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Exhibit 10.5
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
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1. Definitions................................................................. 1
2. General; Securities Subject to this Agreement............................... 4
x. Xxxxx of Rights......................................................... 4
b. Registrable Securities.................................................. 4
c. Holders of Registrable Securities....................................... 4
3. Demand Registration......................................................... 4
a. Request for Demand Registration......................................... 4
b. Limitation on Demand Registrations...................................... 5
c. Effective Demand Registration........................................... 5
d. Expenses................................................................ 5
e. Underwriting Procedures................................................. 6
f. Selection of Underwriters............................................... 6
4. Incidental or "Piggy-Back" Registration..................................... 7
a. Request for Incidental Registration..................................... 7
b. Reduction in Registrable Securities to be Registered.................... 7
c. Expenses................................................................ 8
5. Holdback Agreements......................................................... 8
a. Restrictions on Public Sale by Designated Holders....................... 8
b. Restrictions on Public Sale by the Company.............................. 9
6. Registration Procedures..................................................... 9
a. Obligations of the Company.............................................. 9
b. Seller Information...................................................... 11
c. Preparation; Reasonable Investigation................................... 11
d. Notice to Discontinue................................................... 12
7. Indemnification; Contribution............................................... 12
a. Indemnification by the Company.......................................... 12
b. Indemnification by Designated Holders................................... 13
c. Conduct of Indemnification Proceedings.................................. 13
d. Other Indemnification................................................... 14
e. Contribution............................................................ 14
f. Insurance............................................................... 15
8. Rule 144.................................................................... 15
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9. Miscellaneous............................................................... 16
a. Recapitalizations, Exchanges, etc....................................... 16
b. No Inconsistent Agreements.............................................. 16
c. Remedies................................................................ 16
d. Amendments and Waivers.................................................. 16
e. Notices................................................................. 16
f. Successors and Assigns; Third Party Beneficiaries....................... 17
g. Counterparts............................................................ 18
h. Headings................................................................ 18
i. GOVERNING LAW........................................................... 18
j. Severability............................................................ 18
k. Entire Agreement........................................................ 18
l. Further Assurances...................................................... 19
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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 Fenruary 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 between the Company, Superior National Capital Holding Corporation, Superior
National Capital, L.P. and Centre Reinsurance Services (Bermuda) III Limited.
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"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.
"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.
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"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
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.
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"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.
x. Xxxxx 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 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
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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).
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
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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 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
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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 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. Notwith- standing 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
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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 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
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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), 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:
(1) 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;
(2) 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;
(3) 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
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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;
(4) 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 jurisdictions 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;
(5) 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;
(6) 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;
(7) 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;
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(8) 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 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;
(9) 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;
(10) 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
(11) 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 of them such access
to its books and records
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(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 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
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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
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
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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.
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
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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 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.
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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 successor 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.
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:
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(1) 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.
(2) 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.
(3) 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
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and the incidental or "piggy-back" 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.
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.
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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.
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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: J. Xxxxx Xxxxxx
Title: Chief Financial Officer
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
