of Directors of the Company and HSB Group, authorized
committees of such boards, or authorized directors or officers of the Company
and HSB Group may amend or modify the Agreement and Plan of Share Exchange, or
waive certain of the conditions contained therein, at any time before or after
adoption of such agreement by the stockholders of the Company, although no such
amendment, modification or waiver may affect the rights of any stockholder of
the Company in any manner that is, in the judgment of the Board of Directors of
the Company, materially adverse to such stockholder. In addition, the Boards of
Directors of the Company or HSB Group or authorized committees of such boards,
may terminate the Agreement and Plan of Share Exchange at any time before the
Effective Time, whether before or after adoption by the stockholders of the
Company.
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<PAGE>
Certain Federal Income Tax Consequences
- ---------------------------------------
It is a condition to the consummation of the Restructuring that the
Company receive an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, tax
counsel to the Company, in form and substance reasonably satisfactory to the
Company, dated as of the Effective Time, and based upon facts, representations
and assumptions set forth in such opinion which are consistent with the state of
facts existing as of the Effective Time, substantially to the effect that, for
federal income tax purposes (i) no gain or loss will be recognized by the
Company as a result of the Share Exchange; (ii) no gain or loss will be
recognized by the stockholders of the Company on the exchange of their shares of
Company Common Stock solely for shares of HSB Group Common Stock or shares of
Company Preferred Stock for share of HSB Group Preferred Stock pursuant to the
Share Exchange; (iii) the tax basis of the shares of HSB Group Common Stock and
HSB Group Preferred Stock received by stockholders in the Share Exchange will be
the same as the tax basis of the shares of Company Common Stock and Company
Preferred Stock surrendered in exchange therefor; and (iv) the holding period of
the shares of HSB Group Common Stock and HSB Group Preferred Stock received in
the Share Exchange will include the period during which the shares of Company
Common Stock and Company Preferred Stock were held as capital assets at the
Effective Time.
Stockholders should consult their own tax advisors with respect to
specific tax effects to them of the Share Exchange under federal, state, local
and foreign tax laws.
Stock Plans and Other Employee Benefit Plans
- --------------------------------------------
At the Effective Time, the Company's 1985 Stock Option Plan and 1995
Stock Option Plan will be assumed by HSB Group and, except as follows, will not
be changed as a result of the Share Exchange. The options and rights to acquire
Company Common Stock under such plans which are outstanding at, and immediately
prior to, the Effective Time will be converted into options or rights to acquire
the same number of shares of HSB Group Common Stock at the same price per share
and on the same terms and conditions as in effect immediately prior to the Share
Exchange, and any restricted shares awarded under such plans as to which the
restrictions have not lapsed as of the Effective Time of the Share
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<PAGE>
Exchange, will be converted into the same number of shares of HSB Group Common
Stock carrying identical restrictions. Any future options, rights or restricted
shares awarded under such plans will be for shares of HSB Group Common Stock.
At the Effective Time, the Company Retirement Plan, the Excess
Retirement Plan, the Thrift Incentive Plan, the Supplemental Thrift Plan, the
Leveraged Employee Stock Ownership Plan, the Long-Term and Short-Term Incentive
Plans, the Directors Stock and Deferred Compensation Plan, the Service Award
Plan, employment agreements and related trust agreement, and all other employee
benefit plans or programs of the Company, will be assumed by HSB Group. These
plans, agreements and programs will remain in effect in accordance with their
terms and, except as follows, will not be changed as a result of the Share
Exchange. It is expected that certain of such plans, agreements and programs
will be amended, where appropriate, to provide for participation by certain
employees of HSB Group, and that other technical and conforming amendments will
be made, including changing references in such plans, agreements and programs,
from Company Common Stock to HSB Group Common Stock, to reflect the new
corporate structure resulting from the Restructuring.
Approval of the Share Exchange by the Company's stockholders will
constitute approval, if and to the extent such approval may be required, of the
assumption of, and amendment to, the plans, agreements and programs identified
or otherwise referred to in this section.
Automatic Dividend Reinvestment Plan (DRP) and Payroll Investment Plan (PIP)
- ----------------------------------------------------------------------------
Assuming the Share Exchange is approved, HSB Group expects to adopt and
maintain a DRP and PIP substantially similar to the Company's DRP and PIP so
that holders of HSB Group Common Stock may, if they so elect, reinvest cash
dividends and certain voluntary cash amounts (or payroll deductions in the case
of the PIP) in shares of HSB Group Common Stock. It is expected that the
Company's DRP and PIP will terminate and that HSB Group's DRP and PIP will
become effective at the Effective Time of the Share Exchange. If the Company
declares a cash dividend before the Effective Time which is payable after the
Effective Time, such
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dividends paid to participants in HSB Group's DRP or PIP will be reinvested in
shares of HSB Group Common Stock.
Trading of HSB Group Common Stock
- ---------------------------------
HSB Group will apply to have HSB Group Common Stock listed on the New
York Stock Exchange. If the Share Exchange is approved, it is anticipated that
the shares of HSB Group Common Stock received by the holders of Company Common
Stock will be so listed, under the trading symbol HSB, as of the Effective Time
of the Share Exchange. As a result, it is anticipated that the holders of
Company Common Stock will be able to trade their shares without interruption.
Transfer and Dividend Disbursement Agent; Exchange of Stock Certificates
- ------------------------------------------------------------------------
HSB Group has appointed The First National Bank of Boston, P.O. Box
644, Boston Massachusetts 02102-0644, as its transfer and dividend disbursing
agent.
If the Share Exchange is approved and consummated, it will not be
necessary for holders of Company Common Stock to surrender their stock
certificates for new certificates representing their HSB Group Common Stock.
Certificates formerly representing shares of Company Common Stock will be
replaced by certificates representing HSB Group Common Stock only when such
certificates are submitted to HSB Group's transfer agent with a request that
such certificates be so replaced or when such certificates are presented for
transfer.
Dissenters' Appraisal Rights
- ----------------------------
The Company's stockholders have the right, under Sections 33-855 to
33-872, inclusive, of the CBCA to elect to object to the Share Exchange and
demand payment for the "fair value" (as defined in Section 33-855 of the CBCA)
of their Company Common Stock in accordance with the provisions of Section
33-863 of the CBCA.
Stockholders of the Company who object to the Share Exchange will be
entitled, if the Share Exchange is consummated, to receive a cash payment equal
to the fair
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value of their shares. Fair value is to be determined as of the day prior to the
Effective Date of the Share Exchange.
The following is a summary of the procedures to be followed under
Sections 33-860 through 33-868 of the CBCA, the text of which is attached to
this Prospectus and Proxy Statement as Appendix B and which is incorporated
herein by reference. This summary does not purport to be a complete statement of
such provisions of the CBCA and is qualified in its entirety by reference to
Sections 33-855 through 33-872, inclusive, of the CBCA.
To be entitled to the cash payment, a stockholder who objects to the
Share Exchange and wishes to assert dissenters' rights must satisfy the
following conditions: i) the stockholder must deliver written notice to the
Company before the vote is taken of his or her intent to demand payment for his
or her shares if the proposed action is effectuated; and ii) the stockholder
must not vote his or her shares in favor of the Share Exchange.
If the Share Exchange is approved by the Company's stockholders at the
June 23, 1997 Special Meeting, written notice (a "Dissenters' Notice") will be
sent to all stockholders who satisfied the conditions described in the preceding
paragraph. Such notice will be sent no later than ten days after the date the
Share Exchange is approved and shall: i) state where the payment demand must be
sent and where and when certificates must be deposited; ii) inform holders of
uncertificated shares to what extent transfer of the shares will be restricted
after the payment demand is received; iii) supply a form for demanding payment
that includes the date of the first announcement to news media or stockholders
of the terms of the Share Exchange and requires that the person asserting
dissenters' rights certify whether or not he or she acquired beneficial
ownership of the shares before that date; iv) set a date by which the
corporation must receive the payment demand, which date may not be less than
thirty nor more than sixty days after the date the Dissenters' Notice is
delivered in accordance with this paragraph.
A stockholder who is sent a Dissenters' Notice must demand payment,
certify whether he or she acquired beneficial ownership of the shares before the
date of the first announcement to news media or stockholders of the
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terms of the Share Exchange, and deposit his or her certificates in accordance
with the terms of the Dissenters' Notice. The stockholder who demands payment
and deposits his or her share certificates as described above retains all other
rights of a stockholder until these rights are canceled or modified by the Share
Exchange. A stockholder who does not demand payment or deposit his or her share
certificates where required, each by the date set in the Dissenters' Notice, is
not entitled to payment for his or her shares under Sections 33-855 to 33-872,
inclusive of the CBCA.
As soon as the Share Exchange is effected, or upon receipt of a payment
demand (provided that the Company determines that the stockholder has met the
beneficial ownership requirements outlined above), the Company shall pay to each
stockholder who complied with the conditions described above an amount which the
Company estimates to be the fair value of the shares, plus accrued interest. The
payment shall be accompanied by: i) the Company's balance sheet as of December
31, 1996, an income statement for 1996, a statement of changes in stockholders'
equity for 1996 and the latest available interim financial statements, if any;
ii) a statement of the Company's estimate of the fair value of the shares; iii)
an explanation of how the interest was calculated; and iv) a statement of the
stockholder's right to demand payment and a copy of Sections 33-855 to 33-872 of
the CBCA.
If the Company does not effect the Share Exchange within sixty days
after the date set for demanding payment and depositing share certificates, the
Company shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares. If after returning deposited
certificates and releasing transfer restrictions, the Company effectuates the
Share Exchange, it must send a new Dissenters' Notice and repeat the payment
demand procedure.
If the Company elects to withhold payment from a stockholder because he
or she was not the beneficial owner of the shares before the date set forth in
the Dissenters' Notice, the Company shall estimate the fair value of the shares,
plus accrued interest, and shall pay this amount to each dissenting stockholder
who agrees to accept it. The Company must send with the offer an explanation of
the
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estimate of fair value of the shares, an explanation of how interest was
calculated and a statement of the stockholder's right to demand payment.
If a dissenting stockholder does not agree with the Company's offer,
the stockholder must notify the Company of its own estimate of the value of the
shares within thirty days of the Company's offer.
If demand for payment remains unsettled, the Company may commence a
court appraisal proceeding within sixty days after the payment demand is made.
If the Company does not commence the proceeding within the sixty-day period, it
must pay each dissenting stockholder whose demand remains unsettled the amount
such stockholder demanded.
Costs and expenses of any such proceeding will be determined by the
court and will be assessed against the Company if it failed to comply with the
requirements of Sections 33-860 to 33-868, inclusive, of the CBCA and can also
be assessed against either party if it is determined that such party acted in an
arbitrary or vexatious manner or not in good faith. If the court finds that the
services of counsel for any dissenting stockholder were of substantial benefit
to other similar dissenting stockholders, and that the fees for those services
should not be assessed against the Company, the court may award to these counsel
reasonable fees to be paid out of the amounts awarded to the dissenting
stockholders who were benefited.
A stockholder's failure to vote on the Share Exchange will not
constitute a waiver of his or her dissenters' rights under Sections 33-855 to
33-872, inclusive of the CBCA. However, a vote in favor of the Share Exchange
will constitute a waiver of this right, and a vote against the Share Exchange
itself will not satisfy the requirements with respect to written objection and
written demand or the other requirements summarized above of the CBCA necessary
to perfect dissenters' appraisal rights.
Failure by a stockholder to follow the steps required by Sections
33-855 to 33-872, inclusive, of the CBCA for perfecting dissenters' appraisal
rights will result in the loss of those rights. An objecting stockholder who
does not perfect his or her right to appraisal through compliance
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with the CBCA will have the rights specified in the Agreement and Plan of Share
Exchange.
All written communications from stockholders with respect to the
exercise of appraisal rights should be mailed to The Hartford Steam Boiler
Inspection and Insurance Company, One State Street, P.O. Box 5024, Hartford, CT
06102-5024; Attention:
Corporate Secretary.
In view of the complexities of the foregoing provisions of the CBCA,
Company stockholders who are considering pursuing dissenters' appraisal rights
may wish to consult legal counsel.
Financial Statements
- --------------------
Complete pro forma and comparative financial information regarding the
Company and its consolidated subsidiaries giving effect to the Share Exchange
has not been included herein because immediately following the effective time of
the Share Exchange, the consolidated financial statements for HSB Group will be
substantially the same as the consolidated financial statements of the Company
immediately prior to the Share Exchange. Had the Share Exchange taken place at
March 31, 1997, consolidated equity for HSB Group shareholders would have been
$x million.
Dividends and Market Price Ranges
- ---------------------------------
The following table sets forth the high and low prices of Company
Common Stock for the periods indicated. The table also sets forth dividends
declared on Company Common Stock for such periods.
Dividends Per Share
Calendar Year High Low of Common Stock
- -----------------------------------------------------------------------
1995 First Quarter $43 3/4 $39 1/4 $.55
Second Quarter 45 7/8 41 5/8 .55
Third Quarter 49 3/8 42 5/8 .57
Fourth Quarter 50 3/8 45 3/8 .57
1996 First Quarter $52 1/2 $48 $.57
Second Quarter 50 3/4 46 .57
Third Quarter 49 43 1/4 .57
Fourth Quarter 47 1/8 42 3/4 .57
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1997 First Quarter $47 5/8 $44 5/8 $.57
Second Quarter (through
May __, 1997) _______ _______ __
On December 30, 1996, General Reinsurance Corporation exchanged its
2,000 shares of Series A Cumulative Preferred Stock of EIG, Co., the Company's
wholly owned subsidiary, for 2,000 shares of Company Preferred Stock. On January
27, 1997, the Company's Board declared a dividend in the amount of $54.17 per
share on such shares which was paid on January 31, 1997. On March 24, 1997 the
Board declared the regular quarterly dividend of $162.50 per share on Company
Preferred Stock payable on April 30, 1997.
The last reported sales price of Company Common Stock on the New York Stock
Exchange on May x, 1997 was $x per share. The last reported sales price of
Company Common Stock on the Record Date was $x per share. At the Record Date,
the x outstanding shares of Company Common Stock were held by x stockholders of
record.
Legal Opinions
- --------------
Certain legal matters relating to the issuance of HSB Group Common
Stock and HSB Group Preferred Stock will be passed upon by Robert C. Walker,
Senior Vice President and General Counsel of the Company.
Experts
- -------
The consolidated financial statements incorporated in this Prospectus
and Proxy Statement by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996 have been so incorporated in reliance on the
report of Coopers & Lybrand L.L.P., independent public accountants, given on the
authority of said firm as experts in auditing and accounting.
Stockholder Vote Required for Approval
- --------------------------------------
Approval of the Share Exchange requires the approval of two-thirds of
all outstanding shares of Company Common Stock and Company Preferred Stock
voting together as a single class.
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<PAGE>
The Board of Directors unanimously recommends a vote FOR the proposal to
approve the Share Exchange.
DEADLINE FOR STOCKHOLDER PROPOSALS
As currently contemplated, the Share Exchange, if approved, will be
effectuated in the third quarter of 1997. Therefore, it is expected that HSB
Group will be conducting the 1998 Annual Meeting of Stockholders. Stockholders
who wish to submit written proposals for possible inclusion in the proxy
statement prepared in connection with such meeting must make certain that they
are received no later than October 30, 1997. Proposals should be sent to the
Corporate Secretary, HSB Group, Inc., One State Street, P.O. Box 5024, Hartford,
Connecticut 06102-5024.
OTHER MATTERS
Representatives of the Company's independent public accountants, Coopers
& Lybrand L.L.P., will be present at the Special Meeting to make a statement if
they wish to do so, and will be available to respond to appropriate questions
raised by stockholders.
The Company reserves the right to adjourn the Special Meeting one or
more times and to continue to solicit proxies, if insufficient affirmative votes
are present in person or by proxy to approve the Share Exchange.
The Company's annual report on Form 10-K for the year ended December 31,
1996 and quarterly report on Form 10-Q for the quarter ended March 31, 1997,
which have been filed with the Securities and Exchange Commission, are
incorporated by reference in this Prospectus and Proxy Statement. These reports
contain information about the Company and its subsidiaries and their
consolidated operations and financial condition. These reports, except for
exhibits, will be furnished without charge to stockholders upon written request
to the Corporate Secretary, The Hartford Steam Boiler Inspection and Insurance
Company, P.O. Box 5024, One State Street, Hartford Connecticut, 06102-5024.
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<PAGE>
By Order of the Board of Directors,
/s/ R. K. Price
R. K. PRICE
Corporate Secretary
Printed on recycled paper
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<PAGE>
Appendix A
AGREEMENT AND PLAN OF SHARE EXCHANGE
OF
THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY
AND
HSB GROUP, INC.
This Agreement and Plan of Share Exchange (the "Agreement" or "Plan of
Exchange") is dated and executed as of the 19th day of March, 1997, by and
between THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY, a
Connecticut corporation (the "Insurance Company"), and HSB GROUP, INC., a
Connecticut corporation (the "Holding Company").
1. The name of the Insurance Company is The Hartford
Steam Boiler Inspection and Insurance Company, a Connecticut
corporation, and the name of the Holding Company is HSB Group,
Inc., a Connecticut Corporation.
2. The designation and number of authorized and
outstanding shares of the Holding Company are: 18,000 shares
of common stock (the "Holding Company Common Shares"), each of
which is entitled to one vote and 100 shares of which are
issued and outstanding and 2,000 authorized preferred shares,
none of which are issued and outstanding. Immediately prior to
the Effective Time (as hereinafter defined), the designation
and number of authorized shares of the Holding Company will
be: (a) 50,000,000 Holding Company Common Shares, each of
which will have attached thereto a Right (as defined below);
and (b) 500,000 shares of preferred stock, no par value (the
"Holding Company Preferred Shares"), of which (i) 250,000 will
be designated as Series A Junior Participating Preferred
Shares(the "Holding Company Junior Preferred Shares"), each of
which will be entitled to 200 votes, voting together with the
Holding Company Common Shares, and (ii) 2,000 will be
designated as Series B Convertible
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Preferred Shares (the "Holding Company Convertible Shares"),
each of which will be entitled to 199 votes, voting together
with the Holding Company Common Shares, and with respect to
certain matters voting as a separate class.
The designation and number of authorized and outstanding
shares of the Insurance Company are: (a) 50,000,000 shares
of common stock, no par value (the "Insurance Company Common
Shares"), each of which is entitled to one vote, 20,043,608
shares of which were, as of March 19, 1997, issued and
outstanding and 29,956,392 shares of which were, as of March
19, 1997, held as authorized and unissued shares of the
Insurance Company, and which in each case have attached
thereto a Right; and (b) 500,000 authorized preferred
shares, no par value (the "Insurance Company Preferred
Shares"), of which (i) 250,000 are designated Series A
Junior Participating Preferred Shares (the "Insurance
Company Junior Preferred Shares"),each of which is entitled
to 200 votes, voting together with the Insurance Company
Common Shares, and none of which is outstanding, and (ii)
2,000 shares are designated as Series B Convertible
Preferred Shares (the "Insurance Company Convertible
Preferred Shares"), each of which is entitled to 199 votes,
voting together with the Insurance Company Common Shares,
and with respect to certain matters voting as a separate
class, and all of which were, as of March 19, 1997, issued
and outstanding.
For adoption and approval, this Plan of Exchange shall
require the approval of two-thirds of all outstanding
Insurance Company Common Shares and Insurance Company
Convertible Preferred Shares voting together as a single
class.
3. Upon the time of filing of a Certificate of
Exchange in connection with the share exchange contemplated
hereby (the "Share Exchange") with the Secretary of State of
the State of Connecticut (the "Effective Time"):
(a) each outstanding Insurance Company Common
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<PAGE>
Share (and associated Right) and each outstanding Insurance
Company Convertible Preferred Share shall by operation of
law and without further action be exchanged for one Holding
Company Common Share (and associated Right) and one Holding
Company Convertible Preferred Share, respectively, subject
to dissenting stockholders' rights under Sections 33-855 to
33-872, inclusive of the Connecticut Business Corporation
Act (the "CBCA"); and
(b) each Holding Company Common Share outstanding
immediately prior to the Effective Time shall be canceled
and shall be restored to the status of an authorized but
unissued Holding Company Common Share;
so that, immediately after the Effective Time, all of the
outstanding Insurance Company Common Shares and Insurance
Company Convertible Preferred Shares will be held by the
Holding Company, and all of the outstanding Holding Company
Common Shares and Holding Company Convertible Preferred Shares
will be held by the owners of the Insurance Company Common
Shares and Insurance Company Convertible Preferred Shares,
respectively, that were outstanding immediately prior to the
Effective Time.
4. By the Holding Company's having executed this
Agreement and by the subsequent consummation of the
transactions enumerated herein, the Holding Company shall be
deemed to have approved the following plans of the Insurance
Company (collectively, the "Plans"): the 1985 and 1995 Stock
Option Plans; the Retirement Plan; the Excess Retirement Plan;
the Thrift Incentive Plan; the Leveraged Employee Stock
Ownership Plan; the Long-Term and Short-Term Incentive Plans;
the Directors Stock and Deferred Compensation Plan; the
Service Award Plan; employment agreements; and all other
employee benefit plans or programs of the Insurance Company;
and, by virtue of the Share Exchange and without any action on
the part of the participants in the Plans, each Insurance
Company
A-3
<PAGE>
Common Share and each option, unit or right then
issued and outstanding under the Plans shall be converted into
an equivalent number of shares, options, units or rights,
respectively, of Holding Company Common Shares, at the same
per share price, if applicable, and upon the same terms and
subject to the same conditions as applicable immediately prior
to the Effective Time to the relevant share, option, unit or
right, and any restricted shares awarded under such Plans as
to which the restrictions have not lapsed as of the Effective
Time of the Share Exchange, will be converted into the same
number of Holding Company Common Shares carrying identical
restrictions.
To the extent deemed necessary or appropriate, Holding Company
and Insurance Company shall make appropriate amendments to the
Plans to reflect the adoption thereof as the Plans of Holding
Company without adverse effect upon any of the options and
shares outstanding under the Plans.
5. At the Effective Time, the Holding Company will
assume the Insurance Company's rights and obligations pursuant
to the Rights Agreement, dated as of November 28, 1988 between
the Insurance Company and The First National Bank of Boston,
as Rights Agent (the "Rights Agreement"), and by virtue of the
Share Exchange, and without any action on the part of the
holder thereof, each right (a "Right") to purchase Insurance
Company Junior Preferred Shares and to otherwise exercise
options, rights and privileges, issued pursuant to the Rights
Agreement shall be converted into and become a right to
purchase an equivalent number or amount of Holding Company
Junior Preferred Shares, at the same exercise price, and upon
the same terms and subject to the same conditions, as
applicable immediately prior to the Effective Time and to
otherwise exercise options, rights and other privileges
pursuant to the Rights Agreement. The Holding Company will
reserve, for purposes of issuance pursuant to the Rights
Agreement, a number of Holding Company Junior Preferred Shares
equivalent to the number of Insurance Company Junior Preferred
Shares reserved by the Insurance
A-4
<PAGE>
Company for such purposes
immediately prior to the Effective Time.
6. At the Effective Time, each certificate evidencing
ownership of Insurance Company Common Shares (and associated
Rights) and Insurance Company Convertible Preferred Shares
outstanding at the Effective Time shall automatically, and
without any action by the holder thereof, be deemed to
evidence, an equivalent number of Holding Company Common
Shares (and associated Rights) or Holding Company Convertible
Preferred Shares, respectively, subject to dissenting
stockholders' rights under Sections 33-855 to 33-872,
inclusive, of the CBCA.
7. At the Effective Time, the board of directors and
executive officers of the Insurance Company shall become the
board of directors and executive officers of the Holding
Company. The executive officers of the Holding Company shall
be identified as follows: Gordon W. Kreh, President and
Chief Executive Officer; Saul L. Basch, Senior Vice
President, Treasurer and Chief Financial Officer; Michael L.
Downs, Senior Vice President; John J. Kelley, Senior Vice
President; William A. Kerr, Senior Vice President; R. Kevin
Price, Senior Vice President and Corporate Secretary;
William Stockdale, Senior Vice President; and Robert C.
Walker, Senior Vice President and General Counsel.
8. Immediately prior to, and at, the Effective Time, the
articles of incorporation of the Holding Company shall be as
set forth in Exhibit A to this Agreement.
9. The Plan of Exchange shall be conditioned upon:
(a) receipt of the requisite vote of stockholders of the
Insurance Company pursuant to Section 33-817 of the CBCA;
(b) approval or exemption of the insurance regulatory
authorities in Connecticut, Texas, the
A-5
<PAGE>
United Kingdom and Hong Kong, or any other consents,
approvals or exemptions necessary or appropriate for the
consummation of the Share Exchange, in form and substance
satisfactory to the Insurance Company and the Holding
Company;
(c) the effectiveness of a Registration Statement under the
Securities Act of 1933 relating to the common stock of
Holding Company to be issued or reserved for issuance in
connection with the Share Exchange;
(d) authorization for listing, subject to official notice of
issuance, of the Holding Company Common Shares (and
associated Rights) on the New York Stock Exchange, Inc.;
(e) receipt of an opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, tax counsel for the Insurance Company, regarding
certain federal income tax consequences of the Share
Exchange;
(f) receipt of an opinion of counsel as to the legality of
the Holding Company Common Shares and Holding Company
Convertible Preferred Shares issuable in connection with the
Share Exchange; and
(g) the absence of any injunction prohibiting or restricting
in any manner the Share Exchange or the operation of the
Holding Company, the Insurance Company or any of their
subsidiaries after consummation of such Share Exchange.
10. At any time before or after the adoption of this
Agreement by the stockholders of the Insurance Company, this
Agreement may be amended or modified or certain of its
conditions waived by the boards of directors of the Holding
Company and the Insurance Company or authorized committees of
such boards; provided that no such amendment, modification or
waiver may affect the rights of any stockholder of the
Insurance Company in any manner that is materially adverse to
such stockholder in the judgment of the board of
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<PAGE>
directors of the Insurance Company. The Plan of Exchange may
be abandoned by either the Insurance Company or the Holding
Company, notwithstanding the approval of the Plan of Exchange
by the stockholders of the Insurance Company, at any time
prior to the Effective Time, if for any reason the board of
directors of either of such corporations determines that it is
inadvisable to proceed with the Plan of Exchange, including
without limitation, giving consideration to the number of
shares for which dissenting stockholders' rights pursuant to
Sections 33-855 to 33-872, inclusive, of the CBCA have been
exercised and the cost to the Insurance Company thereof.
11. The Insurance Company and the Holding Company,
respectively, shall take all such action as may be necessary
or appropriate in order to effectuate the Share Exchange and
the other transactions contemplated by this Agreement. If, at
any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this
Agreement, the officers and directors of each of the Holding
Company and the Insurance Company, as of the Effective Time,
shall take such further action.
THE HARTFORD STEAM BOILER
INSPECTION AND INSURANCE COMPANY
a Connecticut corporation
By: ______________________________
Its:
HSB GROUP, INC.
a Connecticut corporation
By: ______________________________
Its: ______________________________
A-7
<PAGE>
Appendix B
CONNECTICUT GENERAL STATUTES ANNOTATED
TITLE 33. CORPORATIONS
CHAPTER 601. BUSINESS CORPORATIONS
PART XIII. DISSENTERS' RIGHTS
(A) RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
ss. 33-855. Definitions
As used in sections 33-855 to 33-872, inclusive:
(1) "Corporation" means the issuer of the shares held by a dissenter before the
corporate action or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under section 33-856 and who exercises that right when and in the manner
required by sections 33-860 to 33-868, inclusive.
(3) "Fair value", with respect to a dissenter's shares, means the value of the
shares immediately before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in anticipation of
the corporate action.
(4) "Interest" means interest from the effective date of the corporate action
until the date of payment, at the average rate currently paid by the corporation
on its principal bank loans or, if none, at a rate that is fair and equitable
under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are registered
in the records of a corporation or the beneficial owner of shares to the extent
of the rights granted by a nominee certificate on file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial shareholder.
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<PAGE>
ss. 33-856. Right to dissent
(a) A shareholder is entitled to dissent from, and obtain payment of the fair
value of his shares in the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party (A) if
shareholder approval is required for the merger by section 33-817 or the
certificate of incorporation and the shareholder is entitled to vote on the
merger or (B) if the corporation is a subsidiary that is merged with its parent
under section 33-818;
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale;
(4) An amendment of the certificate of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it: (A)
Alters or abolishes a preferential right of the shares; (B) creates, alters or
abolishes a right in respect of redemption, including a provision respecting a
sinking fund for the redemption or repurchase, of the shares; (C) alters or
abolishes a preemptive right of the holder of the shares to acquire shares or
other securities; (D) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or (E)
reduces the number of shares owned by the shareholder to a fraction of a share
if the fractional share so created is to be acquired for cash under section 33-
668; or
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<PAGE>
(5) Any corporate action taken pursuant to a shareholder vote to the extent the
certificate of incorporation, bylaws or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
(b) Where the right to be paid the value of shares is made available to a
shareholder by this section, such remedy shall be his exclusive remedy as holder
of such shares against the corporate transactions described in this section,
whether or not he proceeds as provided in sections 33-855 to 33-872, inclusive.
ss. 33-857. Dissent by nominees and beneficial owners
(a) A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares held on
his behalf only if: (1) He submits to the corporation the record shareholder's
written consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and (2) he does so with respect to all
shares of which he is the beneficial shareholder or over which he has power to
direct the vote.
ss.ss. 33-858, 33-859. Reserved for future use
(B) PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
ss. 33-860. Notice of dissenters' rights
(a) If proposed corporate action creating dissenters' rights under section 33-
856 is submitted to a vote at a shareholders' meeting, the meeting notice shall
state that shareholders are or may be entitled to assert dissenters' rights
under sections 33-855 to 33-872, inclusive, and be accompanied by a copy of said
sections.
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<PAGE>
(b) If corporate action creating dissenters' rights under section 33-856 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in section 33-862.
ss. 33-861. Notice of intent to demand payment
(a) If proposed corporate action creating dissenters' rights under section 33-
856 is submitted to a vote at a shareholders' meeting, a shareholder who wishes
to assert dissenters' rights (1) shall deliver to the corporation before the
vote is taken written notice of his intent to demand payment for his shares if
the proposed action is effectuated and (2) shall not vote his shares in favor of
the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a) of
this section is not entitled to payment for his shares under sections 33-855 to
33-872, inclusive.
ss. 33-862. Dissenters' notice
(a) If proposed corporate action creating dissenters' rights under section 33-
856 is authorized at a shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders who satisfied the requirements of
section 33-861.
(b) The dissenters' notice shall be sent no later than ten days after the
corporate action was taken and shall:
(1) State where the payment demand must be sent and where and when certificates
for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
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<PAGE>
certify whether or not he acquired beneficial ownership of the shares before
that date;
(4) Set a date by which the corporation must receive the payment demand, which
date may not be fewer than thirty nor more than sixty days after the date the
subsection (a) of this section notice is delivered; and
(5) Be accompanied by a copy of sections 33-855 to 33-872, inclusive.
ss. 33-863. Duty to demand payment
(a) A shareholder sent a dissenters' notice described in section 33-862 must
demand payment, certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenters' notice pursuant to
subdivision (3) of subsection (b) of said section and deposit his certificates
in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) of this section retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not demand payment or deposit his share certificates
where required, each by the date set in the dissenters' notice, is not entitled
to payment for his shares under sections 33-855 to 33-872, inclusive.
ss. 33-864. Share restrictions
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under section 33-866.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the taking of the proposed corporate action.
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ss. 33-865. Payment
(a) Except as provided in section 33-867, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with section 33-863 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest.
(b) The payment shall be accompanied by: (1) The corporation's balance sheet as
of the end of a fiscal year ending not more than sixteen months before the date
of payment, an income statement for that year, a statement of changes in
shareholders' equity for that year and the latest available interim financial
statements, if any; (2) a statement of the corporation's estimate of the fair
value of the shares; (3) an explanation of how the interest was calculated; (4)
a statement of the dissenter's right to demand payment under section 33- 860;
and (5) a copy of sections 33-855 to 33-872, inclusive.
ss. 33-866. Failure to take action
(a) If the corporation does not take the proposed action within sixty days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 33-862 and repeat the payment demand procedure.
ss. 33-867. After-acquired shares
(a) A corporation may elect to withhold payment required by section 33-865 from
a dissenter unless he was the beneficial owner of the shares before the date set
forth in the dissenters' notice as the date of the first announcement to news
media or to shareholders of the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under subsection
(a) of this section, after taking the
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proposed corporate action, it shall estimate the fair value of the shares, plus
accrued interest, and shall pay this amount to each dissenter who agrees to
accept it in full satisfaction of his demand. The corporation shall send with
its offer a statement of its estimate of the fair value of the shares, an
explanation of how the interest was calculated and a statement of the
dissenter's right to demand payment under section 33-868.
ss. 33-868. Procedure if shareholder dissatisfied with payment or offer
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate, less any payment under section 33-865, or reject the corporation's
offer under section 33-867 and demand payment of the fair value of his shares
and interest due, if:
(1) The dissenter believes that the amount paid under section 33-865 or offered
under section 33-867 is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(2) The corporation fails to make payment under section 33-865 within sixty days
after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does not return
the deposited certificates or release the transfer restrictions imposed on
uncertificated shares within sixty days after the date set for demanding
payment.
(b) A dissenter waives his right to demand payment under this section unless he
notifies the corporation of his demand in writing under subsection (a) of this
section within thirty days after the corporation made or offered payment for his
shares.
ss.ss. 33-869, 33-870. Reserved for future use
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(C) JUDICIAL APPRAISAL OF SHARES
ss. 33-871. Court action
(a) If a demand for payment under section 33-868 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding in the superior court for the
judicial district where a corporation's principal office or, if none in this
state, its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the superior court for the judicial district where the registered
office of the domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of this
state, whose demands remain unsettled parties to the proceeding as in an action
against their shares and all parties must be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) of this section is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment (1)
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation, or (2) for the fair
value, plus accrued interest, of his after-acquired shares for which the
corporation elected to withhold payment under section 33-867.
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ss. 33-872. Court costs and counsel fees
(a) The court in an appraisal proceeding commenced under section 33-871 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court shall assess the costs
against the corporation, except that the court may assess costs against all or
some of the dissenters, in amounts the court finds equitable, to the extent the
court finds the dissenters acted arbitrarily, vexatiously or not in good faith
in demanding payment under section 33-868.
(b) The court may also assess the fees and expenses of counsel and experts for
the respective parties, in amounts the court finds equitable: (1) Against the
corporation and in favor of any or all dissenters if the court finds the
corporation did not substantially comply with the requirements of sections 33-
860 to 33-868, inclusive; or (2) against either the corporation or a dissenter,
in favor of any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously or not in good
faith with respect to the rights provided by sections 33-855 to 33-872,
inclusive.
(c) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
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Appendix C
Amended and Restated
ARTICLES OF INCORPORATION
of
HSB GROUP, INC.
Effective as of _______, 1997
Hartford, Connecticut
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ARTICLES OF INCORPORATION
of
HSB GROUP, INC.
Article I
The name of the Corporation is HSB Group, Inc.
Article II
The address of the registered office of the Corporation is One State Street,
Hartford, Connecticut, 06102-5024. The name of the registered agent at that
address is R. Kevin Price.
Article III
The nature of the business to be transacted, and the purposes to be promoted or
carried out by the Corporation, are to engage in any lawful act or activity for
which corporations may be formed under the Connecticut Business Corporation Act
or any successor statute thereto.
Article IV
A. The authorized number of shares, which may be increased from time to time
when and if authorized by the shareholders shall consist of 50,000,000
shares of common stock and 500,000 shares of preferred stock, of which
250,000 shares have been designated as "Series A Junior Participating
Preferred Stock" and 2,000 shares have been designated as "Series B
Convertible Preferred Stock".
B. The Board of Directors is authorized to fix and determine the terms,
limitations and relative rights and preferences of the preferred stock
including, without limitation, any voting rights thereof, to divide and
issue the preferred stock in series, to fix and determine the variations
among series to the extent permitted by law and to provide that shares of
the preferred stock, or any series thereof, may be convertible into the
same or a different number of shares of common stock. No shareholder shall
have any preemptive right to purchase or subscribe to any shares of any
class of stock of the Corporation, whether now or hereafter authorized, or
to
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any securities convertible into shares of any class of stock of the
Corporation.
C. The designations, voting powers, preferences and relative, participating,
optional and other special rights of the Series A Junior Participating
Preferred Stock, and the qualifications, limitations or restrictions
thereof are as follows:
1. Designation and Amount.
The shares of such series shall be designated as "Series A Junior
Participating Preferred Stock" and the number of shares constituting
such series shall be 250,000.
2. Dividends and Distributions.
(a) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the
shares of Series A Junior Participating Preferred Stock with respect
to dividends, the holders of shares of Series A Junior Participating
Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the last business day
of January, April, July and October in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date ), commencing
on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Junior Participating
Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $12.00 or (b) subject to the provision for
adjustment hereinafter set forth, 200 times the aggregate per share
amount of all cash dividends, and 200 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock, without
par value, of the
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Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Junior
Participating Preferred Stock. In the event the Corporation shall at
any time after November 28, 1988 (the "Rights Declaration Date") (i)
declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in
each such case the amount to which holders of shares of Series A
Junior Participating Preferred Stock were entitled immediately prior
to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in Paragraph 2.(a)
above immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common
Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $12.00 per share on the Series A
Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of
such shares of Series A Junior Participating Preferred stock unless
the date of
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issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares or
unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares
of Series A Junior Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares
of Series A Junior Participating Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of
shares of Series A Junior Participating Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which
record date shall be no more than 30 days prior to the date fixed for
the payment thereof.
3. Voting Rights.
The holders of shares of Series A Junior Participating Preferred Stock
shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle
the holder thereof to 200 votes on all matters submitted to a vote of
the shareholders of the Corporation. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any
dividend on Common stock payable in shares of Common Stock (ii)
subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each
such case the number of votes per share to which holders of shares of
Series A Junior Participating Preferred Stock
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were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the holders of shares
of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of shareholders of the Corporation.
(c) (i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6)
quarterly dividends thereon, the occurrence of such contingency shall
mark the beginning of a period (herein called a "default period")
which shall extend until such time when all accrued and unpaid
dividends for all previous quarterly dividend periods and for the
current quarterly dividend period on all shares of Series A Junior
Participating Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each default
period, all holders of Preferred Stock (including holders of the
Series A Junior Participating Preferred Stock) with dividends in
arrears in an amount equal to six (6) quarterly dividends thereon,
voting as a class, irrespective of series, shall have the right to
elect two (2) Directors.
(ii) During any default period, such voting right of the holders of
Series A Junior Participating Preferred Stock may be exercised
initially at a special meeting called pursuant to subparagraph (iii)
of this Section 3.(c). or at any annual meeting of shareholders, and
thereafter at annual meetings of shareholders, provided that neither
such voting right nor the right of the holders of any other series of
Preferred Stock, if any, to increase, in certain cases, the authorized
number
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of Directors shall be exercised unless the holders of ten
percent (10%) in number of shares of Preferred Stock outstanding shall
be present in person or by proxy. The absence of a quorum of the
holders of Common Stock shall not affect the exercise by the holders
of Preferred Stock of such voting right. At any meeting at which the
holders of Preferred Stock shall exercise such voting right initially
during an existing default period, they shall have the right, voting
as a class, to elect Directors to fill such vacancies, if any in the
Board of Directors as may then exist up to two (2) Directors or, if
such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special
meeting does not amount to the required number, the holders of the
Preferred Stock shall have the right to make such increase in the
number of Directors as shall be necessary to permit the election by
them of the required number. After the holders of the Preferred Stock
shall have exercised their right to elect Directors in any default
period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to the
rights of any equity securities ranking senior to or pari passu with
the Series A Junior Participating Preferred Stock.
(iii)Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any shareholder or
shareholders owning in the aggregate not less than ten percent (10%)
of the total number of shares of Preferred Stock outstanding,
irrespective of series, may request, the calling of special meeting of
the holders of Preferred Stock, which meeting shall thereupon be
called by the President, a Vice-President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled to vote pursuant to this
paragraph 3(c)(iii) shall be given to each holder
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of record of Preferred Stock by mailing a copy of such notice to him
at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than
20 days and not later than 60 days after such order or request or in
default of the calling of such meeting within 60 days after such order
or request, such meeting may be called on similar notice by any
shareholder or shareholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this paragraph
3(c)(iii), no such special meeting shall be called during the period
within 60 days immediately preceding the date fixed for the next
annual meeting of the shareholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to
be entitled to elect the whole number of Directors until the holders
of Preferred Stock shall have exercised their right to elect two (2)
Directors voting as a class, after the exercise of which right (x) the
Directors so elected by the holders of Preferred Stock shall continue
in office until their successors shall have been elected by such
holders or until the expiration of the default period and (y) any
vacancy in the Board of Directors may (except as provided in paragraph
3(c)(ii) of this Section) be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the class of
stock which elected the Director whose office shall have become
vacant. References in this paragraph 3.(c) to Directors elected by the
holders of a particular class of stock shall include Directors elected
by such Directors to fill vacancies as provided in clause (y) of the
foregoing sentence.
(v) Immediately upon the expiration of a default period,(x) the right
of the holders of Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of
Preferred Stock as a class shall
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terminate and (z) the number of Directors shall be such number as may
be provided for in the certificate of incorporation or bylaws
irrespective of any increase made pursuant to the provisions of
paragraph 3(c)(ii) (such number being subject, however, to change
thereafter in any manner provided by law or in the certificate of
incorporation or bylaws). Any vacancies in the Board of Directors
effected by the provisions of clauses (y) and (z) in the preceding
sentence may be filled by a majority of the remaining Directors.
(d) Except as set forth herein, holders of Series A Junior Participating
Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any
corporate action.
4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series A Junior Participating Preferred
Stock outstanding shall have been paid in full, the Corporation
shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A
Junior Participating Preferred Stock;
(ii)declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with
the Series A Junior Participating Preferred Stock, except
dividends paid ratably on the Series A Junior Participating
Preferred Stock and all such
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parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii)redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with
the Series A Junior Participating Preferred Stock, provided
that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange
for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Junior Participating Preferred
Stock;
(iv) purchase or otherwise acquire for consideration any shares of
Series A Junior Participating Preferred Stock, or any shares of
stock ranking on a parity with the Series A Junior
Participating Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of
the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under
paragraph (a) of this Section 4, purchase or otherwise acquire
such shares at such time and in such manner.
5. Reacquired Shares.
Any shares of Series A Junior Participating Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall
be retired
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and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the
Board of Directors, subject to the conditions and restrictions on
issuance set forth herein.
6. Liquidation, Dissolution or Winding Up.
(a) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of
shares of Series A Junior Participating Preferred Stock shall have
received $200 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the
date of such payment (the "Series A Liquidation Preference").
Following the payment of the full amount of the Series A Liquidation
Preference, no additional distributions shall be made to the holders
of shares of Series A Junior Participating Preferred Stock unless,
prior thereto, the holders of shares of Common Stock shall have
received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series A Liquidation Preference
by (ii) 200 (as appropriately adjusted as set forth in paragraph 6(c)
below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in
clause (ii), the "Adjustment Number"). Following the payment of the
full amount of the Series A Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Series A Junior
Participating Preferred Stock and Common Stock, respectively, holders
of Series A Junior Participating Preferred Stock and holders of shares
of Common Stock shall receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such Preferred Stock and Common
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Stock, on a per share basis, respectively.
(b) In the event, however that there are not sufficient assets
available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of
preferred stock if any, which rank on a parity with the Series A
Junior Participating Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of such parity shares
in proportion to their respective liquidation preferences. In the
event, however, that there are not sufficient assets available to
permit payment in full of the Common Adjustment then such remaining
assets shall be distributed ratably to the holders of Common Stock.
(c) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding Common
Stock or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the Adjustment Number in
effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.
7. Consolidation, Merger, etc.
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any
other property, then in any such case the shares of Series A Junior
Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 200 times the aggregate
amount of stock, securities, cash and/or any other property (payable in
kind), as the case may be, into which or for which each share of Common
Stock
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is changed or exchanged. In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change
of shares of Series A Junior Participating Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which
is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
8. Optional Redemption.
(a) The Corporation shall have the option to redeem the whole or any part
of the Series A Junior Participating Preferred Stock at any time at a
redemption price equal to, subject to the provision for adjustment
hereinafter set forth, 200 times the "current per share market price"
of the Common Stock on the date of the mailing of the notice of
redemption, together with unpaid accumulated dividends to the date of
such redemption. In the event the Corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of shares or (iv) issue any shares by reclassification
of its shares of Common Stock, then in each such case the amount to
which holders of shares of Series A Junior Participating Preferred
Stock shall be otherwise entitled immediately prior to such event
under the immediately preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which shall be
the number of shares of Common Stock outstanding immediately after
such event and the denominator of which shall be the number of shares
of Common Stock that shall have been outstanding immediately prior to
such event. The
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"current per share market price" on any date shall be deemed to be the
average of the closing prices per share of such Common Stock for the
10 consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date. The closing price for each day shall
be the last sale price, regular way, or, in case no such sale shall
take place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if
the Common Stock shall not be listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on the principal national securities exchange on
which the Common Stock shall not be listed or admitted to trading or,
if the Common Stock shall not be listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so
quoted the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such
other system then in use or, if on any such date the Common Stock
shall not be quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market
maker making a market in the Common Stock selected by the Board of
Directors of the Corporation. If on such date no such market maker
shall be making a market in the Common Stock, the fair value of the
Common Stock on such date as determined in good faith by the Board of
Directors of the Corporation shall be used. The term "Trading Day"
shall mean a day on which the principal national securities exchange
on which the Common Stock shall be listed or admitted to trading shall
be open for the transaction of business or, if the Common Stock shall
not be listed or admitted to trading on any national securities
exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on which
banking institutions in the State of New York
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shall not be authorized or obligated by law or executive order to
close.
(b) Notice of any such redemption shall be given by mailing to the holders
of the Series A Junior Participating Preferred Stock a notice of such
redemption, first class postage prepaid, not later than the thirtieth
day and not earlier than the sixtieth-day before the date fixed for
redemption, at their last address as the same shall appear upon the
books of the Corporation. Any notice which shall be mailed in the
manner herein provided shall be conclusively presumed to have been
duly given, whether or not the stockholder shall have received such
notice, and failure duly to give such notice by mail, or any defect in
such notice, to any holder of Series A Junior Participating Preferred
Stock shall not affect the validity of the proceedings for the
redemption of such Series A Junior Participating Preferred Stock.
(c) If less than all the outstanding shares of the Series A Junior
Participating Preferred Stock are to be redeemed by the Corporation,
the number of shares to be redeemed shall be determined by the Board
of Directors and the shares to be redeemed shall be determined by lot
or pro rata or in such fair and equitable other manner as may be
prescribed by resolution of the Board of Directors.
(d) The notice of redemption to each holder of Series A Junior
Participating Preferred Stock shall specify (a) the number of shares
of Series A Junior Participating Preferred Stock of such holder to be
redeemed, (b) the date fixed for redemption, (c) the redemption price
and (d) the place of payment of the redemption price.
(e) If any such notice of redemption shall have been duly given or if the
corporation shall have given to the bank or trust company hereinafter
referred to irrevocable written authorization promptly to give or
complete such notice, and if on or before the redemption date
specified therein the funds necessary for such redemption shall have
been
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deposited by the Corporation with the bank or trust company designated
in such notice, doing business in the United States of America and
having a capital, surplus and undivided profits aggregating at least
$25,000,000 according to its last published statement of condition, in
trust for the benefit of the holders of Series A Junior Participating
Preferred Stock called for redemption, then, notwithstanding that any
certificate for such shares so called for redemption shall not have
been surrendered for cancellation, from and after the time of such
deposit all such shares called for redemption shall no longer be
deemed outstanding, all rights with respect to such shares shall no
longer be deemed outstanding and all rights with respect to such
shares shall forthwith cease and terminate, except the right of the
holders thereof to receive from such bank or trust company at any time
after the time of such deposit the funds so deposited, without
interest, the right to exercise, up to the close of business on the
fifth day before the date fixed for redemption, all privileges of
conversion or exchange if any. In case less than all the shares
represented by any surrendered certificate shall be redeemed, a new
certificate shall be issued representing the unredeemed shares Any
interest accrued on such funds so deposited shall be paid to the
Corporation from time to time. Any funds so deposited and unclaimed at
the end of six years from such redemption date shall be repaid to the
Corporation, after which the holders of shares of Series A Junior
Participating Preferred Stock called for redemption shall look only to
the Corporation for payment thereof; provided, however, that any funds
so deposited which shall not be required for redemption because of the
exercise of any privilege of conversion or exchange subsequent to the
date of deposit shall be repaid to the Corporation forthwith.
9. Ranking.
The Series A Junior Participating Preferred Stock shall rank junior to
all other series of the Corporation's
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Preferred Stock as to the payment of dividends and the distribution of
assets, unless the terms of any such series shall provide otherwise.
10. Amendment.
The Articles of Incorporation of the Corporation shall not be further
amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of at least a majority of the
outstanding shares of Series A Junior Participating Preferred Stock,
voting separately as a class.
D. The designations, voting powers, preferences and relative, participating,
optional and other special rights of the Series B Convertible Preferred
Stock, and the qualifications, limitations or restrictions thereof are as
follows:
1. Number of Shares and Designations.
Two thousand (2,000) shares of the Preferred Stock, without par value,
of the Corporation are constituted as a series thereof designated as
Series B Convertible Preferred Stock (the "Series B Preferred Stock").
2. Definitions.
For purposes of the Series B Preferred Stock, the following terms
shall have the meanings indicated:
(a) "Accrued Dividends" shall have the meaning set forth in Section 4(a)
below.
(b) "Articles of Incorporation" shall mean the Articles of Incorporation
of the Corporation, as amended from time to time.
(c) "Board of Directors" shall mean the board of directors of the
Corporation or any committee authorized by such board of directors to
perform any of its responsibilities with respect to the
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Series B Preferred Stock.
(d) "Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New
York, New York are not required to be open.
(e) "Call Event" shall mean the consummation of a transaction pursuant to
Section 2.2 of the Transaction Agreement.
(f) "Common Stock" shall mean the common stock of the Corporation, without
par value.
(g) "Constituent Person" shall have the meaning set forth in Section 8(e)
below.
(h) "Conversion Price" shall mean the conversion price per share of Common
Stock for which the Series B Preferred Stock is convertible, as such
Conversion Price may be adjusted pursuant to Section 8 below. The
initial conversion price will be $ 50.20.
(i) "Current Market Price" of publicly traded shares of Common Stock or
any other class of capital stock or other security of the Corporation
or any other issuer for any day shall mean the last reported sales
price, regular way on such day, or, if no sale takes place on such
day, the average of the reported closing bid and asked prices on such
day, regular way, in either case as reported on the New York Stock
Exchange Composite Tape or, if such security is not listed or admitted
for trading on the New York Stock Exchange ("NYSE"), on the principal
national securities exchange on which such security is listed or
admitted for trading or, if not listed or admitted for trading on any
national securities exchange, on the National Market System of the
National Association of Securities Dealers, Inc. Automated Quotations
System ("NASDAQ") or, if such security is not quoted on such National
Market System, the average of the closing bid and asked prices on such
day in the over-the-counter market as reported by NASDAQ or, if bid
and asked prices for such security on
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such day shall not have been reported through NASDAQ, the average of
the bid and asked prices on such day as furnished by any NYSE member
firm regularly making a market in such security selected for such
purpose by the Board of Directors.
(j) "Dividend Payment Date" shall mean the last business day of January,
April, July and October in each year, commencing on the last business
day of January, 1997, provided, however, that if any Dividend Payment
Date falls on any day other than a Business Day, the dividend payment
due on such Dividend Payment Date shall be paid on the Business Day
immediately following such Dividend Payment Date.
(k) "Dividend Periods" shall mean quarterly dividend periods commencing on
the last business day of January, April, July and October of each year
and ending on and including the day preceding the first day of the
next succeeding Dividend Period (other than the initial Dividend
Period, which shall commence on the Issue Date and end on and include
January 30, 1997).
(l) "Fair Market Value" shall mean the average of the daily Current Market
Prices of a share of Common Stock during the five (5) consecutive
Trading Days selected by the Corporation commencing not more than 20
Trading Days before, and ending not later than, the earlier of the day
in question and the day before the "ex" date with respect to the
issuance or distribution requiring such computation. The term "'ex'
date," when used with respect to any issuance or distribution, means
the first day on which the Common Stock trades regular way, without
the right to receive such issuance or distribution, on the exchange or
in the market, as the case may be, used to determine that day's
Current Market Price.
(m) "Issue Date" shall mean the first date on which shares of Series B
Preferred Stock are issued and sold.
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(n) "Junior Stock" shall mean the Common Stock, the Series A Preferred
Stock and any other class or series of shares of the Corporation over
which the Series B Preferred Stock has preference or priority in the
payment of dividends or in the distribution of assets on any
liquidation, dissolution or winding up of the Corporation.
(o) "Liquidation Preference" shall have the meaning set forth in Section
4(a) below.
(p) "non-electing share" shall have the meaning set forth in Section 8(e)
below.
(q) "Person" shall mean any individual, firm, partnership, corporation or
other entity, and shall include any successor (by merger or otherwise)
of such entity.
(r) "Put Event" shall mean the consummation of a transaction pursuant to
Section 2.3 of the Transaction Agreement.
(s) "Redemption Date" shall have the meaning set forth in Section 5(b)
below.
(t) "Rights" shall mean the rights of the Corporation which are issuable
under the Corporation's Rights Agreement dated as of November 28,
1988, and as amended from time to time, or rights to purchase any
capital stock of the Corporation under any successor shareholder
rights plan or plans adopted in replacement of the Corporation's
Rights Agreement.
(u) "Securities" shall have the meaning set forth in Section 8(d)(3)
below.
(v) "Series A Preferred Stock" shall mean the series of Preferred Stock of
the Corporation, without par value, designated Series A Junior
Participating Preferred Stock.
(w) "Series B Preferred Stock" shall have the meaning set forth in Section
1 above.
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(x) "set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which
indicates, pursuant to a declaration of dividends or other
distribution by the Board of Directors, the allocation of funds to be
so paid on any series or class of capital stock of the Corporation;
provided, however, that if any funds for any class or series of Junior
Stock or any class or series of stock ranking on a parity with the
Series B Preferred Stock as to the payment of dividends are placed in
a separate account of the Corporation or delivered to a disbursing,
paying or other similar agent, then "set apart for payment" with
respect to the Series B Preferred Stock shall mean placing such funds
in a separate account or delivering such funds to a disbursing, paying
or other similar agent.
(y) "Stated Value" shall have the meaning set forth in Section 4(a) below.
(z) "Trading Day" shall mean any day on which the securities in question
are traded on the NYSE, or if such securities are not listed or
admitted for trading on the NYSE, on the principal national securities
exchange on which such securities are listed or admitted, or if not
listed or admitted for trading on any national securities exchange, on
the National Market System of the NASDAQ, or if such securities are
not quoted on such National Market System, in the applicable
securities market in which the securities are traded.
(aa) "Transaction" shall have the meaning set forth in Section D.8(e)
hereof.
(bb) "Transaction Agreement" shall mean that certain Transaction Agreement,
dated as of December 30, 1994, by and among the Corporation and
General Reinsurance Corporation.
(cc) "Transfer Agent" means The First National Bank of
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Boston or such other agent or agents of the Corporation as may be
designated by the Board of Directors as the transfer agent for the
Series B Preferred Stock.
3. Dividends.
(a) The holders of shares of the Series B Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of
Directors out of assets legally available for that purpose, dividends
payable in cash at the rate per annum of $650 per share of Series B
Preferred Stock. Such dividends shall be cumulative from the Issue
Date, whether or not in any Dividend Period or Periods there shall be
assets of the Corporation legally available for the payment of such
dividends, and shall be payable quarterly, when, as and if declared by
the Board of Directors, in arrears on Dividend Payment Dates,
commencing on January 31, 1997. Each such dividend shall be payable in
arrears to the holders of record of shares of the Series B Preferred
Stock, as they appear on the stock records of the Corporation at the
close of business on such record dates, which shall not be more than
60 days nor less than 10 days preceding the payment dates thereof, as
shall be fixed by the Board of Directors or a duly authorized
committee thereof. Accrued and unpaid dividends for any past Dividend
Periods may be declared and paid at any time, without reference to any
Dividend Payment Date, to holders of record on such date, not
exceeding 45 days preceding the payment date thereof, as may be fixed
by the Board of Directors.
(b) The amount of dividends payable for each full Dividend Period for the
Series B Preferred Stock shall be computed by dividing the annual
dividend rate by four. The amount of dividends payable for the initial
Dividend Period, or any other period shorter or longer than a full
Dividend Period, on the Series B Preferred Stock shall be computed on
the basis of twelve 30-day months and a 360-day year. Holders of
shares of Series B Preferred Stock shall not be entitled to any
dividends,
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whether payable in cash, property or stock, in excess of cumulative
dividends, as herein provided, on the Series B Preferred Stock. No
interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series B Preferred
Stock that may be in arrears.
(c) So long as any shares of the Series B Preferred Stock are outstanding,
no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any class or
series of stock of the Corporation ranking, as to dividends and
amounts distributable upon liquidation, dissolution or winding up, on
a parity with the Series B Preferred Stock, for any period unless full
cumulative dividends have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set
apart for such payment on the Series B Preferred Stock for all
Dividend Periods terminating on or prior to the date of payment of the
dividend on such class or series of parity stock. When dividends are
not paid in full or a sum sufficient for such payment is not set
apart, as aforesaid, all dividends declared upon shares of the Series
B Preferred Stock and all dividends declared upon any other class or
series of stock ranking on a parity as to dividends and amount
distributable upon liquidation, dissolution or winding up shall be
declared ratably in proportion to the respective amounts of dividends
accumulated and unpaid on the Series B Preferred Stock and accumulated
and unpaid on such parity stock.
(d) So long as any shares of the Series B Preferred Stock are outstanding,
no dividends (other than (i) the Rights and (ii) dividends or
distributions paid in shares of, or options, warrants or rights to
subscribe for or purchase shares of, Junior Stock) shall be declared
or paid or set apart for payment or other distribution declared or
made upon Junior Stock, nor shall any Junior Stock or any series of
stock of the Corporation ranking, as to dividends and amounts
distributable upon liquidation,
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dissolution or winding up, on a parity with Series B Preferred Stock
be redeemed, purchased or otherwise acquired (other than a redemption,
purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan of the Corporation
or any subsidiary) for any consideration (or any moneys be paid to or
made available for a sinking fund for the redemption of any shares of
any such stock) by the Corporation, directly or indirectly (except by
conversion into or exchange for Junior Stock), unless in each case the
full cumulative dividends on all outstanding shares of the Series B
Preferred Stock and any other stock of the Corporation ranking on a
parity with the Series B Preferred Stock, as to dividends and amounts
distributable upon liquidation, dissolution or winding up shall have
been paid or set apart for payment for all past Dividend Periods with
respect to the Series B Preferred Stock and all past dividend periods
with respect to such parity stock.
4. Payments upon Liquidation.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation before any payment or distribution of the assets of the
Corporation (whether capital or surplus) shall be made to or set apart
for the holders of Junior Stock, the holders of the shares of Series B
Preferred Stock shall be entitled to receive Ten Thousand Dollars
($10,000) per share of Series B Preferred Stock (the "Stated Value")
plus an amount equal to all dividends (whether or not earned or
declared) accrued and unpaid thereon ("Accrued Dividends") to the date
of final distribution to such holders (the "Liquidation Preference");
but such holders shall not be entitled to any further payment. If,
upon any liquidation, dissolution or winding up of the Corporation,
the assets of the Corporation, or proceeds thereof, distributable
among the holders of the shares of Series B Preferred Stock shall be
insufficient to pay in full the Liquidation Preference, and the
liquidation preference on all other shares of any class or series of
stock ranking, as to dividends
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<PAGE>
and amounts distributable upon liquidation, dissolution or winding up,
on a parity with the Series B Preferred Stock, then such assets, or
the proceeds thereof, shall be distributed among the holders of shares
of Series B Preferred Stock and any such other parity stock ratably in
accordance with the respective amounts that would be payable on such
shares of Series B Preferred Stock and any such other stock if all
amounts payable thereon were paid in full. For the purposes of this
Section 4, (i) a consolidation or merger of the Corporation with one
or more corporations, or (ii) a sale or transfer of all or
substantially all of the Corporation's assets, shall not be deemed to
be a liquidation, dissolution or winding up, voluntary or involuntary,
of the Corporation.
(b) Subject to the rights of the holders of shares of any series or class
or classes of stock ranking on a parity with or prior to the Series B
Preferred Stock as to dividends and amounts distributable upon
liquidation, dissolution or winding up of the Corporation, after
payment shall have been made to the holders of the Series B Preferred
Stock, as and to the fullest extent provided in this Section 4, any
other series or class or classes of Junior Stock shall, subject to the
respective terms and provisions (if any) applying thereto, be entitled
to receive any and all assets remaining to be paid or distributed, and
the holders of the Series B Preferred Stock shall not be entitled to
share therein.
5. Redemption at the Option of the Corporation.
(a) The shares of Series B Preferred Stock shall be redeemable at the
option of the Corporation by resolution of its Board of Directors,
in whole (i) at any time on or after the fifth anniversary of the
Issue Date or (ii) if on the date of a notice pursuant to Section
5(b) below, the Current Market Price of all Common Stock which
would be issuable upon conversion of all of the 2,000 shares of
Preferred Stock originally issued, as of any date within ten
Business Days prior to such notice date,
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exceeded $22 million. In either case, such redemption shall be at the
Stated Value, plus all dividends accrued and unpaid on the shares of
Series B Preferred Stock up to the date fixed for the redemption, upon
giving notice as provided hereinbelow.
(b) At least 90 days prior to the date fixed for the redemption of
shares of Series B Preferred Stock, a written notice shall be
mailed in a postage prepaid envelope to each holder of record of
the shares of Series B Preferred Stock to be redeemed, addressed
to such holder at his post office address as shown on the records
of the Corporation, notifying such holder of the election of the
corporation to redeem such shares, stating the date fixed for
redemption thereof (the "Redemption Date"), and calling upon such
holder to surrender to the Corporation, on the Redemption Date at
the place designated in such notice, his certificate or
certificates representing the number of shares specified in such
notice of redemption.
On or after the Redemption Date, each holder of shares of Series B
Preferred Stock to be redeemed shall present and surrender his
certificate or certificates for such shares to the Corporation at
the place designated in such notice and thereupon the redemption
price of such shares shall be paid to or on the order of the
person whose name appears on such certificate or certificates as
the owner thereof and each surrendered certificate shall be
canceled. In case less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
From and after the Redemption Date (unless default shall be made
by the Corporation in payment of the redemption price), all
dividends on the shares of Series B Preferred Stock designated for
redemption in such notice shall cease to accrue, and all rights of
the holders thereof as stockholders of the Corporation, except the
right to receive the redemption price of such shares (including
all
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accrued and unpaid dividends up to the Redemption Date) upon the
surrender of certificates representing the same, shall cease and
terminate and such shares shall not thereafter be transferred
(except with the consent of the Corporation) on the books of the
Corporation, and such shares shall not be deemed to be
outstanding for any purpose whatsoever. At its election, the
Corporation, prior to the Redemption Date, may deposit the
redemption price (including all accrued and unpaid dividends up
to the Redemption Date) of shares of Series B Preferred Stock so
called for redemption in trust for the holders thereof with a
bank or trust company (having a capital surplus and undivided
profits aggregating not less than $50,000,000) in the Borough of
Manhattan, City and State of New York, or in any other city in
which the Corporation at the time shall maintain a transfer
agency with respect to such shares, in which case the aforesaid
notice to holders of shares of Series B Preferred Stock to be
redeemed shall state the date of such deposit, shall specify the
office of such bank or trust company as the place of payment of
the redemption price, and shall call upon such holders to
surrender the certificates representing such shares at such place
on or after the date fixed in such redemption notice (which shall
not be later than the Redemption Date) against payment of the
redemption price (including all accrued and unpaid dividends up
to the Redemption Date). Any interest accrued on such funds shall
be paid to the Corporation from time to time. Any moneys so
deposited which shall remain unclaimed by the holders of such
shares of Series B Preferred Stock at the end of two years after
the Redemption Date shall be returned by such bank or trust
company to the Corporation.
If a notice of redemption has been given pursuant to this Section
5 and any holder of shares of Series B Preferred Stock shall,
prior to the close of business on the day preceding the Redemption
Date, give written notice to the Corporation pursuant to Section 8
below of the conversion of any or all of the shares to be redeemed
held by such holder (accompanied by a certificate or certificates
for
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such shares, duly endorsed or assigned to the Corporation, and
any necessary transfer tax payment, as required by Section 8
below), then such redemption shall not become effective as to
such shares to be converted, such conversion shall become
effective as provided in Section 8 below, and any moneys set
aside by the Corporation for the redemption of such shares of
converted Series B Preferred Stock shall revert to the general
funds of the Corporation.
6. Redemption at the Option of the Holder.
The Corporation, when requested to do so in writing by a holder of
Series B Preferred Stock at any time after the earlier of (i) the
eighth anniversary of an Issue Date pursuant to a Call Event or (ii)
the fifth anniversary of an Issue Date pursuant to a Put Event, shall
purchase or redeem the share or shares of Series B Preferred Stock
identified by such holder, such purchase or redemption to occur on a
date not more than thirty days after receipt by the Corporation of such
request, at the Stated Value of the share or shares to be purchased or
redeemed, plus all dividends accrued and unpaid on such share or shares
up to the date of such purchase or redemption.
7. Shares to Be Retired.
All shares of Series B Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation (excluding, until the
Corporation elects to retire them, shares which are held as treasury
shares) shall be restored to the status of authorized but unissued
shares of Preferred Stock, without designation as to series.
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8. Conversion.
Holders of shares of Series B Preferred Stock shall have the right to
convert all or a portion of such shares into shares of Common Stock, as
follows:
(a) Subject to and upon compliance with the provisions of this Section 8,
a holder of shares of Series B Preferred Stock shall have the right,
at its option, at any time after 5 Business Days after the Issue Date,
to convert such shares into the number of fully paid and nonassessable
shares of Common Stock obtained by dividing the aggregate Stated Value
of such shares by the Conversion Price (as in effect on the date
provided for in the last paragraph of Section 8(b)) by surrendering
such shares to be converted, such surrender to be made in the manner
provided in Section 8(b); provided, however, that the right to convert
shares called for redemption pursuant to Section 5 of this article
shall terminate at the close of business on the day preceding the
Redemption Date, unless the Corporation shall default in making
payment of the cash payable upon such redemption under Section 5 of
this article. Certificates will be issued for the remaining shares of
Series B Preferred Stock in any case in which fewer than all of the
shares of Series B Preferred Stock represented by a certificate are
converted.
(b) In order to exercise the conversion right, the holder of shares of
Series B Preferred Stock to be converted shall surrender the
certificate or certificates representing such shares, duly endorsed or
assigned to the Corporation or in blank, at the office of the Transfer
Agent in the Borough of Manhattan, City of New York, accompanied by
written notice to the Corporation that the holder thereof elects to
convert Series B Preferred Stock. Unless the shares issuable on
conversion are to be issued in the same name as the name in which such
share of Series B Preferred Stock is registered, each share
surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Corporation, duly executed
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by the holder or such holder's duly authorized attorney and an amount
sufficient to pay any transfer or similar tax (or evidence reasonably
satisfactory to the Corporation demonstrating that such taxes have
been paid).
Holders of shares of Series B Preferred Stock at the close of business
on a dividend payment record date shall be entitled to receive the
dividend payable on such shares on the corresponding Dividend Payment
Date notwithstanding the conversion thereof following such dividend
payment record date and prior to such Dividend Payment Date. Except as
provided above, the Corporation shall make no payment or allowance for
unpaid dividends, whether or not in arrears, on converted shares or
for dividends on the shares of Common Stock issued upon such
conversion.
As promptly as practicable after the surrender of certificates for
shares of Series B Preferred Stock as aforesaid, the Corporation shall
issue and shall deliver at such office to such holder, or on his or
her written order, a certificate or certificates for the number of
full shares of Common Stock issuable upon the conversion of such
shares in accordance with provisions of this Section 8, and any
fractional interest in respect of a share of Common Stock arising upon
such conversion shall be settled as provided in Section 8(c).
Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates
for shares of Series B Preferred Stock shall have been surrendered and
such notice (and if applicable, payment of an amount equal to the
dividend payable on such shares) received by the Corporation as
aforesaid, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby at such
time on such date and such conversion shall be at the Conversion Price
in
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effect at such time on such date, unless the stock transfer books of
the Corporation shall be closed on that date, in which event such
person or persons shall be deemed to have become such holder or
holders of record at the close of business on the next succeeding day
on which such stock transfer books are open, but such conversion shall
be at the Conversion Price in effect on the date upon which such
shares shall have been surrendered and such notice received by the
Corporation.
(c) No fractional shares or scrip representing fractions of shares of
Common Stock shall be issued upon conversion of the Series B Preferred
Stock. Instead of any fractional interest in a share of Common Stock
that would otherwise be deliverable upon the conversion of a share of
Series B Preferred Stock, the Corporation shall pay to the holder of
such share an amount in cash based upon the Current Market Price of
Common Stock on the Trading Day immediately preceding the date of
conversion. If more than one share shall be surrendered for conversion
at one time by the same holder, the number of full shares of Common
Stock issuable upon conversion thereof shall be computed on the basis
of the aggregate number of shares of Series B Preferred Stock so
surrendered.
(d) The Conversion Price shall be adjusted from time to time as follows:
(1) If the Corporation shall after the Issue Date (A) pay a
dividend or make a distribution on its capital stock in
shares of its Common Stock, (B) subdivide its outstanding
Common Stock into a greater number of shares, (C) combine
its outstanding Common Stock into a smaller number of shares
or (D) issue any shares of capital stock by reclassification
of its Common Stock, the Conversion Price in effect at the
opening of business on the day next following the date fixed
for the determination of stockholders entitled to receive
such dividend or distribution or at the opening of business
on the day next following the day on which such
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subdivision, combination or reclassification becomes
effective, as the case may be, shall be adjusted so that the
holder of any share of Series B Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the
number of shares of Common Stock that such holder would have
owned or have been entitled to receive after the happening
of any of the events described above had such share been
converted immediately prior to the record date in the case
of a dividend or distribution or the effective date in the
case of a subdivision, combination or reclassification. An
adjustment made pursuant to this subparagraph (a) shall
become effective immediately after the opening of business
on the day next following the record date (except as
provided in Section 8(h) below) in the case of a dividend or
distribution and shall become effective immediately after
the opening of business on the day next following the
effective date in the case of a subdivision, combination or
reclassification.
(2) If the Corporation shall issue after the Issue Date rights
or warrants (in each case, other than the Rights) to all
holders of Common Stock entitling them (for a period
expiring within 45 days after the record date mentioned
below) to subscribe for or purchase Common Stock at a price
per share less than the Fair Market Value per share of
Common Stock on the record date for the determination of
stockholders entitled to receive such rights or warrants,
then the Conversion Price in effect at the opening of
business on the day next following such record date shall be
adjusted to equal the price determined by multiplying (I)
the Conversion Price in effect immediately prior to the
opening of business on the day next following the date fixed
for such determination by (II) a fraction, the numerator of
which shall be the sum of (A) the number of shares of Common
Stock outstanding on the close of business on the date fixed
for such determination and (B) the number of shares that the
aggregate proceeds to the
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Corporation from the exercise of such rights or warrants for
Common Stock would purchase at such Fair Market Value, and
the denominator of which shall be the sum of (A) the number
of shares of Common Stock outstanding on the close of
business on the date fixed for such determination and (B)
the number of additional shares of Common Stock offered for
subscription or purchase pursuant to such rights or
warrants. Such adjustment shall become effective immediately
after the opening of business on the day next following such
record date (except as provided in Section 8(h) below). In
determining whether any rights or warrants entitle the
holders of Common Stock to subscribe for or purchase shares
of Common Stock at less than such Fair Market Value, there
shall be taken into account any consideration received by
the Corporation upon issuance and upon exercise of such
rights or warrants, the value of such consideration, if
other than cash, to be determined by the Board of Directors.
(3) If the Corporation shall distribute to all holders of its
Common Stock any shares of capital stock of the Corporation
(other than Common Stock) or evidence of its indebtedness or
assets (excluding cash dividends or distributions paid from
profits or surplus of the Corporation) or rights or warrants
(in each case, other than the Rights) to subscribe for or
purchase any of its securities (excluding those rights and
warrants issued to all holders of Common Stock entitling
them for a period expiring within 45 days after the record
date referred to in subparagraph (b) above to subscribe for
or purchase Common Stock, which rights and warrants are
referred to in and treated under subparagraph (b) above (any
of the foregoing being hereinafter in this subparagraph (3)
called the "Securities"), then in each such case the
Conversion Price shall be adjusted so that it shall equal
the price determined by multiplying (I) the Conversion Price
in effect immediately prior to the close of business on
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the date fixed for the determination of stockholders
entitled to receive such distribution by (II) a fraction,
the numerator of which shall be the Fair Market Value per
share of the Common Stock on the record date mentioned below
less the then fair market value (as determined by the Board
of Directors, whose determination shall be conclusive) of
the portion of the capital stock or assets or evidences of
indebtedness so distributed or of such rights or warrants
applicable to one share of Common Stock, and the denominator
of which shall be the Fair Market Value per share of the
Common Stock on the record date mentioned below. Such
adjustment shall become effective immediately at the opening
of business on the Business Day next following (except as
provided in Section 8(h) below) the record date for the
determination of shareholders entitled to receive such
distribution. For the purposes of this clause (c), the
distribution of a Security, which is distributed not only to
the holders of the Common Stock on the date fixed for the
determination of stockholders entitled to such distribution
of such security, but also is distributed with each share of
Common Stock delivered to a person converting a share of
Series B Preferred Stock after such determination date,
shall not require an adjustment of the Conversion Price
pursuant to this clause (c); provided that on the date, if
any, on which a Person converting a share of Series B
Preferred Stock would no longer be entitled to receive such
Security with a share of Common Stock (other than as a
result of the termination of all such Securities), a
distribution of such Securities shall be deemed to have
occurred and the Conversion Price shall be adjusted as
provided in this clause (c) (and such day shall be deemed to
be "the date fixed for the determination of the stockholders
entitled to receive such distribution" and "the record date"
within the meaning of the two preceding sentences).
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(4) No adjustment in the Conversion Price shall be required
unless such adjustment would require a cumulative increase
or decrease of at least 1% in such price; provided, however,
that any adjustments that by reason of this subparagraph (4)
are not required to be made shall be carried forward and
taken into account in any subsequent adjustment until made;
and provided, further, that any adjustment shall be required
and made in accordance with the provisions of this Section 8
(other than this subparagraph (4)) not later than such time
as may be required in order to preserve the tax-free nature
of a distribution to the holders of shares of Common Stock.
Notwithstanding any other provisions of this Section 8, the
Corporation shall not be required to make any adjustment of
the Conversion Price for the issuance of any shares of
Common Stock pursuant to any plan providing for the
reinvestment of dividends on securities of the Corporation.
All calculations under this Section 8 shall be made to the
nearest cent (with $.005 being rounded upward) or to the
nearest 1/10 of a share (with .05 of a share being rounded
upward), as the case may be. Anything in this Section 8(d)
to the contrary notwithstanding, the Corporation shall be
entitled, to the extent permitted by law, to make such
reductions in the Conversion Price, in addition to those
required by this Section 8(d), as it in its discretion shall
determine to be advisable in order that any stock dividends,
subdivision of shares, reclassification or combination of
shares, distribution of rights or warrants to purchase stock
or securities, or a distribution of other assets (other than
cash dividends) hereafter made by the Corporation to its
stockholders shall not be taxable.
(e) If the Corporation shall be a party to any transaction (including
without limitation a merger, consolidation, sale of all or
substantially all of the Corporation's assets or recapitalization of
the Common Stock and excluding any transaction as to which Section
8(d)(1) applies) (each of the
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foregoing being referred to herein as a "Transaction"), in each case
as a result of which shares of Common Stock shall be converted into
the right to receive stock, securities or other property (including
cash or any combination thereof), each share of Series B Preferred
Stock which is not converted into the right to receive stock,
securities or other property in connection with such Transaction shall
thereafter be convertible into the kind and amount of shares of stock,
securities and other property (including cash or any combination
thereof) receivable upon the consummation of such Transaction by a
holder of that number of shares or fraction thereof of Common Stock
into which one share of Series B Preferred Stock was convertible
immediately prior to such Transaction, assuming such holder of Common
Stock (i) is not a Person with which the Corporation consolidated or
into which the Corporation merged or which merged into the Corporation
or to which such sale or transfer was made, as the case may be
("Constituent Person"), or an affiliate of a Constituent Person and
(ii) failed to exercise his rights of election, if any, as to the kind
or amount of stock, securities and other property (including cash)
receivable upon such Transaction (provided that if the kind or amount
of stock, securities and other property (including cash) receivable
upon such Transaction is not the same for each share of Common Stock
of the Corporation held immediately prior to such Transaction by other
than a Constituent Person or an affiliate thereof and in respect of
which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this Section 8(e) the
kind and amount of stock, securities and other property (including
cash) receivable upon such Transaction by each non-electing share
shall be deemed to be the kind and amount so receivable per share by
the plurality of the non-electing shares). The Corporation shall not
be a party to any Transaction unless the terms of such Transaction are
consistent with the provisions of this Section 8(e) and it shall not
consent or agree to the occurrence of any Transaction until the
Corporation
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has entered into an agreement with the successor or purchasing entity,
as the case may be, for the benefit of the holders of the Series B
Preferred Stock that will contain provisions enabling the holders of
the Series B Preferred Stock that remains outstanding after such
Transaction to convert into the consideration received by holders of
Common Stock at the Conversion Price in effect immediately prior to
such Transaction. The provisions of this Section 8(e) shall similarly
apply to successive Transactions.
(f) If:
(1) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock (other than in cash out
of profits or surplus and other than the Rights); or
(2) the Corporation shall authorize the granting to the
holders of the Common Stock of rights or warrants (other
than the Rights) to subscribe for or purchase any shares
of any class or any other rights or warrants (other than
the Rights); or
(3) there shall be any reclassification of the Common Stock
(other than an event to which Section 8(d)(1) applies) or
any consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the
Corporation is required, or the sale or transfer of all or
substantially all of the assets of the Corporation as an
entirety; or
(4) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation,
then the Corporation shall cause to be filed with the
Transfer Agent and shall cause to be mailed to the holders
of shares of the Series B Preferred Stock at their
addresses as shown on the stock records of the
Corporation, as promptly as possible, but at least 15 days
prior to the applicable date hereinafter specified, a
notice stating (A) the
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date on which a record is to be taken for the purpose of
such dividend, distribution or rights or warrants, or, if a
record is not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such dividend,
distribution or rights or warrants are to be determined or
(B) the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution or winding
up is expected to become effective, and the date as of which
it is expected that holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for
securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up. Failure to give or
receive such notice or any defect therein shall not affect
the legality or validity of the proceedings described in
this Section 8.
(g) Whenever the Conversion Price is adjusted as herein provided,
the Corporation shall promptly file with the Transfer Agent an
officer's certificate setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the
facts requiring such adjustment which certificate shall be
prima facie evidence of the correctness of such adjustment.
Promptly after delivery of such certificate, the Corporation
shall prepare a notice of such adjustment of the Conversion
Price setting forth the adjusted Conversion Price and the
effective date of such adjustment and shall mail such notice of
such adjustment of the Conversion Price to the holder of each
share of Series B Preferred Stock at such holder's last address
as shown on the stock records of the Corporation.
(h) In any case in which Section 8(d) provides that an adjustment
shall become effective on the day next following a record date
for an event, the Corporation may defer until the occurrence of
such event (A) issuing to the holder of any share of
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Series B Preferred Stock converted after such record date
and before the occurrence of such event the additional
shares of Common Stock issuable upon such conversion by
reason of the adjustment required by such event over and
above the Common Stock issuable upon such conversion before
giving effect to such adjustment and (B) paying to such
holder any amount in cash in lieu of any fraction pursuant
to Section 8(c).
(i) For purposes of this Section 8, the number of shares of Common
Stock at any time outstanding shall not include any shares of
Common Stock then owned or held by or for the account of the
Corporation. The Corporation shall not pay a dividend or make
any distribution on shares of Common Stock held in the treasury
of the Corporation.
(j) There shall be no adjustment of the Conversion Price in case of
the issuance of any stock of the Corporation in a
reorganization, acquisition or other similar transaction except
as specifically set forth in this Section 8. If any action or
transaction would require adjustment of the Conversion Price
pursuant to more than one paragraph of this Section 8, only one
adjustment shall be made and such adjustment shall be the
amount of adjustment that has the highest absolute value.
(k) If the Corporation shall take any action affecting the Common
Stock, other than action described in this Section 8, that in
the opinion of the Board of Directors would materially
adversely affect the conversion rights of the holders of the
shares of Series B Preferred Stock, the Conversion Price for
the Series B Preferred Stock may be adjusted, to the extent
permitted by law, in such manner, if any, and at such time, as
the Board of Directors may determine to be equitable in the
circumstances.
(l) The Corporation covenants that it will at all times reserve and
keep available, free from
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preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of
Common Stock held in its treasury, or both, for the purpose
of effecting conversion of the Series B Preferred Stock, the
full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series B Preferred
Stock not theretofore converted. For purposes of this
Section 8.(l)., the number of shares of Common Stock that
shall be deliverable upon the conversion of all outstanding
shares of Series B Preferred Stock shall be computed as if
at the time of computation all such outstanding shares were
held by a single holder.
The Corporation covenants that any shares of Common Stock
issued upon conversion of the Series B Preferred Stock shall be
validly issued, fully paid and non-assessable. Before taking
any action that would cause an adjustment reducing the
Conversion Price below the then-par value of the shares of
Common Stock deliverable upon conversion of the Series B
Preferred Stock, the Corporation will take any corporate action
that, in the opinion of its counsel, may be necessary in order
that the Corporation may validly and legally issue fully-paid
and nonassessable shares of Common Stock at such adjusted
Conversion Price.
(m) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue
or delivery of shares of Common Stock or other securities or
property on conversion of the Series B Preferred Stock pursuant
hereto; provided, however, that the Corporation shall not be
required to pay any tax that may be payable in respect of any
transfer involved in the issue or delivery of shares of Common
Stock or other securities or property in a name other than that
of the holder of the Series B Preferred Stock to be converted
and no such issue or delivery shall be made unless and until
the person requesting any issue or delivery has paid to the
Corporation the amount of any such tax or established, to the
reasonable satisfaction of the
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Corporation, that such tax has been paid.
9. Ranking.
Any class or series of stock of the Corporation shall be deemed to
rank:
(a) prior to the Series B Preferred Stock, as to the payment of
dividends and as to distributions of assets upon liquidation,
dissolution or winding up, if the holders of such class or series
shall be entitled to the receipt of dividends and of amounts
distributable upon liquidation, dissolution or winding up in
preference or priority to the holders of Series B Preferred
Stock;
(b) on a parity with the Series B Preferred Stock, as to the payment
of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, whether or not the dividend rates,
dividend payment dates or redemption or liquidation prices per
share thereof be different from those of the Series B Preferred
Stock if the holders of such class of stock or series and the
Series B Preferred Stock shall be entitled to the receipt of
dividends and of amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective
amounts of accrued and unpaid dividends per share or liquidation
preferences, without preference or priority one over the other;
and
(c) junior to the Series B Preferred Stock, as to the payment of
dividends or as to the distribution of assets upon liquidation,
dissolution or winding up, if such stock or series shall be
Common Stock or Series A Preferred Stock or if the holders of
Series B Preferred Stock shall be entitled to receipt of
dividends or of amounts distributable upon liquidation,
dissolution or winding up in preference or priority to the
holders of shares of such stock or series.
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10. Voting.
(a) The holders of shares of Series B Preferred Stock shall have the
following voting rights:
1. Subject to the provision for adjustment hereinafter set forth, each
share of Series B Preferred Stock shall entitle the holder thereof to
199 votes on all matters submitted to a vote of the shareholders of
the Corporation. In the event the Corporation shall at any time after
the Issue Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the number of votes per share to which
holders of shares of Series B Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
2. Except as otherwise provided herein or by law, the holders of shares
of Series B Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
shareholders of the Corporation.
(b) Unless the affirmative vote or consent of the holders of a
greater number of shares shall then be required by law, the
consent of the holders of at least 66 2/3% of all of the
outstanding shares of Series B Preferred Stock (in addition to
any vote required by the terms of any other affected series of
Preferred Stock ranking on a parity with the Series B Preferred
Stock as to dividends and amounts distributable upon liquidation,
dissolution and winding up), given in person or by proxy, either
in writing or by a vote at a meeting called
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for the purpose, at which the holders of shares of Series B
Preferred Stock and such other series of Preferred Stock shall
vote together as a single class without regard to series, shall
be necessary for authorizing, effecting or validating the
amendment, alteration or repeal of any of the provisions of the
Articles of Incorporation or of any certificate amendatory
thereof or supplemental thereto (including any Certificate of
Designations, Preferences and Rights or any similar document
relating to any series of Preferred Stock) which would materially
adversely affect the preferences, rights, powers or privileges of
the Series B Preferred Stock; provided, however, that the
amendment of the provisions of the Articles of Incorporation so
as to authorize or create, or to increase the authorized amount
of, any Junior Stock or any shares of any class ranking on a
parity with the Series B Preferred Stock shall not be deemed to
materially adversely affect the preferences, rights, powers or
privileges of Series B Preferred Stock.
(c) Unless the affirmative vote or consent of the holders of a
greater number of shares shall then be required by law, the
consent of the holders of at least 66 2/3% of all of the
outstanding shares of Series B Preferred Stock (in addition to
any vote required by the terms of any other series of Preferred
Stock ranking on a parity with the Series B Preferred Stock as to
dividends and amounts distributable upon liquidation, dissolution
or winding up), given in person or by proxy, either in writing or
by a vote at a meeting called for the purpose at which the
holders of shares of Series B Preferred Stock and such other
series of Preferred Stock shall vote together as a single class
without regard to series, shall be necessary for authorizing,
effecting or validating the creation, authorization or issue of
any shares of any class of stock of the Corporation ranking prior
to the Series B Preferred Stock as to dividends or upon
liquidation, dissolution or winding up, or the reclassification
of any authorized stock of the Corporation into any such prior
shares, or the
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creation, authorization or issuance of any obligation or security
convertible into or evidencing the right to purchase any such
prior shares.
(d) For purposes of the provisions of Sections 10(b) and 10(c), each
share of Series B Preferred Stock shall have one (1) vote per
share.
(e) Except as set forth herein, holders of Series B Preferred Stock
shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any
corporate action.
11. Record Holders.
The Corporation and the Transfer Agent may deem and treat the record
holder of any shares of Series B Preferred Stock as the true and
lawful owner thereof for all purposes, and neither the Corporation nor
the Transfer Agent shall be affected by any notice to the contrary.
Article V
The corporate office shall be in Hartford or in such other town in Connecticut
as the Board of Directors may determine. The annual meeting of the shareholders
shall be held at such time and place within the state and upon such notice as
may be determined from time to time either by or in accordance with the bylaws.
At all meetings of the shareholders and subject, in the case of preferred
shareholders, to such provisions concerning voting rights as the Board of
Directors may determine pursuant to the authority granted in Article III hereof,
each shareholder shall be entitled to vote in person or by an attorney duly
authorized by a written proxy and each share of common stock represented at such
meetings shall be entitled to one vote.
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Article VI
The business property and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors consisting of the number of
directors fixed from time to time by resolution adopted by the affirmative vote
of a majority of the entire Board of Directors. The directors shall be divided
into three classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors. The directors initially
elected to Class I shall serve for a term expiring at the annual meeting of
shareholders next following the end of the calendar year 1997, the directors
initially elected to Class II shall serve for a term expiring at the annual
meeting of shareholders next following the end of the calendar year 1998 and the
directors initially elected to the third class shall serve for a term expiring
at the annual meeting of shareholders next following the end of the calendar
year 1998. At each annual meeting of shareholders, successors to the class of
directors whose term expires at the annual meeting shall be elected for a
three-year term. If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible, and any additional director of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining term of that
class, but in no case will a reduction of the number of directors remove any
director in office or shorten the term of any incumbent director. A director
shall hold office until the annual meeting for the year in which his term
expires and until his successor shall be elected and shall qualify, subject,
however, to prior death, resignation, removal from office or order of court
that, by reason of incompetency or any other lawful cause, he is no longer a
director in office.
Any vacancy on the Board of Directors that results from an increase in the
number of directors may be filled by the concurring vote of directors holding a
majority of the directorships, which number of directorships shall be the number
prior to the vote on the increase, and any other vacancy occurring in the Board
of Directors may be filled by
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concurring vote of a majority of the remaining directors then in office,
although less than a quorum, or by a sole remaining director. Any director
elected to fill a vacancy not resulting from an increase in the number of
directors shall have the same remaining term as that of his predecessor.
Any director or the entire Board of Directors may be removed only for cause by
the affirmative vote of eighty percent (80%) of the votes entitled to be cast by
the holders of all then outstanding shares of voting stock of the Corporation,
voting together as a single class. For the purposes of this Article VI, "cause"
shall be defined as (a) a final non-appealable order of conviction of a felony
involving moral turpitude by a court of competent jurisdiction in the United
States or (b) a final non-appealable order of a court of competent jurisdiction
in the United States finding gross negligence in the performance of duties as a
director or officer of the Corporation.
Notwithstanding the foregoing, whenever the holders of any one or more classes
or series of preferred stock issued by the Corporation shall have the right,
voting separately by class or series, to elect directors at an annual or special
meeting of shareholders, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms of these
Articles applicable thereto, and such directors so elected shall not be divided
into classes pursuant to this Article VI unless expressly provided by such term.
Notwithstanding any other provisions of these Articles or the bylaws of the
Corporation (and notwithstanding the fact that a lesser percentage or separate
class vote may be specified by law, these Articles or the bylaws of the
Corporation) the affirmative vote of the holders of not less than eighty percent
(80%) of the votes entitled to be cast by the holders of all then outstanding
shares of voting stock of the Corporation, voting together as a single class,
shall be required to amend or repeal, or adopt any provisions inconsistent with
this Article VI; provided, however, that this paragraph shall not apply to, and
such eighty percent (80%) vote shall not be required for any amendment, repeal
or adoption recommended by three-quarters of the entire Board if all of such
directors are persons who
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were members of the Board at the annual meeting of shareholders of the
Corporation held prior to the proposal of any such amendment, repeal or adoption
or persons nominated by such members.
Article VII
A. In addition to any affirmative vote required by law or these Articles or
the bylaws of the Corporation, and except as otherwise expressly provided
in Section B of this Article VII, a Business Combination (as hereinafter
defined) shall require the affirmative vote of not less than eighty percent
(80%) of the votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock (as hereinafter defined), voting
together as a single class. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage or separate class vote may be specified, by law or in any
agreement with any national securities exchange or otherwise.
B. The provisions of Section A of this Article VII shall not be applicable to
any particular Business Combination, and such Business Combination shall
require only such affirmative vote, if any, as is required by law or by any
other provision of these Articles or the bylaws of the Corporation, or any
agreement with any national securities exchange, if all of the conditions
specified in either of the following Paragraphs 1 or 2 are met:
1. The Business Combination shall have been approved by two-thirds (whether
such approval is made prior to or subsequent to the acquisition of
beneficial ownership of the Voting Stock that caused the Interested
Shareholder, as hereinafter defined to become an Interested Shareholder)
of the Continuing Directors, as hereinafter defined.
2. All of the following conditions shall have been met:
(a) The aggregate amount of cash and the Fair Market Value (as
hereinafter defined) as of the date of the consummation of the
Business Combination of consideration other than cash to be
received per share by holders of Common Stock in such Business
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Combination shall be at least equal to the highest amount
determined under clauses (i), (ii), (iii) and (iv) below:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested Shareholder for
any share of Common Stock in connection with the acquisition by
the Interested Shareholder of beneficial ownership of shares of
Common Stock within the two-year period immediately prior to
the first public announcement of the proposed Business
Combination (the "Announcement Date");
(ii)the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Shareholder became an Interested Shareholder (the
"Determination Date"), whichever is higher;
(iii)(if applicable) the price per share equal to the Fair Market
Value per share of Common Stock determined pursuant to the
immediately preceding clause (ii), multiplied by the ratio of
(x) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid
by or on behalf of the Interested Shareholder for any share of
Common Stock in connection with the acquisition by the
Interested Shareholder of beneficial ownership of shares of
Common Stock within the two-year period immediately prior to
the Announcement Date to (y) the Fair Market Value per share
of Common Stock on the first day in such two-year period on
which the Interested Shareholder acquired beneficial ownership
of any share of Common Stock; and
(iv) The Corporation's net income per share of Common Stock for the
four full consecutive fiscal quarters immediately preceding
the Announcement Date, multiplied by the higher of the then
price/earnings multiple (if any) with respect to common stock
of such Interested Shareholder or the highest price/earnings
multiple with respect to
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Common Stock within the two-year period immediately
preceding the Announcement Date (such price/earnings
multiples being determined as customarily computed and
reported in the financial community);
(b) The aggregate amount of cash and the Fair Market Value as of the
date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders
of shares of any class or series of outstanding Capital Stock (as
hereinafter defined), other than Common Stock, shall be at least
equal to the highest amount determined under clauses (i), (ii),
(iii) and (iv) below:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested Shareholder for
any share of such class or series of Capital Stock in
connection with the acquisition by the Interested Shareholder
of beneficial ownership of shares of such class or series of
Capital Stock within the two-year period immediately prior to
the Announcement Date;
(ii) the Fair Market Value per share of such class or series of
Capital Stock on the Announcement Date or on the Determination
Date, whichever is higher;
(iii) (if applicable) the price per share equal to the Fair Market
Value per share of such class or series of Capital Stock
determined pursuant to the immediately preceding clause (ii),
multiplied by the ratio of (x) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by or on behalf of the Interested
Shareholder for any share of such class or series of the Capital
Stock in connection with the acquisition by the Interested
Shareholder of beneficial ownership of shares of such class or
series of Capital Stock within the two-year period immediately
prior to the Announcement Date to (y) the Fair Market Value per
share of such class or series of Capital Stock on
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the first day in such two-year period on which the Interested
Shareholder acquired beneficial ownership of any share of such
class or series of Capital Stock; and
(iv) (if applicable) the highest preferential amount per share to
which the holders of shares of such class or series of Capital
Stock would be entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
affairs of the Corporation, regardless of whether the Business
Combination to be consummated constitutes such an event.
The provision of this paragraph 2(b) shall be required to be met with
respect to every class or series of outstanding Capital Stock,
whether or not the Interested Shareholder has previously acquired
beneficial ownership of any shares of a particular class or series of
Capital Stock.
(c) The consideration to be received by holders of a particular class
or series of outstanding Capital Stock shall be in cash or in the
same form as previously has been paid by or on behalf of the
Interested Shareholder in connection with its direct or indirect
acquisition of beneficial ownership of shares of such class or
series of Capital Stock. If the consideration so paid for shares of
any class or series of Capital Stock varied as to form, the form of
consideration for such class or series of Capital Stock shall be
either cash or the form used to acquire beneficial ownership of the
largest number of shares of such class or series of Capital Stock
previously acquired by the Interested Shareholder.
(d) After such Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business
Combination: (i) except as approved by two-thirds of the
Continuing Directors, there shall have been no failure to declare
and pay at the regular date therefor any full quarterly dividends
(whether or not cumulative) payable in accordance with the terms
of any outstanding Capital Stock; (ii) there shall have been no
reduction in the annual rate
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of dividends paid on the Common Stock (except as necessary to
reflect any stock split, stock dividend or subdivision of the
Common Stock), except as approved by two-thirds of the Continuing
Directors; (iii) there shall have been an increase in the annual
rate of dividends paid on the Common Stock as necessary to
reflect fully any reclassification (including any reverse stock
split), recapitalization, reorganization or any similar
transaction that has the effect of reducing the number of
outstanding shares of Common Stock, unless the failure so to
increase such annual rate is approved by two-thirds of the
Continuing Directors; and (iv) such Interested Shareholder shall
not have become the beneficial owner of any additional shares of
Capital Stock except as part of the transaction that results in
such Interested Shareholder becoming an Interested Shareholder
and except in a transaction that, after giving effect thereto,
would not result in any increase in the Interested Shareholder's
percentage beneficial ownership of any class or series of Capital
Stock.
(e) After such Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder shall not have received
the benefit, directly or indirectly (except proportionately as a
shareholder of this Corporation), of any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by this Corporation,
whether in anticipation of or in connection with such Business
Combination or otherwise.
(f) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder
(the "Act") (or any subsequent provisions replacing such Act,
rules and regulations) or the insurance laws and regulations of
the State of Connecticut, if applicable, shall be mailed to all
shareholders of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such
proxy or information statement is required
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by law to be mailed). The proxy or information statement shall
contain on the first page thereof, in a prominent place, any
statement as to the advisability (or inadvisability) of the
Business Combination that the Continuing Directors, or any of
them, may choose to make and, if deemed advisable by a majority
of the Continuing Directors, the opinion of an investment banking
firm selected by a majority of the Continuing Directors as to the
fairness (or not) of the terms of the Business Combination from a
financial point of view to the holders of the outstanding shares
of Capital Stock other than the Interested Shareholder and its
Affiliates or Associates (as hereinafter defined), such
investment banking firm to be paid a reasonable fee for its
services by the Corporation.
(g) Such Interested Stockholder shall not have made or caused the
making of any major change in the Corporation's business or
equity capital structure without the approval of a majority of
the continuing Directors.
C. For the purposes of this Article VII:
1. The term "Business Combination" shall mean:
(a) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (i) any Interested Shareholder or
(ii) any other corporation (whether or not itself an Interested
Shareholder) which is or after such merger or consolidation would
be an Affiliate or Associate of an Interested Shareholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) with
any Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder involving any assets or securities of this
Corporation, any subsidiary or any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder having an
aggregate Fair Market Value of $10,000,000 or more; or
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(c) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder; or
(d) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or
any other transaction (whether or not with or otherwise involving
an Interested Shareholder) that has the effect, directly or
indirectly, of increasing the proportionate share of any class or
series of Capital Stock, or any securities convertible into
Capital Stock or into equity securities of any Subsidiary, that
is beneficially owned by any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder: or
(e) any agreement, contract or other arrangement providing for any
one or more of the actions specified in the foregoing clauses (a)
to (d).
2. The term "Capital Stock" shall mean all capital stock of the
Corporation authorized to be issued from time to time under Article III
of these Articles, and the term "Voting Stock" shall mean all Capital
Stock which by its terms may be voted on all matters submitted to
shareholders of the Corporation generally.
3. The term "person" shall mean any individual, firm, corporation or other
entity and shall include any group comprised of any person and any
other person with whom such person or any Affiliate or Associate of
such person has any agreement, arrangement or understanding, directly
or indirectly, for the purpose of acquiring, holding, voting or
disposing of Capital Stock.
4. The term "Interested Shareholder" shall mean any person (other than the
Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of the
Corporation or any Subsidiary or any trustee of or
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fiduciary with respect to any such plan when acting in such capacity)
who (a) is the beneficial owner of Voting Stock representing ten
percent (10%) or more of the votes entitled to be cast by the holders
of all then outstanding shares of Voting Stock or (b) is an Affiliate
or Associate of the Corporation and at any time within the two-year
period immediately prior to the date in question was the beneficial
owner of Voting Stock representing ten percent (10%) or more of the
votes entitled to be cast by the holders of all then outstanding
shares of Voting Stock.
5. A person shall be a "beneficial owner" of any Capital Stock (a) which
such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (b) which such person or any of its Affiliates
or Associates has, directly or indirectly, (i) the right to acquire
(whether such right is exercisable immediately or subject only to the
passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, convertible
securities, exchange rights, warrants or options, or otherwise, or
(ii) the right to vote pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, convertible
securities, exchange rights, warrants or options, or otherwise, or
(ii) the right to vote pursuant to any agreement, arrangement or
understanding; or (c) which are beneficially owned, directly or
indirectly, by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Capital Stock. For the purposes of
determining whether a person is an Interested Shareholder pursuant to
paragraph 4 of this Section C, the number of shares of Capital Stock
deemed to be outstanding shall include shares deemed beneficially
owned by such person through application of paragraph 5 of this
Section C, but shall not include any other shares of Capital Stock
that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
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6. The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Act as in
effect on March 1, 1984 (the term "registrant" in said Rule 12b-2
meaning in this case the Corporation).
7. The term "Subsidiary" means any corporation of which a majority of any
class of equity security is beneficially owned by the Corporation;
provided, however, that for the purposes of the definition of
Interested Shareholder set forth in paragraph 4 of this Section C, the
term "Subsidiary" shall mean only a corporation of which a majority of
each class of equity security is beneficially owned by the Corporation.
8. The term "Continuing Director" means any member of the board of
directors of the Corporation (the "Board") while such person is a
member of the Board, who is not an Affiliate or Associate or
representative of the Interested Shareholder and was a Member of the
Board prior to the time that the Interested Shareholder became an
Interested Shareholder, and any successor of a Continuing Director,
while such successor is a member of the Board, who is not an Affiliate
or Associate or representative of the Interested Shareholder and is
recommended or elected to succeed the Continuing Director by a majority
of Continuing Directors.
9. The term "Fair Market Value" means (a) in the case of cash, the amount
of such cash; (b) in the case of stock, the highest closing sales
price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York
Stock Exchange-Listed Stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or if such stock is
not listed on such Exchange, on the principal United States securities
exchange registered under the Act on which such stock is listed, or,
if such stock is not listed on any such exchange, the highest closing
bid quotation with respect to a share of such stock as determined by a
majority of the Continuing Directors in good faith; and (c) in the
case of property other than cash or stock, the fair market value of
such property on the date in question as determined in good faith by a
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majority of the Continuing Directors.
10. In the event of any Business Combination in which this Corporation
survives, the phrase "consideration other than cash to be received" as
used in paragraphs 2.(a) and 2.(b) of Section B of this Article VII
shall include the shares of Common Stock and/or the shares of any other
class or series of Capital Stock retained by the holders of such
shares.
D. The Board of Directors shall have the power and duty to determine for the
purposes of this Article VII on the basis of information known to them
after reasonable inquiry, (a) whether a person is an Interested
Shareholder, (b) the number of shares of Capital Stock or other securities
beneficially owned by any person, (c) whether a person is an Affiliate or
Associate of another, and (d) whether the assets that are the subject of
any Business Combination have, or the consideration to be received for the
issuance or transfer of securities by this Corporation have, or any
Subsidiary in any Business Combination has, an aggregate Fair Market Value
of $10,000,000 or more. Any such determination made in good faith shall be
binding and conclusive on all parties.
E. Nothing contained in this Article VII shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
F. The fact that any Business Combination complies with the provisions of
Section B of this Article VII shall not be construed to impose any
fiduciary duty, obligation or responsibility on the Board, or any member
thereof, to approve such Business Combination or recommend its adoption or
approval to the shareholders of this Corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board, or any
member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.
G. Notwithstanding any other provisions of these Articles or the bylaws of the
Corporation (and notwithstanding the fact that a lesser percentage or
separate class vote may be specified by law, these Articles or the bylaws
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<PAGE>
of the Corporation), the affirmative vote of the holders of not less than
eighty percent (80%) of the votes entitled to be cast by the holders of all
then outstanding shares of Voting Stock, voting together as a single class,
shall be required to amend or repeal, or adopt any provisions inconsistent
with, this Article VII; provided, however, that this Section G shall not
apply to, and such eighty percent (80%) vote shall not be required for, any
amendment, repeal or adoption unanimously recommended by the Board if all
of such directors are persons who would be eligible to serve as Continuing
Directors within the meaning of Section C, paragraph 8 of this Article VII.
Article VIII
To the full extent permitted by the Connecticut General Statutes as the same
exists or may hereafter be amended, no person who is or was a director of the
Corporation shall be personally liable to the Corporation or its shareholders
for monetary damages for breach of duty as a director in an amount that exceeds
the compensation received by the director for serving the Corporation during the
year of the violation. The limitation of liability of any person who is or was a
director provided for in this Article shall not be exclusive of any other
limitation or elimination of liability contained in, or pursuant to, the
Connecticut General Statutes, as the same exists or may hereafter be amended.
Any repeal or modification of this Article VIII by the shareholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
Article IX
The officers and directors of the Corporation shall be indemnified by the
Corporation to the fullest extent permitted by, or pursuant to, the Connecticut
General Statutes, as the same exists or may hereafter be amended. The
Corporation may pay for or reimburse the reasonable expenses incurred by a
director who is a party to a proceeding in advance of final disposition of the
proceeding if such director is in full compliance with Section 33-773 of the
Connecticut Business Corporation Act, as the same exists or may hereafter be
amended. Any repeal or
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modification of this Article IX shall not adversely affect any right or
protection of a director or officer of the Corporation existing at the time of
such repeal or modification.
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APPENDIX D
BYLAWS
of
HSB GROUP, INC.
ARTICLE I
SHAREHOLDERS' MEETINGS
All meetings of the Shareholders shall be held in the City of Hartford
or such other place within Connecticut as the Board of Directors may appoint.
The Annual Meeting shall be held on the 3rd Tuesday of April in each year or on
some other day within two (2) months thereafter as fixed by the Board of
Directors. Special meetings of the Shareholders may be held at such time as
fixed by the Board of Directors. Notice of every meeting of the Shareholders and
of the time and place thereof shall be given as required by law. At each meeting
of the Shareholders the President or Chairman of the Board shall preside and act
as Chairman. The Chairman may appoint a Committee on Proxies to receive, count
and report the votes cast in person at such meeting and the votes represented by
proxies. The holders of a majority of the shares of the issued and outstanding
stock entitled to vote at a meeting, present either in person or by proxy, shall
constitute a quorum for the transaction of business at such meeting of the
Shareholders. If a quorum is not present at such meeting, the Shareholders
present in person or by proxy may adjourn to such future time as shall be agreed
upon by them, and notice of such adjournment shall be given to Shareholders not
present or represented at the meeting.
Regulations for the conduct of a meeting of Shareholders may be
prescribed by the Chairman or at the Chairman's option be adopted by the
Shareholders present by voice vote or by ballot.
At any meeting of the Shareholders, only such business may be conducted
as shall have been properly brought before the meeting and as shall have been
determined to be lawful and appropriate for consideration by Shareholders at the
meeting. To be properly brought before a meeting business must be (a) specified
in the notice of meeting, (b)
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otherwise properly brought before the meeting by or at the direction of the
Board of Directors or the Chairman of the meeting, or (c) otherwise properly
brought before the meeting by a Shareholder. For business to be properly brought
before a meeting by a Shareholder pursuant to clause (c) above, the Shareholder
must have given timely notice thereof in proper written form to the Corporate
Secretary. To be timely, a Shareholder's notice to the Corporate Secretary must
be delivered to or mailed and received by the Corporate Secretary of the Company
not less than sixty nor more than ninety days prior to the anniversary of the
date on which the immediately preceding Annual Meeting of the Shareholders was
convened; provided, however, that in the event that the Annual Meeting is called
for a date that is not within thirty days before or after such anniversary date,
notice by the Shareholder in order to be timely must be received not later than
the close of business on the tenth day following the day on which such notice of
the date of the Annual Meeting was mailed or such public disclosure of the date
of the Annual Meeting was made, whichever first occurs. Such Shareholder's
notice shall set forth as to each matter the Shareholder proposes to bring
before the meeting (a) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting,
(b) the name and record address of such Shareholder, (c) the class and number of
shares of capital stock of the Company which are beneficially held by such
Shareholder and (d) any material interest of such Shareholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at a meeting except in accordance with the procedures set forth
herein. The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the procedures set forth herein, or that business was not
lawful or appropriate for consideration by Shareholders at the meeting, and if
the Chairman of the meeting should so determine, the Chairman of the meeting
shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted at that meeting.
Nominations of persons for election to the Board of Directors of the
Company may be made by the Board of
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Directors or by any Shareholder entitled to vote for the election of Directors
in compliance with the notice procedures set forth herein. Any Shareholder
entitled to vote for the election of Directors at a meeting may nominate persons
for the election of Directors only if timely written notice of such
Shareholder's intent is given to the Corporate Secretary. To be timely, a
Shareholder's notice to the Corporate Secretary must be delivered to or mailed
and received by the Corporate Secretary of the Company not less than sixty days
nor more than ninety days prior to the anniversary of the date on which the
immediately preceding Annual Meeting of the Shareholders was convened; provided,
however, that in the event that the Annual Meeting is called for a date that is
not within thirty days before or after such anniversary date, notice by the
Shareholder in order to be timely must be received not later than the close of
business on the tenth day following the day on which such notice of the date of
the Annual Meeting was mailed or such public disclosure of the date of the
Annual Meeting was made, whichever first occurs. Such Shareholder's notice shall
set forth (a) as to each person whom the Shareholder proposes to nominate for
election or re-election as a Director, (i) the name, age, business address and
residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the class and number of shares of capital stock of the
Company which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including, without limitation such person's written consent to being
named in the proxy statement as a nominee and to serving as a Director if
elected) and (b) as to the Shareholder giving the notice, (i) the name and
address, as they appear on the Company's books, of such Shareholder and, (ii)
the class and number of shares of capital stock of the Company which are
beneficially owned by such Shareholder. If the Chairman of the meeting
determines that a nomination was not in accordance with the foregoing
procedures, such nomination shall be void.
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ARTICLE II
DIRECTORS
The Board of Directors shall consist of the number of directors fixed
from time to time by resolution adopted by the affirmative vote of a majority of
the entire Board of Directors. No person shall serve as Director beyond the date
of the first Annual Meeting of Shareholders held subsequent to the Director's
seventieth birthday.
Regular and special meetings of the Board of Directors shall be held as
determined by the Directors.
At any meetings of the Board of Directors, a majority of the Directors
then in office, but not less than one-third of the directorships fixed in
accordance with this Article, shall constitute a quorum for the transaction of
business. Unless otherwise prescribed herein or in the Articles of Incorporation
of the Company, action of the Board of Directors shall be by majority vote of
the Directors present. The compensation of Directors shall be determined by the
Board of Directors.
ARTICLE III
COMMITTEES
The Board of Directors may by resolution designate two or more
Directors to constitute an executive committee or other committees, which
committees shall have and may exercise all such authority of the Board of
Directors as shall be provided in such resolution, subject to such limitations
as are provided under Section 33-753 of the Connecticut General Statutes, as it
may be amended from time to time.
The Board of Directors may by resolution designate one or more
Directors as alternate members of such committees who may replace any absent
member at any meeting of such committees upon such notice and in such manner as
may be provided in the resolution designating such alternate members.
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ARTICLE IV
OFFICERS
There shall be a President and there may be a Chairman of the Board,
each elected by the Board of Directors from their own number. The President
shall be the chief executive officer and responsible under the direction of the
Board of Directors for the supervision, management and active control of the
affairs and properties of the Company.
The Board of Directors may also elect a Corporate Secretary, a
Treasurer, one or more Executive Vice Presidents and Senior Vice Presidents.
The President shall appoint such other Officers as may be required for
the prompt and orderly transaction of the business of the Company.
Any elected Officer may be removed at the pleasure of the Directors
and any appointed Officer may also be removed by the President.
The Officers shall be subject to the direction of and shall have such
authority and perform such duties as may be assigned from time to time by the
Board of Directors or the President.
ARTICLE V
AMENDMENTS
These bylaws may be altered, amended, added to or repealed by a
majority of the entire Board of Directors at any meeting of said Board, provided
that notice thereof shall have been given in the notice of such meeting.
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STATE OF CONNECTICUT,
ss. Hartford, CT..............19
COUNTY OF HARTFORD.
The foregoing is a true copy of the bylaws of HSB Group, Inc.
Attest:___________________
Corporate Secretary
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Part II - Information Not Required in Prospectus
Item 20. Indemnification of Officers and Directors
Item 21. Exhibits. See Exhibit Index attached hereto.
Item 22. Undertakings
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(2) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(3) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
(4) To remove from registration by means of a post-effective amendment
any shares of HSB Group which are not issued in the exchange.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant
<PAGE>
to the provisions described in Item 20, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Hartford, State of
Connecticut on May --, 1997.
HSB GROUP, INC.
By: /s/ Gordon W. Kreh
Gordon W. Kreh
President, Chief
Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities
indicated, on the dates indicated.
SIGNATURE TITLE
/s/ Gordon W. Kreh President and Chief
Gordon W. Kreh Executive Officer
(Principal Executive
Officer)
/s/ Saul L. Basch Senior Vice President,
Saul L. Basch Treasurer, Chief
Financial Officer and
Director
(Principal Financial and
Accounting Officer)
/s/ R. Kevin Price Senior Vice President,
R. Kevin Price Corporate Secretary and
Director
/s/ Robert C. Walker Senior Vice President,
Robert C. Walker General Counsel and
Director
<PAGE>
EXHIBIT INDEX
(2) Agreement and Plan of Share Exchange (attached to
Prospectus and Proxy Statement as Appendix A).
(3)(i) Articles of Incorporation of HSB Group, Inc.
(attached to Prospectus and Proxy Statement as
Appendix B).
(3)(ii) Bylaws of HSB Group, Inc. (attached to Prospectus
and Proxy Statement as Appendix C).
(5)(i) Opinion of Robert C. Walker, Senior Vice President
and General Counsel
(8) Opinion of Skadden, Arps, Slate, Meagher & Flom
LLP
(23)(a) Consent of Robert C. Walker, Senior Vice President
and General Counsel (included in (5)(i))
(23)(b) Consent of Skadden, Arps, Slate, Meagher & Flom
LLP (included in (5)(ii))
(23)(c) Consent of Coopers & Lybrand L.L.P.
(99)(a) Form of Proxy Card and letter to participants in
employee plans
<PAGE>
Exhibit 5(i)
April 18, 1997
The Hartford Steam Boiler Inspection
and Insurance Company
One State Street
P.O. Box 5024
Hartford, Connecticut 06102-5024
Ladies and Gentlemen:
In connection with the preparation and filing with the Securities and Exchange
Commission pursuant to the Securities Act of 1933 (the "Act") of the
Registration Statement on Form S-4 as amended (the "Registration Statement") on
behalf of a newly formed holding company, HSB Group, Inc., a Connecticut
corporation (the "Holding Company"), relating to the issuance of 20,041,707
shares of common stock of the Holding Company (the "Common Shares"), you have
requested my opinion as to certain legal matters related to the Agreement and
Plan of Share Exchange (the "Share Exchange") pursuant to which shares of common
stock and preferred stock (the "Preferred Shares") of the Holding Company will
be exchanged on a one-for-one basis for all the outstanding shares of common
stock and Series B Convertible Preferred Stock, respectively, of The Hartford
Steam Boiler Inspection and Insurance Company (the "Company").
As counsel for the Company in this transaction, I have made such legal and
factual examination and inquiries as I have deemed advisable for the purpose of
rendering this opinion. Based upon the foregoing, it is my opinion that upon (i)
the Boards of Directors of the Company and the Holding Company having taken all
required corporate action; (ii) the Registration Statement having become
effective under the Act; (iii) the Agreement and Plan of Share Exchange (the
"Exchange Agreement"), attached as Appendix A to the Prospectus and Proxy
Statement contained in the Registration Statement (the "Prospectus") having been
duly adopted by the Company's stockholders at the Company's Special Meeting to
be held on June 23, 1997; (iv) all conditions in the Exchange Agreement to the
effectiveness of the Share Exchange provided for therein having been satisfied
and the restated Articles of Incorporation of the Holding Company substantially
in the form attached as Appendix B to the Prospectus having been duly filed with
the Secretary of State of Connecticut (the "Secretary of State"); (v) the
Articles of Share Exchange having been duly filed with the Secretary of State;
and (vi) the Common Shares and the Preferred Shares having been duly exchanged
in the transactions contemplated by the Exchange Agreement and the Prospectus;
the Common Shares and the Preferred Shares will be validly issued, fully paid
and nonassessable.
The foregoing opinion is limited to the Federal laws of the United States and
the laws of the State of Connecticut, and I am expressing no opinion as to the
effect of the laws of any other jurisdiction.
I hereby consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to the reference to me under the heading "Legal
Opinions" in the Prospectus. In giving such consent, I do not thereby admit that
I am in the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations promulgated thereunder.
Very truly yours,
Robert C. Walker
Exhibit (8)
April 18, 1997
The Hartford Steam Boiler Inspection
and Insurance Company
One State Street
P.O. Box 5024
Hartford, Connecticut 06102-5024
Ladies and Gentlemen:
You have requested our opinion as to certain Federal income
tax consequences of the Agreement and Plan of Share Exchange (the "Share
Exchange") pursuant to which shares of common stock and preferred stock of a
newly formed holding company, HSB Group, Inc., a Connecticut corporation (the
"Holding Company") will be exchanged on a one-for-one basis for all the
outstanding shares of common stock and Series B Convertible Preferred Stock,
respectively, of Hartford Steam Boiler Inspection and Insurance Company, a
Connecticut corporation (the "Company"). Following the Share Exchange, certain
other transactions will be effected as described in the Prospectus and Proxy
Statement of the Company and the Holding Company dated the date hereof (together
with the Share Exchange, the "Restructuring"), filed with the Securities and
Exchange Commission (the "Proxy Statement/Prospectus").
In connection with rendering our opinion, we have examined and are familiar
with originals or copies, certified or otherwise identified to our satisfaction,
of the Agreement and Plan of Share Exchange of the Company and the Holding
Company, dated as of March 19, 1997 among the Company and Holding Company, the
Proxy Statement/Prospectus, and such other records and documents as we have
deemed necessary or appropriate as a basis for the opinions set forth below. We
have assumed the genuineness of all signatures, the legal capacity of all
natural persons, the authenticity of all records and documents submitted to us
as originals, the conformity to original records and documents of all records
and documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such copies. As to any facts material to
this opinion that we did not independently establish or verify, we have relied
upon representations of officers of the Company. In rendering this opinion, we
have assumed that the transactions will be consummated in accordance with the
descriptions thereof set forth in such records and documents and that such
records and documents accurately reflect the material facts of the transactions.
Our opinion is limited to legal rather than factual matters.
In rendering our opinion, we have relied upon the Internal Revenue Code of
1986, as amended, Treasury Regulations, legislative history, judicial
authorities, published positions of the Internal Revenue Service and such other
authorities as we have considered relevant, all in effect as of the date hereof
and all of which are subject to change, sometimes with retroactive effect, or
differing interpretation.
Based upon and subject to the foregoing, we are of the opinion that:
(a) no gain or loss will be recognized by the Company as a result of
the Share Exchange;
(b) no gain or loss will be recognized by the stockholders of the
Company on the exchange of their shares of common stock and Series B Convertible
Preferred Stock solely for shares of Holding Company common stock and Series B
Convertible Preferred Stock, respectively, pursuant to the Share Exchange;
(c) the tax basis of the shares of Holding Company common stock and
Series B Convertible Preferred Stock received by stockholders of the Company on
the exchange of all their shares of the Company common stock and Series B
Convertible Preferred Stock in the Share Exchange solely for shares of Holding
Company common stock and Series B Convertible Preferred Stock will be the same
in the aggregate as the tax basis of the shares of the Company common stock and
Series B Convertible Preferred Stock surrendered in exchange therefor; and
(d) the holding period of the shares of Holding Company common stock
and Series B Convertible Preferred Stock received in the Share Exchange will
include the period during which the shares of the Company common stock and
Series B Convertible Preferred Stock surrendered in exchange therefor were held,
provided such shares of the Company common stock and Series B Convertible
Preferred Stock were held as capital assets at the Effective Time.
Except as set forth above, we express no other opinion. Our opinion is not
binding upon a court, and, accordingly, it is possible that the Internal Revenue
Service or a court may disagree with our conclusions. We hereby consent to the
filing of this opinion letter as an exhibit to the Proxy Statement/Prospectus.
In giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
or the rules and regulations promulgated thereunder.
Very truly yours,
Skadden, Arps, Slate, Meagher & Flom LLC
EXHIBIT (23)(c)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this registration
statement on Form S-4 of our report dated January 27, 1997, on our audit of the
consolidated financial statements and financial statement schedules of The
Hartford Steam Boiler Inspection and Insurance Company. We also consent to the
reference to us under the heading "Proposal to Approve Share Exchange--Experts".
Coopers & Lybrand L.L.P.
Hartford, Connecticut
April 18, 1997
Exhibit 99(a)
The following is the text of the Company's form of proxy and memo to employees
participating in Company plans to be used in connection with the Company's 1997
special meeting:
THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY
ONE STATE STREET, P.O. BOX 5024, HARTFORD, CONNECTICUT 06102-5024
SPECIAL MEETING OF STOCKHOLDERS - JUNE 23, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned hereby appoints Joel B. Alvord, Richard G. Dooley, Gordon W.
Kreh and Lois D. Rice, each with the power to appoint his or her substitute, and
hereby authorizes them to represent and to vote, as designated on the reverse
side, all the shares of common stock of the Company held on record by the
undersigned on April 25, 1997 at the Special Meeting of Stockholders to be held
on June 23, 1997 or any adjournment thereof, upon all matters properly coming
before said Special Meeting including but not limited to the matters set forth
on the reverse side, hereby revoking any proxy heretofore given.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSAL TO APPROVE
THE AGREEMENT AND PLAN OF SHARE EXCHANGE.
(Important - To be signed and dated on reverse side)
SEE REVERSE SIDE
[LOGO]
THIS IS YOUR PROXY. YOUR VOTE IS IMPORTANT
Regardless of whether you plan to attend the Special Meeting of Stockholders,
you can be sure your shares are represented at the meeting by promptly returning
your proxy in the enclosed envelope.
The proposal to be presented to stockholders at the Special Meeting involves the
formation of a holding company structure as described in more detail in the
enclosed Prospectus and Proxy Statement. For the reasons stated in the
accompanying materials, the Board of Directors believes that the formation of
such a holding company structure is in the best interests of the Company and its
stockholders and recommends a vote "FOR" the the proposal to approve the
Agreement and Plan of Share Exchange.
/X/ Please mark votes as in this example.
The Board of Directors recommends a vote FOR the following proposal:
Approval of Agreement and Plan of Share Exchange in connection with formation
of revised holding company structure.
/ /FOR
/ /AGAINST
/ /ABSTAIN
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
MARK HERE IF YOU HAVE MADE COMMENTS / /
Please sign exactly as your name appears. If acting as attorney, executor,
trustee or in other representative capacity, sign name and print title. Please
date proxy and return in the enclosed post-paid return envelope.
Signature: --------------------------- Date:----------
Signature: --------------------------- Date:----------
<PAGE>
To: Employees of The Hartford Steam Boiler Inspection and Insurance Company
From: R. K. Price, Senior Vice President and Corporate Secretary
Date:
If you are a participant in any of the Company's stock plans (Payroll Investment
Plan, Employee Stock Ownership Plan, Thrift Incentive Plan - HSB Stock Fund, or
the Stock Option and Restricted Stock Plan), you should receive proxy materials
for the Company's Special Meeting to be held on June 23, 1997 through the U.S.
mail shortly.
Included with the proxy materials is a card upon which to register your vote in
connection with action proposed to be taken at the Special Meeting. The proxy
card lists the number of shares allocated to your account under each of the
plans in which you participate, as well as any shares you hold directly. The
following abbreviations are used to identify your holdings:
COM - Shares held directly or through the Payroll Investment
Plan
RST - Restricted Stock held under the Stock Option and
Restricted Stock Plan
TIP - Shares allocated to your account under the Thrift Incentive Plan if
you participate in the HSB Stock Fund
ESO - Shares allocated to your account under the Employee Stock Ownership
Plan (ESOP)
If you hold shares jointly with another individual or as custodian for a minor's
account, you will receive a separate card for that account.
Whether you own one share or a thousand, it is very important that your shares
be represented at the Special Meeting. As a shareholder, you have the right and
an obligation to have your vote count at the Special Meeting. I encourage you to
use this opportunity by completing the proxy card and returning it in the
envelope provided.
If you do not receive your materials by May 20, or if you misplace your card,
please contact Jean Cohn, Home Office, Ext. 5724.
