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REGISTRATION RIGHTS AGREEMENT
among
SUPERIOR NATIONAL INSURANCE GROUP, INC.,
INSURANCE PARTNERS, L.P.
and
INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P.
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Dated: April 11, 1997
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TABLE OF CONTENTS
PAGE
1. Definitions......................................................1
2. General; Securities Subject to this Agreement....................4
(a) Grant of Rights............................................4
(b) Registrable Securities.....................................4
(c) Holders of Registrable Securities..........................4
3. Demand Registration..............................................5
(a) Request for Demand Registration............................5
(b) Limitation on Demand Registrations.........................5
(c) Effective Demand Registration..............................6
(d) Expenses...................................................6
(e) Underwriting Procedures....................................6
(f) Selection of Underwriters..................................7
4. Incidental or "Piggy-Back" Registration..........................7
(a) Request for Incidental Registration........................7
(b) Reduction in Registrable Securities to be Registered.......8
(c) Expenses...................................................9
5. Holdback Agreements..............................................9
(a) Restrictions on Public Sale by Designated Holders..........9
(b) Restrictions on Public Sale by the Company.................9
6. Registration Procedures.........................................10
(a) Obligations of the Company................................10
(b) Seller Information........................................12
(c) Preparation; Reasonable Investigation.....................12
(d) Notice to Discontinue.....................................13
7. Indemnification; Contribution...................................13
(a) Indemnification by the Company............................13
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PAGE
(b) Indemnification by Designated Holders.....................14
(c) Conduct of Indemnification Proceedings....................15
(d) Other Indemnification.....................................16
(e) Contribution..............................................16
(f) Insurance.................................................16
8. Rule 144........................................................17
9. Miscellaneous...................................................17
(a) Recapitalizations, Exchanges, etc.........................17
(b) No Inconsistent Agreements................................17
(c) Remedies..................................................18
(d) Amendments and Waivers....................................18
(e) Notices...................................................18
(f) Successors and Assigns; Third Party Beneficiaries.........19
(g) Counterparts..............................................20
(h) Headings..................................................20
(I) GOVERNING LAW.............................................20
(j) Severability..............................................20
(k) Entire Agreement..........................................20
(l) Further Assurances........................................20
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated April 11, 1997 (this
"Agreement"), among Superior National Insurance Group, Inc., a California
corporation (the "Company"), Insurance Partners, L.P., a Delaware limited
partnership ("IP"), and Insurance Partners Offshore (Bermuda), L.P., a Bermuda
limited partnership ("IP Bermuda" and, together with IP, "Insurance Partners").
WHEREAS, pursuant to the Amended and Restated Stock Purchase
Agreement, dated as of September 17, 1996, as amended and restated effective as
of February 17, 1997 (the "Stock Purchase Agreement"), by and among the Company,
IP, IP Bermuda and such other persons or entities that execute the form of
subscription agreement attached thereto as Exhibit A, pursuant to which the
Company has agreed to, among other things, issue and sell to (a) IP, and IP has
agreed to purchase from the Company, an aggregate of 1,369,856 shares of Common
Stock and (b) IP Bermuda, and IP Bermuda has agreed to purchase from the
Company, an aggregate of 754,978 shares of Common Stock; and
WHEREAS, in order to induce each of IP and IP Bermuda to purchase
its shares of Common Stock (in the aggregate, the "Shares"), the Company has
agreed to grant registration rights with respect to the Registrable Securities
(as hereinafter defined) as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereby agree
as follows:
1. DEFINITIONS. As used in this Agreement the following terms
have the meanings indicated:
"AFFILIATE" shall mean any Person who is an "affiliate" as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
"APPROVED UNDERWRITER" has the meaning set forth in Section
3(f).
"CENTRELINE" means CentreLine Reinsured Limited, a Bermuda
corporation.
"CENTRELINE WARRANT" means the Common Stock Purchase Warrant,
dated as of June 30, 1994, issued by the Company to CentreLine pursuant to the
Preferred Securities Purchase Agreement, dated as of June 30, 1994, by and
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between the Company, Superior National Capital Holding Corporation, Superior
National Capital, L.P. and Centre Reinsurance Services (Bermuda) III Limited.
"COMMISSION" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"COMMON STOCK" means the Common Stock, no par value per share,
of the Company or any other equity securities of the Company into which such
securities are converted, reclassified, reconstituted or exchanged.
"COMPANY" has the meaning assigned to such term in the recital
to this Agreement.
"COMPANY INDEMNIFIED PARTY" has the meaning set forth in
Section 7(b).
"DEMAND REGISTRATION" has the meaning set forth in Section
3(a).
"DESIGNATED HOLDER" means each of the Insurance Partners
Stockholders and any transferee thereof to whom Registrable Securities have been
transferred in accordance with Section 9(f).
"DESIGNATED INDEMNIFIED PARTY" has the meaning set forth in
Section 7(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"IIA" means International Insurance Advisors, Inc., a Delaware
corporation.
"III" means International Insurance Investors, L.P., a Bermuda
limited partnership.
"INCIDENTAL REGISTRATION" has the meaning set forth in Section
4(a).
"INDEMNIFIED PARTY" has the meaning set forth in Section 7(c).
"INITIATING HOLDER" has the meaning set forth in Section 3(a).
"INSURANCE PARTNERS" has the meaning assigned to such term in
the recital to this Agreement.
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"INSURANCE PARTNERS STOCKHOLDERS" means each of IP, IP Bermuda
and any Affiliate thereof to whom or which Registrable Securities are
transferred.
"IP" has the meaning assigned to such term in the recital to
this Agreement.
"IP BERMUDA" has the meaning assigned to such term in the
recital to this Agreement.
"1992 COMMON STOCK PURCHASE WARRANTS" means each of the Common
Stock Purchase Warrants, dated as of March 31, 1992, issued by the Company
pursuant to the Note Purchase Agreement, dated as of March 31, 1992, among the
Company and the purchasers listed on Schedule I thereto.
"OTHER RIGHTHOLDERS" has the meaning set forth in Section
3(a).
"PERSON" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, limited liability company, government (or an
agency or political subdivision thereof) or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
"REGISTRABLE SECURITIES" means each of the following: (a) any
and all Shares owned by the Designated Holders and (b) any shares of Common
Stock issued or issuable to any of the Designated Holders with respect to the
Shares by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise and shares of Common Stock issuable upon conversion,
exercise or exchange thereof.
"REGISTRATION EXPENSES" means all expenses arising from or
incident to the Company's performance of, or compliance with, this Agreement,
including, without limitation, all registration, filing and listing fees; all
fees and expenses of complying with securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue sky"
qualifications of Registrable Securities); all printing, messenger and delivery
expenses; the fees and disbursements of counsel for the Company and its
independent public accountants; the fees and disbursements of one firm of
counsel (other than in-house counsel) retained by the holders of Registrable
Securities being registered; the expenses of any special audits required by or
incident to such performance and compliance; and any liability insurance or
other premiums for insurance obtained in connection with any registration
pursuant to the terms of this Agreement; PROVIDED, HOWEVER, that Registration
Expenses shall not include underwriting discounts and commissions and transfer
taxes, if any; and PROVIDED FURTHER, that in any case where Registration
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Expenses are borne by the holders pursuant to Section 3(d), Registration
Expenses shall not include general overhead expenses of the Company or other
expenses for the preparation of financial statements or other data normally
prepared by the Company in the ordinary course of its business.
"REGISTRATION STATEMENT" means a registration statement filed
pursuant to the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SHARES" has the meaning assigned to such term in the recital
to this Agreement.
"STOCK PURCHASE AGREEMENT" has the meaning assigned to such
term in the recital to this Agreement.
"SUBSIDIARY" has the meaning set forth in Section 6(c).
2. GENERAL; SECURITIES SUBJECT TO THIS AGREEMENT.
(a) GRANT OF RIGHTS. The Company hereby grants registration
rights to the Insurance Partners Stockholders upon the terms and conditions set
forth in this Agreement.
(b) REGISTRABLE SECURITIES. For the purposes of this
Agreement, Registrable Securities will cease to be Registrable Securities when
(i) a Registration Statement covering such Registrable Securities has been
declared effective under the Securities Act by the Commission and such
Registrable Securities have been disposed of pursuant to such effective
Registration Statement, (ii) the entire amount of Registrable Securities
proposed to be sold in a single sale by a Designated Holder, in the opinion of
counsel satisfactory to the Company and the Designated Holder, each in their
reasonable judgment, may be distributed to the public without any limitation as
to volume pursuant to Rule 144 (or any successor provision then in effect) under
the Securities Act and the Designated Holder is not then an Affiliate of the
Company, or (iii) the Registrable Securities are proposed to be sold or
distributed by a Person not entitled to the registration rights granted by this
Agreement.
(c) HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to
be a holder of Registrable Securities whenever such Person owns of record
Registrable Securities, or holds an option to purchase, or a security
convertible into or exercisable or exchangeable for, Registrable Securities
whether or not such acquisition or conversion has actually been effected and
disregarding any legal restrictions upon the exercise of such rights. If the
Company receives conflicting
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instructions, notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company may act upon the basis of the
instructions, notice or election received from the registered owner of such
Registrable Securities. Registrable Securities issuable upon exercise of an
option or upon conversion of another security shall be deemed outstanding for
the purposes of this Agreement.
3. DEMAND REGISTRATION.
(a) REQUEST FOR DEMAND REGISTRATION. At any time any of the
Insurance Partners Stockholders (the "Initiating Holders") shall be entitled to
request in writing that the Company use its best efforts to effect the
registration under the Securities Act, and under the securities or "blue sky"
laws of any jurisdiction designated by such Initiating Holders, of all or part
of such Initiating Holders' Registrable Securities in accordance with this
Section 3 (a "Demand Registration"). Any such request for a Demand Registration
shall specify the amount of Registrable Securities proposed to be sold and the
intended method of disposition thereof. Upon receiving a request for a Demand
Registration, the Company will promptly, but in no event more than 10 days after
the receipt from the Initiating Holders of a request for a Demand Registration,
give written notice of such Demand Registration to all of the Insurance Partners
Stockholders (other than the Initiating Holders) and all holders of (x) the 1992
Common Stock Purchase Warrants and (y) the CentreLine Warrant (the "Other
Rightholders"), and thereupon will, as provided in Section 6, use its best
efforts to effect the registration under the Securities Act of (i) the
Registrable Securities which the Company has been so requested by the Initiating
Holders to register and (ii) all other shares of Common Stock which the Company
has been requested in writing to register by such Insurance Partners
Stockholders and Other Rightholders (which requests shall specify the number of
shares of Common Stock proposed to be sold and the intended method of
disposition thereof and shall be given to the Company within 30 days after the
giving of such written notice of the Demand Registration by the Company).
(b) LIMITATION ON DEMAND REGISTRATIONS. Notwithstanding
anything to the contrary set forth in Section 3(a), the Company shall not be
obligated to file a Registration Statement with respect to a Demand Registration
upon a request by the Initiating Holders under Section 3(a) if (i) the Company
has any other Registration Statement on file but not yet declared effective,
(ii) the Company has filed any other Registration Statement that has an
effective date within a period of 180 days prior to the filing of the
Registration Statement with respect to the Demand Registration, (iii)
Registrable Securities having an anticipated aggregate net offering price of
less than $7,500,000 are to be registered in such Demand Registration or (iv)
the Company has paid the Registration Expenses for the maximum number of Demand
Registrations for which it is obligated to pay under Section 3(d).
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(c) EFFECTIVE DEMAND REGISTRATION. A registration shall not
constitute a Demand Registration until it has become effective and remains
continuously effective for the lesser of (i) the period during which all
Registrable Securities registered in the Demand Registration are sold and (ii)
180 days; PROVIDED, HOWEVER, that a registration shall not constitute a Demand
Registration if (x) after such Demand Registration has become effective, such
registration or the related offer, sale or distribution of Registrable
Securities thereunder is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court for
any reason not attributable to the Initiating Holders and such interference is
not thereafter eliminated or (y) the conditions to closing specified in the
underwriting agreement, if any, entered into in connection with such Demand
Registration are not satisfied or waived, other than by reason of a failure by
the Initiating Holders.
(d) EXPENSES. The Company will pay all Registration Expenses
in connection with three Demand Registrations under this Section 3 that either
become effective under the Securities Act or are withdrawn prior to the
effective date thereof; PROVIDED, HOWEVER, that the Company shall be obligated
to pay all Registration Expenses in connection with only two Demand
Registrations under this Section 3 that either become effective under the
Securities Act or are withdrawn prior to the effective date thereof if (i) there
shall have been an Incidental Registration pursuant to Section 4(a) and (ii) the
Company shall have registered in such Incidental Registration Registrable
Securities held by the Insurance Partners Stockholders having an anticipated
aggregate net offering price of not less than $5,000,000; PROVIDED FURTHER, that
any such withdrawal as the result of the actions of any Person or Persons other
than the Initiating Holders, or based upon material adverse information relating
to the Company that is different from the information known by or available
(upon request from the Company or otherwise) to the Initiating Holders at the
time of their request for a Demand Registration under this Section 3, shall not
diminish the number of registrations in connection with which the Company agrees
to pay Registration Expenses; and PROVIDED FURTHER, that if such withdrawal is
the result of the actions of the Initiating Holders, then such Initiating
Holders may in their sole and unlimited discretion elect to bear the
Registration Expenses of such Demand Registration, in which case such
registration shall not be counted as a Demand Registration pursuant to this
Section 3. In the event that the Initiating Holders elect to bear the
Registration Expenses (and underwriting discounts and commissions and transfer
taxes, if any) in connection with any Demand Registration requested under this
Section 3, such Registration Expenses shall be apportioned among the holders
whose shares of Common Stock are then being registered, on the basis of the
respective amounts (by number of shares) of Common Stock then being registered
by them or on their behalf.
(e) UNDERWRITING PROCEDURES. If the Initiating Holders so
elect, the offering of Registrable Securities pursuant to a Demand Registration
shall be in the form of a firm commitment underwritten offering and the managing
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underwriter or underwriters selected for such offering shall be the Approved
Underwriter (as hereinafter defined) selected in accordance with Section 3(f).
In connection with any Demand Registration under this Section 3 involving an
underwriting, none of the Registrable Securities held by any of the Insurance
Partners Stockholders (other than the Initiating Holders) or shares of Common
Stock held by any Other Rightholders making a request for inclusion thereof
pursuant to Section 3(a) shall be included in such underwriting unless such
Insurance Partners Stockholders or Other Rightholders, as the case may be,
accept the terms of the underwriting as agreed upon by the Company, the
Initiating Holders and the Approved Underwriter, and then only in such quantity
as will not, in the opinion of the Approved Underwriter, jeopardize the success
of such offering. If the Approved Underwriter advises the Company in writing
that in its opinion the aggregate amount of Common Stock requested to be
included in such offering is sufficiently large to have a material adverse
effect on the success of such offering, then the Company shall include in such
registration only the aggregate amount of Common Stock that in the opinion of
the Approved Underwriter may be sold without any such material adverse effect
and shall reduce, as to the Initiating Holders, the Insurance Partners
Stockholders (other than the Initiating Holders) and the Other Rightholders as a
group, the amount of Common Stock to be included in such registration, pro rata
within such group based on the number of Registrable Securities and other shares
of Common Stock included in the request for registration pursuant to Section
3(a).
(f) SELECTION OF UNDERWRITERS. If any Demand Registration of
Registrable Securities is in the form of an underwritten offering, the
Initiating Holders holding a majority of the Registrable Securities held by all
such Initiating Holders shall select and obtain an investment banking firm of
national reputation to act as the managing underwriter of the offering (the
"Approved Underwriter"); PROVIDED, HOWEVER, that the Approved Underwriter shall,
in any case, be acceptable to the Company in its reasonable judgment.
4. INCIDENTAL OR "PIGGY-BACK" REGISTRATION.
(a) REQUEST FOR INCIDENTAL REGISTRATION. If the Company, at
any time or from time to time, proposes to register any of its shares of Common
Stock for its own account under the Securities Act (other than a registration of
shares of Common Stock solely in connection with any plan for the acquisition of
shares of Common Stock by employees of the Company or any dividend reinvestment
plan, and other than a registration of shares of Common Stock, the Registration
Statement pertaining to which does not permit secondary sales or include
substantially the same information as would be required to be included in a
Registration Statement covering the sale of Registrable Securities), then it
will at each such time give written notice (given at least 30 days prior to the
proposed filing date) describing the proposed registration and distribution to
each of the Designated Holders of its intention to do so and, upon the written
request of each of the Designated Holders, made within 30 days
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after the receipt of any such notice (which request shall specify the amount of
Registrable Securities proposed to be sold by such Designated Holder and the
intended method of disposition thereof), the Company will, as provided in
Section 6, use its best efforts to effect the registration under the Securities
Act of all of the Registrable Securities that the Company has been so requested
to register by the Designated Holders, to the extent required to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Registrable Securities to be registered (each, an "Incidental
Registration"); PROVIDED, HOWEVER, that if, at any time after giving written
notice of its intention to register any of its shares of Common Stock and prior
to the effective date of the Registration Statement filed in connection with
such Incidental Registration, the Company shall determine for any reason not to
register such shares of Common Stock, the Company may, at its election, give
written notice of such determination to each of the Designated Holders and,
thereupon, shall be relieved from its obligation to register any Registrable
Securities in connection with such Incidental Registration (but not from its
obligation to pay the Registration Expenses in connection therewith), without
prejudice, however, to the rights of any Insurance Partners Stockholder to
request that such registration be effected as a Demand Registration under
Section 3. In connection with any Incidental Registration under this Section
4(a) involving an underwriter, or a distribution with the assistance of a
selling agent, the right of any Designated Holder to participate in such
Incidental Registration shall be conditioned upon such Designated Holder's
participation in such underwriting or distribution.
(b) REDUCTION IN REGISTRABLE SECURITIES TO BE REGISTERED.
Notwithstanding anything to the contrary set forth in Section 4(a), if a
proposed Incidental Registration is for a registered public offering involving
an underwriting and the representative of the underwriters advises the Company
in writing that the registration of all or part of the shares of Common Stock to
be underwritten in such Incidental Registration would materially adversely
effect such offering, then the Company shall so advise the Designated Holders
and any other holders of shares of Common Stock requesting registration in such
Incidental Registration, and the number of shares of Common Stock that are
entitled to be included in the Incidental Registration shall be allocated (i)
first, to the Company for shares of Common Stock being sold for its own account,
(ii) second, among the Designated Holders and any other holders of shares of
Common Stock entitled to "incidental" registration rights and requesting
inclusion of shares of Common Stock in such Incidental Registration, pro rata on
the basis of the number of shares of Common Stock requested to be included in
such Incidental Registration, and (iii) third, any other shares of Common Stock
requested to be included in such Incidental Registration; PROVIDED, HOWEVER,
that if any Insurance Partners Stockholder or Other Rightholder does not request
inclusion of the maximum number of shares of Common Stock allocated to it
pursuant to the foregoing procedure, then the remaining portion of its
allocation shall be reallocated among those Insurance Partners Stockholders and
Other Rightholders whose allocations were not satisfied on the basis of the
number of shares of Common
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Stock requested to be included in such Incidental Registration, and this
procedure shall be repeated until all of the shares of Common Stock that may be
included in the registration on behalf of the Insurance Partners Stockholders
and the Other Rightholders have been so allocated. The Company shall not limit
the number of shares of Common Stock to be included in an Incidental
Registration pursuant to this Agreement in order to include shares held by
stockholders with no registration rights or to include any shares of stock
issued to employees, officers, directors or consultants pursuant to any stock
option plan, or in order to include in such registration securities registered
for the Company's own account.
If any shares of Common Stock are withdrawn from the Incidental
Registration or if the number of shares of Common Stock to be included in such
Incidental Registration was previously reduced as a result of marketing factors,
then the Company shall then offer to all Persons who have retained the right to
include Common Stock in the Incidental Registration the right to include
additional shares of Common Stock in the registration in an aggregate amount
equal to the number of shares of Common Stock so withdrawn, with such shares of
Common Stock to be allocated among the Persons requesting additional inclusion
pro rata in accordance with the terms of this Section 4(b).
(c) EXPENSES. The Company shall pay all Registration Expenses
in connection with any Incidental Registration pursuant to this Section 4,
whether or not such Incidental Registration becomes effective. No Incidental
Registration under this Section 4 shall relieve the Company of its obligations
to effect a Demand Registration upon request under Section 3(a).
5. HOLDBACK AGREEMENTS.
(a) RESTRICTIONS ON PUBLIC SALE BY DESIGNATED HOLDERS. Each of
the Designated Holders agrees not to effect any public sale or distribution of
any Registrable Securities being registered or of any securities convertible
into or exchangeable or exercisable for such Registrable Securities, including a
sale pursuant to Rule 144 under the Securities Act, during the 90 day period
beginning on the effective date of such Registration Statement (except as part
of such registration), (i) in the case of a non-underwritten public offering, if
and to the extent requested by the Company or (ii) in the case of an
underwritten public offering, if and to the extent requested by the Approved
Underwriter (in the event of a Demand Registration pursuant to Section 3) or the
Company's underwriters (in the event of an Incidental Registration pursuant to
Section 4(a)), as the case may be.
(b) RESTRICTIONS ON PUBLIC SALE BY THE COMPANY. The Company
agrees not to effect any public sale or distribution of any of its securities,
or any securities convertible into or exchangeable or exercisable for such
securities (except pursuant to registrations on Form S-4 or Form S-8 or any
successor thereto),
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during the period beginning on the effective date of any Registration Statement
in which the Designated Holders of Registrable Securities are participating and
ending on the earlier of (i) the date on which all Registrable Securities
registered on such Registration Statement are sold and (ii) 180 days after the
effective date of such Registration Statement.
6. REGISTRATION PROCEDURES.
(a) OBLIGATIONS OF THE COMPANY. If and whenever the Company is
requested to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 3 and 4, then the Company will promptly
use its best efforts to:
(i) prepare and (in any event within 90 days after the
end of the period within which requests for registration may be given to
the Company) file with the Commission a Registration Statement with
respect to such Registrable Securities and use its best efforts to cause
such Registration Statement to become effective;
(ii) prepare and file with the Commission 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 and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by such Registration Statement until such time as all
of such securities have been disposed of in accordance with the intended
methods of disposition thereof by the seller or sellers thereof set forth
in such Registration Statement, but in no event for a period of more than
six months (or, with respect to any Registration Statement covering
Registrable Securities the distribution of which has been deferred
pursuant to Section 4(c), nine months) after such Registration Statement
becomes effective;
(iii) as soon as reasonably possible, furnish to each
seller of Registrable Securities, prior to filing a Registration
Statement, such number of conformed copies of such Registration Statement
and of each such amendment and supplement thereto (in each case including
all exhibits, except that the Company shall not be obligated to furnish
any seller of Registrable Securities with more than two copies of such
exhibits), such number of copies of the prospectus contained in such
Registration Statement (including each preliminary prospectus and any
summary prospectus), in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by
such seller;
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(iv) register or qualify such Registrable Securities
covered by such Registration Statement under such other securities or
"blue sky" laws of such jurisdictions as each seller of Registrable
Securities shall request, and do any and all other acts and things which
may be necessary or advisable to enable such seller to consummate the
disposition in such jurisdic tions of the Registrable Securities owned by
such seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified, or to subject itself to
taxation in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(v) cause the Registrable Securities covered by such
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the seller or sellers of
Registrable Securities to consummate the disposition of such Registrable
Securities;
(vi) notify each seller of any Registrable Securities
covered by such Registration Statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make
statements therein not misleading in the light of the circumstances then
existing, and prepare and furnish to such seller a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit 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 then existing;
(vii) advise each seller of Registrable Securities as to
the time when such Registration Statement becomes effective and as to the
threat of or the issuance by the Commission of any stop order suspending
the effectiveness of such Registration Statement or the institution of any
proceedings for that purpose, and use its best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible the
removal thereof, if issued;
(viii)comply with all applicable rules and regulations
of the Commission, and make available to each seller of Registrable
Securities, as soon as reasonably practicable, an earnings statement
covering the period of
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at least 12 months, but not more than 18 months, beginning with the first
