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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-KA
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 30, 1997
HIGHLANDS INSURANCE GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-14028 75-2370945
(State or Other Jurisdiction of (Commission (IRS Employer
Incorporation or Organization) File Number) Identification No.)
10370 Richmond Avenue 77042
Houston, Texas (Zip Code)
(Address of Principal Executive Offices)
(713) 952-9555
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
On May 15, 1997, Highlands Insurance Group, Inc., a Delaware Corporation
("Highlands") filed with the Securities and Exchange Commission a Report of Form
8-K (the "Initial 8-K Report") with respect to Highlands' acquisition of Vik
Brothers Insurance, Inc. and its subsidiaries. This amendment is being filed for
the purpose of including additional exhibits and should be read in conjunction
with the Initial 8-K Report.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired:
(b) Pro Forma Financial Information
Financial statements of business acquired and the pro forma information required
to be filed are not attached to this form 8-KA and will be filed by amendment
not later than 60 days after the date that the Initial 8-K Report was required
to be filed.
(c) Exhibits
The following Exhibits are included herewith:
4.1 Stockholders Agreement among Highlands Insurance Group, Inc., Insurance
Partners, L.P., Insurance Partners Offshore (Bermuda) L.P., The Scandinavia
Company, Erik M. Vik and Manoeuvre Ltd.
4.2 Form of Amendment Number 1 to 10% Convertible Subordinated Debenture, Due
December 31, 2005 of Highlands Insurance Group, Inc.
4.3 Form of Amendment Number 1 to 10% Convertible Subordinated Debenture,
Series 2, Due December 31, 2005 of Highlands Insurance Group, Inc.
4.4 Form of Amendment Number 1 to Common Stock Subscription Warrant, Series A
4.5 Form of Amendment Number 1 to Common Stock Subscription Warrant, Series B
4.6 Form of Amendment Number 1 to Common Stock Subscription Warrant, Series A-2
4.7 Form of Amendment Number 1 to Common Stock Subscription Warrant, Series B-2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HIGHLANDS INSURANCE GROUP, INC.
June 10, 1997 By: /s/ Stephen J. Greenberg
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Stephen J. Greenberg
Vice President and Secretary
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STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (the "Agreement") entered into and
effective as of April 30, 1997 among Highlands Insurance Group, Inc., a Delaware
corporation (the "Corporation"), Insurance Partners, L.P., a Delaware limited
partnership ("IP"), Insurance Partners Offshore (Bermuda) L.P., a Bermuda
limited partnership ("IP Bermuda"; IP and IP Bermuda, collectively, the "IP
Parties"), The Scandinavia Company, Inc. ("Scandinavia"), Erik M. Vik ("EMV")
and Manoeuvre Ltd. ("Manoeuvre", and collectively with Scandinavia and EMV, the
"VBI Stockholders") the IP Parties, the VBI Stockholders and each other Person
(as defined below), other than the Corporation, that may become a party hereto
as contemplated hereby being hereinafter referred to individually as a "Party"
and collectively as the "Parties");
W I T N E S S E T H:
WHEREAS, Vik Brothers Insurance, Inc., an Indiana corporation
("VBI"), the Corporation and Highlands Acquisition Corp., a subsidiary of the
Corporation ("HAC"), have entered into an Amended and Restated Agreement and
Plan of Merger (as so amended and restated and as supplemented, extended or
otherwise modified from time to time, the "Merger Agreement"), dated as of
February 13, 1997, pursuant to which HAC and VBI are merging (the "Merger") as
of the date hereof with VBI being the surviving corporation of the Merger;
WHEREAS, as a result of the consummation of the Merger, the
VBI Stockholders are receiving shares of Common Stock, par value $.01 per share
(as applicable, the "Common Stock" or the "Merger Shares"), of the Corporation;
WHEREAS, the IP Parties own certain Debentures and Warrants
issued by the Corporation which are, upon the satisfaction of certain
conditions, convertible into or exercisable for shares of Common Stock; and
WHEREAS, in connection with and as a condition to the
consummation of the Merger, the parties hereto have entered into this Agreement
in order to define certain rights, duties and obligations of such parties.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
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ARTICLE 1
GENERAL PROVISIONS:
REPRESENTATIONS AND WARRANTIES
1.1 Certain Terms. In addition to the terms defined elsewhere herein,
when used herein the following terms shall have the meanings indicated:
"Accredited Investor" shall have the meaning set forth for
such term in Regulation D.
An "Affiliate" of a Person means in all cases, any Person
controlling, controlled by, or under common control with such Person.
With respect to any Stock, "beneficial" ownership or
"beneficially" owned shall have the same meaning as in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended.
"Capital Stock" means any and all shares, interests,
participations, or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation), and any and all warrants, options, or other rights to purchase
or acquire any of the foregoing.
"Common Stock Equivalents" means (without duplication with any
other Common Stock or Common Stock Equivalents) rights, warrants, options,
convertible securities or exchangeable securities or indebtedness, or other
rights, exercisable for or convertible or exchangeable into, directly or
indirectly, Common Stock or securities convertible or exchangeable into Common
Stock, whether at the time of issuance or upon the passage of time or the
occurrence of some future event.
"Fully-Diluted Common Stock" means, at any time, the then
outstanding Common Stock of the Corporation plus (without duplication) all
shares of Common Stock issuable, whether at such time or upon the passage of
time or the occurrence of some future event, upon the exercise, conversion or
exchange of all then-outstanding Common Stock Equivalents.
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"Person" means any natural person, corporation, limited
partnership, general partnership, joint stock company, joint venture,
association, company, trust, bank, trust company, land trust, business trust, or
other organization, whether or not a legal entity, and any government or agency
or political subdivision thereof.
"Regulation D" means Regulation D as promulgated under the
Securities Act.
"SEC" means the Securities and Exchange Commission or any
successor governmental agency.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means (i) any corporation or other entity a
majority of the Capital Stock of which having ordinary voting power to elect a
majority of the board of directors or other Persons performing similar functions
is at the time owned, directly or indirectly, with power to vote, by the
Corporation or any direct or indirect Subsidiary of the Corporation or (ii) a
partnership in which the Corporation or any direct or indirect Subsidiary is a
general partner.
1.2 Representations and Warranties.
(a) Each of the Parties (as to such Party only) represents and
warrants to the Corporation and the other Parties that:
(i) such Party has full power and authority to
execute, deliver, and perform this Agreement and to consummate the
transactions contemplated hereby, and the execution, delivery, and
performance by it of this Agreement and the consummation by it of the
transactions contemplated hereby have been duly authorized by all
necessary action;
(ii) this Agreement has been duly and validly
executed and delivered by such Party and constitutes the binding
obligation of such Party enforceable against such Party in accordance
with its terms; and
(iii) the execution, delivery, and performance by
such Party of this Agreement and the consummation by such Party of
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the transactions contemplated hereby will not, with or without the
giving of notice or the lapse of time, or both, (A) violate any
provision of law, statute, rule, or regulation to which it is subject,
(B) violate any order, judgment, or decree applicable to it, or (C)
conflict with, or result in a breach or default under, any term or
condition of its certificate of incorporation or by-laws, certificate
of limited partnership or partnership agreement, as applicable, or any
agreement or other instrument to which such Party is a party or by
which such Party is bound, other than any such violation, conflict or
breach the occurrence of which would not have a material adverse effect
on the ability of such Party to perform this Agreement.
(b) The Corporation hereby represents and warrants to each
Party that:
(i) it is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware,
it has full corporate power and authority under its certificate of
incorporation to execute, deliver, and perform this Agreement and to
consummate the transactions contemplated hereby, and the execution,
delivery, and performance by it of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by
all necessary action;
(ii) this Agreement has been duly and validly
executed and delivered by the Corporation and constitutes the binding
obligation thereof enforceable against the Corporation in accordance
with its terms; and
(iii) the execution, delivery, and performance by the
Corporation of this Agreement and the consummation by the Corporation
of the transactions contemplated hereby will not, with or without the
giving of notice or the lapse of time, or both, (A) violate any
provision of law, statute, rule, or regulation to which the Corporation
is subject, (B) violate any order, judgment, or decree applicable to
the Corporation, or (C) conflict with, or result in a breach or default
under, any term or condition of its Certificate of Incorporation or
by-laws or any agreement or other instrument to which the Corporation
is a party or by which it is bound, other than any such violation,
conflict or breach the occurrence of which would not have a material
adverse effect on the ability of the Corporation to perform this
Agreement.
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ARTICLE 2
VOTING OF COMMON STOCK
2.1 Voting of Capital Stock. Each of the VBI Stockholders agrees that
so long as the IP Parties beneficially own (without regard to any contractual or
legal prohibition on the ability of the IP Parties to exercise the warrants or
cause the conversion of convertible debt currently owned by them), at least 75%
of the total number of shares of Fully-Diluted Common Stock beneficially owned
by them as of the date hereof (the "IP Ownership Condition"), he or it will vote
(or cause to be voted) his or its shares of Common Stock as directed by IP as
long as such direction is to vote (i) in favor of (A) any nominees for director
nominated by the incumbent Board of Directors (including, without limitation,
any of such nominees for director designated by either of the IP Parties) and
(B) any other proposal recommended by the Board of Directors for approval by the
Corporation's stockholders and (ii) against any proposal which the Board of
Directors has recommended be rejected by the Corporation's stockholders. Upon
request of the IP Parties, as long as the VBI Stockholders are required to vote
their shares of Common Stock as recommended by the Board of Directors, each of
them separately agrees to execute appropriate proxies or powers of attorney to
permit IP to vote and/or execute written consents with respect to his or its
shares of Common Stock as contemplated by this Section 2.1.
ARTICLE 3
TRANSFER AND PLEDGE OF SECURITIES
3.1 Right of Participation.
(a) If either or both of the IP Parties proposes to sell
shares of Common Stock for value, but excluding (i) a sale which is pursuant to
a public offering registered under the Securities Act, (ii) a sale made in
accordance with Rule 144 under the Securities Act (or any similar successor
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provision), (iii) a sale to an Affiliate of IP and (iv) any sale in which all of
the Parties agree and are permitted to participate, then such IP Party shall
offer (the "Participation Offer") to include in the proposed sale a number of
shares of Common Stock designated by any of the other Parties, not to exceed, in
respect of any such other Party, the number of shares equal to the product of
(A) the aggregate number of shares of Common Stock to be sold by such IP Party
to the proposed transferee and (B) a fraction the numerator of which is equal to
the number of shares of Merger Shares held by such other Party and the
denominator of which is equal to the number of shares of Common Stock held by
all the Parties (excluding shares of Common Stock held by persons to whom a
Participation Offer is made which are not Merger Shares); provided that if the
consideration to be received by such IP Party includes any securities subject to
Section 5 of the Securities Act, only Parties who are Accredited Investors shall
be entitled to include their shares of Common Stock in such sale. The IP Party
making the Participation Offer (the "Offering IP Party") shall give written
notice to each other Party of the Participation Offer (the "Tag-Along Notice")
at least 15 days prior to the proposed sale. The Tag-Along Notice shall specify
the proposed transferee, the number of shares of Common Stock to be sold to such
transferee, the amount and type of consideration to be received therefor, and
the place and date on which the sale is to be consummated. Each other Party who
wishes to include shares of Common Stock in the proposed sale in accordance with
the terms of this Section 3.1(a) shall so notify the Offering IP Party not more
than 10 days after the date of the Tag-Along Notice. The Participation Offer
shall be conditioned upon consummation of the sale of shares of Common Stock
pursuant to the transactions contemplated in the Tag-Along Notice with the
transferee named therein. If any Party shall have accepted the Participation
Offer, the Offering IP Party shall reduce to the extent necessary the amount of
securities it otherwise would have sold in the proposed sale so as to permit the
other Parties who have accepted the Participation Offer to sell the number of
shares that they are entitled to sell under this Section 3.1(a), and the
Offering IP Party and such other Parties shall sell the number of shares
specified in the Participation Offer to the proposed transferee in accordance
with the terms of such sale set forth in the Tag-Along Notice.
3.2 Transfers Subject to Compliance with Securities Act. No shares of
Common Stock may be transferred by a Party (other than pursuant to an effective
registration statement under the Securities Act) unless such Party first
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delivers to the Corporation an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to the Corporation, to the effect that such
transfer is not required to be registered under the Securities Act.
3.3 Certain Transfers. In the event of any transfer of Common Stock by
any VBI Stockholder to any Person other than an Affiliate of such VBI
Stockholder, the Person receiving such shares of Common Stock shall do so free
and clear of the restrictions imposed, and without benefit of the rights
provided, by this Agreement. A VBI Stockholder may only transfer Common Stock to
an Affiliate if such Affiliate shall agree in a writing, satisfactory to the
Corporation, to be bound by the terms of this Agreement.
ARTICLE 4
REGISTRATION OF STOCK
4.1 Registration Rights. Pursuant to the Registration Rights Agreement
(the "Registration Rights Agreement"), dated as of the date hereof, between the
Corporation, the VBI Parties and Alexander M. Vik, the Corporation has granted
the VBI Parties certain registration rights with respect to the Common Stock
held by them.
ARTICLE 5
TERMINATION
5.1 Termination. This Agreement shall terminate upon the earliest of
(i) the tenth anniversary of the date hereof, (ii) the IP Ownership Condition
ceases to be satisfied and (iii) the dissolution, liquidation, or winding-up of
the Corporation. A Person who ceases to hold any Common Stock or Common Stock
Equivalents and who ceases to beneficially own any Common Stock or Common Stock
Equivalents shall cease to be a Party and shall have no further rights under
this Agreement, but shall remain subject to Article 6 hereof.
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ARTICLE 6
MISCELLANEOUS
6.1 Amendment. Any provision of this Agreement may be altered,
supplemented, amended, or waived only by the written consent of each of (i) the
Corporation and (ii) all of the Parties.
6.2 Specific Performance. The Parties and the Corporation recognize
that the obligations imposed on them in this Agreement are special, unique, and
of extraordinary character, and that in the event of breach by any party,
damages will be an insufficient remedy; consequently, it is agreed that the
Parties and the Corporation may have specific performance and injunctive relief
(in addition to damages) as a remedy for the enforcement hereof, without proving
damages.
6.3 Successors and Assignees. Except as otherwise expressly provided
herein and subject to Section 3.1(a), the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the Parties and the Corporation; provided that the benefits of
Section 2.1 shall not inure to the successors and assigns of the IP Parties. No
such assignment shall relieve the assignor from any liability hereunder. Any
purported assignment made in violation of this Section 6.3 shall be void and of
no force and effect.
6.4 Legends. (a) Each certificate for shares of Common Stock acquired
by any of the VBI Stockholders pursuant to the Merger shall include a legend in
substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR
SOLD, UNLESS IT HAS BEEN REGISTERED UNDER THE SECURITIES ACT OR UNLESS
AN EXEMPTION FROM REGISTRATION IS AVAILABLE (AND, IN SUCH CASE, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY SHALL HAVE
BEEN DELIVERED TO THE COMPANY TO THE EFFECT THAT SUCH OFFER OR SALE IS
NOT REQUIRED TO BE REGISTERED UNDER THE SECURITIES ACT).
(b) A restriction on transfer of shares of Common Stock set
forth in the first sentence of such legend (a
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"Restriction") shall cease and terminate as to any particular shares of Common
Stock if the Corporation shall have received either a written opinion of counsel
selected by any of the VBI Stockholders which opinion and counsel shall be
reasonably satisfactory to the Corporation (which opinion shall be delivered to
the Corporation in writing and, provided, that Stroock & Stroock & Lavan LLP and
Schnader, Harrison, Segal & Lewis shall be deemed counsel satisfactory to the
Company), or a "no-action" letter from the SEC to the effect that (i) any
transfer by such Party of such shares will not violate the Securities Act or
(ii) the record owner of such shares is eligible to sell such shares pursuant to
paragraph (k) of Rule 144 under the Securities Act. Whenever such Restriction
shall cease and terminate as to any shares of Common Stock, the holder thereof
shall be entitled to receive from the Corporation, without expense to such
holder, new certificate(s) not bearing a legend stating such Restriction.
6.5 Notices. Any and all notices, designations, consents, offers,
acceptances, or other communications provided for herein (each a "Notice") shall
be given in writing by overnight courier, telegram, or telecopy (with receipt
confirmed) which shall be addressed, or sent, to the respective addresses as
follows (or such other address as the Corporation or any Party may specify to
the Corporation and all other Parties by Notice):
The Corporation:
Highlands Insurance Group, Inc.
10370 Richmond
Houston, TX 77042-4123
Attn: President
Telecopy Number: (713) 952-0240
Copy to: Steven D. Rubin, Esq.
Weil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, TX 77002
Telecopy Number: (713) 224-9511
The IP Parties:
Insurance Partners, L.P.
One Chase Manhattan Plaza, 44th Floor
New York, NY 10005
Attn: Mr. Robert A. Spass
Managing Partner
Telecopy Number: (212) 898-8720
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Insurance Partners Offshore
(Bermuda), L.P.
Cedar House
41 Cedar Avenue
P.O. Box HM 1179
Hamilton, HM EX, Bermuda
Attn: Mr. Robert A. Spass
Managing Partner
Copy to: Thomas A. Roberts, Esq.
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201-6950
Telecopy Number: (214) 746-7777
Vik: Mr. Alexander M. Vik
10 Ashton Drive
Greenwich, CT 06831
Telecopy Number: (203) 622-1610
Copy to: Hillel M. Bennett, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038
Telecopy Number: (212) 806-6006
All Notices shall be deemed effective and received (a) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified above and
receipt thereof is confirmed; (b) if given by overnight courier, on the business
day immediately following the day on which such Notice is delivered to a
reputable overnight courier service; or (c) if given by telegram, when such
Notice is delivered at the address specified above. No Party shall be entitled
to receive a Notice hereunder (or a copy of a Notice delivered to the
Corporation) if, at the time such Notice is to be sent, such Party (including
its Affiliates and the employees of such Party and its Affiliates) no longer
owns any shares of Common Stock.
6.6 Confidentiality. The Parties shall, and shall cause their
respective officers, directors, employees, and agents and the subsidiaries and
Affiliates of the Parties and their respective officers, directors, employees,
and agents to, hold confidential and not use in any manner detrimental to the
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Corporation or any of its Subsidiaries all information ("Confidential
Information") they may have or obtain concerning the Corporation or any of its
Subsidiaries and their respective assets, business, operations, or prospects;
provided, however, that the foregoing shall not apply to and the term
"Confidential Information" shall not include (a) information that is or becomes
generally available to the public other than as a result of a disclosure (i) in
violation of this Agreement by a Party or any of its employees, agents,
accountants, legal counsel, or other representatives or (ii) in breach of a
Party's fiduciary obligations, (b) information that is or becomes available to a
Party or any of its employees, agents, accountants, legal counsel, or other
representatives on a nonconfidential basis prior to its disclosure by the
Corporation or its employees, agents, accountants, legal counsel, or other
representatives and (c) information that is required to be disclosed by a Party
or any of its employees, agents, accountants, legal counsel, or other
representatives as a result of any applicable law, rule, or regulation of any
governmental authority or stock exchange. If any Party desires to sell shares of
Common Stock and in connection with such potential sale desires to disclose
information regarding the Corporation to the potential purchaser in such sale
which it is not permitted to disclose pursuant to the preceding sentence, such
Party shall notify the Corporation of such Party's desire to disclose such
information and shall identify the potential purchaser in such notification. The
Corporation may require any such potential purchaser of Common Stock to enter
into a confidentiality agreement with respect to Confidential Information on
customary terms used in confidentiality agreements in connection with corporate
acquisitions; provided, that notwithstanding the execution of such a
confidentiality agreement by any such potential purchaser, the Corporation, by
notice to the Party proposing such sale, may prohibit the disclosure of any
Confidential Information to such potential purchaser if such potential purchaser
is a direct and material competitor of the Corporation.
6.7 Counterparts. This Agreement may be executed in two or more
counterparts and each counterpart shall be deemed to be an original and which
counterparts together shall constitute one and the same agreement of the parties
hereto.
6.8 Section Headings. Headings contained in this Agreement are inserted
only as a matter of convenience and in no way define, limit, or extend the scope
or intent of this Agreement or any provisions hereof.
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6.9 No Punitive Damages; Waiver of Jury Trial; Prevailing Party's Fees
and Expenses. The Corporation and the Parties each hereby agree to waive any and
all rights to request or receive punitive damages in connection with any action
or proceeding related to the subject matter of this Agreement. The Corporation
and the Parties each hereby waive all right to trial by jury in any action or
proceeding to enforce or defend any rights under this Agreement. The
substantially prevailing party in any action or proceeding relating to this
Agreement shall be entitled to receive an award of, and to recover from any
non-prevailing party, any fees or expenses incurred by him or it (including,
without limitation, fees and disbursements of such prevailing party's counsel)
in connection with any such action or proceeding.
6.10 Choice of Law. This Agreement will be governed by and construed
and enforced in accordance with the laws of the State of Delaware (without
regard to the principles of conflicts of law) applicable to a contract executed
and to be performed in such state. The Corporation and the Parties (i) agree to
submit to personal jurisdiction and to waive any objection as to venue in the
State or federal courts located in the County of New Castle, State of Delaware,
(ii) agree that any action or proceeding shall be brought exclusively in such
courts, unless subject matter jurisdiction or personal jurisdiction cannot be
obtained and (iii) agree that service of process on any party in any such action
shall be effective if made by registered or certified mail addressed to such
party at the address specified herein, or to any party hereto at such other
addresses as it or he may from time to time specify to the other parties in
writing for such purpose. The exclusive choice of forum set forth in this
Section 6.10 shall not be deemed to preclude the enforcement of any judgment
obtained in such forum or the taking of any action under this Agreement to
enforce such judgment in any appropriate jurisdiction.
6.11 Entire Agreement. This Agreement, together with the Registration
Rights Agreement, contains the entire understanding of the parties hereto
respecting the subject matter hereof and supersedes all prior agreements,
discussions and understandings with respect thereto.
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6.12 Cumulative Rights. The rights of the Parties and the Corporation
under this Agreement are cumulative and in addition to all similar and other
rights of the parties under other agreements.
6.13 Severability. If any term, provision, covenant, or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired, or invalidated.
6.14 No Conversion of Common Stock Equivalents. Nothing set forth in
this Agreement shall be deemed to require any of the Parties to cause any Common
Stock Equivalents to be converted into Common Stock (by way of conversion,
exchange or exercise of the Common Stock Equivalent) except insofar as such
conversion, exchange, exercise or other action is necessary to consummate any
transaction contemplated by Article 3 hereof.
ARTICLE 7
WAIVER
Each of the IP Parties, as holder of those certain 10% Convertible
Subordinated Debentures Due December 31, 2005 (the "Debentures"), issued by the
Corporation, does hereby consent to the consummation of the Merger, and does
further hereby waive compliance by the Corporation of any covenant, agreement or
condition of the Corporation set forth in the Debentures (including, without
limitation, to the extent applicable, the covenants and agreements specified in
Section 5(n)(i) and Section 11 of the Debentures) in connection with the
consummation of the Merger.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
HIGHLANDS INSURANCE GROUP, INC.
By: /s/ Charles J. Bachand
--------------------------
Name: Charles J. Bachand
Title: Vice President & Treasurer
INSURANCE PARTNERS, L.P.
By: Insurance GenPar MGP, L.P.,
its general partner
By: Insurance GenPar MGP, Inc.
its general partner
By: /s/ Robert Spass
--------------------
Name: Robert Spass
Title: President
INSURANCE PARTNERS (OFFSHORE)
BERMUDA, L.P.
By: Insurance GenPar (Bermuda),
L.P., its general partner
By: Insurance GenPar (Bermuda)
Inc., its general partner
By: /s/ Robert Spass
--------------------
Name: Robert Spass
Title: President
THE SCANDINAVIA COMPANY, INC.
By: /s/ Alexander Vik
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Name: Alexander Vik
Title: Chairman
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MANOEUVRE LTD
By: /s/ unreadable
------------------
Name:
Title:
/s/ Erik M. Vik
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ERIK M. VIK
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AMENDMENT NUMBER 1
TO
10% CONVERTIBLE SUBORDINATED DEBENTURE No. 1
DUE DECEMBER 31, 2005
OF
HIGHLANDS INSURANCE GROUP, INC.
THIS AMENDMENT NUMBER 1, dated as of April 30, 1997 (this
"Amendment"), is entered into by and between Highlands Insurance Group, Inc., a
Delaware corporation (the "Company"), and the undersigned Holder of that certain
10% Convertible Subordinated Debenture, No. 1, due December 31, 2005, of the
Company, dated January 23, 1996 (the "Debenture"), pursuant to which the Company
has promised to pay to the Holder the principal sum of THIRTY-SIX MILLION EIGHT
HUNDRED FORTY-THREE THOUSAND NINE HUNDRED FIFTY-SIX DOLLARS ($36,843,956) on
December 31, 2005 and to pay interest thereon, all in accordance with the terms
of the Debenture. Unless otherwise defined herein, capitalized terms shall have
the meanings ascribed thereto in the Debenture.
RECITALS
A. The Company has entered into that certain Amended and
Restated Agreement and Plan of Merger, dated as of February 13, 1997 (as amended
by Amendment Number 1 thereto, the "Merger Agreement"), by and among the
Company, Highlands Acquisition Corp. and Vik Brothers Insurance, Inc.
B. Simultaneously with the closing of the transactions
contemplated by, and certain transactions entered into in connection with, the
Merger Agreement (collectively, the "Merger Transactions"), the Company will
enter into a Credit Agreement, dated as of April 30, 1997 (the "Credit
Agreement"), among the Company, various lending institutions listed from time to
time on Annex I to the Credit Agreement (each a "Bank" and collectively, the
"Banks") and The Chase Manhattan Bank, as administrative agent, in order to
provide financing for, among other things, certain of the Merger Transactions.
C. Section 6.9(a) of the Merger Agreement and Section 4.01(n)
of the Credit Agreement require certain amendments to be made to the terms of
the Debenture.
D. Pursuant to Section 9 of the Debenture, the Company and the
Holder wish to amend the terms of the Debenture as set forth below in order to
comply with Section 6.9(a) of the Merger Agreement and Section 4.01(n) of the
Credit Agreement.
<PAGE>
Now therefore, in consideration of the foregoing and good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the Company and the Holder agrees as follows:
AGREEMENT
1. Amendment to Section 2(a) of the Debenture. Section 2(a) of
the Debenture is hereby deleted and replaced in its entirety with the following
new Subsection 2(a):
(a) Senior Indebtedness. "Senior Indebtedness" means
the principal of, premium, if any, and unpaid interest (including
without limitation any interest accruing from and after the date of any
filing made in respect of the Company or any of its Subsidiaries
pursuant to Chapter 11 of Title 11 of the U.S. Code, whether or not a
claim for such interest would be recognized or allowed in such
proceeding) on the following, whether outstanding at the date hereof or
thereafter incurred or created: (i) Indebtedness of the Company for
money borrowed (including purchase-money obligations), evidenced by
notes or other written obligations, (ii) Indebtedness of the Company
evidenced by notes, debentures, bonds or other securities issued under
the provisions of an indenture or similar instrument, (iii) obligations
of the Company as lessee under Capital Leases and under leases of
property made as part of any sale and leaseback transactions, (iv)
Interest Rate Agreements of the Company, (v) Indebtedness of others of
any of the kinds described in the preceding clauses (i) through (iv)
assumed or guaranteed by the Company and (vi) renewals, extensions and
refundings of, and Indebtedness and obligations of a successor person
issued in exchange for or in replacement of, Indebtedness or
obligations of the kinds described in the preceding clauses (i) through
(v); provided, however, that the following shall not constitute Senior
Indebtedness: (A) any Indebtedness or obligation as to which, in the
instrument creating or evidencing the same or pursuant to which the
same is outstanding; it is expressly provided that such Indebtedness or
obligation is subordinate in right of payment to all other Indebtedness
of the Company not expressly subordinated to such Indebtedness or
obligation; (B) any Indebtedness or obligation which by its terms
refers explicitly to the Debentures and states that such Indebtedness
or obligation shall not be senior in right of payment thereto; (C) any
Indebtedness or obligation of the Company in respect of the Debentures;
(D) Indebtedness or other obligations of the Company to a Subsidiary of
the Company; and (E) Indebtedness guaranteed by the Company on behalf
of any stockholder, director, officer or employee of the Company or any
of its Subsidiaries.
2. Amendment to Section 2(c)(i). Section 2(c)(i) of the
Debenture is hereby deleted and replaced in its entirety with the following new
Section 2(c)(i):
2
<PAGE>
(i) Upon the failure to pay (beyond any applicable
grace periods) any installment of principal, premium, interest, fees or
any other amounts owing on any Senior Indebtedness, the outstanding
principal amount of which equals or exceeds $5 million in the
aggregate, when the same becomes due and payable, including without
limitation a declaration that such principal amount of Senior
Indebtedness has been declared to be due and payable prior to its
maturity (a "Payment Default"), no payment of principal, premium (if
any), interest or other amounts owing shall be made on the Debentures
or on account of the purchase or other acquisition of Debentures unless
and until (i) such default shall have been cured or expressly waived or
shall have ceased to exist or (ii) adequate provision has been made for
the payment of such Senior Indebtedness in a manner satisfactory to the
holders of such Senior Indebtedness.
3. Amendment to Section 3(a)(vi). Section 3(a)(vi) of the
Debenture is hereby deleted and replaced in its entirety with the following new
Section 3(a)(vi):
(vi) There shall be a default or an event of default
under any bond, debenture, note or other evidence of Indebtedness of
the Company or any Significant Subsidiary (other than the Debentures)
or under any mortgage, indenture or other instrument under which there
may be issued or by which there may be secured or evidenced any
indebtedness of the Company or any Significant Subsidiary, whether such
Indebtedness now exists or shall hereafter be created, if such default
(A) results from the failure to pay principal of any such Indebtedness
at final scheduled maturity (unless extended), or (B) results in an
acceleration of an obligation to pay the principal of any such
Indebtedness, and in the case of either clause (A) or (b), the
principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness, aggregates $5 million or more at
any one time; or
4. Amendment to Section 5(g)(ii) of the Debenture. Section
5(g)(ii) of the Debenture is hereby amended by (i) deleting the word "and" at
the end of clause (G), (ii) replacing the period at the end of clause (H) with a
semi-colon and (iii) inserting the following new clauses (I) and (J) after
clause (H) thereof:
(I) Indebtedness incurred in connection with the
Senior Credit Facility; and
(J) (i) Other Indebtedness of the Company not to
exceed $5,000,000 in the aggregate and (ii) other Indebtedness incurred
in the ordinary course of business of the Subsidiaries of the Company
that are insurance companies not to exceed $1,000,000 in the aggregate.
3
<PAGE>
5. Amendment to Section 5(g)(ii)(D) of the Debenture. Section
5(g)(ii) of the Debenture is hereby amended by replacing the first clause
thereof up to the first proviso thereof with the following new clause:
(D) Indebtedness of the Company or any Subsidiary of
the Company issued in exchange for, or all of the net proceeds of which
are used to substantially concurrently repay, redeem, refund,
refinance, discharge or otherwise retire for value, outstanding
Indebtedness which when Incurred was permitted under subsection 5(g)(i)
or under clauses (A), (B), (E) or (I) of this subsection 5(g)(ii)
("Refinancing Indebtedness") in a principal amount not to exceed the
outstanding principal amount of the Indebtedness so refinanced, plus
any prepayment penalties and premiums, plus customary fees, expenses
and costs related to the incurrence of such Refinancing Indebtedness;
6. Amendment to Section 5(h) of the Debenture. Section 5(h) of
the Debenture is hereby amended by (i) deleting the word "and" at the end of
clause (4), (ii) replacing the period at the end of clause (5) with a comma
followed by the word "and" and (iii) inserting the following new clause (6)
immediately after clause (5) thereof:
(6) Senior Credit Facility. Any encumbrances
or restrictions contained in the Senior Credit Facility to the
extent not otherwise permitted pursuant to Section 5(f) or (g)
herein.
7. Amendment to Section 5(i) of the Debenture. Section 5(i) of
the Debenture is hereby amended by deleting the period, and by adding the
following proviso, at the end of such Section:
; provided, further, that any exercise by the Banks of any of their
rights in respect of any property or assets of the Company or any of
its Subsidiaries under or pursuant to any Lien provided for, or arising
under or in connection with, the Senior Credit Facility shall not
constitute an Asset Sale as defined in this Debenture and shall not be
subject to the restrictions placed on Asset Sales by this subsection
5(i) or any other provision of this Debenture.
8. Amendment to Section 5(m)(i) of the Debenture. Section
5(m)(i) of the Debenture is hereby deleted and replaced in its entirety with the
following new Subsection 5(m)(i):
(i) The Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, Incur or suffer to exist
any Lien upon or with respect to any of the Property of the Company or
any such Subsidiary whether now owned or
4
<PAGE>
hereafter acquired, or on any income or profits therefrom, or assign or
otherwise convey any right to receive income to secure any Indebtedness
unless, contemporaneously therewith or prior thereto, effective
provision shall be made whereby the Debentures are secured equally and
ratably with such other Indebtedness; provided, however, that (A) the
Company may Incur and suffer to exist any Liens created pursuant to or
in connection with the Senior Credit Facility and the transactions
contemplated thereby and any related swaps and permitted refinancings
thereof and (B) in addition to Liens permitted pursuant to clause (A)
above, the Company and any Subsidiary, without securing the Debentures,
may Incur and suffer to exist any Lien securing Senior Indebtedness or
create or assume any Indebtedness so secured, provided, that after
giving effect thereto, the aggregate Senior Indebtedness secured by
such Liens does not exceed $30 million; and, provided further that the
provisions of this subsection 5(m) shall not prohibit the creation,
incurrence, existence or assumption of any Permitted Liens or any Lien
securing other Indebtedness required to be equally and ratably secured
as a result of the incurrence of such Lien.
9. Amendment to Section 11 of the Debenture. Section 11 of the
Debenture is hereby amended by adding the following new paragraph after the last
paragraph in Section 11 and immediately prior to Section 12:
Notwithstanding any provision of this Section 11 to
the contrary, prior to mailing a Change of Control notice (as described
in this Section 11(a)-(g), the "Change of Control Notice"), the Company
will either (i) repay in full the Senior Credit Facility (or any
permitted refinancing thereof) or offer to make such repayment and
repay the Indebtedness of each Bank which accepts such offer or (ii)
obtain a consent under the Senior Credit Facility (or under the
documentation with respect to any permitted refinancing thereof)
permitting the Company to repurchase the Debentures. The Company shall
first comply with the foregoing undertaking before it shall be required
to repurchase any Debentures provided that the failure to so comply may
become an Event of Default to the extent the provisions of Section
3(a)(iii) are satisfied.
10. Section 12 of the Debenture is hereby amended by inserting
the following terms and definitions in alphabetical order into Section 12:
"Affiliate" shall mean, with respect to a
specified Person, any other Person which controls, is
controlled by or is under common control with such specified
Person.
"Interest Rate Agreement" shall mean any
interest rate swap agreement, any interest rate cap agreement,
any interest rate collar agreement or other similar agreement
or arrangement to protect against fluctuations in interest
rates.
5
<PAGE>
"Senior Credit Facility" shall mean that
certain Credit Agreement, dated as of April 30, 1997, among
the Company, various lending institutions and The Chase
Manhattan Bank, as administrative agent, as amended,
supplemented, extended or otherwise modified from time to
time.
11. Notwithstanding any provision of the Debenture to the
contrary, the issuance of Common Stock pursuant to the Merger Agreement and the
Merger Transactions shall not (i) constitute a Change of Control pursuant to the
Debenture, (ii) result in an adjustment to the number of shares of Common Stock
issuable upon conversion of the Debenture and (iii) result in an adjustment of
the exercise or conversion price of the Debenture.
12. This Amendment may be executed in two or more counterparts
and each counterpart shall be deemed to be an original and which counterparts
together shall constitute one and the same agreement of the parties hereto.
13. All other provisions of the Debenture shall not be
affected by this Amendment and shall remain in full force and effect.
[SIGNATURES CONTAINED ON NEXT PAGE]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Amendment as of the date first written above.
HIGHLANDS INSURANCE GROUP, INC.
By: _______________________________________
Name:______________________________________
Title:_____________________________________
HOLDER: INSURANCE PARTNERS, L.P.
By: Insurance GenPar MGP, L.P.,
its general partner
By: Insurance GenPar MGP, Inc.,
its general partner
By: _____________________________
Name:____________________________
Title:___________________________
7
<PAGE>
AMENDMENT NUMBER 1
TO
10% CONVERTIBLE SUBORDINATED DEBENTURE, SERIES 2 No. 1
DUE DECEMBER 31, 2005
OF
HIGHLANDS INSURANCE GROUP, INC.
THIS AMENDMENT NUMBER 1, dated as of April 30, 1997 (this
"Amendment"), is entered into by and between Highlands Insurance Group, Inc., a
Delaware corporation (the "Company"), and the undersigned Holder of that certain
10% Convertible Subordinated Debenture, Series 2, No. 1, due December 31, 2005,
of the Company, dated January 23, 1996 (the "Debenture"), pursuant to which the
Company has promised to pay to the Holder the principal sum of TWO MILLION ONE
HUNDRED THOUSAND DOLLARS ($2,100,000) on December 31, 2005 and to pay interest
thereon, all in accordance with the terms of the Debenture. Unless otherwise
defined herein, capitalized terms shall have the meanings ascribed thereto in
the Debenture.
RECITALS
A. The Company has entered into that certain Amended and
Restated Agreement and Plan of Merger, dated as of February 13, 1997 (as amended
by Amendment Number 1 thereto, the "Merger Agreement"), by and among the
Company, Highlands Acquisition Corp. and Vik Brothers Insurance, Inc.
B. Simultaneously with the closing of the transactions
contemplated by, and certain transactions entered into in connection with, the
Merger Agreement (collectively, the "Merger Transactions"), the Company will
enter into a Credit Agreement, dated as of April 30, 1997 (the "Credit
Agreement"), among the Company, various lending institutions listed from time to
time on Annex I to the Credit Agreement (each a "Bank" and collectively, the
"Banks") and The Chase Manhattan Bank, as administrative agent, in order to
provide financing for, among other things, certain of the Merger Transactions.
C. Section 6.9(a) of the Merger Agreement and Section 4.01(n)
of the Credit Agreement require certain amendments to be made to the terms of
the Debenture.
D. Pursuant to Section 9 of the Debenture, the Company and the
Holder wish to amend the terms of the Debenture as set forth below in order to
comply with Section 6.9(a) of the Merger Agreement and Section 4.01(n) of the
Credit Agreement.
<PAGE>
Now therefore, in consideration of the foregoing and good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the Company and the Holder agrees as follows:
AGREEMENT
1. Amendment to Section 2(a) of the Debenture. Section 2(a) of
the Debenture is hereby deleted and replaced in its entirety with the following
new Subsection 2(a):
(a) Senior Indebtedness. "Senior Indebtedness" means
the principal of, premium, if any, and unpaid interest (including
without limitation any interest accruing from and after the date of any
filing made in respect of the Company or any of its Subsidiaries
pursuant to Chapter 11 of Title 11 of the U.S. Code, whether or not a
claim for such interest would be recognized or allowed in such
proceeding) on the following, whether outstanding at the date hereof or
thereafter incurred or created: (i) Indebtedness of the Company for
money borrowed (including purchase-money obligations), evidenced by
notes or other written obligations, (ii) Indebtedness of the Company
evidenced by notes, debentures, bonds or other securities issued under
the provisions of an indenture or similar instrument, (iii) obligations
of the Company as lessee under Capital Leases and under leases of
property made as part of any sale and leaseback transactions, (iv)
Interest Rate Agreements of the Company, (v) Indebtedness of others of
any of the kinds described in the preceding clauses (i) through (iv)
assumed or guaranteed by the Company and (vi) renewals, extensions and
refundings of, and Indebtedness and obligations of a successor person
issued in exchange for or in replacement of, Indebtedness or
obligations of the kinds described in the preceding clauses (i) through
(v); provided, however, that the following shall not constitute Senior
Indebtedness: (A) any Indebtedness or obligation as to which, in the
instrument creating or evidencing the same or pursuant to which the
same is outstanding; it is expressly provided that such Indebtedness or
obligation is subordinate in right of payment to all other Indebtedness
of the Company not expressly subordinated to such Indebtedness or
obligation; (B) any Indebtedness or obligation which by its terms
refers explicitly to the Debentures and states that such Indebtedness
or obligation shall not be senior in right of payment thereto; (C) any
Indebtedness or obligation of the Company in respect of the Debentures;
(D) Indebtedness or other obligations of the Company to a Subsidiary of
the Company; and (E) Indebtedness guaranteed by the Company on behalf
of any stockholder, director, officer or employee of the Company or any
of its Subsidiaries.
2
<PAGE>
2. Amendment to Section 3(a)(vi). Section 3(a)(vi) of the
Debenture is hereby deleted and replaced in its entirety with the following new
Section 3(a)(vi):
(vi) There shall be a default or an event of default
under any bond, debenture, note or other evidence of Indebtedness of
the Company or any Significant Subsidiary (other than the Debentures)
or under any mortgage, indenture or other instrument under which there
may be issued or by which there may be secured or evidenced any
indebtedness of the Company or any Significant Subsidiary, whether such
Indebtedness now exists or shall hereafter be created, if such default
(A) results from the failure to pay principal of any such Indebtedness
at final scheduled maturity (unless extended), or (B) results in an
acceleration of an obligation to pay the principal of any such
Indebtedness, and in the case of either clause (A) or (b), the
principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness, aggregates $5 million or more at
any one time; or
3. Amendment to Section 11 of the Debenture. Section 11 of the
Debenture is hereby amended by adding the following new paragraph after the last
paragraph in Section 11 and immediately prior to Section 12:
Notwithstanding any provision of this Section 11 to
the contrary, prior to mailing a Change of Control notice (as described
in this Section 11(a)-(g), the "Change of Control Notice"), the Company
will either (i) repay in full the Senior Credit Facility (or any
permitted refinancing thereof) or offer to make such repayment and
repay the Indebtedness of each Bank which accepts such offer or (ii)
obtain a consent under the Senior Credit Facility (or under the
documentation with respect to any permitted refinancing thereof)
permitting the Company to repurchase the Debentures. The Company shall
first comply with the foregoing undertaking before it shall be required
to repurchase any Debentures provided that the failure to so comply may
become an Event of Default to the extent the provisions of Section
3(a)(iii) are satisfied.
4. Section 12 of the Debenture is hereby amended by inserting
the following terms and definitions in alphabetical order into Section 12:
"Affiliate" shall mean, with respect to a
specified Person, any other Person which controls, is
controlled by or is under common control with such specified
Person.
"Interest Rate Agreement" shall mean any
interest rate swap agreement, any interest rate cap agreement,
any interest rate collar agreement or other similar agreement
or arrangement to protect against fluctuations in interest
rates.
3
<PAGE>
"Senior Credit Facility" shall mean that
certain Credit Agreement, dated as of April 30, 1997, among
the Company, various lending institutions and The Chase
Manhattan Bank, as administrative agent, as amended,
supplemented, extended or otherwise modified from time to
time.
5. Notwithstanding any provision of the Debenture to the
contrary, the issuance of Common Stock pursuant to the Merger Agreement and the
Merger Transactions shall not (i) constitute a Change of Control pursuant to the
Debenture, (ii) result in an adjustment to the number of shares of Common Stock
issuable upon conversion of the Debenture and (iii) result in an adjustment of
the exercise or conversion price of the Debenture.
6. This Amendment may be executed in two or more counterparts
and each counterpart shall be deemed to be an original and which counterparts
together shall constitute one and the same agreement of the parties hereto.
7. All other provisions of the Debenture shall not be affected
by this Amendment and shall remain in full force and effect.
[SIGNATURES CONTAINED ON NEXT PAGE]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Amendment as of the date first written above.
HIGHLANDS INSURANCE GROUP, INC.
By: _______________________________________
Name:______________________________________
Title:_____________________________________
HOLDER: __________________________________________
RICHARD M. HAVERLAND
5
<PAGE>
AMENDMENT NUMBER 1
TO
COMMON STOCK SUBSCRIPTION WARRANT, SERIES A No. 1
To Subscribe for and Purchase Shares
of Common Stock of
Highlands Insurance Group, Inc.
THIS AMENDMENT NUMBER 1, dated as of April 30, 1997 (this
"Amendment"), is entered into by and between Highlands Insurance Group, Inc., a
Delaware corporation (the "Company"), and the undersigned Holder of that certain
Common Stock Subscription Warrant, Series A, No. 1, dated January 23, 1996 (the
"Warrant"), to purchase from the Company up to TWO MILLION THREE HUNDRED
TWENTY-SEVEN THOUSAND FIVE HUNDRED NINE (2,327,509) fully paid and
non-assessable shares of the Common Stock of the Company pursuant to the terms
of the Warrant. Unless otherwise defined herein, capitalized terms shall have
the meanings ascribed thereto in the Warrant.
RECITALS
A. The Company has entered into that certain Amended and
Restated Agreement and Plan of Merger, dated as of February 13, 1997 (as amended
by Amendment Number 1 thereto, the "Merger Agreement"), by and among the
Company, Highlands Acquisition Corp. and Vik Brothers Insurance, Inc.
B. Section 6.9(a) of the Merger Agreement requires certain
amendments to be made to the terms of the Warrant.
C. Pursuant to Section 14(a) of the Warrant, the Company and
the Holder wish to amend the terms of the Warrant as set forth below in order to
comply with Section 6.9(a) of the Merger Agreement.
Now therefore, in consideration of the foregoing and good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the Company and the Holder agrees as follows:
<PAGE>
AGREEMENT
1. Notwithstanding any provision of the Warrant to the
contrary, no adjustment shall be made to the number of shares of Common Stock
issuable upon exercise of the Warrant as a result of any Additional Adverse
Development.
2. Notwithstanding any provision of the Warrant to the
contrary, the issuance of Common Stock pursuant to, and in transactions entered
into in connection with, the Merger Agreement and the transactions contemplated
thereby shall not (i) result in an adjustment to the number of shares of Common
Stock issuable upon exercise of the Warrant and (ii) result in an adjustment of
the exercise or conversion price of the Warrant.
3. This Amendment may be executed in two or more counterparts
and each counterpart shall be deemed to be an original and which counterparts
together shall constitute one and the same agreement of the parties hereto.
4. All other provisions of the Warrant shall not be affected
by this Amendment and shall remain in full force and effect.
[SIGNATURES CONTAINED ON NEXT PAGE]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Amendment as of the date first written above.
HIGHLANDS INSURANCE GROUP, INC.
By: _______________________________________
Name:______________________________________
Title:_____________________________________
HOLDER: INSURANCE PARTNERS, L.P.
By: Insurance GenPar MGP, L.P.,
its general partner
By: Insurance GenPar MGP, Inc.,
its general partner
By: _____________________________
Name:____________________________
Title:___________________________
3
<PAGE>
AMENDMENT NUMBER 1
TO
COMMON STOCK SUBSCRIPTION WARRANT, SERIES B No. 1
To Subscribe for and Purchase Shares
of Common Stock of
Highlands Insurance Group, Inc.
THIS AMENDMENT NUMBER 1, dated as of April 30, 1997 (this
"Amendment"), is entered into by and between Highlands Insurance Group, Inc., a
Delaware corporation (the "Company"), and the undersigned Holder of that certain
Common Stock Subscription Warrant, Series B, No. 1, dated January 23, 1996 (the
"Warrant"), to purchase from the Company up to SIX HUNDRED TWELVE THOUSAND FIVE
HUNDRED THREE (612,503) fully paid and non-assessable shares of the Common Stock
of the Company pursuant to the terms of the Warrant. Unless otherwise defined
herein, capitalized terms shall have the meanings ascribed thereto in the
Warrant.
RECITALS
A. The Company has entered into that certain Amended and
Restated Agreement and Plan of Merger, dated as of February 13, 1997 (as amended
by Amendment Number 1 thereto, the "Merger Agreement"), by and among the
Company, Highlands Acquisition Corp. and Vik Brothers Insurance, Inc.
B. Section 6.9(a) of the Merger Agreement requires certain
amendments to be made to the terms of the Warrant.
C. Pursuant to Section 14(a) of the Warrant, the Company and
the Holder wish to amend the terms of the Warrant as set forth below in order to
comply with Section 6.9(a) of the Merger Agreement.
Now therefore, in consideration of the foregoing and good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the Company and the Holder agrees as follows:
<PAGE>
AGREEMENT
1. The following terms and definitions shall be inserted in
alphabetical order into Section 13 of the Warrant:
"Affiliate" shall mean, with respect to a
specified Person, any other Person which controls, is
controlled by or is under common control with such specified
Person.
"Change of Control" shall mean
(i) the occurrence of any event
(including any merger or consolidation of the Company
or any Subsidiary of the Company with or into another
Person, any merger of another Person into the Company
or any Subsidiary of the Company or any other similar
transaction) that results in any Person or group
(other than one or more of IP and its Affiliates)
having "beneficial ownership" (within the meaning of
Rule 13d-3 under the Exchange Act) of Voting
Securities of the Company representing, at the time
of determination, in excess of 25% of the number of
votes that could be cast in the election of directors
of the Company at such time by the holders of all
outstanding Voting Securities of the Company;
(ii) the sale, lease, assignment,
transfer or other disposition (including, without
limitation, by reinsurance, liquidation or
dissolution), of all or substantially all of the
assets or business of (A) the Company and its
Subsidiaries considered as a whole or (B) Highlands
Insurance Company and its Subsidiaries considered as
a whole, in any such case to any Person or group
(other than one or more of IP and its Affiliates) in
one transaction or a series of related transactions;
or
(iii) the occurrence of any event
(including any merger or consolidation of Highlands
Insurance Company with or into another Person, any
merger of another Person into Highlands Insurance
Company or any other similar transaction) that
results in any Person or group (other than one or
more of the Company, IP, and any Affiliate of IP)
having "beneficial ownership" (within the meaning of
Rule 13d-3 under the Exchange Act) of any Voting
Securities of Highlands Insurance Company.
2
<PAGE>
"IP" shall mean, collectively, Insurance
Partners, L.P. and Insurance Partners Offshore (Bermuda),
L.P.
"Voting Securities" shall mean any class of
capital stock of a Person pursuant to which the holders
thereof have, at the time of determination, the general voting
power under ordinary circumstances to vote for the election of
directors, managers, trustees or general partners of such
Person (irrespective of whether or not at the time any other
class or classes will have or might have voting power by
reason of the happening of any contingency).
2. Notwithstanding any provision of the Warrant to the
contrary, no adjustment shall be made to the number of shares of Common Stock
issuable upon exercise of the Warrant as a result of any Additional Adverse
Development.
3. Notwithstanding any provision of the Warrant to the
contrary, the issuance of Common Stock pursuant to, and in transactions entered
into in connection with, the Merger Agreement and the transactions contemplated
thereby shall not (i) constitute a Change of Control pursuant to the Warrant,
(ii) result in an adjustment to the number of shares of Common Stock issuable
upon exercise of the Warrant and (iii) result in an adjustment of the exercise
or conversion price of the Warrant.
4. This Amendment may be executed in two or more counterparts
and each counterpart shall be deemed to be an original and which counterparts
together shall constitute one and the same agreement of the parties hereto.
5. All other provisions of the Warrant shall not be affected
by this Amendment and shall remain in full force and effect.
[SIGNATURES CONTAINED ON NEXT PAGE]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Amendment as of the date first written above.
HIGHLANDS INSURANCE GROUP, INC.
By: _______________________________________
Name:______________________________________
Title:_____________________________________
HOLDER: INSURANCE PARTNERS, L.P.
By: Insurance GenPar MGP, L.P.,
its general partner
By: Insurance GenPar MGP, Inc.,
its general partner
By: _____________________________
Name:____________________________
Title:___________________________
4
<PAGE>
AMENDMENT NUMBER 1
TO
COMMON STOCK SUBSCRIPTION WARRANT, SERIES A-2 No. 1
To Subscribe for and Purchase Shares
of Common Stock of
Highlands Insurance Group, Inc.
THIS AMENDMENT NUMBER 1, dated as of April 30, 1997 (this
"Amendment"), is entered into by and between Highlands Insurance Group, Inc., a
Delaware corporation (the "Company"), and the undersigned Holder of that certain
Common Stock Subscription Warrant, Series A-2, No. 1, dated January 23, 1996
(the "Warrant"), to purchase from the Company up to ONE HUNDRED THIRTY-TWO
THOUSAND SIX HUNDRED SIXTY (132,660) fully paid and non-assessable shares of the
Common Stock of the Company pursuant to the terms of the Warrant. Unless
otherwise defined herein, capitalized terms shall have the meanings ascribed
thereto in the Warrant.
RECITALS
A. The Company has entered into that certain Amended and
Restated Agreement and Plan of Merger, dated as of February 13, 1997 (as amended
by Amendment Number 1 thereto, the "Merger Agreement"), by and among the
Company, Highlands Acquisition Corp. and Vik Brothers Insurance, Inc.
B. Section 6.9(a) of the Merger Agreement requires certain
amendments to be made to the terms of the Warrant.
C. Pursuant to Section 14(a) of the Warrant, the Company and
the Holder wish to amend the terms of the Warrant as set forth below in order to
comply with Section 6.9(a) of the Merger Agreement.
Now therefore, in consideration of the foregoing and good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the Company and the Holder agrees as follows:
AGREEMENT
1. Notwithstanding any provision of the Warrant to the
contrary, no adjustment shall be made to the number of shares of Common Stock
issuable upon exercise of the Warrant as a result of any Additional Adverse
Development.
<PAGE>
2. Notwithstanding any provision of the Warrant to the
contrary, the issuance of Common Stock pursuant to, and in transactions entered
into in connection with, the Merger Agreement and the transactions contemplated
thereby shall not (i) result in an adjustment to the number of shares of Common
Stock issuable upon exercise of the Warrant and (ii) result in an adjustment of
the exercise or conversion price of the Warrant.
3. This Amendment may be executed in two or more counterparts
and each counterpart shall be deemed to be an original and which counterparts
together shall constitute one and the same agreement of the parties hereto.
4. All other provisions of the Warrant shall not be affected
by this Amendment and shall remain in full force and effect.
[SIGNATURES CONTAINED ON NEXT PAGE]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Amendment as of the date first written above.
HIGHLANDS INSURANCE GROUP, INC.
By: _______________________________________
Name:______________________________________
Title:_____________________________________
HOLDER: __________________________________________
RICHARD M. HAVERLAND
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<PAGE>
AMENDMENT NUMBER 1
TO
COMMON STOCK SUBSCRIPTION WARRANT, SERIES B-2 No. 1
To Subscribe for and Purchase Shares
of Common Stock of
Highlands Insurance Group, Inc.
THIS AMENDMENT NUMBER 1, dated as of April 30, 1997 (this
"Amendment"), is entered into by and between Highlands Insurance Group, Inc., a
Delaware corporation (the "Company"), and the undersigned Holder of that certain
Common Stock Subscription Warrant, Series B-2, No. 1, dated January 23, 1996
(the "Warrant"), to purchase from the Company up to THIRTY-FOUR THOUSAND NINE
HUNDRED ELEVEN (34,911) fully paid and non-assessable shares of the Common Stock
of the Company pursuant to the terms of the Warrant. Unless otherwise defined
herein, capitalized terms shall have the meanings ascribed thereto in the
Warrant.
RECITALS
A. The Company has entered into that certain Amended and
Restated Agreement and Plan of Merger, dated as of February 13, 1997 (as amended
by Amendment Number 1 thereto, the "Merger Agreement"), by and among the
Company, Highlands Acquisition Corp. and Vik Brothers Insurance, Inc.
B. Section 6.9(a) of the Merger Agreement requires certain
amendments to be made to the terms of the Warrant.
C. Pursuant to Section 14(a) of the Warrant, the Company and
the Holder wish to amend the terms of the Warrant as set forth below in order to
comply with Section 6.9(a) of the Merger Agreement.
Now therefore, in consideration of the foregoing and good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the Company and the Holder agrees as follows:
AGREEMENT
1. The following terms and definitions shall be inserted in
alphabetical order into Section 13 of the Warrant:
<PAGE>
"Affiliate" shall mean, with respect to a
specified Person, any other Person which controls, is
controlled by or is under common control with such specified
Person.
"Change of Control" shall mean
(i) the occurrence of any event
(including any merger or consolidation of the Company
or any Subsidiary of the Company with or into another
Person, any merger of another Person into the Company
or any Subsidiary of the Company or any other similar
transaction) that results in any Person or group
(other than one or more of IP and its Affiliates)
having "beneficial ownership" (within the meaning of
Rule 13d-3 under the Exchange Act) of Voting
Securities of the Company representing, at the time
of determination, in excess of 25% of the number of
votes that could be cast in the election of directors
of the Company at such time by the holders of all
outstanding Voting Securities of the Company;
(ii) the sale, lease, assignment,
transfer or other disposition (including, without
limitation, by reinsurance, liquidation or
dissolution), of all or substantially all of the
assets or business of (A) the Company and its
Subsidiaries considered as a whole or (B) Highlands
Insurance Company and its Subsidiaries considered as
a whole, in any such case to any Person or group
(other than one or more of IP and its Affiliates) in
one transaction or a series of related transactions;
or
(iii) the occurrence of any event
(including any merger or consolidation of Highlands
Insurance Company with or into another Person, any
merger of another Person into Highlands Insurance
Company or any other similar transaction) that
results in any Person or group (other than one or
more of the Company, IP, and any Affiliate of IP)
having "beneficial ownership" (within the meaning of
Rule 13d-3 under the Exchange Act) of any Voting
Securities of Highlands Insurance Company.
"IP" shall mean, collectively, Insurance
Partners, L.P. and Insurance Partners Offshore (Bermuda),
L.P.
"Voting Securities" shall mean any class of
capital stock of a Person pursuant to which the holders
thereof have, at the time of determination, the general voting
power under ordinary circumstances to vote for the election
2
<PAGE>
of directors, managers, trustees or general partners of such
Person (irrespective of whether or not at the time any other
class or classes will have or might have voting power by
reason of the happening of any contingency).
2. Notwithstanding any provision of the Warrant to the
contrary, no adjustment shall be made to the number of shares of Common Stock
issuable upon exercise of the Warrant as a result of any Additional Adverse
Development.
3. Notwithstanding any provision of the Warrant to the
contrary, the issuance of Common Stock pursuant to, and in transactions entered
into in connection with, the Merger Agreement and the transactions contemplated
thereby shall not (i) constitute a Change of Control pursuant to the Warrant,
(ii) result in an adjustment to the number of shares of Common Stock issuable
upon exercise of the Warrant and (iii) result in an adjustment of the exercise
or conversion price of the Warrant.
4. This Amendment may be executed in two or more counterparts
and each counterpart shall be deemed to be an original and which counterparts
together shall constitute one and the same agreement of the parties hereto.
5. All other provisions of the Warrant shall not be affected
by this Amendment and shall remain in full force and effect.
[SIGNATURES CONTAINED ON NEXT PAGE]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Amendment as of the date first written above.
HIGHLANDS INSURANCE GROUP, INC.
By: _______________________________________
Name:______________________________________
Title:_____________________________________
HOLDER: __________________________________________
RICHARD M. HAVERLAND
