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.
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:
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: