EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement"), dated as of
____________, 2004, is entered into by and among National Interstate
Corporation, an Ohio corporation (the "Corporation") on the one hand, and ▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ and Great American Insurance Company, an Ohio corporation (each
individually a "Shareholder" and collectively the "Shareholders"), on the other
hand.
This Agreement relates to the disposition and transfer of Common Shares,
$.01 par value per share, of the Corporation (the "Common Shares") held by the
Shareholders.
In consideration of the undertakings contained in this Agreement, the
parties agree as follows:
1. RESTRICTIONS ON TRANSFER. No gift, bequest, sale, exchange, transfer,
assignment or other disposition (collectively, a "Transfer") of all or any
portion of the Common Shares owned, whether, beneficially or legally, by the
Shareholder now or hereafter may be made except as provided in this Agreement
and each Shareholder hereby severally agrees that it will not Transfer all or
any portion of such Common Shares except as permitted by this Agreement.
(a) Gifts, Bequests, and Other Transfers without Consideration. Each
Shareholder may give, bequeath, or otherwise Transfer without receipt of cash
consideration (collectively, a "Gift") Common Shares held by such Shareholder to
any person or organization so long as the number of Common Shares transferred as
a result of such Gift or series of related Gifts is less than ten percent (10%)
of the total issued and outstanding Common Shares of the Corporation immediately
prior to such Gift. If any transferee is an affiliate (as defined below) of the
Shareholder, then the Common Shares transferred in connection with such Gift
shall remain subject to the restrictions on Transfer provided in this Agreement
and such affiliate donee will be deemed to be a "Shareholder" for the purposes
this Agreement. For the purposes of this Agreement: (A) "affiliate" means any
person or entity that controls, is controlled by, or is under common control
with (1) the Shareholder or (2) any entity, organization or person controlled by
such Shareholder, and (B) "control," "controlled by" or "under common control
with" means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of an entity, organization or
person, whether through the ownership of voting securities, by contract or
otherwise.
(b) Public and Private Sales. Each Shareholder may sell Common Shares
either:
(i) pursuant to an underwriting agreement, a purchase agreement or
similar arrangement to which the Corporation and the
Shareholder are party relating to an underwritten public
offering of Common Shares (collectively, an "Underwritten
Sale"); or
(ii) in any public or privately negotiated sale, whether pursuant
to a registration statement or otherwise, (including sales
under Rule 144 of the Securities Act of 1933, as amended (the
"Securities Act")) (collectively such public and private
sales, "Negotiated Sales"), only if, to the knowledge of such
selling Shareholder, each purchaser in such Negotiated
Sale or series of related Negotiated Sales, either alone or as
a member of a group of related or affiliated purchasers, will
not be the "beneficial owner" of ten percent (10%) or more of
the Corporation's issued and outstanding Common Shares
immediately following such Negotiated Sale or series of
related sales. For the purposes of this Section 1(b), a
selling Shareholder shall be deemed to have knowledge of
information included in the public filings, if any, of the
Corporation's other shareholders.
If any purchaser in a Negotiated Sale or Underwritten Sale is an affiliate of
the selling Shareholder, then the Common Shares transferred in connection with
such Negotiated Sale or Underwritten Sale shall remain subject to the
restrictions on Transfer provided in this Agreement and such affiliate purchaser
will be deemed to be a "Shareholder" for the purposes of this Agreement. For
purposes of this Agreement "beneficial owner" has the meaning set forth in Rule
13d-1 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or in any comparable rule adopted to replace Rule 13d-1.
(c) Tender Offer or Exchange Offer; Merger, Consolidation, or
Reclassification. Each Shareholder may tender or exchange all or any portion of
his or its Common Shares pursuant to a tender offer or exchange offer which
seeks to acquire two thirds or more of the Corporation's outstanding shares.
Each Shareholder may surrender or exchange his or its Common Shares pursuant to
a merger or consolidation of the Corporation into or with another corporation or
other entity or a reclassification of the Corporation's securities.
(d) Transfers without Consideration to a Trust or other Entity whose
Primary Beneficiary is the Shareholder. ▇▇. ▇▇▇▇▇▇▇▇ may Transfer without
receipt of consideration all or any portion of the Common Shares held by him to
any trust or other entity for financial planning or estate planning purposes,
but only if the primary beneficiary of such transferee trust or other entity is
▇▇. ▇▇▇▇▇▇▇▇ or his lineal descendants. The Common Shares received by any
transferee trust or other entity party to such Transfer shall remain subject to
the restrictions on Transfer provided in this Agreement and such transferee will
be deemed to be a "Shareholder" for the purposes of this Agreement.
(e) Legends. Each Shareholder consents to the placing of the following
legend on certificates representing the Common Shares owned by such Shareholder
or any affiliate of such Shareholder that takes Common Shares subject to the
restrictions on Transfer contemplated by this Agreement.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A REGISTRATION RIGHTS AGREEMENT BY AND AMONG THE COMPANY AND
CERTAIN SHAREHOLDERS OF THE COMPANY, A COPY OF WHICH AGREEMENT IS ON FILE
AT THE PRINCIPAL OFFICE OF THE COMPANY. THE SALE, TRANSFER OR OTHER
DISPOSITION OF THESE SHARES IS SUBJECT TO THE TERMS OF SUCH AGREEMENT AND
THE SHARES ARE TRANSFERABLE ONLY UPON PROOF OF COMPLIANCE THEREWITH.
2
(f) Opinion of Counsel. Unless waived by the Corporation, prior to any
Transfer other than a Transfer made pursuant to an effective registration
statement, the Shareholder shall deliver a written opinion of legal counsel,
addressed to the Corporation and its transfer agent, in customary form and
substance to each addressee, to the effect that the proposed Transfer of the
Common Shares may be effected without registration under the Securities Act and
applicable state securities laws.
2. RIGHT OF FIRST REFUSAL FOR OTHER TRANSFERS. Except for the Transfers
expressly permitted under Section 1, the Corporation shall have a right of first
refusal to purchase all or any portion of the Shareholders' Common Shares, upon
the terms and conditions set forth in this Section 2, with respect to any
proposed Transfer of all or any portion of the Common Shares held from time to
time by either of the Shareholders.
(a) Notice. If the Shareholder proposes to Transfer Common Shares to
another person, entity or organization (the "Offeror"), and such Transfer is not
expressly permitted under Section 1, the Shareholder shall first obtain a bona
fide, written offer for the Common Shares from an Offeror which offer shall
include the consideration per share to be paid for such Common Shares, the
method of payment of such consideration, the proposed closing date for such
transaction and any other limitations or restrictions of such offer
(collectively, the "Offer"). A bona fide offer includes, but is not limited to,
any Offer at or above the closing price of the Common Shares on Nasdaq (or such
other exchange or market on which the Common Shares are then listed or trading)
on the date of such Offer or at the close of any date within five days of such
Offer. Before accepting such Offer, the Shareholder shall first give written
notice (the "Notice") to the Corporation of the identity of the Offeror and the
price and other terms of the proposed Transfer, together with a copy of such
Offer.
(b) Exercise of Right. For a period of ten (10) days after receipt of the
Notice, the Corporation shall have the right to purchase, at the price and upon
the other terms specified in the Notice, all (but not less than all) of the
Common Shares proposed to be transferred to the Offeror pursuant to such Notice.
The Corporation shall advise the Shareholder of its election to exercise this
right within the ten-day (10) period. Any such purchase by the Corporation shall
be completed within forty-five (45) days of the date of the Notice. Whether the
Corporation determines to exercise its right pursuant to this provision shall be
determined by an action of a majority of the members of the Corporation's Board
of Directors who are not interested in the Transfer.
(c) Expenses. If the Corporation exercises its right of first refusal
pursuant to the terms of this Section 2, the Corporation shall reimburse the
Offeror up to $75,000 in documented reasonable out-of-pocket due diligence
expenses incurred by such Offeror in connection with its proposed purchase of
the Shareholder's Common Shares.
(d) Failure to Exercise. If the Corporation does not exercise its right of
first refusal during the ten (10) day period referred to in Section 2(b), then
the Shareholder that provided such Notice to the Corporation shall have the
right for thirty (30) days (or such longer period as set forth in the Notice)
from the expiration of such ten (10) day period to apply for regulatory approval
of the proposed sale and to consummate such proposed sale of Common Shares to
the Offeror on terms and conditions no more favorable to the Offeror than those
stated in the Notice
3
and in accordance with the provisions of this Section 2; provided that where
all necessary application has been made for regulatory approval during the
30-day period but one or more of such regulatory approvals has not been obtained
during such 30-day period, the consummation of such proposed sale may be
postponed (for up to 180 days following the date of the Notice) until such
regulatory approval is obtained or denied. Any such Common Shares not
transferred within such 30-day period, or 180-day period, as the case may be,
will be subject again to all of the provisions of this Section 2.
3. REGISTRATION RIGHTS. Subject to the provisions of this Section 3, following
the 180-day lock-up period after the effective date of the Corporation's initial
public offering (the "Initial Public Offering Date"), the Corporation shall use
its reasonable best efforts to register under the Securities Act, upon the terms
and conditions set forth herein, all or part of the Common Shares held by either
of the Shareholders as such Shareholders may request. Notwithstanding anything
herein to the contrary, the registration rights set forth herein and the
Shareholders' right to sell Common Shares pursuant to a registration statement
are subject to the Corporation's right of first refusal set forth in Section 2.
(a) Piggy-Back Registration. (i) Subject to the provisions of this Section
3, if the Corporation at any time proposes to register any of its Common Shares
under the Securities Act, whether or not for sale for its own account, and the
registration form to be used may be used for the registration of Common Shares
by the Shareholders, each such time, the Corporation shall give written notice
of such proposed filing to the Shareholders as soon as practicable (but in no
event less than ten (10) days before the anticipated filing date), and such
notice shall offer the Shareholders the opportunity to include such number of
Common Shares in the registration as the Shareholders may request.
(ii) The Corporation shall use its best efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit the Common Shares requested by the Shareholders to be included in the
registration statement for such offering on the same terms and conditions as the
Common Shares to be sold by the Corporation or the other selling shareholders
included therein. Notwithstanding the foregoing, if the managing underwriter of
such registration advises the Corporation in writing, with a copy to the
Shareholder, that, in its opinion, the number of Common Shares requested to be
included in the registration exceeds the number which can be sold in such
offering, then the Corporation will include in such registration only the number
of Common Shares recommended by the managing underwriter, selected in the
following order of priority: (i) first, the Common Shares that the Corporation
intends to be included in such registration; (ii) second, Common Shares that the
Shareholders have requested to be included in such registration (pro rata
according to the Common Shares proposed to be included in the registration by
such Shareholders); and (iii) third, Common Shares held by all other parties.
(b) Demand Registration. (i) Following the 180-day lock-up period after
the Initial Public Offering Date, the Shareholders may request the Corporation
to register under the Securities Act all or part of their Common Shares. Upon
receipt of such request, the Corporation shall give written notice of the
proposed registration to the other Shareholder if he or it was not a party to
the request, so that he or it may participate in the requested registration. As
soon as practicable after receipt of the request and determination of whether
the other Shareholder will
4
participate in the requested registration, the Corporation will prepare and file
a registration statement for the Common Shares and, thereafter, use its
reasonable best efforts to have the registration statement declared effective,
to update the registration statement and related prospectus when necessary, and
to maintain the effectiveness of the registration statement for a period not
exceeding six months. The Corporation's obligation to register the Common Shares
under this Section 3(b) is conditioned upon the inclusion in the registration
Common Shares with an aggregate market value of not less than $5.0 million.
(ii) Shelf Registration. Following the one-year anniversary of the Initial
Public Offering Date, the Corporation shall prepare and file with the Securities
and Exchange Commission (the "SEC") a "shelf registration statement" on Form
S-3, or such other appropriate Securities Act registration form, for an offering
to be made on a continuous basis pursuant to Rule 415 under Securities Act,
covering all of the Common Shares then owned by the Shareholders (the "Shelf
Registration Statement"). The Corporation will use its reasonable best efforts
to have the Shelf Registration Statement declared effective within 90 days of
the filing of such Shelf Registration Statement and to keep such Shelf
Registration Statement continuously effective until the earlier to occur of (A)
the third anniversary of the effectiveness of such Shelf Registration Statement
or (B) the date on which all of the Common Shares held by the Shareholders and
registered on such Shelf Registration Statement have been sold.
(c) Exception. The Corporation may postpone for a reasonable period of
time (not to exceed 90 days) the filing or the effectiveness of a registration
statement for a registration under Section 3(a) or 3(b) if the Corporation
furnishes to the Shareholders a certificate signed by an officer of the
Corporation stating that the Corporation has determined reasonably and in good
faith, after consultation with legal counsel, that such filing would require
disclosure of material non-public information concerning the Corporation (which
the Corporation is not otherwise required to disclose at such time); provided
that the right to postpone the filing or effectiveness may not be exercised by
the Corporation for more than 120 days in a twelve-month period.
(d) Underwriting Requirements. In connection with any offering involving
any underwriting of Common Shares in a registration under Section 3(a), the
Corporation shall not be required to include a Shareholder's Common Shares in
such underwriting unless the Shareholder accepts the terms of the underwriting
as agreed upon between the Corporation and the underwriters in such quantities
and on such terms as set forth in this Agreement, and the Shareholder agrees to
sell the Shareholder's Common Shares on the basis provided herein and completes
and/or executes all questionnaires, indemnities, lock-ups, underwriting
agreements and other documents (including powers of attorney and custody
arrangements) required generally of all selling shareholders, in each case, in
customary form and substance, which are requested to be executed in connection
therewith.
(e) Expenses. Each Shareholder will pay all out-of-pocket expenses (or
their portion thereof, as applicable) of registering their Common Shares
pursuant to Section 3(a) or 3(b), including all registration and filing fees,
printing expenses, fees and expenses of compliance with securities or blue sky
laws (including reasonable fees and disbursements of counsel in connection with
blue sky qualifications of the Common Shares), National Association of
Securities Dealers (the "NASD") fees, listing fees (if any), accounting fees and
expenses
5
(including the expenses of any comfort letters or costs associated with the
delivery by the independent certified public accountants of comfort letters),
fees and expenses of the Corporation's legal counsel, fees and expenses of any
separate legal counsel retained by the Shareholders, and will bear the cost of
all brokers' and underwriting discounts, commissions and transfer taxes, if any,
attributable to the Common Shares sold by such Shareholder; provided, however,
that for (A) one demand registration statement under Section 3(b)(i), and (B)
one Shelf Registration Statement under Section 3(b)(ii), the Corporation will
pay all expenses of registering the Shareholders' Common Shares (other than the
fees and expenses of any separate legal counsel retained by the Shareholders and
the cost of all brokers' and underwriting discounts, commissions and transfer
taxes, if any, attributable to the Common Shares sold by the Shareholders);
provided, however, that notwithstanding the foregoing, each Shareholder shall
pay all incremental printing expenses, and fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Common Shares), if
any, incurred in connection with a Shelf Registration Statement if such
Shareholder determines to sell any of his or its Common Shares registered on
such Shelf Registration Statement through an underwriter. All expenses and costs
of any other demand registrations, if any, will be paid by the selling
Shareholder(s) as first described in this Section 3(e).
4. REGISTRATION PROCEDURES. Whenever the Corporation is required to use its
reasonable best efforts to effect or cause the registration of any Common Shares
under the Securities Act as provided in this Agreement, the Corporation will, as
soon as practicable:
(a) Prepare and file with the SEC a registration statement on Form ▇-▇,
▇-▇ or S-3, based on the Corporation's eligibility or the requirements of
Section 3, as applicable, with respect to such Common Shares and use its
reasonable best efforts to cause such registration statement to become and
remain effective in order to permit the sale of the Common Shares by the
Shareholders in accordance with the intended method or methods of distribution
thereof described in such registration statement;
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective during such period;
(c) Comply with the provisions of the Securities Act with respect to the
sale or other disposition of all securities covered by such registration
statement during such period;
(d) Furnish to the selling Shareholders each amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus included in such registration statement (including each preliminary
prospectus and summary prospectus), in conformity with the requirements of the
Securities Act, and such other documents the Shareholder may reasonably request;
(e) (i) Promptly notify in writing each Shareholder that holds Common
Shares covered by such registration statement, (A) when such registration
statement or any post-effective amendment or supplement thereto becomes
effective, (B) of the issuance by the SEC or
6
any state securities authority of any stop order, injunction or other order or
requirement suspending the effectiveness of such registration statement (and
take all reasonable action to prevent the entry of such stop order or to remove
it if entered, or the initiation of any proceedings for that purpose), or (C) of
the happening of any event as a result of which the registration statement, as
then in effect, the prospectus related thereto or any document included therein
by reference includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made and (ii) in the case of an event under clause (e)(i)(B) or (C), promptly
file such amendments and supplements which may be required on account of such
event and use its reasonable best efforts to cause each such amendment and
supplement to become effective;
(f) Promptly furnish counsel for each underwriter, if any, and for the
Shareholders copies of any written request by the SEC or any state securities
authority for amendments or supplements to a registration statement and
prospectus or for additional information;
(g) Use commercially reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of a registration statement at the earliest
possible time;
(h) Use commercially reasonable efforts to cause all such Common Shares
covered by such registration statement to be listed on the principal securities
exchange or authorized for quotation on Nasdaq, if any, on which the Common
Shares issued by the Corporation are then listed or authorized for quotation, or
eligible for listing or quotation, if the listing or authorization for quotation
of such securities is then permitted under the rules of such exchange or the
NASD;
(i) Enter into an underwriting agreement with the underwriter of such
offering in the form customary for such underwriter for similar offerings,
including such representations and warranties by the Corporation, provisions
regarding the delivery of opinions of counsel for the Corporation and
accountants' comfort letters, provisions regarding indemnification and
contribution, and such other terms and conditions as are at the time customarily
contained in such underwriter's underwriting agreements for similar offerings
(the sellers of Common Shares that are to be distributed by such underwriter(s)
may, at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Corporation to and
for the benefit of such underwriter(s) shall also be made to and for the benefit
of such sellers of Common Shares);
(j) Make available for inspection by representatives of the selling
Shareholders and any underwriters participating in any disposition pursuant
hereto and any counsel or accountant retained by the Shareholders or
underwriters, all relevant financial and other records, pertinent documents and
properties of the Corporation and cause the respective officers, Directors and
employees of the Corporation to supply all information reasonably requested by
any such representative, underwriter, counsel or accountant in connection with a
registration pursuant hereto. The Shareholders agree that information obtained
by such Shareholder as a result of such inspections shall be deemed confidential
and shall not be used by the Shareholder or any of its representatives or
advisors as the basis for any market transactions in the securities of the
Corporation (or for the Shareholder's business purposes or for any reason other
than in
7
connection with a registration hereunder) unless and until such information is
made generally available (other than by the Shareholders or where the
Shareholders know that such information became publicly available as a result of
a breach of any confidentiality arrangement) to the public. The Shareholders
further agree that, upon learning that disclosure of such records is sought,
they will give prompt notice to the Corporation and allow the Corporation, at
its expense, to undertake appropriate action to prevent disclosure of the
records deemed confidential; and
(k) Make reasonably available its employees and personnel and otherwise
provide reasonable assistance to the underwriters (taking into account the needs
of the Corporation's businesses and the requirements of the marketing process)
in the marketing of the Common Shares in any underwritten offering.
The Corporation may require the Shareholder who is selling Common Shares
pursuant to which any registration is being effected to furnish the Corporation
such information regarding the Shareholder and the distribution of such Common
Shares as the Corporation may from time to time reasonably request in writing.
In any registration pursuant to Section 3(a) or 3(b), the Corporation will take
all actions necessary to comply with the securities or "blue sky" laws of any
jurisdiction in which the Common Shares are to be offered or sold. The
Corporation will not, however, be required to qualify generally to do business
as a foreign entity in any jurisdiction wherein it would not otherwise be
obligated to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction. Each Shareholder agrees that upon any notice from the Corporation
of the happening of any event of the kind described above in clauses (e)(i)(B)
and (e)(i)(C) above, such Shareholder will discontinue disposition of the Common
Shares until such Shareholder's receipt of the copies of the supplemented or
amended prospectus contemplated by clause (e)(ii) above, and if so directed by
the Company, such Shareholder will deliver to the Corporation (at the
Corporation's expense) all copies, other than permanent file copies then in such
Shareholder's possession, of the prospectus covering such Common Shares that was
in effect prior to such amendment or supplement.
5. INDEMNIFICATION.
(a) In the event of any registration of any Common Shares pursuant to this
Agreement, the Corporation shall indemnify and hold harmless, to the fullest
extent permitted by law, the Shareholders, their affiliates, directors,
officers, fiduciaries, employees, agents and shareholders, each other person who
participates as an underwriter or a qualified independent underwriter, if any,
in the offering or sale of such securities, each director, officer, fiduciary,
employee, agent and shareholder or general and limited partner of such
underwriter or qualified independent underwriter, and each other person
(including any such person's directors, officers, fiduciaries, employees, agents
and shareholders or members or general and limited partners), if any, who
controls such seller or any such underwriter or qualified independent
underwriter, within the meaning of the Securities Act, against any and all
claims in respect thereof and expenses (including reasonable fees and expenses
of counsel and any amounts paid in any settlement effected with the
Corporation's consent, which consent shall not be unreasonably withheld,
conditioned or delayed) to which each such indemnified party may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such claims
or expenses arise
8
out of or are based upon any of the following actual or alleged statements,
omissions or violations (each, a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement under which such Common Shares were registered pursuant to this
Agreement under the Securities Act or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any final or summary prospectus or any amendment or
supplement thereto (unless corrected in the final prospectus), together with the
documents incorporated by reference therein, or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, or (iii) any violation by the Corporation of any
federal, state, common law or applicable foreign rule or regulation applicable
to the Corporation and relating to action required of or inaction by the
Corporation in connection with any such registration, and the Corporation will
reimburse any such indemnified party for any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such claim as such expenses are incurred; provided, however, that the
Corporation shall not be liable to any such indemnified party in any such case
to the extent such claim or expense arises out of or is based upon any Violation
that occurs in reliance upon and in conformity with written information
furnished to the Corporation or its representatives by or on behalf of such
indemnified party expressly stating that such information is for use therein.
(b) The Shareholders shall indemnify and hold harmless (in the same manner
and to the same extent as set forth in Section 5(a)), to the fullest extent
permitted by law, the Corporation, its Directors, officers, fiduciaries,
employees, agents and shareholders and each person (including any such person's
directors, officers, fiduciaries, employees, agents and shareholders or members
or general and limited partners), if any, controlling the Corporation within the
meaning of the Securities Act and all other prospective sellers and their
directors, officers, fiduciaries, employees, agents and shareholders or general
and limited partners and respective controlling persons (including any such
person's directors, officers, fiduciaries, employees, agents and shareholders or
members or general and limited partners) against any and all claims and expenses
(including reasonable fees and expenses of counsel and any amounts paid in any
settlement effected with the consent of the indemnifying party, which consent
shall not be unreasonably withheld, conditioned or delayed) to which each such
indemnified party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such claims or expenses arise out of or are based upon
any Violation that occurs in reliance upon and in conformity with written
information furnished to the Corporation or its representatives by or on behalf
of such Shareholder, expressly stating that such information is for use in
connection with any registration statement, preliminary, final or summary
prospectus or amendment or supplement or document incorporated by reference into
any of the foregoing. Notwithstanding anything in this Section 5(b) to the
contrary, no indemnifying party shall be required pursuant to this Section 5(b)
to contribute any amount in excess of the gross proceeds received by such
indemnifying party from the sale of Common Shares in the offering to which the
claims of the indemnified parties relate.
9
(c) Any person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel selected by the indemnifying party
and reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party will not be subject to any liability for any
settlement made by the indemnified party without the indemnifying party's
consent (but such consent will not be unreasonably withheld). An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
will not be obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest exists between such indemnified party and any other of such indemnified
parties with respect to such claim.
(d) Contribution. If the indemnification provided for in this Section 5 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
shall contribute, to the fullest extent permitted by applicable law, the amount
paid or payable by such indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand, and the indemnified party, on
the other hand, in connection with the matters that resulted in such loss,
claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact related to information was supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement of omission; provided, that in no event shall the amounts payable
in indemnity by a Shareholder under Section 5(d) exceed the net proceeds
received by such Shareholder in the registered offering out of which such
indemnification arises. No party guilty of fraudulent misrepresentation under
Section 11(f) of the Securities Act shall be entitled to contribution under this
Section 5(d).
6. MISCELLANEOUS.
(a) Choice of Law. This Agreement will be interpreted and enforced under
the laws of the State of Ohio.
(b) Entire Agreement. This Agreement constitutes the entire agreement
among the parties on its subject matter.
(c) Counterparts. This Agreement may be executed in two or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same instrument.
(d) Termination. This Agreement will remain in effect with respect to each
Shareholder until all of the Common Shares held by such Shareholder have been
disposed of as
10
provided herein. If a Shareholder party hereto ceases to own any Common Shares,
such party will no longer be deemed to be a Shareholder for purposes of this
Agreement, and there shall be no liability on the part of any such party, except
for liabilities arising from a breach of this Agreement prior to such
termination.
(e) Successors and Assigns. This Agreement will be binding on and inure to
the benefit of the parties hereto and, except as provided herein, their
respective successors and assigns.
(f) Specific Enforcement. It is agreed and understood that monetary
damages would not adequately compensate an injured party for the breach of this
Agreement by any party, that this Agreement shall be specifically enforceable,
and that any breach or threatened breach of this Agreement shall be the proper
subject of a temporary or permanent injunction or restraining order. Further,
each party hereto waives any claim or defense that there is an adequate remedy
at law for such breach or threatened breach.
(g) Notices. All notices provided for or permitted hereunder shall be made
in writing by hand-delivery, telecopier or air courier guaranteeing overnight
delivery to the other party at the following addresses (or at such other address
as shall be given in writing by any party to the others):
If to the Company, to:
National Interstate Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: General Counsel
If to Great American Insurance Company, to:
Great American Insurance Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Treasurer
If to ▇▇. ▇▇▇▇▇▇▇▇, to:
▇▇▇▇ ▇▇▇▇▇▇▇▇
National Interstate Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
All such notices shall be deemed to have been duly given when delivered by hand,
if personally delivered; when receipt is acknowledged in writing, if telecopied;
and on the next business day, if timely delivered to an air courier guaranteeing
overnight delivery. For purposes of this
11
Agreement, "business day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of Ohio are authorized or
obligated by law or executive order to close.
[signatures on next page]
12
IN WITNESS WHEREOF, the parties have executed this Agreement on
___________, 2004.
NATIONAL INTERSTATE CORPORATION
___________________________________
By:________________________________
Title:_____________________________
GREAT AMERICAN INSURANCE COMPANY, as Shareholder
___________________________________
By:________________________________
Title:_____________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, as Shareholder
___________________________________
13