month after the effective date of the Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(ix) list all the Registrable Securities on any
securities exchange (or The Nasdaq Stock Market, Inc. or the
over-the-counter market) on which similar securities are then listed, if
such securities are not already so listed and such listing is then
permitted under the rules of such exchange;
(x) cooperate with each seller of Registrable Securities
and each underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the National Association of Securities Dealers,
Inc.; and
(xi) furnish to each seller a signed counterpart,
addressed to the sellers, of (x) an opinion of counsel representing the
Company for purposes of such registration, dated the effective date of
such Registration Statement, and (y) a "comfort letter" signed by the
independent public accountants of the Company who have certified the
Company's financial statements included in such Registration Statement, in
each case, covering substantially the same matters with respect to such
Registration Statement (and the prospectus included therein) and, in the
case of such accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities; PROVIDED,
HOWEVER, that the Company shall not be obligated to furnish such
accountants' letter except in connection with an underwritten offering.
(b) SELLER INFORMATION. The Company may require each seller of
Registrable Securities as to which any registration is being effected to furnish
to the Company such information regarding the distribution of such securities as
the Company may from time to time reasonably request in writing and as shall be
required by law in connection therewith.
(c) PREPARATION; REASONABLE INVESTIGATION. In connection with
the preparation and filing of each Registration Statement registering
Registrable Securities under the Securities Act, the Company will give the
holders of such Registrable Securities so registered and their underwriters, if
any, and their respective counsel and financial advisors, the opportunity to
participate in the preparation of such Registration Statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each
13
of them such access to its books and records (including the books and records of
its Subsidiaries (as hereinafter defined)) and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
opinion of such holders' and such underwriters' respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act; PROVIDED,
HOWEVER, that the Company shall not be obligated to give such opportunities and
access to any holder of Registrable Securities holding less than 150,000
Registrable Securities other than the Initiating Holders, as a group, requesting
a Demand Registration pursuant to Section 3(c). A "Subsidiary" means, with
respect to the Company, a corporation or other entity of which 50% or more of
the voting power of the outstanding voting securities or 50% or more of the
outstanding equity interests is held, directly or indirectly, by the Company.
(d) NOTICE TO DISCONTINUE. Each Designated Holder of
Registrable Securities agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 6(a)(vi), such
Designated Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Designated Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 6(a)(vi) and, if so
directed by the Company, such Designated Holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Designated Holder's possession, of the prospectus covering such Registrable
Securities that is current at the time of receipt of such notice. If the Company
shall give any such notice, the Company shall extend the period during which
such Registration Statement shall be maintained effective pursuant to this
Agreement (including, without limitation, the period referred to in Section
6(a)(ii)) by the number of days during the period from and including the date of
the giving of such notice pursuant to Section 6(a)(vi) to and including the date
when the Designated Holder shall have received the copies of the supplemented or
amended prospectus contemplated by and meeting the requirements of Section
6(a)(vi).
7. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any
registration of any Registrable Securities pursuant to the terms of Section 3 or
Section 4, (i) the Company will indemnify and hold harmless, to the fullest
extent permitted by law, each of the Designated Holders and their respective
directors, officers, partners, trustees, employees, legal counsel, accountants,
financial advisors and agents, and each other Person, if any, who controls
(within the meaning of the Securities Act and the Exchange Act) such Designated
Holder or any such directors, officers, partners, trustees, employees, legal
counsel, accountants, financial advisors and agents (each of the foregoing, a
"designated indemnified party") against any and
14
all losses, claims, damages, liabilities and expenses (including reasonable
costs of investigation), joint or several, to which such designated indemnified
party may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions or proceedings in
respect thereof) arise out of or are based upon (x) any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement under which such Registrable Securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, any notification or offering circular, or any
amendment or supplement thereto or (y) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and (ii) the Company will reimburse such
designated indemnified party for any legal or any other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, liability or action; PROVIDED, HOWEVER, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability (or actions or proceedings in respect thereof) arises out of or is
based upon (x) any untrue statement or alleged untrue statement of any material
fact made in such Registration Statement, any such preliminary prospectus, final
prospectus, summary prospectus, notification or offering circular, or any
amendment or supplement thereto or (y) any omission or alleged omission to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in reliance upon and in conformity with
written information concerning such Designated Holder and furnished to the
Company through an instrument duly executed by such Designated Holder
specifically stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such designated indemnified party and shall survive the
transfer of such securities by any Designated Holder.
(b) INDEMNIFICATION BY DESIGNATED HOLDERS. The Company may
require, as a condition to including any Registrable Securities in any
Registration Statement filed pursuant to Section 3 or Section 4, that the
Company shall have received an undertaking from each Designated Holder selling
such Registrable Securities to indemnify and hold harmless the Company, its
directors, officers, legal counsel, accountants and financial advisors and each
other Person, if any, who controls (within the meaning of the Securities Act and
the Exchange Act) the Company or any such directors, officers, legal counsel,
accountants and financial advisors (each of the foregoing, a "Company
indemnified party") against any losses, claims, damages, liabilities or
expenses, joint or several, to which such Company indemnified party may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
arise out of or are based upon any statement of a material fact or omission to
state a material fact in such Registration Statement, any preliminary prospectus
or final prospectus contained therein, any notification or offering circular, or
any amendment or supplement thereto, if such statement or omission was made in
15
reliance upon and in conformity with written information concerning such
Designated Holder and furnished to the Company through an instrument duly
executed by such Designated Holder specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus, final
prospectus, summary prospectus, notification or offering circular, or amendment
or supplement thereto. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Company indemnified
party and shall survive the transfer of such securities by any Designated
Holder.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after
receipt by any designated indemnified party or Company indemnified party (each,
an "indemnified party") of notice of the commencement of any action, suit,
proceeding or investigation or threatened thereof in writing for which the
indemnified party intends to claim indemnification or contribution pursuant to
this Agreement, such indemnified party will give written notice thereof to the
indemnifying party; PROVIDED, HOWEVER, that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under this Agreement, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. If notice of
commencement of any such action is brought against an indemnified party, the
indemnifying party may (and, upon request by the indemnified party, will), at
its expense, participate in and assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; PROVIDED, HOWEVER, that in
the event of any failure by the indemnifying party diligently to assume and
conduct such defense, the indemnifying party will pay all costs and expenses
(including legal fees and expenses) incurred by such indemnified party in
connection with such claim or litigation. The indemnified party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be paid by the
indemnified party unless (i) the indemnifying party agrees to pay the same, (ii)
the indemnifying party fails to assume the defense of such action with counsel
satisfactory to the indemnified party in its reasonable judgment or (iii) the
named parties to any such action (including any impleaded parties) have been
advised by such counsel in writing that either (x) representation of such
indemnified party and the indemnifying party by the same counsel would be
inappropriate under applicable standards of professional conduct or (y) there
may be one or more legal defenses available to the indemnified party which are
different from or additional to those available to the indemnifying party. In
either of such cases, the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
written consent of each indemnified party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation.
16
(d) OTHER INDEMNIFICATION. Indemnification similar to that
specified in this Section 7 (with appropriate modifications) shall be given by
the Company and each seller of Registrable Securities with respect to any
registration or other qualification of such Registrable Securities under any
federal or state law or regulation of governmental authority other than the
Securities Act.
(e) CONTRIBUTION. If the indemnification provided for in this
Section 7 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative faults of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Sections 7(a), 7(b) and 7(c), any legal
or other fees, charges or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(e) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person.
(f) INSURANCE. In connection with any Demand Registration or
Incidental Registration, the Company will provide at its expense a binder or
binders of insurance in form satisfactory to the Designated Holders
participating in such registration, and, as soon as practicable thereafter, a
policy or policies of insurance, insuring each such Designated Holder, and each
Person, if any, who controls such Designated Holder within the meaning of the
Securities Act and the Exchange Act, for the aggregate amount of the public
offering price received for the Registrable Securities disposed of by such
Designated Holder (subject to such deductible as is customarily contained in
underwriting insurance policies at such time) against all losses, claims,
damages, liabilities and expenses which arise out of or are based upon any
untrue statement, alleged untrue statement, omission or alleged
17
omission of the character described in this Section 7 in connection with such
registration and disposition and which are customarily covered under
underwriting insurance policies; PROVIDED, HOWEVER, that the Company shall not
be obligated to provide such insurance if it determines in good faith that such
insurance is not available on commercially reasonable terms at the time of such
registration, and the holders of a majority of the Registrable Securities to be
registered reasonably agree.
8. RULE 144. The Company covenants that it shall file (a) any
reports required to be filed by it under the Exchange Act and (b) take such
further action as each Designated Holder of Registrable Securities may
reasonably request (including providing any information necessary to comply with
Rule 144 under the Securities Act), all to the extent required from time to time
to enable such Designated Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such rule may be amended
from time to time, or (ii) any similar rules or regulations hereafter adopted by
the Commission. The Company shall, upon the request of any Designated Holder of
Registrable Securities, deliver to such Designated Holder a written statement as
to whether it has complied with such requirements.
9. MISCELLANEOUS.
(a) RECAPITALIZATIONS, EXCHANGES, ETC. The provisions of this
Agreement shall apply, to the full extent set forth herein, with respect to (i)
the shares of Common Stock and (ii) any and all equity securities of the Company
or any suc cessor or assign of the Company (whether by merger, consolidation,
sale of assets or otherwise), which may be issued in respect of, in conversion
of, in exchange for or in substitution of, the shares of Common Stock, and shall
be appropriately adjusted for any stock dividends, splits, reverse splits,
combinations, recapitalizations and the like occurring after the date hereof.
The Company shall cause any successor or assign (whether by merger,
consolidation, sale of assets or otherwise) to enter into a new registration
rights agreement with the Designated Holders on terms substantially similar to
this Agreement as a condition of any such transaction.
(b) NO INCONSISTENT AGREEMENTS. The Company shall not enter
into any agreement with respect to its securities that is inconsistent with the
registration rights granted in this Agreement or grant any additional
registration rights to any Person or with respect to any securities that are not
Registrable Securities that are prior in right to or inconsistent with the
rights granted in this Agreement. If at any time after the date hereof, any
Person other than an Other Rightholder shall advise or give notice to the
Company of such Person's exercise of registration rights granted by the Company
to such Person prior to the date hereof, the Company shall use its best efforts
to cause such Person to acknowledge the registration rights granted pursuant to
this Agreement and agree that such Person's registration rights shall not be
prior in right to the rights granted in this Agreement.
18
(c) REMEDIES. The Designated Holders, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
shall be entitled to specific performance of their rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive in any action for specific performance the
defense that a remedy at law would be adequate.
(d) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless consented to in writing by (i) the Company and (ii) the
Insurance Partners Stockholders holding Registrable Securities representing
(after giving effect to any adjustments) at least 60% of the aggregate number of
Registrable Securities owned by all of the Insurance Partners Stockholders. Any
such written consent shall be binding upon the Company and all of the Designated
Holders.
(e) NOTICES. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be made
by registered or certified first-class mail, return receipt requested,
telecopier, courier service, overnight mail or personal delivery:
(i) if to the Company:
Superior National Insurance Group, Inc.
00000 Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
Xxxxxxx & XxXxxxxx
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
19
(ii) if to IP or IP Bermuda
c/o Insurance Partners Advisors, L.P.
One Chase Xxxxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxxx X. Xxxxxx
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
(iii) if to any other Designated Holder, at its address
as it appears on the record books of the
Company.
All such notices and communications shall be deemed to have been
duly given when delivered by hand, if personally delivered; when delivered by
courier or overnight mail, if delivered by commercial courier service or
overnight mail; five (5) Business Days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is mechanically acknowledged, if
telecopied.
(f) SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto. The Demand Registration rights of the
Insurance Partners Stockholders contained in Section 3 and the other rights of
each of the Insurance Partners Stockholders with respect thereto and the
incidental or "piggyback" registration rights of the Designated Holders
contained in Section 4 and the other rights of each of the Designated Holders
with respect thereto shall be, with respect to any Registrable Security,
automatically transferred to any Person who is the transferee of such
Registrable Security, provided that such transfer was made in compliance with
applicable securities laws and such transferee is made a party to this Agreement
and, after such transfer, is the holder of not less than 150,000 Registrable
Securities. All of the obligations of the Company hereunder shall survive any
such transfer. Subject to Section 7, no Person other than the parties hereto and
their successors and permitted assigns is intended to be a beneficiary of any of
the rights granted hereunder.
20
(g) COUNTERPARTS. This Agreement may be executed in any number
of 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 agreement.
(h) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(I) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
(j) SEVERABILITY. If any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, it being
intended that all of the rights and privileges of the Designated Holders shall
be enforceable to the fullest extent permitted by law.
(k) ENTIRE AGREEMENT. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and in the Stock Purchase Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
(l) FURTHER ASSURANCES. Each of the parties shall execute
such documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.
21
IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Agreement on the date first written above.
SUPERIOR NATIONAL INSURANCE
GROUP, INC.
By: /S/ J. XXXXX XXXXXX
-------------------------------
Name:
Title:
INSURANCE PARTNERS, L.P.
By: Insurance GenPar, L.P., its
General Partner
By: Insurance GenPar MGP, L.P., its
General Partner
By: Insurance GenPar MGP, Inc., its
General Partner
By: /S/ XXXXXX X. XXXXXX
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
INSURANCE PARTNERS OFFSHORE
(BERMUDA), L.P.
By: Insurance GenPar (Bermuda), L.P.,
its General Partner
By: Insurance GenPar (Bermuda) MGP,
L.P., its General Partner
By: Insurance GenPar (Bermuda) MGP,
Ltd., its General Partner
By: /S/ XXXXXX X. XXXXXX
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
