SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - December 30, 1994
THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
Connecticut 0-13300 06-0384680
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One State Street, Hartford, Connecticut 06102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - (203-722-1866)
</page>
<PAGE>
Item 2. Acquisition or Disposition of Assets
On December 30, 1994 The Hartford Steam Boiler Inspection and
Insurance Company (HSB) completed the acquisition of General
Reinsurance Corporation's 50% interest in Engineering Insurance
Group (EIG), a partnership of HSB and General Reinsurance formed
in 1988 to provide machinery breakdown insurance to business and
industry outside the United States and Canada.
According to the terms of the transaction, HSB and General
Reinsurance contributed their partnership interests to a newly
formed corporation, EIG Co., in exchange for which HSB received
all of the outstanding common shares of EIG Co. and General
Reinsurance received preferred stock of EIG Co. with a stated
value of $20 million and a dividend rate of 6.5% per annum.
Subject to certain conditions, after a minimum period of two
years the preferred stock can be exchanged for 6.5% preferred
stock of HSB which is convertible, at General Reinsurance's
option, into 398,370 common shares of HSB.
Following the acquisition, Engineering Insurance Company,
Limited, the insurance operating subsidiary of EIG Co. will
remain a fully capitalized insurer based in London.
The transaction has been accounted for as a purchase by HSB. The
terms of the acquisition are more fully described in the
Transaction Agreement filed herewith as Exhibit 2.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Audited financial statements of EIG Co. will be filed as an
amendment to this Form 8-K by no later than March 15, 1995.
(b) Pro Forma Financial Information
The following pro forma consolidated condensed financial
statements of The Hartford Steam Boiler Inspection and Insurance
Company are filed herewith:
Pro Forma Condensed Consolidated Statement of Financial
Position as of September 30, 1994 (Unaudited)
Pro Forma Condensed Consolidated Income Statement for the Nine
Months ended September 30, 1994 (Unaudited)
Pro Forma Condensed Consolidated Income Statement for the Year
Ended December 31, 1993 (Unaudited)
Notes to Unaudited Pro Forma Condensed Consolidated Statement
of Financial Position
Notes to Unaudited Pro Forma Condensed Consolidated Income
Statements
(c) Exhibits
The following exhibit is filed with this Form 8-K:
2. Transaction Agreement between The Hartford Steam Boiler
Inspection and Insurance Company and General
Reinsurance Corporation dated December 30, 1994.
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE HARTFORD STEAM BOILER
INSPECTION AND INSURANCE COMPANY
Dated: January 16, 1995 /s/ Robert C. Walker
Robert C. Walker
Senior Vice President
</page>
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Page No.
2 Transaction Agreement between The Hartford Steam
Boiler Inspection and Insurance Company and General
Reinsurance Corporation dated December 30, 1994
</page>
<PAGE>
The Hartford Steam Boiler Inspection and Insurance Company
Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
The following unaudited pro forma condensed consolidated
statements of income for HSB for the nine months ended
September 30, 1994 and year ended December 31, 1993, present
consolidated operating results for HSB as if HSB's acquisition
of 50% of EIG not previously owned by HSB had occurred as of
January 1, 1993. The accompanying unaudited pro forma
condensed consolidated Statement of Financial Position as of
September 30, 1994 gives effect to the 50% acquisition as if
it had occurred as of September 30, 1994. The unaudited pro
forma condensed financial data does not purport to represent
what HSB's financial position or results of operations
actually would have been had the transaction in fact occurred
on the dates indicated, or to project HSB's financial position
or results of operations for any future period. The pro forma
adjustments are based upon available information and certain
assumptions believed to be reasonable in the circumstances.
The unaudited pro forma consolidated financial information
should be read in conjunction with the accompanying notes
thereto and the separate historical financial statements of
HSB as of and for the nine months ended September 30, 1994,
and for the year ended December 31, 1993, which are contained
in HSB's Form 10-Q for the quarterly period ended September
30, 1994 and in its Annual Report on Form 10-K for the year
ended December 31, 1993, respectively.
The pro forma adjustments are provided for informational
purposes only and are applied to the historical consolidated
financial statements of HSB and EIG to account for the
acquisition as a purchase. Under purchase accounting the
total purchase price will be allocated to EIG Co. assets and
liabilities based upon relative fair values.
<PAGE>
Hartford Steam Boiler Inspection and Insurance Company
Pro Forma Condensed Consolidated Statement of Financial Position (Unaudited)
September 30, 1994
(in millions)
<TABLE>
HSB EIG Pro Forma Pro Forma
Historical Historical 100% Adjustments HSB
---------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS:
CASH $ 6.70 $ 1.20 $ 7.90
SHORT-TERM INVESTMENTS 66.80 16.30 83.10
FIXED MATURITIES 161.60 39.10 200.70
EQUITY SECURITIES 213.00 213.00
--------- --------- ---------
TOTAL CASH & INVESTED ASSETS 448.10 56.60 504.70
INSURANCE PREMIUMS RECEIVABLE 62.80 15.20 78.00
ENGINEERING SERVICES RECEIVABLE 72.30 72.30
FIXED ASSETS 60.90 1.80 62.70
PARTICIPATION IN POOLS & ASSOCIATIONS 8.60 $ (8.10)(B) 0.50
PREPAID ACQUISITION COSTS 30.60 4.10 34.70
CAPITAL LEASE 17.70 17.70
REINSURANCE RECOVERABLE 37.40 13.70 51.10
OTHER ASSETS 74.00 9.70 11.90 (A) 95.60
--------- --------- -------- ---------
TOTAL ASSETS $ 812.40 $ 101.10 $ 3.80 $ 917.30
========= ========= ======== =========
LIABILITIES:
UNEARNED INSURANCE PREMIUMS $ 165.60 $ 27.80 $ 193.40
CLAIMS AND ADJUSTMENT EXPENSES 187.10 27.70 214.80
SHORT-TERM BORROWINGS 31.10 24.00 $ 0.20 (A) 55.30
LONG-TERM BORROWINGS 0.60 0.60
CAPITAL LEASE 27.80 27.80
DEFERRED INCOME TAXES (3.00) (1.30) (0.10)(A) (4.40)
DIVIDEND PAYABLE 11.30 11.30
EMPLOYEE STOCK OWNERSHIP PLAN 2.20 2.20
OTHER LIABILITIES 85.90 6.60 20.00 (A) 112.50
--------- --------- -------- ---------
TOTAL LIABILITIES 508.60 84.80 20.10 613.50
--------- --------- -------- ---------
PARTNERSHIP INTEREST/COMMON EQUITY 16.30 (16.30)(A)(B) 0.00
PREFERRED STOCK 20.00 (A)
(20.00)(A) 0.00
COMMON STOCK 10.00 10.00
ADDITIONAL PAID-IN CAPITAL 34.00 34.00
UNREALIZED INVESTMENT GAINS, NET OF TAX 20.60 20.60
RETAINED EARNINGS 285.90 285.90
TREASURY STOCK, @ COST (40.20) (40.20)
BENEFIT PLANS (6.50) (6.50)
--------- --------- -------- ---------
TOTAL SHAREHOLDER'S EQUITY 303.80 16.30 (16.30) 303.80
--------- --------- -------- ---------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 812.40 $ 101.10 $ 3.80 $ 917.30
========= ========= ======== =========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Statement
of Financial Position.
</page>
<PAGE>
The Hartford Steam Boiler Inspection and Insurance Company
Notes to Unaudited Pro Forma Condensed Consolidated
Statement of Financial Position
(A) Pro forma adjustments reflecting the issuance of EIG Co. preferred stock
and the resulting minority interest position reflected on HSB's
consolidated statement of financial position. Pro forma adjustments
resulting from the allocation of purchase price based on relative fair
values of underlying net assets acquired are as follows:
- Excess purchase price over fair value of net assets acquired.
- Premium allocated to short term debt based on current interest rates.
- Adjustment to deferred tax asset based upon other purchase adjustments.
(B) Adjustments to eliminate HSB's 100% interest in EIG partnership, including
the 50% interest previously reported on the equity basis of accounting.
</page>
<PAGE>
Hartford Steam Boiler Inspection and Insurance Company
Pro Forma Condensed Consolidated Income Statement (Unaudited)
For the Nine Months Ended September 30, 1994
(in millions except per share amounts)
<TABLE>
HSB EIG Pro Forma Pro Forma
Historical Historical Adjustments HSB Consolidated
---------- ---------- ----------- ----------------
<S> <C> <C> <C> <C>
REVENUES:
INSURANCE PREMIUMS $ 255.40 $ 22.90 $ 278.30
NET ENGINEERING SERVICES 172.00 172.00
NET INVESTMENT INCOME 19.10 3.70 22.80
REALIZED INVESTMENT GAINS 8.20 (0.10) 8.10
--------- --------- ---------
TOTAL REVENUES 454.70 26.50 481.20
EXPENSES:
CLAIMS AND ADJUSTMENT 111.00 9.40 120.40
POLICY ACQUISITION 48.00 4.90 52.90
UNDERWRITING & INSPECTION 80.10 4.80 84.90
NET ENGINEERING SERVICES 158.80 2.80 161.60
OTHER 1.20 2.40 $ (0.2) (a) 5.20
0.8 (b)
1.0 (c)
PROPOSITION 103 2.90 2.90
--------- --------- -------- ---------
TOTAL EXPENSES 402.00 24.30 1.6 427.90
EQUITY IN OPERATIONS OF INS. ASSOC. 1.10 (1.1) (d) 0.00
INCOME BEFORE TAXES AND CUMULATIVE --------- --------- -------- ---------
EFFECT OF CHANGE IN ACCTG. PRIN. 53.80 2.20 (2.7) 53.30
--------- --------- -------- ---------
INCOME TAXES:
CURRENT 12.70 1.10 (1.0) (e) 12.20
(0.6) (f)
DEFERRED 2.60 0.80 3.40
--------- --------- -------- ---------
TOTAL INCOME TAXES 15.30 1.90 (1.6) 15.60
INCOME BEFORE CUMULATIVE EFFECT --------- --------- -------- ---------
OF CHANGE IN ACCTG. PRIN. $ 38.50 $ 0.30 $ (1.1) $ 37.70
========= ========= ======== =========
PER SHARE:
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCTG. PRIN. $ 1.88 $ 1.84
========= =========
AVERAGE SHARES OUTSTANDING 20.50 20.50
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Income
Statement.
</PAGE>
<PAGE>
Hartford Steam Boiler Inspection and Insurance Company
Pro Forma Condensed Consolidated Income Statement (Unaudited)
For the Year Ended December 31, 1993
(in millions except per share amounts)
<TABLE>
HSB EIG Pro Forma Pro Forma
Historical Historical Adjustments HSB Consolidated
---------- ---------- ----------- ----------------
<S> <C> <C> <C> <C>
REVENUES:
INSURANCE PREMIUMS $ 349.20 $ 23.90 $ 373.10
NET ENGINEERING SERVICES 231.50 231.50
NET INVESTMENT INCOME 29.30 8.40 37.70
REALIZED INVESTMENT GAINS 26.10 26.10
--------- -------- ---------
TOTAL REVENUES 636.10 32.30 668.40
EXPENSES:
CLAIMS AND ADJUSTMENT 199.10 14.40 213.50
POLICY ACQUISITION 64.20 5.00 69.20
UNDERWRITING & INSPECTION 112.30 5.40 117.70
NET ENGINEERING SERVICES 219.70 3.30 223.00
OTHER 1.80 8.40 $ (0.4) (a) 12.10
1.0 (b)
1.3 (c)
RESTRUCTURING 20.00 20.00
--------- --------- -------- ---------
TOTAL EXPENSES 617.10 36.50 1.9 655.50
EQUITY IN OPERATIONS OF INS. ASSOC. (2.10) 2.1 (d) 0.00
INCOME BEFORE TAXES AND CUMULATIVE --------- --------- -------- ---------
EFFECT OF CHANGE IN ACCTG. PRIN. 16.90 (4.20) 0.2 12.90
--------- --------- -------- ---------
INCOME TAXES:
CURRENT 6.90 1.40 (0.9) (e) 5.90
(1.5) (f)
DEFERRED (3.10) 0.30 (2.80)
--------- --------- -------- ---------
TOTAL INCOME TAXES 3.80 1.70 (2.4) 3.10
INCOME BEFORE CUMULATIVE EFFECT --------- --------- -------- ---------
OF CHANGE IN ACCTG. PRIN. $ 13.10 $ (5.90) $ 2.6 $ 9.80
========= ========= ======== =========
PER SHARE:
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCTG. PRIN. $ 0.63 $ 0.47
========== =========
AVERAGE SHARES OUTSTANDING 20.7 20.7
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Income
Statement.
</PAGE>
<PAGE>
The Hartford Steam Boiler Inspection and Insurance Company Notes to Unaudited
Pro Forma Condensed Consolidated Income Statements
(a) Adjustment to reflect elimination of amortization of goodwill and other
intangibles on EIG's financials resulting from the original investment.
(b) Adjustment to reflect amortization of goodwill arising from the current
transaction over a 15 year period.
(c) Adjustment to reflect preferred stock dividend paid to minority interest
resulting from the transaction.
(d) Adjustment to eliminate HSB's original 50% interest in the historical
earnings of EIG, reported on the equity basis of accounting.
(e) Adjustment to eliminate HSB's existing 50% share of taxes arising from
EIG's consolidated incorporated subsidiary, Engineering Insurance Company,
Limited.
(f) Adjustment to reflect HSB's tax provision on the EIG partnership activity
for the 50% portion not previously owned.
</page>
TRANSACTION AGREEMENT
Transaction Agreement (the "Agreement"), dated
as of December 30, 1994, by and between The Hartford Steam
Boiler Inspection and Insurance Company, a Connecticut
corporation ("Hartford"), and General Reinsurance Corpora-
tion, a Delaware corporation ("GenRe").
Hartford and GenRe currently each hold a 50%
general partnership interest in Engineering Insurance
Group, a Connecticut partnership (the "Partnership").
Hartford and GenRe desire to exchange their interests
(each an "Interest") in the Partnership for stock of EIG,
Co., a newly formed Delaware corporation ("Newco"), on the
terms hereinafter set forth.
In order to implement the foregoing and in
consideration of the mutual representations, warranties,
covenants and agreements contained herein, the parties
hereto agree as follows:
1. Transaction.
1.1. Formation of Newco. Upon the terms and
subject to the conditions set forth in this Agreement,
Hartford, in reliance upon the representations, warranties
and agreements contained herein, hereby agrees to transfer
all of its Interest in the Partnership, on the Closing
Date (as defined below), to Newco in exchange for 200
shares of common stock of Newco, per value $.01 per share
(the "Newco Common Stock"). At the Closing (as defined
below), Hartford shall also acquire 35 additional shares
of Newco Common Stock for $3.5 million in cash.
1.2. Exchange. Upon the terms and subject to
the conditions set forth in this Agreement, GenRe, in
reliance upon the representations, warranties and agree-
ments contained herein, hereby agrees to transfer all of
its Interest in the Partnership, on the Closing Date (as
defined in Section 1.3 below), to Newco in exchange for
2,000 shares of Series A Cumulative Preferred Stock of
Newco having the terms and preferences set forth in Exhib-
it A (the "Newco Preferred Stock").
1.3. The Closing. The closing (the "Closing")
of the transactions contemplated by Sections 1.1 and 1.2
shall take place on December 30, 1994 or as soon thereaf-
ter as is practicable. On the date the Closing occurs
(the "Closing Date"), GenRe shall transfer its Interest to
Newco and Newco shall deliver GenRe a certificate or
certificates registered in GenRe's name representing the
Newco Preferred Stock. On the Closing Date, Hartford
shall transfer its Interest to Newco and Newco shall
deliver to Hartford a certificate or certificates regis-
tered in Hartford's name representing the Newco Common
Stock.
2. Further Agreements.
2.1. Keepwell. Hartford hereby agrees, for the
express benefit of GenRe (and not for the benefit of any
person not a party hereto), to provide Newco with suffi-
cient funds to pay any debt or equity obligation of Newco
upon maturity or redemption, as the case may be (by accel-
eration or otherwise), and to pay dividends on the Newco
Preferred Stock as such dividends become due. Hartford
further agrees that it will cause the Board of Directors
of Newco to declare and pay dividends on the Newco Pre-
ferred Stock for each and every "Dividend Period" (as that
term is defined in Exhibit A), subject to the requirements
of applicable law.
2.2. Call. Hartford, at any time within a
twenty-business day period commencing on the second anni-
versary of the Closing, may elect to exchange 2,000 shares
of Series B Convertible Preferred Stock of Hartford to be
issued pursuant to a certificate of designation in the
form of Exhibit B hereto (the "Hartford Preferred Stock")
for the Newco Preferred Stock, such shares of Newco Pre-
ferred Stock to be duly issued, fully paid and nonassess-
able and such exchange to be consummated as promptly as
practicable after such election.
2.3. Put. GenRe, at any time within a twenty-
business day period commencing on the fifth anniversary of
the Closing, may elect to exchange the Newco Preferred
Stock for 2,000 shares of Hartford Preferred Stock, such
shares to be duly issued, fully paid and nonassessable and
such exchange to be consummated as promptly as practicable
after such election.
2.4. Financial Statements. Promptly after the
Closing Date, Hartford will cause Newco to prepare finan-
cial statements of Newco as of the Closing Date. Such
financial statements will be delivered to Hartford and
GenRe.
3. Representations, Warranties and Agreements of
Hartford. Hartford represents and warrants to GenRe as
follows:
(a) Hartford has all requisite corporate
power and authority to enter into, execute, deliver and
consummate the transactions contemplated by this Agreement
and this Agreement has been duly authorized, executed and
delivered by Hartford and is a valid and binding obli-
gation of Hartford enforceable against Hartford in accor-
dance with its terms;
(b) the Hartford Preferred Stock, when
issued and delivered in accordance with the terms hereof,
will be duly and validly issued, fully paid and nonas-
sessable;
(c) neither the execution and delivery by
Hartford of this Agreement nor the consummation by Hart-
ford of the transactions contemplated hereby will violate
any provision of the Charter (as in effect at the Closing)
or By-Laws of Hartford, any law or regulation applicable
to Hartford or to which its properties are subject or
result in any material breach of any terms or provisions
of, or constitute a material default under, any material
contract, agreement or instrument to which Hartford is a
party or by which Hartford is bound;
(d) Hartford has not entered into any
agreement to pay any brokers or finders fee to any person
with respect to this Agreement or the transactions contem-
plated hereby;
(e) at the time of the Closing, the autho-
rized capital stock of Hartford will consist of 50,000,000
shares of Common Stock, of which approximately 20,500,000
shares were issued and outstanding as of September 30,
1994, and 500,000 shares of Preferred Stock, without par
value, of which a series of the Company's Preferred Stock
known as the Series A Preferred Stock has been authorized
and of which no shares are outstanding and of which a
series of the Company's Preferred Stock known as the
Series B Preferred Stock has been created and of which no
shares will be outstanding. At the time of the Closing,
(A) all outstanding shares of Common Stock will be validly
issued, fully paid and non-assessable, (B) Hartford will
not have any outstanding stock or securities convertible
into or exchangeable or exercisable for any shares of its
capital stock, nor will it have outstanding any rights to
subscribe for or to purchase, or any options for the
purchase of, or any agreements, providing for the issuance
(contingent or otherwise) of, or any calls, commitments or
claims of any character relating to, any shares of capital
stock or any securities convertible into or exchangeable
or exercisable for any shares of capital stock, except
pursuant to the terms of the Preferred Stock, the rights
issued under Hartford's Shareholder Rights Plan and for
employee stock options and (C) Hartford will not be sub-
ject to any obligation (contingent or otherwise) to pur-
chase or otherwise acquire or retire any shares of its
capital stock. The issuance of the Hartford Preferred
Stock as contemplated hereby will not violate any preemp-
tive or similar right of any stockholder of Hartford; and
(f) at the Closing, Newco will acquire
from Hartford good and marketable title to the Interest
currently held by Hartford, free and clear of any lien,
charge, claim, pledge, option, encumbrance or other rights
of third parties.
4. Representations, Warranties and Agreements of GenRe.
GenRe represents and warrants to Hartford, as follows:
(a) GenRe has all requisite power and au-
thority to enter into, execute, deliver and consummate the
transactions contemplated by this Agreement, and this
Agreement has been duly executed and delivered by GenRe
and is a valid and binding obligation of GenRe enforceable
against GenRe in accordance with its terms; and
(b) neither the execution and delivery by
GenRe of this Agreement nor the consummation by GenRe of
the transactions contemplated hereby will violate any
provision of the Certificate of Incorporation (as in
effect at the Closing) or By-Laws of GenRe, any law or
regulation applicable to GenRe or to which its properties
are subject or result in any material breach of any terms
or provisions of, or constitute a material default under,
any material contract, agreement or instrument to which
GenRe is a party or by which GenRe is bound;
(c) GenRe has not entered into any agree-
ment to pay any brokers or finders fee to any person with
respect to this Agreement or the transactions contemplated
hereby; and
(d) at the Closing, Newco will acquire
from GenRe good and marketable title to the Interest
currently held by GenRe, free and clear of any lien,
charge, claim, pledge, option, encumbrance or other rights
of third parties.
5. Investment Representations; Transfer Restriction.
5.1. Investment Intention; No Resales. GenRe,
with respect to all of the shares of Newco Preferred Stock
to be acquired by it hereunder (or shares of Hartford
Preferred Stock issuable upon exchange thereof), and Hart-
ford, with respect to the Newco Common Stock to be ac-
quired by it hereunder, each represents and warrants that
it is acquiring such shares for investment solely for its
own account and not with a view to, or for resale in
connection with, the distribution thereof and not with a
present intention of distribution. Each such party agrees
and acknowledges (to the other and for the benefit of
Newco) that, it will not, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate or otherwise
dispose of any of such shares, or solicit any offers to
purchase or otherwise acquire or take a pledge of any of
such shares, unless such offer, transfer, sale, assign-
ment, pledge, hypothecation or other disposition is pursu-
ant to an effective registration statement under the
Securities Act of 1933, as amended (the "Act"), and has
been registered under all applicable state securities and
"blue sky" laws or such party shall have furnished Newco
(or, in the case of Hartford Preferred Stock, Hartford)
with an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to Newco (or, in the case
of Hartford Preferred Stock, Hartford), to the effect that
no such registration is required because of the availabil-
ity of an exemption from registration under the Act and
all applicable state securities and "blue sky" laws.
5.2. Federal Securities Laws Matters. Each of
GenRe and Hartford hereby further represents and warrants
to the other and for the benefit of Newco that it is
familiar with Release No. 5226 issued by the Securities
and Exchange Commission under the Act, it has consulted
with its counsel with regard thereto, and it is fully
aware of the position of the Commission limiting the
resale to the public of any shares of Newco Preferred
Stock, Hartford Preferred Stock or Newco Common Stock.
5.3. Additional Investment Representations.
Each of GenRe and Hartford hereby further represents and
warrants to the other and for the benefit of Newco that
either (i) it is an "Accredited Investor" (as such term is
defined in Rule 501 of Regulation D under the Act) or (ii)
(A) its financial situation is such that it can afford to
bear the economic risk of holding the shares of Newco
Preferred Stock, Hartford Preferred Stock or Newco Common
Stock for an indefinite period of time, (B) it can afford
to suffer complete loss of its investment in the shares of
Newco Preferred Stock, Hartford Preferred Stock or Newco
Common Stock, and (C) its knowledge and experience in
financial and business matters are such that it is capable
of evaluating the merits and risks of investment in the
shares of Newco Preferred Stock, Hartford Preferred Stock
or Newco Common Stock.
5.4. Transfer Restriction; Certain Permitted
Transfers. GenRe shall not transfer the shares of Newco
Preferred Stock at any time prior to the second anniversa-
ry of the Closing Date (the "Second Anniversary") without
the prior written consent of Hartford, which consent may
be withheld in Hartford's sole discretion. Hartford shall
not transfer the shares of Newco Common Stock acquired
hereunder at any time prior to the Second Anniversary
without the prior written consent of GenRe, which consent
may be withheld in GenRe's sole discretion. The certifi-
cates with respect to the shares of Newco Common Stock or
Newco Preferred Stock acquired hereunder will contain a
legend which shall refer to this restriction. Anything to
the contrary in this Agreement notwithstanding, each of
GenRe and Hartford may transfer any of its shares of Newco
Preferred Stock, Hartford Preferred Stock or Newco Common
Stock to any subsidiary of such party who is an Accredited
Investor, and no opinion of counsel as to the availability
of an exemption under the Act is required in connection
therewith.
6. Conditions to Obligations of GenRe.
The obligation of GenRe hereunder is subject to
the performance by Hartford on or prior to the Closing
Date of all of the agreements of Hartford to be performed
hereunder and to the satisfaction on or prior to the
Closing Date of each of the following further conditions:
6.1. Representations and Warranties of Hart-
ford. The representations and warranties of Hartford con-
tained in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date.
6.2. Purchase Permitted by Applicable Laws.
The acquisition of the Newco Preferred Stock on the terms
and conditions herein provided shall not violate any
applicable law or governmental regulation and shall not
subject GenRe to any tax, penalty, liability or other
onerous condition under or pursuant to any applicable law
or governmental regulation, and GenRe shall have received
such certificates or other evidence as GenRe may request
to establish compliance with this condition.
6.3. Consents. All consents, approvals and
waivers from governmental authorities and other parties
necessary to consummate the transactions hereby shall have
been obtained.
6.4. No Proceedings. No suit, action, investi-
gation, inquiry or other proceeding by any governmental
authority or other person shall have been instituted or
threatened which questions the validity or legality of the
transactions contemplated hereby.
7. Conditions to the Obligations of Hartford.
The obligation of Hartford hereunder is subject
to the performance by GenRe on or prior to the Closing
Date of all of the agreements of GenRe to be performed
hereunder and to the satisfaction on or prior to the
Closing Date of each of the following further conditions:
7.1. Representations and Warranties of GenRe.
The representations and warranties of GenRe contained in
Section 4 hereof shall be true and correct in all material
respects as of the Closing Date.
7.2. Purchase Permitted by Applicable Laws.
The acquisition of the Common Stock on the terms and
conditions herein provided shall not violate any applica-
ble law or governmental regulation and shall not subject
Hartford to any tax, penalty, liability or other onerous
condition under or pursuant to any applicable law or
governmental regulation, and Hartford shall have received
such certificates or other evidence as Hartford may re-
quest to establish compliance with this condition.
7.3. Consents. All consents, approvals and
waivers from governmental authorities and other parties
necessary to consummate the transactions hereby shall have
been obtained.
7.4. No Proceedings. No suit, action, investi-
gation, inquiry or other proceeding by any governmental
authority or other person shall have been instituted or
threatened which questions the validity or legality of the
transactions contemplated hereby.
8. Miscellaneous
8.1. Blue Sky. Each party agrees to use its
reasonable best efforts to comply with all state securi-
ties and "blue sky" laws which might be applicable to the
transaction, contemplated hereby.
8.2. Binding Effect. The provisions of this
Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs,
successors and assigns.
8.3. Severability. The invalidity, illegality
or unenforceability of one or more of the provisions of
this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of
this Agreement in such jurisdiction or the validity,
legality or enforceability of this Agreement, including
any such provision, in any other jurisdiction, it being
intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent
permitted by law.
8.4. Amendment. This Agreement may be amended,
modified or supplemented only by a written instrument
executed by each party hereto.
8.5. Notices. All notices and other communica-
tions provided for herein shall be dated and in writing
and shall be deemed to have been duly given when deliv-
ered, if delivered personally or sent by registered or
certified mail, return receipt requested, postage prepaid
and when received if delivered otherwise, to the party to
whom it is directed:
(i) If to Hartford, to it at the fol-
lowing address:
The Hartford Steam Boiler Inspection
and Insurance Company
One State Street
Hartford, CT 06102
Attention: Roberta A. O'Brien, Esq.
(ii) If to GenRe, to it at the fol-
lowing address:
General Reinsurance Corporation
Financial Centre
695 East Main Street
P.O. Box 10350
Stamford, CT 06904-2350
Attention: Nicholas S. Canelos, Esq.
or at such other address as either party shall have speci-
fied by notice in writing to the other in accordance with
this Section 8.5 (provided, that any notice specifying a
change of address shall be deemed to have been given only
upon receipt).
8.6. Applicable Law. The laws of the State of
Connecticut shall govern the interpretation, validity and
performance of the terms of this Agreement, regardless of
the law that might be applied under applicable principles
of conflicts of law.
8.7. Integration. This Agreement constitutes
the entire agreement and understanding of the parties with
respect to the matters contained herein. There are no re-
strictions, agreements, promises, representations, warran-
ties, conditions, covenants, or undertakings with respect
to the subject matter hereof or thereof other than those
expressly set forth herein or therein. This Agreement
supersedes all prior agreements and understandings between
the parties with respect to the subject matter hereof.
8.8. Descriptive Headings. The headings in
this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning of terms
contained herein.
8.9. Counterparts. This Agreement may be exe-
cuted in counterparts, each of which shall be deemed to be
an original, but all of which shall constitute one and the
same instrument.
8.10. Expenses. Whether or not this Agreement
and the transactions contemplated hereby are consummated,
all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses.
8.11. Rights Cumulative; Waiver. The rights
and remedies of each party shall be cumulative and not
exclusive of any rights or remedies which it would other-
wise have hereunder or at law or in equity or by statute,
and no failure or delay by such party in exercising any
right or remedy shall impair any such right or remedy, nor
shall any single or partial exercise of any power or right
preclude its other or further exercise or the exercise of
any other power or right. The waiver by any party hereto
of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any preceding or
succeeding breach and no failure by either party to exer-
cise any right or privilege hereunder shall be deemed a
waiver of such party's rights or privileges hereunder or
shall be deemed a waiver of such party's rights to exer-
cise the same at any subsequent time or times hereunder.
IN WITNESS WHEREOF, each party has executed this
Agreement as of the date first above written.
GENERAL REINSURANCE CORPORATION
By: _________________________
Name:
Title:
THE HARTFORD STEAM BOILER INSPECTION
AND INSURANCE COMPANY
By:_________________________
Name:
Title:
Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A CUMULATIVE PREFERRED STOCK
of
EIG, CO.
Pursuant to Section 151 of the Delaware General
Corporation Law
EIG, CO., a corporation organized and existing
under and by virtue of the laws of Delaware (hereinafter
called the "Corporation"), pursuant to the provisions of
Section 151 of the Delaware General Corporation Law, does
by Michael L. Downs, its President, and Roberta A.
O'Brien, its Corporate Secretary, hereby certify that,
pursuant to authority expressly vested in the Board of
Directors of the Corporation by the provisions of its
Certificate of Incorporation, said Board of Directors at
a meeting duly called and held on ___________, duly
adopted resolutions providing for the issuance of a
series of Preferred Stock, without par value, of the
Corporation and setting forth the voting powers, designa-
tion, preferences and relative, participating, optional
and other special rights of such series and the qualifi-
cation, limitation and restrictions of such rights, to
the extent that the foregoing are not set forth in the
Certificate of Incorporation of the Corporation, which
resolutions are as follows:
RESOLVED, that pursuant to the authority vested
in the Board of Directors of this Corporation in accor-
dance with the provisions of its Certificate of Incorpo-
ration, a series of Preferred Stock of the Corporation be
and it hereby is created, and that the designation and
amount thereof and the voting powers, preferences and
relative, participating, optional and other special
rights of the shares of such series, and the qualifica-
tions, limitations or restrictions thereof are as fol-
lows:
SECTION 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 A Cumulative Pre-
ferred Stock (the "Series A Preferred Stock").
SECTION 2. Definitions. For purposes of the
Series A Preferred Stock, the following terms shall have
the meanings indicated:
2.1 "Board of Directors" shall mean the board
of directors of the Corporation or any committee autho-
rized by such board of directors to perform any of its
responsibilities with respect to the Series A Preferred
Stock.
2.2 "Business Day" shall mean any day other
than a Saturday, Sunday or a day on which state or feder-
ally chartered banking institutions in New York, New York
are not required to be open.
2.3 "Certificate" shall mean the Certificate
of Incorporation of the Corporation, as amended from time
to time.
2.4 "Common Stock" shall mean the common stock
of the Corporation, without par value.
2.5 "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 April
in 1995; 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.
2.6 "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 February 1, 1995
and end on and include April 27, 1995).
2.7 "Equivalent Amount" shall mean an amount
equal to what the Net After-Tax Return (as defined below)
would have been had the regular cash dividend to a holder
of Series A Preferred Stock at the Base Rate been paid
entirely out of the current or accumulated earnings and
profits of the Corporation for Federal income tax purpos-
es. "Net After-Tax Return" means, with respect to any
regular cash dividend that would have been paid at the
Base Rate on shares of Series A Preferred Stock, the
amount of such regular cash dividend less the Federal
corporate income tax to which such regular cash dividend
would be subject, giving effect to the deduction then
allowed domestic corporations (the "Dividends Received
Deduction") with respect to dividends received that are
paid out of the current or accumulated earnings and
profits of the Corporation, as determined for Federal
income tax purposes. For purposes of the foregoing, (A)
the portion of any regular cash dividend not made out of
current or accumulated earnings and profits of the Corpo-
ration, as determined for Federal income tax purposes,
otherwise treated as a return of capital, shall be treat-
ed as gain received by a domestic insurance corporation
upon a taxable sale or exchange of shares of Preferred
Stock, (B) the applicable tax rate and the percentage of
the dividend at the Equivalent Amount, if any, that
qualifies for the Dividends Received Deduction shall
respectively be assumed to be the highest marginal Feder-
al corporate income tax rate and the highest percentage
that would apply to the dividend under the law in effect
at the time of the payment of the dividend if received by
a holder of Preferred Stock that is a domestic insurance
corporation generally eligible for the Dividends Received
Deduction and reporting taxable income based on a calen-
dar year, disregarding any minimum tax, and (C) the char-
acter of the dividend at the Equivalent Amount for Feder-
al income tax purposes shall be as determined under the
law in effect when such dividend is paid.
2.8 "Gross-Up Event" shall mean that all or a
portion of a dividend payment with respect to the Series
A Preferred Stock shall constitute a return of capital.
2.9 "Issue Date" shall mean the first date on
which shares of Series A Preferred Stock are issued and
sold.
2.10 "Junior Stock" shall mean the Common
Stock and any class or series of shares of preferred
stock of the Corporation other than the Series A Pre-
ferred Stock.
2.11 "Liquidation Preference" shall have the
meaning set forth in Section 4.1 hereof.
2.12 "Person" shall mean any individual, firm,
partnership, corporation or other entity, and shall
include any successor (by merger or otherwise) of such
entity.
2.13 "Series A Preferred Stock" shall mean the
series of Preferred Stock of the Corporation, without par
value, designated Series A Cumulative Preferred Stock.
2.14 "set apart for payment" shall be deemed
to include, without any action other than the following,
the recording by the Corporation in its accounting led-
gers of any accounting or bookkeeping entry which indi-
cates, 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 A 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 A
Preferred Stock shall mean placing such funds in a sepa-
rate account or delivering such funds to a disbursing,
paying or other similar agent.
2.15 "Stated Value" shall have the meaning set
forth in Section 4.1 hereof.
2.16 "Transfer Agent" means such agent or
agents of the Corporation as may be designated by the
Board of Directors as the transfer agent for the Series A
Preferred Stock.
SECTION 3. Dividends.
3.1 The holders of shares of the Series A
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 (the "Base Rate") of $650 per
share of Series A Preferred Stock, provided that the Base
Rate (i) shall increase $10 on each anniversary of the
Issue Date commencing on the second anniversary of the
Issue Date and (ii) the Base Rate for any Dividend Period
shall be adjusted, if a Gross-Up Event shall be in ef-
fect, to the Equivalent Amount. Such dividends shall be
cumulative from February 1, 1995, 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 April 28, 1995.
Each such dividend shall be payable in arrears to the
holders of record of shares of the Series A Preferred
Stock, as they appear on the stock records of the Corpo-
ration 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.
3.2 The amount of dividends payable for each
full Dividend Period for the Series A Preferred Stock
shall be computed by dividing the Rate by four, and then
applying any adjustment pursuant to clause (ii) of the
first sentence of Section 3.1. 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 A Preferred Stock shall be computed on the
basis of twelve 30-day months and a 360-day year. Hold-
ers of shares of Series A Preferred Stock shall not be
entitled to any dividends, whether payable in cash,
property or stock, in excess of cumulative dividends, as
herein provided, on the Series A 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 A Preferred Stock that may be in arrears.
3.3 So long as any shares of the Series A
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 divi-
dends and amounts distributable upon liquidation, disso-
lution or winding up, on a parity with the Series A Pre-
ferred 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 A Pre-
ferred 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 A 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 divi-
dends accumulated and unpaid on the Series A Preferred
Stock and accumulated and unpaid on such parity stock.
3.4 So long as any shares of the Series A
Preferred Stock are outstanding, no dividends (other than
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, dissolution or
winding up, on a parity with Series A 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 A
Preferred Stock and any other stock of the Corporation
ranking on a parity with the Series A 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 A Preferred Stock and all past
dividend periods with respect to such parity stock.
SECTION 4. Payments upon Liquidation.
4.1 In the event of any liquidation, disso-
lution or winding up of the Corporation before any pay-
ment 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 A Preferred Stock shall be entitled to
receive Ten Thousand Dollars ($10,000) per share of Se-
ries A Preferred Stock (the "Stated Value") plus an
amount equal to all dividends (whether or not earned or
declared) accrued and unpaid thereon to the date of final
distribution to such holders (the "Liquidation Prefer-
ence"); 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 A Preferred Stock shall
be insufficient to pay in full the Liquidation Prefer-
ence, and the liquidation preference on all other shares
of any class or series of stock ranking, as to dividends
and amounts distributable upon liquidation, dissolution
or winding up, on a parity with the Series A Preferred
Stock, then such assets, or the proceeds thereof, shall
be distributed among the holders of shares of Series A
Preferred Stock and any such other parity stock ratably
in accordance with the respective amounts that would be
payable on such shares of Series A 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.
4.2 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 A Preferred Stock
as to dividends and amounts distributable upon liquida-
tion, dissolution or winding up of the Corporation, after
payment shall have been made to the holders of the Se-
ries A 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 enti-
tled to receive any and all assets remaining to be paid
or distributed, and the holders of the Series A Preferred
Stock shall not be entitled to share therein.
SECTION 5. Mandatory Redemption. The Corpo-
ration shall purchase or redeem any outstanding shares of
Series A Preferred Stock 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, on the tenth anniversary
of the Issue Date.
SECTION 6. Shares to Be Retired. All shares
of Series A Preferred Stock which shall have been issued
and reacquired in any manner by the Corporation (exclud-
ing, 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 Serial
Preferred Stock, without designation as to series.
SECTION 7. Ranking. Any class or series of
stock of the Corporation shall be deemed to rank junior
to the Series A Preferred Stock, as to the payment of
dividends or as to the distribution of assets upon liqui-
dation, dissolution or winding up.
SECTION 8. Voting. Except as required by law,
holders of Series A Preferred Stock shall have no voting
rights and their consent shall not be required for taking
any corporate action.
SECTION 9. Record Holders. The Corporation
and the Transfer Agent may deem and treat the record
holder of any shares of Series A 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.
<PAGE>
RESOLVED, FURTHER, that the proper officers of
the Corporation be and they are hereby authorized and
directed, jointly and severally, to prepare, execute and
file a certificate setting forth a copy of the foregoing
resolutions and to execute any and all other documents
and take any and all other steps necessary or appropriate
in order to comply with the laws of the State of Delaware
and effectuate the purposes of said resolutions.
IN WITNESS WHEREOF, EIG, CO. has caused this
Certificate to be signed in its name by Michael L. Downs,
its President, and Roberta A. O'Brien, its Corporate
Secretary, as of this day of , 199 .
EIG, CO.
___________________________
Name: Michael L. Downs
Title: President
Attest:
_____________________________
Name: Roberta A. O'Brien
Title: Secretary
<PAGE>
STATE OF CONNECTICUT)
) ss.:
COUNTY OF HARTFORD )
On this day of , 199 , before me,
_______________________, a Notary Public in and for said
County and State, residing therein, dully commissioned
and sworn, personally appeared Michael L. Downs and
Roberta A. O'Brien known to me or proved to me on the
basis of satisfactory evidence to be the President and
the Corporate Secretary, respectively, of EIG, CO.,
a Delaware corporation, the Corporation that executed the
foregoing Certificate of Designation and Preferences, and
upon oath did severally depose and say, each for himself
and not for the other, that he is the officer of said
Corporation as above designated; that he is acquainted
with the seal of said Corporation and that the seal
affixed to said instrument is the corporate seal of said
Corporation; that the signatures to said instrument were
made by said officers of said Corporation as indicated
after said signatures; and that the said Corporation
executed the said instrument freely and voluntarily and
for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto subscribed
my name and affixed my official seal at my office in the
County of Hartford, State of Connecticut, on the day and
year in this certificate first above written.
______________________________
Notary Public in and for the
County of Hartford
State of Connecticut
[SEAL]
My Commission Expires:
Exhibit B
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES B CONVERTIBLE PREFERRED STOCK
of
THE HARTFORD STEAM BOILER INSPECTION
AND INSURANCE COMPANY
Pursuant to Section 33-340 of the Connecticut Stock
Corporation Act
THE HARTFORD STEAM BOILER INSPECTION AND INSUR-
ANCE COMPANY, a corporation organized and existing under
and by virtue of the laws of Connecticut (hereinafter
called the "Corporation"), pursuant to the provisions of
Section 33-340 of the Connecticut Stock Corporation Act,
does by Gordon Kreh, its President, and R. Kevin Price,
its Corporate Secretary, hereby certify that, pursuant to
authority expressly vested in the Board of Directors of
the Corporation by the provisions of its Charter, said
Board of Directors at a meeting duly called and held on
September 26, 1994, duly adopted resolutions providing
for the issuance of a series of Preferred Stock, without
par value, of the Corporation and setting forth the
voting powers, designation, preferences and relative,
participating, optional and other special rights of such
series and the qualification, limitation and restrictions
of such rights, to the extent that the foregoing are not
set forth in the Charter of the Corporation, which reso-
lutions are as follows:
RESOLVED, that pursuant to the authority vested
in the Board of Directors of this Corporation in accor-
dance with the provisions of its Charter, a series of
Preferred Stock of the Corporation be and it hereby is
created, and that the designation and amount thereof and
the voting powers, preferences and relative, participat-
ing, optional and other special rights of the shares of
such series, and the qualifications, limitations or
restrictions thereof are as follows:
SECTION 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").
SECTION 2. Definitions. For purposes of the
Series B Preferred Stock, the following terms shall have
the meanings indicated:
2.1 "Accrued Dividends" shall have the meaning
set forth in Section 4.1 hereof.
2.2 "Board of Directors" shall mean the board
of directors of the Corporation or any committee autho-
rized by such board of directors to perform any of its
responsibilities with respect to the Series B Preferred
Stock.
2.3 "Business Day" shall mean any day other
than a Saturday, Sunday or a day on which state or feder-
ally chartered banking institutions in New York, New York
are not required to be open.
2.4 "Call Event" shall mean the consummation
of a transaction pursuant to Section 2.2 of the Transac-
tion Agreement.
2.5 "Charter" shall mean the Charter of the
Corporation, as amended from time to time.
2.6 "Common Stock" shall mean the common stock
of the Corporation, without par value.
2.7 "Constituent Person" shall have the mean-
ing set forth in Section 8.5 hereof.
2.8 "Conversion Price" shall mean the conver-
sion price per share of Common Stock for which the Se-
ries B Preferred Stock is convertible, as such Conversion
Price may be adjusted pursuant to Section 8. The initial
conversion price will be $_________ [to be established
such that aggregate number of shares receivable upon
conversion is initially equal to $20 million divided by
average of high and low market price of Common Stock on
date of Closing of Transaction Agreement divided by
1.265].
2.9 "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 Quota-
tions 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 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.
2.10 "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
________, 199__; 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.
2.11 "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 ________, 199__).
2.12 "Fair Market Value" shall mean the aver-
age 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 dis-
tribution, on the exchange or in the market, as the case
may be, used to determine that day's Current Market
Price.
2.13 "Issue Date" shall mean the first date on
which shares of Series B Preferred Stock are issued and
sold.
2.14 "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 Se-
ries 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 Corpo-
ration.
2.15 "Liquidation Preference" shall have the
meaning set forth in Section 4.1 hereof.
2.16 "non-electing share" shall have the mean-
ing set forth in Section 8.5 hereof.
2.17 "Person" shall mean any individual, firm,
partnership, corporation or other entity, and shall
include any successor (by merger or otherwise) of such
entity.
2.18 "Put Event" shall mean the consummation
of a transaction pursuant to Section 2.3 of the Transac-
tion Agreement.
2.19 "Redemption Date" shall have the meaning
set forth in Section 5.3 hereof.
2.20 "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.
2.21 "Securities" shall have the meaning set
forth in Section 8.4(c) hereof.
2.22 "Series A Preferred Stock" shall mean the
series of Preferred Stock of the Corporation, without par
value, designated Series A Junior Participating Preferred
Stock.
2.23 "Series B Preferred Stock" shall have the
meaning set forth in Section 1 hereof.
2.24 "set apart for payment" shall be deemed
to include, without any action other than the following,
the recording by the Corporation in its accounting led-
gers of any accounting or bookkeeping entry which indi-
cates, 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 sepa-
rate account or delivering such funds to a disbursing,
paying or other similar agent.
2.25 "Stated Value" shall have the meaning set
forth in Section 4.1 hereof.
2.26 "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 secu-
rities 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.
2.27 "Transaction" shall have the meaning set
forth in Section 8.5 hereof.
2.28 "Transaction Agreement" shall mean that
certain Transaction Agreement, dated as of December 30,
1994, by and among the Corporation and General Reinsur-
ance Corporation.
2.29 "Transfer Agent" means The First National
Bank of Boston or such other agent or agents of the
Corporation as may be designated by the Board of Direc-
tors as the transfer agent for the Series B Preferred
Stock.
SECTION 3. Dividends.
3.1 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 ____________. 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 there-
of, as shall be fixed by the Board of Directors or a duly
authorized committee thereof. Accrued and unpaid divi-
dends 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.
3.2 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,
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.
3.3 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 divi-
dends and amounts distributable upon liquidation, disso-
lution or winding up, on a parity with the Series B Pre-
ferred 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 Pre-
ferred 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 divi-
dends accumulated and unpaid on the Series B Preferred
Stock and accumulated and unpaid on such parity stock.
3.4 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 de-
clared or paid or set apart for payment or other distri-
bution 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, dissolution or winding up, on a parity with
Series B Preferred Stock be redeemed, purchased or other-
wise 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 Corpora-
tion 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 con-
version into or exchange for Junior Stock), unless in
each case the full cumulative dividends on all outstand-
ing 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 Pre-
ferred Stock and all past dividend periods with respect
to such parity stock.
SECTION 4. Payments upon Liquidation.
4.1 In the event of any liquidation, disso-
lution or winding up of the Corporation before any pay-
ment 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 Se-
ries B Preferred Stock (the "Stated Value") plus an
amount equal to all dividends (whether or not earned or
declared) accrued and unpaid thereon ("Accrued Divi-
dends") 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 Corpora-
tion, 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 and amounts distributable upon liquida-
tion, dissolution or winding up, on a parity with the
Series B Preferred Stock, then such assets, or the pro-
ceeds 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 liqui-
dation, dissolution or winding up, voluntary or involun-
tary, of the Corporation.
4.2 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 liquida-
tion, dissolution or winding up of the Corporation, after
payment shall have been made to the holders of the Se-
ries 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 enti-
tled 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.
SECTION 5. Redemption at the Option of the
Corporation.
5.1 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
5.3 hereof, 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, exceeded $22 million. In either case, such redemp-
tion shall be at the Stated Value, plus all dividends ac-
crued and unpaid on the shares of Series B Preferred
Stock up to the date fixed for the redemption, upon
giving notice as provided hereinbelow.
5.2 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 Se-
ries 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 desig-
nated 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 cancelled. In case less than all the shares repre-
sented by any such certificate are redeemed, a new cer-
tificate 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 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 depos-
it the redemption price (including all accrued and unpaid
dividends up to the Redemption Date) of shares of Se-
ries 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 aggregat-
ing not less than $50,000,000) in the Borough of Manhat-
tan, City and State of New York, or in any other city in
which the Corporation at the time shall maintain a trans-
fer agency with respect to such shares, in which case the
aforesaid notice to holders of shares of Series B Pre-
ferred 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 certif-
icates 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 divi-
dends 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 Pre-
ferred 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 pursu-
ant to this Section 5 and any holder of shares of Se-
ries 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 certifi-
cate or certificates for 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.
SECTION 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.
SECTION 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 (exclud-
ing, 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.
SECTION 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:
8.1 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 8.2) by surrendering
such shares to be converted, such surrender to be made in
the manner provided in Section 8.2; provided, however,
that the right to convert shares called for redemption
pursuant to Section 5 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 hereof.
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.
8.2 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 Trans-
fer 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 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 8.3.
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 con-
version 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 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.
8.3 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 conver-
sion 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.
8.4 The Conversion Price shall be adjusted
from time to time as follows:
(a) 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 outstand-
ing Common Stock into a smaller number of shares or
(D) issue any shares of capital stock by reclassifi-
cation 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 subdivi-
sion, combination or reclassification becomes effec-
tive, 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 con-
verted 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 immedi-
ately after the opening of business on the day next
following the record date (except as provided in
Section 8.8 below) in the case of a dividend or
distribution and shall become effective immediately
after the opening of business on the day next fol-
lowing the effective date in the case of a subdivi-
sion, combination or reclassification.
(b) 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 determi-
nation 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 frac-
tion, 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 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 deter-
mination and (B) the number of additional shares of
Common Stock offered for subscription or purchase
pursuant to such rights or warrants. Such adjust-
ment shall become effective immediately after the
opening of business on the day next following such
record date (except as provided in Section 8.8
below). In determining whether any rights or war-
rants entitle the holders of Common Stock to sub-
scribe 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.
(c) 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 re-
ferred to in subparagraph (b) above to subscribe for
or purchase Common Stock, which rights and warrants
are referred to in and treated under subpara-
graph (b) above (any of the foregoing being herein-
after in this subparagraph (c) called the "Securi-
ties"), 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 the date fixed for the determination of stock-
holders 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 Direc-
tors, whose determination shall be conclusive) of
the portion of the capital stock or assets or evi-
dences 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 8.8 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 deter-
mination 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 distribu-
tion 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 determina-
tion of the stockholders entitled to receive such
distribution" and "the record date" within the
meaning of the two preceding sentences).
(d) 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 (d)
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 adjust-
ment shall be required and made in accordance with
the provisions of this Section 8 (other than this
subparagraph (d)) 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 8.4 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 8.4, 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 divi-
dends) hereafter made by the Corporation to its
stockholders shall not be taxable.
8.5 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 Sec-
tion 8.4(a) applies) (each of the foregoing being re-
ferred 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 con-
verted 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 convert-
ible 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 ("Con-
stituent Person"), or an affiliate of a Constituent
Person and (ii) failed to exercise his rights of elec-
tion, if any, as to the kind or amount of stock, securi-
ties 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 8.5 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 8.5 and it shall not consent or agree to the
occurrence of any Transaction until the Corporation has
entered into an agreement with the successor or purchas-
ing 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 immediate-
ly prior to such Transaction. The provisions of this
Section 8.5 shall similarly apply to successive Transac-
tions.
8.6 If:
(a) 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
(b) the Corporation shall authorize
the granting to the holders of the Common Stock of
rights or warrants (other than the Rights) to sub-
scribe for or purchase any shares of any class or
any other rights or warrants (other than the
Rights); or
(c) there shall be any reclassifica-
tion of the Common Stock (other than an event to
which Section 8.4(a) applies) or any consolidation
or merger to which the Corporation is a party and
for which approval of any stockholders of the Corpo-
ration is required, or the sale or transfer of all
or substantially all of the assets of the Corpora-
tion as an entirety; or
(d) 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 hold-
ers of shares of the Series B Preferred Stock at their
addresses as shown on the stock records of the Corpora-
tion, as promptly as possible, but at least 15 days prior
to the applicable date hereinafter specified, a notice
stating (A) the 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. Fail-
ure to give or receive such notice or any defect therein
shall not affect the legality or validity of the proceed-
ings described in this Section 8.
8.7 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.
8.8 In any case in which Section 8.4 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 Series B Preferred Stock con-
verted 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 8.3.
8.9 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 Corpora-
tion shall not pay a dividend or make any distribution on
shares of Common Stock held in the treasury of the Corpo-
ration.
8.10 There shall be no adjustment of the Con-
version 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.
8.11 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 conver-
sion 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.
8.12 The Corporation covenants that it will at
all times reserve and keep available, free from preemp-
tive 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 deliver-
able upon the conversion of all outstanding shares of
Series B Preferred Stock not theretofore converted. For
purposes of this Section 8.12, the number of shares of
Common Stock that shall be deliverable upon the conver-
sion 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 Pre-
ferred 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 deliver-
able 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.
8.13 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 conver-
sion 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 Corporation, that such tax has been paid.
SECTION 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 distribu-
tion 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.
SECTION 10. Voting.
10.1 The holders of shares of Series B Pre-
ferred Stock shall have the following voting rights:
(a) Subject to the provision for adjustment
hereinafter set forth, each share of Series B Preferred
Stock shall entitle the holder thereof to ____ 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.
(b) 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.
10.2 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 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 this Charter 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 pref-
erences, rights, powers or privileges of the Series B
Preferred Stock; provided, however, that the amendment of
the provisions of this Charter so as to authorize or cre-
ate, 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.
10.3 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 validat-
ing 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 reclassi-
fication of any authorized stock of the Corporation into
any such prior shares, or the creation, authorization or
issuance of any obligation or security convertible into
or evidencing the right to purchase any such prior
shares.
10.4 For purposes of the provisions of Section
10.2 and 10.3, each share of Series B Preferred Stock
shall have one (1) vote per share.
10.5 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 corpo-
rate action.
SECTION 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.
RESOLVED, FURTHER, that the proper officers of
the Corporation be and they are hereby authorized and
directed, jointly and severally, to prepare, execute and
file a certificate setting forth a copy of the foregoing
resolutions and to execute any and all other documents
and take any and all other steps necessary or appropriate
in order to comply with the laws of the State of Connect-
icut and effectuate the purposes of said resolutions.
<PAGE>
IN WITNESS WHEREOF, THE HARTFORD STEAM BOILER
INSPECTION AND INSURANCE COMPANY has caused this Certifi-
cate to be signed in its name by Gordon Kreh, its Presi-
dent, and R. Kevin Price, its Corporate Secretary, and
its corporate seal to be hereunto affixed, as of this
day of , 1994.
THE HARTFORD STEAM BOILER
INSPECTION AND INSURANCE
COMPANY
[CORPORATE SEAL]
___________________________
Name:
Title:
Attest:
_____________________________
Name:
Title:
<PAGE>
STATE OF CONNECTICUT)
) ss.:
COUNTY OF HARTFORD )
On this day of , 1994, before
me, _______________________, a Notary Public in and for
said County and State, residing therein, dully commis-
sioned and sworn, personally appeared Gordon Kreh and
R. Kevin Price known to me or proved to me on the basis
of satisfactory evidence to be the President and the
Corporate Secretary, respectively, of THE HARTFORD STEAM
BOILER INSPECTION AND INSURANCE COMPANY, a Connecticut
corporation, the Corporation that executed the foregoing
Certificate of Designation and Preferences, and upon oath
did severally depose and say, each for himself and not
for the other, that he is the officer of said Corporation
as above designated; that he is acquainted with the seal
of said Corporation and that the seal affixed to said
instrument is the corporate seal of said Corporation;
that the signatures to said instrument were made by said
officers of said Corporation as indicated after said
signatures; and that the said Corporation executed the
said instrument freely and voluntarily and for the uses
and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto subscribed
my name and affixed my official seal at my office in the
County of Hartford, State of Connecticut, on the day and
year in this certificate first above written.
______________________________
Notary Public in and for the
County of Hartford
State of Connecticut
[SEAL]
My Commission Expires:
