Exhibit (2)
AGREEMENT AND PLAN OF SHARE EXCHANGE
OF
THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY
AND
HSB GROUP, INC.
This Agreement and Plan of Share Exchange (the "Agreement" or "Plan of
Exchange") is dated and executed as of the 19th day of March, 1997, by and
between THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY, a
Connecticut corporation (the "Insurance Company"), and HSB GROUP, INC., a
Connecticut corporation (the "Holding Company").
1. The name of the Insurance Company is The Hartford Steam Boiler Inspection
and Insurance Company, a Connecticut corporation, and the name of the
Holding Company is HSB Group, Inc., a Connecticut Corporation.
2. The designation and number of authorized and outstanding shares of the
Holding Company are: 18,000 shares of common stock (the "Holding Company
Common Shares"), each of which is entitled to one vote and 100 shares of
which are issued and outstanding and 2,000 authorized preferred shares,
none of which are issued and outstanding. Immediately prior to the
Effective Time (as hereinafter defined), the designation and number of
authorized shares of the Holding Company will be: (a) 50,000,000 Holding
Company Common Shares, each of which will have attached thereto a Right (as
defined below); and (b) 500,000 shares of preferred stock, no par value
(the "Holding Company Preferred Shares"), of which (i) 250,000 will be
designated as Series A Junior Participating Preferred Shares(the "Holding
Company Junior Preferred Shares"), each of which will be entitled to 200
votes, voting together with the Holding Company Common Shares, and (ii)
2,000 will be designated as Series B Convertible Preferred Shares (the
"Holding Company Convertible Shares"), each of which will be entitled to
199 votes, voting together with the Holding Company Common Shares, and with
respect to certain matters voting as a separate class.
The designation and number of authorized and outstanding shares of the
Insurance Company are: (a) 50,000,000 shares of common stock, no par value
(the "Insurance Company Common Shares"), each of which is entitled to one
vote, 20,043,608 shares of which were, as of March 19, 1997, issued and
outstanding and 29,956,392 shares of which were, as of March 19, 1997, held
as authorized and unissued shares of the Insurance Company, and which in
each case have attached thereto a Right; and (b) 500,000 authorized
preferred shares, no par value (the "Insurance Company Preferred Shares"),
of which (i) 250,000 are designated Series A Junior Participating Preferred
Shares (the "Insurance Company Junior Preferred Shares"),each of which is
entitled to 200 votes, voting together with the Insurance Company Common
Shares, and none of which is outstanding, and (ii) 2,000 shares are
designated as Series B Convertible Preferred Shares (the "Insurance Company
Convertible Preferred Shares"), each of which is entitled to 199 votes,
voting together with the Insurance Company Common Shares, and with respect
to certain matters voting as a separate class, and all of which were, as of
March 19, 1997, issued and outstanding.
For adoption and approval, this Plan of Exchange shall require the approval
of two-thirds of all outstanding Insurance Company Common Shares and
Insurance Company Convertible Preferred Shares voting together as a single
class.
3. Upon the time of filing of a Certificate of Exchange in connection with the
share exchange contemplated hereby (the "Share Exchange") with the
Secretary of State of the State of Connecticut (the "Effective Time"):
(a) each outstanding Insurance Company Common Share (and associated Right)
and each outstanding Insurance Company Convertible Preferred Share shall by
operation of law and without further action be exchanged for one Holding
Company Common Share (and associated Right) and one Holding Company
Convertible Preferred Share, respectively, subject to dissenting
stockholders' rights under Sections 33-855 to 33-872, inclusive of the
Connecticut Business Corporation Act (the "CBCA"); and
(b) each Holding Company Common Share outstanding immediately prior to the
Effective Time shall be canceled and shall be restored to the status of an
authorized but unissued Holding Company Common Share;
so that, immediately after the Effective Time, all of the
outstanding Insurance Company Common Shares and Insurance
Company Convertible Preferred Shares will be held by the
Holding Company, and all of the outstanding Holding Company
Common Shares and Holding Company Convertible Preferred Shares
will be held by the owners of the Insurance Company Common
Shares and Insurance Company Convertible Preferred Shares,
respectively, that were outstanding immediately prior to the
Effective Time.
4. By the Holding Company's having executed this Agreement and by the
subsequent consummation of the transactions enumerated herein, the Holding
Company shall be deemed to have approved the following plans of the
Insurance Company (collectively, the "Plans"): the 1985 and 1995 Stock
Option Plans; the Retirement Plan; the Excess Retirement Plan; the Thrift
Incentive Plan; the Leveraged Employee Stock Ownership Plan; the Long-Term
and Short-Term Incentive Plans; the Directors Stock and Deferred
Compensation Plan; the Service Award Plan; employment agreements; and all
other employee benefit plans or programs of the Insurance Company; and, by
virtue of the Share Exchange and without any action on the part of the
participants in the Plans, each Insurance Company Common Share and each
option, unit or right then issued and outstanding under the Plans shall be
converted into an equivalent number of shares, options, units or rights,
respectively, of Holding Company Common Shares, at the same per share
price, if applicable, and upon the same terms and subject to the same
conditions as applicable immediately prior to the Effective Time to the
relevant share, option, unit or right, and any restricted shares awarded
under such Plans as to which the restrictions have not lapsed as of the
Effective Time of the Share Exchange, will be converted into the same
number of Holding Company Common Shares carrying identical restrictions.
To the extent deemed necessary or appropriate, Holding Company and
Insurance Company shall make appropriate amendments to the Plans to reflect
the adoption thereof as the Plans of Holding Company without adverse effect
upon any of the options and shares outstanding under the Plans.
5. At the Effective Time, the Holding Company will assume the Insurance
Company's rights and obligations pursuant to the Rights Agreement, dated as
of November 28, 1988 between the Insurance Company and The First National
Bank of Boston, as Rights Agent (the "Rights Agreement"), and by virtue of
the Share Exchange, and without any action on the part of the holder
thereof, each right (a "Right") to purchase Insurance Company Junior
Preferred Shares and to otherwise exercise options, rights and privileges,
issued pursuant to the Rights Agreement shall be converted into and become
a right to purchase an equivalent number or amount of Holding Company
Junior Preferred Shares, at the same exercise price, and upon the same
terms and subject to the same conditions, as applicable immediately prior
to the Effective Time and to otherwise exercise options, rights and other
privileges pursuant to the Rights Agreement. The Holding Company will
reserve, for purposes of issuance pursuant to the Rights Agreement, a
number of Holding Company Junior Preferred Shares equivalent to the number
of Insurance Company Junior Preferred Shares reserved by the Insurance
Company for such purposes immediately prior to the Effective Time.
6. At the Effective Time, each certificate evidencing ownership of Insurance
Company Common Shares (and associated Rights) and Insurance Company
Convertible Preferred Shares outstanding at the Effective Time shall
automatically, and without any action by the holder thereof, be deemed to
evidence an equivalent number of Holding Company Common Shares (and
associated Rights) or Holding Company Convertible Preferred Shares,
respectively, subject to dissenting stockholders' rights under Sections
33-855 to 33-872, inclusive, of the CBCA.
7. At the Effective Time, the board of directors and executive officers of the
Insurance Company shall become the board of directors and executive
officers of the Holding Company. The executive officers of the Holding
Company shall be identified as follows: Xxxxxx X. Xxxx, President and Chief
Executive Officer; Xxxx X. Xxxxx, Senior Vice President, Treasurer and
Chief Financial Officer; Xxxxxxx X. Xxxxx, Senior Vice President; Xxxx X.
Xxxxxx, Senior Vice President; Xxxxxxx X. Xxxx, Senior Vice President; R.
Xxxxx Xxxxx, Senior Vice President and Corporate Secretary; Xxxxxxx
Xxxxxxxxx, Senior Vice President; and Xxxxxx X. Xxxxxx, Senior Vice
President and General Counsel.
8. Immediately prior to, and at, the Effective Time, the articles of
incorporation of the Holding Company shall be as set forth in Exhibit A to
this Agreement.
9. The Plan of Exchange shall be conditioned upon:
(a) receipt of the requisite vote of stockholders of the Insurance Company
pursuant to Section 33-817 of the CBCA;
(b) approval or exemption of the insurance regulatory authorities in
Connecticut, Texas, the United Kingdom and Hong Kong, or any other
consents, approvals or exemptions necessary or appropriate for the
consummation of the Share Exchange, in form and substance satisfactory to
the Insurance Company and the Holding Company;
(c) the effectiveness of a Registration Statement under the Securities Act
of 1933 relating to the common stock of Holding Company to be issued or
reserved for issuance in connection with the Share Exchange;
(d) authorization for listing, subject to official notice of issuance, of
the Holding Company Common Shares (and associated Rights) on the New York
Stock Exchange, Inc.;
(e) receipt of an opinion of Skadden, Arps, Slate, Xxxxxxx & Xxxx
(Illinois), tax counsel for the Insurance Company, regarding certain
federal income tax consequences of the Share Exchange;
(f) receipt of an opinion of counsel as to the legality of the Holding
Company Common Shares and Holding Company Convertible Preferred Shares
issuable in connection with the Share Exchange; and
(g) the absence of any injunction prohibiting or restricting in any manner
the Share Exchange or the operation of the Holding Company, the Insurance
Company or any of their subsidiaries after consummation of such Share
Exchange.
10. At any time before or after the adoption of this Agreement by the
stockholders of the Insurance Company, this Agreement may be amended or
modified or certain of its conditions waived by the boards of directors of
the Holding Company and the Insurance Company or authorized committees of
such boards; provided that no such amendment, modification or waiver may
affect the rights of any stockholder of the Insurance Company in any manner
that is materially adverse to such stockholder in the judgment of the board
of directors of the Insurance Company. The Plan of Exchange may be
abandoned by either the Insurance Company or the Holding Company,
notwithstanding the approval of the Plan of Exchange by the stockholders of
the Insurance Company, at any time prior to the Effective Time, if for any
reason the board of directors of either of such corporations determines
that it is inadvisable to proceed with the Plan of Exchange, including
without limitation, giving consideration to the number of shares for which
dissenting stockholders' rights pursuant to Sections 33-855 to 33-872,
inclusive, of the CBCA have been exercised and the cost to the Insurance
Company thereof.
11. The Insurance Company and the Holding Company, respectively, shall take all
such action as may be necessary or appropriate in order to effectuate the
Share Exchange and the other transactions contemplated by this Agreement.
If, at any time after the Effective Time, any further action is necessary
or desirable to carry out the purposes of this Agreement, the officers and
directors of each of the Holding Company and the Insurance Company, as of
the Effective Time, shall take such further action.
THE HARTFORD STEAM BOILER
INSPECTION AND INSURANCE COMPANY
a Connecticut corporation
By: /s/ Xxxxxx X. Xxxx
Its: President and Chief Executive
Officer
HSB GROUP, INC.
a Connecticut corporation
By: /s/ Xxxxxx X. Xxxx
Its: President and Chief Executive
Officer