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: