As Filed with the Securities and Exchange Commission on May 1, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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HIGHLANDS INSURANCE GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
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6331
(Primary Standard Industrial Classification Code Number)
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75-2370945
(I.R.S. Employer Identification Number)
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1000 LENOX DRIVE
LAWRENCEVILLE, NEW JERSEY 08648
(609) 896-1921
(Address, including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
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STEPHEN J. GREENBERG, ESQ.
1000 LENOX DRIVE
LAWRENCEVILLE, NEW JERSEY 08648
(609) 896-1921
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copies to:
ALAN H. LIEBLICH, ESQ.
SCHNADER HARRISON SEGAL & LEWIS, LLP
1600 MARKET STREET, SUITE 3600
PHILADELPHIA, PENNSYLVANIA 19103
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| ___________________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_| _________________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
<S> <C> <C> <C> <C> <C>
Title of Each Class Proposed Proposed
of Securities to be Amount To Maximum Offering Maximum Aggregate Amount of
Registered Be Registered Price Per Share Offering Price Registration Fee
Common Stock.... 500,000 shares $27.4375(a) $13,718,750(a) $4,047.03(a)
</TABLE>
(a) Based on the average of the high and low prices of the Common Stock on
the New York Stock Exchange on April 30, 1998 and estimated solely for
the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
(Date)
(Agent)
(Agency)
(Street)
(City, State, Zip)
(Eligible Agent Name)
Dear (Eligible Agent Name):
I am pleased to send you a Prospectus describing the Agency Stock Purchase Plan
(the "Plan") of Highlands Insurance Group, Inc. (the "Company"). As one of the
Company's eligible agencies, you or your agency associates are permitted to
purchase up to a total of $30,000 of Common Stock of the Company under the Plan.
The Plan provides you and your key employees with a convenient and economical
way to purchase shares of Common Stock at a discount from the market price
without the payment of any brokerage commissions or service charges. The price
of shares of Common Stock purchased under this Plan will be 10% below the
closing price of Highlands stock on the last day of each Subscription Period on
which a trade occurs as reported by the New York Stock Exchange.
The Plan provides that you may participate through lump-sum contributions. We've
arranged for ChaseMellon Shareholder Services, which serves as our agent for the
Plan, to provide you with regular statements reflecting your purchases of stock.
This will simplify your recordkeeping under the Plan.
The enclosed Prospectus provides you with further details regarding the Plan
including some general questions and answers as well as a Subscription Agreement
to complete if you decide to enroll. Your investment for this period must be
made by June 20, 1998, accompanied by your completed Subscription Agreement, in
order for you to enroll in the initial Subscription Period. A subsequent
investment can be made prior to December 20. Please call Irene Matarazzo, Vice
President-Marketing at (609) 895-3010 in Lawrenceville, New Jersey or Ken Javor,
Senior Vice President-Commercial Insurance at (713) 267-8616 in Houston, Texas,
if you need additional information.
Sincerely,
Richard M. Haverland
Chairman and Chief Executive Officer
<PAGE>
PROSPECTUS
HIGHLANDS INSURANCE GROUP, INC.
AGENCY STOCK PURCHASE PLAN
500,000 shares of Common Stock
par value $1.00
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The Agency Stock Purchase Plan (the "Plan") described herein offers
eligible agencies of Highlands Insurance Group, Inc.'s subsidiary insurance
companies an opportunity to acquire a proprietary interest in Highlands
Insurance Group, Inc. (the "Company") and share in its long-term profitable
growth.
Shares of Common Stock for the Plan will be made available by the
Company on the terms described herein and may be shares of treasury stock or
authorized but unissued shares. The purchase price for shares of Common Stock
purchased from the Company will be ninety percent (90%) of the closing price of
the Common Stock as reported by the New York Stock Exchange ("NYSE") on the last
trading day of the applicable Subscription Period. The Common Stock is listed on
the NYSE under the symbol "HIC."
There will be no brokerage commissions or service charges upon the
purchase of shares under the Plan. The Company will bear all other costs of
administering the Plan. ChaseMellon Shareholder Services LLC ("ChaseMellon"),
the Company's transfer agent, will be issuing regular statements under the Plan.
It is recommended that this Prospectus be retained for future
reference.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Price to Proceeds to
Public Commissions Company2
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Per Share See Footnote1 None 100%
Total See Footnote1 -0- 100%
<FN>
1 Common Stock is offered to participants in the Plan at a discount of ten
percent (10%) from the closing price on the NYSE on the last trading day of
the applicable Subscription Period. The closing price of Common Stock on
the NYSE on April __, 1998 was $__________.
2 Before deducting expenses payable by the Company estimated at
$______________.
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</FN>
The date of this Prospectus is May ___, 1998
</TABLE>
<PAGE>
TABLE OF CONTENTS
Available Information......................................................1
Information Incorporated by Reference......................................1
The Company................................................................3
Description of the Plan
Purpose and Advantages of the Plan....................................3
Administration........................................................4
Participation.........................................................4
Costs and Expenses....................................................6
Purchases.............................................................6
Reports to Participants...............................................7
Certificates for Shares...............................................8
Withdrawal from Plan..................................................8
Other Information.....................................................8
Use of Proceeds............................................................9
Experts....................................................................9
Legal Opinion.............................................................10
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") (which term includes any amendments thereto) under the Securities
Act with respect to the Common Stock offered hereby. This Prospectus, which is a
part of the Registration Statement, does not contain all the information set
forth in the Registration Statement and the exhibits and schedules thereto, to
which reference is hereby made for further information with respect to the
Company and the Common Stock to which this Prospectus relates. Statements
contained herein concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement for a more complete
description of the matter involved and each such statement shall be deemed
qualified in its entirety by such reference.
The Registration Statement and the exhibits and schedules thereto
filed by the Company with the Commission may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission
located at Seven World Trade Center, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials may be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). So long as the
Company is subject to the periodic reporting requirements of the Exchange Act,
it will continue to furnish the reports and other information required thereby
to the Commission. Reports and other information filed by the Company pursuant
to the requirements of the Exchange Act may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission
located at Seven World Trade Center, New York, New York 10048, and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2551. The Common Stock is listed on the NYSE. Information filed by the
Company with the NYSE may be inspected at the offices of the NYSE at 20 Broad
Street, New York, New York 10005. Such material may also be accessed
electronically by means of the Commission's home page on the Internet
(http://www.sec.gov).
INFORMATION INCORPORATED BY REFERENCE
The following documents filed with the Commission are incorporated
into this Prospectus by reference:
(1) the Company's Annual Report on Form 10-K for the year ended
December 31, 1997;
(2) the description of the Common Stock contained in the Company's
Registration Statement on Form 10 filed on October 27, 1995, as such
Registration Statement may be amended from time to time for purposes of
updating, changing or modifying such description; and
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<PAGE>
(3) All reports filed by the Company since December 31, 1997, pursuant
to Section 13(a) or 15(d) of the Exchange Act.
All documents filed by the Company after the date of this Prospectus
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the
termination of the offering, shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of such documents.
Any statement contained in a document or other information
incorporated or deemed to be incorporated herein by reference shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated herein by reference modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, upon the
written or oral request of such person, a copy of any and all of the documents
or other information referred to above which have been or may be incorporated by
reference in this Prospectus, except that exhibits to such documents will not be
provided unless they are specifically incorporated by reference into such
documents. Requests for copies of any such document should be directed to
Highlands Insurance Group, Inc., 10370 Richmond Avenue, Houston, Texas 77042,
Attention - Charles Bachand, Vice-President and Chief Financial Officer.
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<PAGE>
THE COMPANY
Highlands Insurance Group, Inc. is an insurance holding company that
through its subsidiaries is engaged in the property and casualty insurance
business. Until January 23, 1996, the Company was a wholly-owned subsidiary of
Halliburton Company. On that date, the shares of the Company's Common Stock were
distributed to holders of record of common stock of Halliburton Company on
January 4, 1996 in the form of a dividend.
Unless the context otherwise requires, references herein and in any
Prospectus Supplement to the "Company" shall mean Highlands Insurance Group,
Inc. and its subsidiaries.
The Company is a Delaware corporation with its principal executive
offices located at 1000 Lenox Drive, Lawrenceville, New Jersey 08648, where its
telephone number is (609) 896-1921.
DESCRIPTION OF THE
AGENCY STOCK PURCHASE PLAN
The following is a description in question and answer form of the
provisions of the Plan offered to selected independent insurance agencies
("Eligible Agencies") of the Company and subsidiary insurance companies. The
Plan was approved by the Company's Board of Directors on March 9, 1998.
Purpose and Advantages of the Plan
1. What is the purpose of the Plan?
This Plan provides an Eligible Agency and its Key Employees, as
defined below, an opportunity to acquire a long-term proprietary interest in the
Company through the purchase of the Company's Common Stock at a discount from
fair market value. In offering this Plan, the Company seeks to foster the common
interests of the Company and its independent agencies and their employees in
achieving long-term profitable growth for the Company. Accordingly, the Company
has created this Plan for the purpose of facilitating the purchase of and
long-term holding of shares of its stock by an Eligible Agency and its Key
Employees and not for such Agency's or Key Employees' short-term gain. It is
expected that an Eligible Agency or Key Employee that purchases shares of stock
under the Plan will hold such shares on a long-term basis, as the Plan is not
intended to benefit an agency or employee which demonstrates a pattern of
immediate resale of shares acquired under the Plan. As discussed in Question &
Answer 6 below regarding eligibility, such a pattern of conduct will cause an
otherwise Eligible Agency to become ineligible for continued participation in
the Plan.
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<PAGE>
2. What are the advantages of the Plan?
Under the Plan, an agency can purchase the Company's Common Stock
at a 10% discount from the fair market value of such shares. Purchases will also
be made without paying any brokerage commissions or service charges.
Administration
3. Who administers the Plan for participants?
The Plan shall be administered by a committee (the "Committee")
consisting of three employees of the Company who are appointed by the Company's
Board of Directors. The Committee may from time to time adopt rules, regulations
and procedures for carrying out the Plan. Any interpretation or construction of
any provision of the Plan by the Committee shall be final and conclusive on all
persons absent contrary action by the Board of Directors.
4. Where can I obtain additional information about the Plan and
its administrators?
Additional information about the Plan and its administrators may
be obtained by contacting Irene Matarazzo, Vice President-Marketing, at
Highlands Insurance Group, Inc., 1000 Lenox Drive, Lawrenceville, New Jersey
08648, telephone number (609) 895-3010 or Ken Javor, Senior Vice
President-Commercial Insurance, at Highlands Insurance Company, 10370 Richmond
Avenue, Houston, Texas 77042, telephone number (713) 267-8616.
5. What is the term of the Plan?
The Plan will be in effect from March 9, 1998 through December
31, 1999. There will be four Subscription Periods ("Subscription Periods"). Each
Subscription Period will run from January 1 through June 30 or July 1 through
December 31; except the initial Subscription Period, which will run from May __,
1998 to June 30, 1998. The Company, in its discretion, may extend the Plan.
Participation
6. Which agencies are eligible to participate?
Selected independent insurance agencies that bring value to the
Company, its affiliates and subsidiaries, directly or indirectly, as determined
by the Company and with whom the Company seeks a long-term relationship are
eligible to participate in the Plan. The Company, in its discretion, may base
eligibility on segmentation, class or any other factor which indicates value to
the Company, directly or indirectly. An Eligible Agency shall be informed of its
eligibility to enroll in the Plan. Continued eligibility will be subject to the
Company's periodic review.
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<PAGE>
An Eligible Agency that participates in the Plan may direct that
shares purchased under the Plan from its contribution account, as defined below
in Question & Answer 16, be registered as of the date of purchase in the name of
certain persons associated with the agency. Such persons may only be (i) the
principal or principals of an Eligible Agency that is a proprietorship, (ii) the
general partner or general partners of an Eligible Agency that is a partnership,
(iii) the officers and stockholders of an Eligible Agency that is a corporation,
(iv) employee benefit plans of such entities established for the benefit of any
of the foregoing persons, and (v) key employees designated by the principal or
principals of an Eligible Agency that is a proprietorship, the general partner
or general partners of an Eligible Agency that is a partnership, or the
executive officers of an Eligible Agency that is a corporation. The Company's
determination of which persons are eligible for direct registration under the
Plan will be final, conclusive and binding. All persons enumerated in (i)
through (v) above who are designated by any such Eligible Agency to participate
in the Plan are referred to in this Prospectus as "Key Employees."
A pattern of immediate resale of stock acquired under this Plan
by an Eligible Agency or a Key Employee thereof, will be a factor in the
Company's determination of continued eligibility for the Plan because it shows
that an agency and its Key Employees are not interested in sharing in the long
term profitable growth of the Company. An otherwise Eligible Agency may not
participate in the Plan if the agency is subject to Section 16 of the Securities
and Exchange Act of 1934 in connection with the Company or is a 5% or greater
owner of the Company as defined in Section 13 of said Act. If an Eligible Agency
enrolled in the Plan becomes subject to Section 16 or a 5% owner, then the
Eligible Agency will be deemed to have withdrawn from the Plan and all amounts
in the contribution account, if any, will be refunded in cash.
7. How may an Eligible Agency participate in the Plan?
An Eligible Agency can enroll in the Plan by completing and
filing a Subscription Agreement with the Company. A Subscription Agreement is
enclosed with this Prospectus and additional Subscription Agreements may be
obtained at any time upon request to Irene Matarazzo, Vice President-Marketing,
at Highlands Insurance Group, Inc., 1000 Lenox Drive, Lawrenceville, New Jersey
08648, telephone number (609) 895-3010 or Ken Javor, Senior Vice
President-Commercial Insurance, at Highlands Insurance Company, 10370 Richmond
Avenue, Houston, Texas 77042, telephone number (713) 267-8616. In addition,
Subscription Agreements will be sent to each Eligible Agency prior to each
Enrollment Period.
8. What does a Subscription Agreement provide?
A Subscription Agreement allows each Eligible Agency to decide
and identify the date on which the agency desires to become enrolled in the Plan
and the amount of the contribution selected for purchases under the Plan.
An Eligible Agency must indicate on the Subscription Agreement
how the shares purchased are to be allocated by specifying the names and
addresses of the Eligible Agency and its Key Employees, where applicable, and
the percentage of the total purchase each is to receive. If an Eligible Agency
wants to change its allocation for any future Subscription Period, the
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<PAGE>
Company must receive a new Subscription Agreement on or before June 20 or
December 20 of the applicable Subscription Period.
9. When may an Eligible Agency enroll in the Plan?
An Eligible Agency may enroll by submitting a Subscription
Agreement to the Company and making a lump sum payment by June 20th or December
20th.
10. May an Eligible Agency transfer its subscription rights to
another person or agency?
No. No Eligible Agency may assign its subscription or rights to
subscribe to any other person or agency and any such attempted assignment shall
be void. However, an Eligible Agency may permit direct registration of stock in
the name of a Key Employee as described in Question & Answer 6.
Expenses
11. Are there any expenses to participants in connection with
purchases under the Plan?
No. Eligible Agencies will not be obligated to pay any brokerage
commissions or other charges with respect to the purchase of Common Stock under
the Plan.
Purchases
12. What is the source and number of shares available to be purchased
under the Plan?
Shares purchased under the Plan may be authorized but unissued
shares of Common Stock of the Company or treasury stock reacquired by the
Company. The total number of shares available for purchase under the Plan is
500,000.
13. What is the price of shares of Common Stock purchased under the
Plan?
The Subscription Price for each share of Common Stock purchased
under the Plan will be 90% of the fair market value of such shares on the last
trading day of the Subscription Period; provided, however, the price shall never
be less than one dollar ($1.00) per share. "Fair market value" of a share will
be the Closing Price as reported on the NYSE on the last day of the Subscription
Period on which a trade occurs.
14. How may an Eligible Agency pay for shares purchased under the
Plan?
The Subscription Price for shares purchased under the Plan is
payable by participants by means of lump sum payment. An Eligible Agency may, by
June 20 or December 20 of the applicable Subscription Period, elect to make lump
sum cash payments for the purchase of Common Stock under the Plan. Lump sum cash
payments shall be in increments of $1,000 and may not be less than $1,000 and
not more than $30,000 annually.
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15. Are there limitations on the amount of contributions or purchases
which can be made?
Yes. Purchases may be made only in increments of $1,000 and
during any one Subscription Period and for each calendar year of the Plan's
term, the total allowable contributions for purchases for each Eligible Agency
and its Key Employees shall not exceed $30,000. At the close of each
Subscription Period, each agency's contributions will be totaled and any excess
contributions above $30,000 shall be returned without interest to the Eligible
Agency within a reasonable time. If at any time throughout a Subscription
Period, an Eligible Agency's total payments exceed the maximum amount permitted
for the agency, the Company will return the excess amount without interest to
the agency within a reasonable period.
16. How are purchases made under the Plan?
The Company shall maintain on its books a contribution account
for each participating Eligible Agency. All contributions made by an Eligible
Agency during a Subscription Period will be credited to the contribution account
for that Eligible Agency. At the end of each Subscription Period, the amount
credited to each Eligible Agency's contribution account will be divided by the
Subscription Price for such Subscription Period and the Eligible Agency's
contribution account will be credited with the number of whole shares, excluding
fractional shares, which results. The full amount of shares, excluding
fractional shares, will then be sent by ChaseMellon directly to the Eligible
Agency and its Key Employees in accordance with the allocation specified in the
section on stock registration of the most current Subscription Agreement filed
with the Company by the Eligible Agency. The Company will rely on the most
current Subscription Agreement and will not be liable as long as the shares are
allocated in accordance with the stock registration section. If the number of
shares subscribed for during any Subscription Period exceeds the number of
shares available for sale under the Plan, available shares will be allocated to
participating Eligible Agencies in proportion to their Plan Accounts and any
excess contributions shall be returned to the participating Eligible Agencies
without interest. All amounts of contributions by an Eligible Agency that would
otherwise entitle the agency or its Key Employees to a fractional interest in
shares will be returned within a reasonable period of time to the Eligible
Agency without interest.
Reports to Participants
17. What kind of reports will be sent to an Eligible Agency
participating in the Plan?
Each Eligible Agency participant in the Plan and, if applicable,
its Key Employees will receive as promptly as practicable after each purchase of
the participating Eligible Agency's account, a statement of account describing
the amount contributed, the number of shares purchased, the price per share and
total shares of Common Stock accumulated under the Plan. These statements will
provide a continuing record of the dates and cost of purchases and should be
retained for income tax purposes. In addition, each stockholder will also
receive the Company's annual reports to stockholders, notices of stockholder
meetings and proxy statements and Internal Revenue Service information for
reporting dividends paid.
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Certificates for Shares
18. Are stock certificates issued for shares of Common Stock
purchased?
Yes. Certificates for Common Stock purchased under the Plan will
be issued and sent directly by ChaseMellon to the Eligible Agencies and Key
Employees that purchase shares under the Plan.
Certificates for fractional shares will not be issued under any
circumstances.
Withdrawal from Plan
19. How and when may an Eligible Agency withdraw from the Plan?
An Eligible Agency may withdraw from the Plan at any time by
giving written notice to the Company of the agency's desire to do so.
Termination of agency status for any reason will be treated as an automatic
withdrawal. If an agency withdraws from the Plan, such agency, if it continues
to be an Eligible Agency, may not re-enroll until after the next full
Subscription Period has elapsed.
20. What happens to any amounts credited to an Eligible Agency's
contribution account at the time of withdrawal?
All amounts credited to an Eligible Agency's contribution account
at the time of withdrawal will be refunded to the participant in cash without
interest.
Other Information
21. What happens if the Company declares a stock split or stock
dividend or changes or exchanges its Common Stock for shares of stock or other
securities of its own or another corporation?
If shares of the Company's Common Stock are changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company or another corporation, as in a merger, consolidation or
otherwise, or if the Company declares a stock split or stock dividend, there
will be substituted for or added to each share reserved for sale under the Plan
the number and kind of shares of stock or other securities into or for which the
Company's Common Stock will be so changed or exchanged, or to which each such
share will be entitled.
22. When do agencies participating in the Plan and its Key Employees
become entitled to the rights of a shareholder of the Company?
An agency participating in the Plan or Key Employees who have
purchased shares under the Plan will become entitled to vote, to receive
dividends and to all other rights as a shareholder of the Company with respect
to shares issued under the Plan on the first day following the end of the
Subscription Period during which such shares were purchased.
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<PAGE>
23. What are the federal income tax consequences of participation in
the Plan?
At the time of purchase, an agency will be treated as having
received ordinary income in an amount equal to the difference between the
Subscription Price paid and the then fair market value of the Common Stock
acquired. At the end of each calendar year, the Company will mail to each agency
a Form 1099 reflecting the amount of ordinary income earned under the Plan. The
Company is entitled to a deduction at the same time in a corresponding amount.
The agency's basis in the Common Stock acquired is equal to the purchase price
plus the amount of ordinary income recognized. When an agency disposes of shares
of Common Stock acquired under the Plan, any amount received in excess of the
value of the shares of Common Stock on which the agency was previously taxed
will be treated as short-term, mid-term or long-term capital gain depending upon
the holding period of the shares (which begins on the date after the shares are
acquired). If the amount received is less than that value, the loss will be
treated as short-term, mid-term or long-term capital loss, depending upon the
holding period of the shares.
If an Eligible Agency that purchases shares has such shares
registered in the name of Key Employees, such shares may be income to such Key
Employees, depending upon the status of the Key Employee and the facts and
circumstances of the registration in the name of the Key Employees.
Each participating agency or Key Employee is advised to consult
with a tax advisor to determine the tax consequences, including state tax
consequences, of a particular transaction in the agency's account or the tax
treatment of registration in the name of a Key Employee.
24. May the Plan be changed or discontinued?
Yes. The Company's Board of Directors has the right to amend,
modify, or terminate the Plan at any time without notice so long as no
participating agency's existing rights are adversely affected as a result of
such change, amendment or modification.
USE OF PROCEEDS
The proceeds to the Company from sales of Common Stock pursuant to the
Plan will be used for general corporate purposes, including investment in and
advances to the Company's subsidiaries.
EXPERTS
The consolidated financial statements and schedules of Highlands
Insurance Group, Inc. as of December 31, 1997 and 1996, and for each of the two
years then ended appearing in the Highlands Insurance Group, Inc.'s Form 10-K
for the year ended December 31, 1997 have been incorporated by reference in this
Prospectus and in the Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, as indicated in
their report with respect thereto, and are incorporated by reference herein, in
reliance upon the authority of said firm as experts in accounting and auditing.
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The consolidated financial statements and schedules of Highlands
Insurance Group, Inc. as of December 31, 1995 and for the year then ended,
appearing in the Highlands Insurance Group, Inc.'s Form 10-K for the year ended
December 31, 1997 and incorporated by reference in this Prospectus and in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing.
LEGAL OPINION
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Schnader Harrison Segal & Lewis
LLP, Philadelphia, Pennsylvania.
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HIGHLANDS INSURANCE GROUP, INC.
AGENCY STOCK PURCHASE PLAN
500,000
Shares of
Common Stock
-------------
PROSPECTUS
-------------
Dated: May _____, 1998
No person has been authorized to give any information or to make any
representation not contained in this prospectus, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company. Neither delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy, any of
the securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offering in such jurisdiction.
-11-
<PAGE>
HIGHLANDS INSURANCE GROUP, INC. AGENCY STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
On behalf of ______________________________________________________
(agency), ________________ (number), I hereby elect to enroll in the Highlands
Insurance Group, Inc. Agency Stock Purchase Plan. I understand a maximum total
contribution of $30,000 applies for each Subscription Period and for each
calendar year. I further understand that Common Stock of the Company will be
purchased in accordance with the Prospectus, a copy of which has been given to
me. I enclose $________ (not less than $1,000 and not greater than $30,000 in
$1,000 increments) by check payable to Highlands Insurance Group, Inc.
Please check the applicable block:
[ ] New Participant
[ ] Continuing Participant
[ ] Withdrawal from the Plan at the end of the current Subscription Period
and receive stock for the current period
[ ] Withdrawal from the Plan immediately and receive all funds held for
the current Subscription Period
_______________________________________________ Fed. ID No.____________________
Agency Name
By:____________________________________________ Date___________________________
Signature
__________________________________________
Title
-12-
<PAGE>
Registration Instructions:
Stock should be registered as follows.
(a) Agency $__________________
(b) Key Employees
(1)__________________________________________ $__________________
Name
------------------------------------------
Address
------------------------------------------
Social Security Number
(2)__________________________________________ $__________________
Name
-----------------------------------------
Address
-----------------------------------------
Social Security Number
(3)__________________________________________ $__________________
Name
------------------------------------------
Address
------------------------------------------
Social Security Number
(4)__________________________________________ $__________________
Name
------------------------------------------
Address
------------------------------------------
Social Security Number
[Use Extra Pages If Necessary]
Total $_________________*
*Must be in increments of $1,000.
This form (with accompanying checks made payable to Highlands Insurance Group,
Inc.) should be sent to Highlands Insurance Group, Inc., 10370 Richmond Avenue,
Houston, Texas 77042, Attention: Darlene Parizote.
-13-
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
Securities and Exchange Commission Registration Fee............... $4,047 .03
Legal Fees and Expenses........................................... $10,000.00
Accountants' Fees and Expenses $ 5,000.00
Total............................................................. $19,047.03
- --------------------------------
* All amounts are estimated except for the registration fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the Delaware General Corporation Law (the
"DGCL") allows a corporation to eliminate the personal liability of directors of
a corporation to the corporation or to any of its stockholders for monetary
damage for a breach of his fiduciary duty as a director, except in the case
where the director breached his duty of loyalty, failed to act in good faith,
engaged in intentional misconduct or knowingly violated a law, authorized the
payment of a dividend or approved a stock repurchase in violation of Delaware
corporate law or obtained an improper personal benefit. The Company's Amended
and Restated Certificate of Incorporation contains a provision which, in
substance, eliminates directors' personal liability as set forth above.
Section 145 of the DGCL provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was a director, officer, employee or agent of the corporation or is or was
serving at its request in such capacity in another corporation or business
association against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Company's Certificate
of Incorporation contains a provision which, in substance, provides for
indemnification as set forth above.
II-1
<PAGE>
<TABLE>
ITEM 16. EXHIBITS
<CAPTION>
<S> <C> <C>
3.1 --- Amended and Restated Certificate of Incorporation of
the Registrant (incorporated by reference to the Company's
registration statement on Form 10 as filed with the
Commission on January 4, 1996)
3.2 --- Form of Amended and Restated Bylaws of the Registrant
(incorporated by reference to the Company's registration
statement on Form 10 as filed with the Commission on January 4,
1996)
4.1 --- Form of Stock Certificate of Common Stock (incorporated by
reference to the Company's registration statement on Form 10 as
filed with the Commission on January 4, 1996) (See also Exhibits
3.1 and 3.2)
4.2 --- Form of 10% Convertible Subordinated Debentures Due December
31, 2005 (incorporated by reference to the Company's registration
statement on Form 10 as filed with the Commission on January 4,
1996)
4.3 --- Form of Amendment to 10% Convertible Subordinated Debentures
Due December 31, 2005 (incorporated by reference to the Company's
current report on Form 8-K/A dated April 30, 1997, Commission
File Number 1-14028)
4.4 --- Form of Common Stock Subscription Warrant, Series A
(incorporated by reference to the Company's registration
statement on Form 10 as filed with the Commission on January 4,
1996)
4.5 --- Form of Amendment to Common Stock Subscription Warrant,
Series A (incorporated by reference to the Company's current
report on Form 8-K/A dated April 30, 1997, Commission File Number
1-14028)
4.6 --- Form of Common Stock Subscription Warrant, Series B
(incorporated by reference to the Company's registration
statement on Form 10 as filed with the Commission on January 4,
1996)
4.7 --- Form of Amendment to Common Stock Subscription Warrant, Series
B (incorporated by reference to the Company's current report on
Form 8-K/A dated April 30, 1997, Commission File Number 1-14028)
4.8 --- Form of 10% Convertible Subordinated Debentures Due December
31, 2005, Series 2 (incorporated by reference to the Company's
registration statement on Form 10 as filed with the Commission on
January 4, 1996)
4.9 --- Form of Amendment to 10% Convertible Subordinated Debentures
Due December 31, 2005, Series 2 (incorporated by reference to the
Company's current report on Form 8-K/A dated April 30, 1997,
Commission File Number 1-14028)
II-2
<PAGE>
4.10 --- Form of Common Stock Subscription Warrant Series A-2
(incorporated by reference to the Company's registration
statement on Form 10 as filed with the Commission on January 4,
1996)
4.11 --- Form of Amendment to Common Stock Subscription Warrant, Series
A-2 (incorporated by reference to the Company's registration
statement on Form 10 as filed with the Commission on January 4,
1996)
4.12 --- Form of Common Stock Subscription Warrant, Series B-2
(incorporated by reference to the Company's current report on
Form 8-K/A dated April 30, 1997, Commission File Number 1-14028)
4.13 --- Form of Amendment to Common Stock Subscription Warrant, Series
B-2 (incorporated by reference to the Company's current report on
Form 8-K/A dated April 30, 1997, Commission File Number 1-14028)
4.14 --- Stockholders Agreement, dated as of April 30, 1997, among
Highlands Insurance Group, Inc., Insurance Partners, L.P.,
Insurance Partners Offshore (Bermuda) L.P., The Scandinavia
Company, Inc., Erik M. Vik and Manoeuvre Ltd. (incorporated by
reference to the Company's current report on Form 8-K/A dated
April 30, 1997, Commission File Number 1-14028)
4.15+ --- Agency Stock Purchase Plan of Highlands Insurance Group, Inc.
5.1+ --- Opinion and consent of Schnader Harrison Segal & Lewis LLP,
counsel for the Company.
23.1+ --- Consent of KPMG Peat Marwick LLP.
23.2+ --- Consent of Arthur Andersen LLP.
23.5+ --- Consent of Schnader Harrison Segal & Lewis LLP (included in
Exhibit 5.1).
24.1+ --- Powers of Attorney of directors and officers of the Registrant.
(See page II-6 of this Registration Statement).
- -------------------------------
<FN>
Filed herewith.
</FN>
</TABLE>
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in
the Registration Statement; provided, however, that the undertakings
set forth in clauses (i) and (ii) above do not apply if the information
required to be included in a post-effective amendment by those clauses
is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that are incorporated by
reference in this Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering; and
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Company's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-4
<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Company pursuant to the provisions described under Item 15 above,
or otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-5
<PAGE>
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
designates and appoints Richard M. Haverland, Charles J. Bachand and Stephen J.
Greenberg, and each of them, as its or his attorneys-in-fact (the
"Attorneys-in-Fact") with full power to act alone, and to execute in the name
and on behalf of the Registrant and each such person, individually in each
capacity stated below, one or more amendments (including post-effective
amendments) to this Registration Statement on Form S-3, which amendments may
make such changes in this Registration Statement on Form S-3 as any such
Attorney-in-Fact deems appropriate, and to file each such amendment to this
Registration Statement on Form S-3 together with all exhibits thereto and any
and all documents in connection therewith.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Lawrenceville, State of New Jersey.
Dated: May 1, 1998
Highlands Insurance Group, Inc.
By: /s/ Richard M. Haverland
Richard M. Haverland,
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
/s/ Richard M. Haverland May 1, 1998
- ------------------------
Richard M. Haverland Chairman, President and Chief
Executive Officer
II-6
<PAGE>
SIGNATURE TITLE DATE
/s/ Charles J. Bachand May 1, 1998
- ----------------------
Charles J. Bachand Vice President, Treasurer and
Principal Accounting Officer
/s/ Robert A. Spass
Robert A. Spass Director May 1, 1998
/s/ Bradley E. Cooper
Bradley E. Cooper Director May 1, 1998
/s/ W. Bernard Pieper
W. Bernard Pieper Director May 1, 1998
/s/ Kenneth S. Crews
Kenneth S. Crews Director May 1, 1998
/s/ Philip J. Hawk
Philip J. Hawk Director May 1, 1998
/s/ Robert W. Shower
Robert W. Shower Director May 1, 1998
II-7
<PAGE>
EXHIBIT 4.15
HIGHLANDS INSURANCE GROUP, INC.
AGENCY STOCK PURCHASE PLAN
As adopted, March 9, 1998
1. Purpose The Highlands Insurance Group, Inc. Agency Stock Purchase
Plan (the "Plan") is established by the Highlands Insurance Group, Inc. (the
"Company") for the benefit of the independent insurance agencies of the Company,
and the Company's affiliated and subsidiary insurance companies, which shall be
those insurance companies whose stock is owned directly or indirectly by the
Company. This Plan provides an Eligible Agency and its Key Employees, as defined
below under Section 2, an opportunity to acquire a long-term proprietary
interest in the Company through the purchase of the Company stock at a discount
from fair market value. In offering this Plan, the Company seeks to foster the
common interests of the Company and its independent agencies and employees
thereof in achieving long-term profitable growth for the Company. Accordingly,
the Company has created this Plan for the purpose of facilitating the purchase
of and long-term holding of shares of its stock by an Eligible Agency and its
Key Employees and not for such Agency's or Key Employee's short-term gain. It is
expected that an Eligible Agency or Key Employee thereof that purchases shares
of stock hereunder will hold such shares on a long-term basis, as the Plan is
not intended to benefit an agency or employee which demonstrates a pattern of
immediate resale of shares acquired hereunder and, as discussed in Paragraph 2
below regarding eligibility, such a pattern of conduct will cause an otherwise
Eligible Agency to become ineligible for continued participation in the Plan.
-1-
<PAGE>
2. Eligibility
a. An agency designated as an Eligible Agency by the Company is
eligible to participate in this Plan. An Eligible Agency shall be an
agency which, as determined by the Company in its discretion, is an
agency that brings value to the Company or affiliates and subsidiaries
and with which the Company seeks a long term relationship. The
Company, in its discretion, may base eligibility on agency
segmentation, class or any other factor(s) which indicates value to
the Company, directly or indirectly. Continued eligibility will be
subject to the Company's periodic review.
b. An Eligible Agency that participates in this Plan may direct that
shares purchased under this Plan from its contributions pursuant to
this Plan be registered as of the date of purchase in the name of
certain persons associated with the agency. Such persons shall only be
(i) the principal or principals of an Eligible Agency that is a
proprietorship, (ii) the general partner or general partners of an
Eligible Agency that is a partnership, (iii) the officers and
stockholders of an Eligible Agency that is a corporation, (iv)
employee benefit plans of such entities established for the benefit of
any of the foregoing persons, and (v) key employees designated by the
principal or principals of an Eligible Agency that is a
proprietorship, the general partner or general partners of an Eligible
Agency that is a partnership, or the executive officers of an Eligible
Agency that is a corporation. The Company's determination of which
individuals are eligible for direct registration under this Plan will
-2-
<PAGE>
be final, conclusive and binding. All persons enumerated in (i)
through (v) above who are designated by any such Eligible Agency to
participate in the Plan are referred to herein as "Key Employees."
c. A pattern of immediate resale of stock acquired under this plan by
an Eligible Agency or a Key Employee thereof shall be a factor in the
Company's determination of the Eligible Agency's continued eligibility
for the Plan because it shows that an Eligible Agency and its Key
Employees are not interested in sharing in the long term profitable
growth of the Company.
3. Method of Payment and Amount of Contribution There shall be one
method of payment to purchase stock. An Eligible Agency may elect to purchase
stock through lump sum payments to the Company. The Eligible Agency shall pay to
the Company by June 20th or December 20th a dollar amount in a lump sum. In each
Subscription Period an Eligible Agency may contribute, in $1,000 increments, an
aggregate minimum of $1,000 and maximum of $30,000 toward the purchase of stock;
provided however, that in any calendar year the aggregate maximum contribution
by an Eligible Agency toward the purchase of stock shall not exceed $30,000.
If at any time throughout a Subscription Period an Eligible Agency's
total payments exceeds the maximum permitted for such agency, then such excess
amount will be returned within a reasonable period of time to the Eligible
Agency without interest.
-3-
<PAGE>
4. Duration of Offer and Subscription Periods This Plan shall be in
effect from March 9, 1998 through and including December 31, 1999, unless
extended by the Company in its sole discretion. During the duration of the Plan
there will be 4 "Subscription Periods". Each Subscription Period runs from
January 1 through June 30 or from July 1 through December 31; provided, however
that the initial Subscription Period shall run from the month following the
month in which the registration statement under the Securities Act of 1933, as
amended concerning the Stock subject to this Plan (the "Registration Statement")
has become effective and end on June 30.
5. Enrollment
An Eligible Agency that wishes to make lump sum payments during a
Subscription Period shall remit a lump sum to the Company along with a
Subscription Agreement for that Subscription Period by June 20th or December
20th of the Subscription Period.
6. Number of Shares to be Offered
The total number of shares to be made available under the Plan is
500,000 shares of common stock of the Company ("Stock"). In the event this
amount of Stock is subscribed prior to the expiration of the Plan, the Plan may
be terminated in accordance with Section 14 of the Plan.
7. Subscription Price The "Subscription Price" for each share of Stock
shall be ninety percent (90%) of the closing price of such share as quoted on
the New York Stock Exchange on the day of purchase; provided, however, that the
price shall never be less than $1.00 per share.
-4-
<PAGE>
8. Purchase of Shares
As of the last day of each Subscription Period any lump sum
payments, not to exceed $30,000, will be credited to the account of the Eligible
Agency making such payments and the amount then so credited will be divided by
the Subscription Price for such Subscription Period. The full amount of whole
shares, excluding fractional shares, which results will then be allocated to the
accounts maintained on the books of the Company's stock transfer agent ("Plan
Accounts") for the Eligible Agency and its Key Employees in accordance with the
allocations specified in the most current form regarding stock registration
filed with the Company by the Eligible Agency. All amounts of lump sum payments
by an Eligible Agency that would otherwise entitle the agency or its Key
Employees to a fractional interest in shares will be returned within a
reasonable period of time to the Eligible Agency without interest. The Company
shall be entitled to rely on the most recent form regarding stock registration
executed in accordance with rules and procedures established by the Board of
Directors, and the Company shall have no liability for allocation of shares
consistent with such form. Unless otherwise requested by the enrolled Eligible
Agency, or Key Employee, shares will be issued and titled in the name of the
enrolled Eligible Agency, or Key Employee, as the case may be. An enrolled
Eligible Agency and its Key Employees will receive a statement of account in a
timely fashion following the end of each Subscription Period in which shares are
acquired. In the event the number of shares subscribed for any Subscription
Period exceeds the number of shares available for sale under the Plan for such
period, the available shares shall be allocated among all the Eligible Agencies
in proportion to their Plan Account balances.
-5-
<PAGE>
9. Withdrawal from the Plan
An enrolled Eligible Agency may withdraw from the Plan at any
time prior to the end of a Subscription Period. At the time of withdrawal the
amount of cash credited to the account of the Eligible Agency for that
Subscription Period will be refunded in cash without interest. If an Eligible
Agency withdraws, such Eligible Agency may not resubscribe until after the next
full Subscription Period has elapsed.
10. Special Rules for Section 16 Officers and 5% Owners
An agency which would otherwise be an Eligible Agency may not
participate in this Plan if the agency is subject to Section 16 of the
Securities Exchange Act of 1934, as amended, in connection with the Company or
is a 5% owner of the Company as defined under Section 13 of said Act. If an
Eligible Agency is enrolled in the Plan and becomes subject to Section 16 or a
5% owner, then such Eligible Agency will be deemed to have withdrawn from the
Plan and all amounts credited will be refunded in cash.
11. Termination of Agency Status
Termination of agency status for any reason shall be treated as
an automatic withdrawal as set forth in Section 9.
12. Assignment and Issuance of Shares
No Eligible Agency or Key Employee may assign its subscription or
rights to subscribe to any other entity (including its shareholders or partners)
and any attempted assignment shall be void. All shares issued under this Plan
shall be titled in the name of the Eligible Agency. Notwithstanding the
foregoing, an Eligible Agency may permit direct registration of stock in the
name of a Key Employee as described in paragraph 8 hereof.
-6-
<PAGE>
13. Adjustment of and Changes in the Stock
In the event that the shares of Stock shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company or of another corporation (whether by reason of merger,
consolidation, recapitalization, split-up, combination of shares, or otherwise),
or if the number of shares of Stock shall be increased through a stock split or
the payment of a stock dividend, then there shall be substituted for or added to
each share of Stock theretofore reserved for sale under the Plan, the number and
kind of shares of stock or other securities into which each outstanding share of
Stock shall be so changed, or for which each such share shall be exchanged, or
to which each such share shall be entitled, as the case may be.
14. Amendment or Discontinuance of the Plan
The Board of Directors of the Company shall have the right to
amend, modify or terminate the Plan at any time without notice provided that no
participant's existing rights are adversely affected thereby.
15. Administration
The Plan shall be administered by a committee to be appointed by
the Board of Directors consisting of three employees of the Company. The
committee may from time to time adopt rules, regulations and procedures for
carrying out the Plan. Interpretation or construction of any provision of the
Plan by the committee shall be final and conclusive on all persons absent
contrary action by the Board of Directors.
-7-
<PAGE>
16. Titles
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
17. Applicable Law
The Plan shall be construed, administered and governed in all
respects under the laws of the state of Delaware.
<PAGE>
-8-
EXHIBIT 5.1
SCHNADER HARRISON SEGAL & LEWIS, LLP
1600 Market Street
Philadelphia, Pennsylvania 19103
May 1, 1998
Highlands Insurance Group, Inc.
1000 Lenox Drive
Lawrenceville, New Jersey 08648
Re: Registration Statement on Form S-3 for
500,000 Shares of Common Stock
Ladies and Gentlemen:
As counsel for Highlands Insurance Group, Inc., a Delaware corporation
(the "Company"), we are furnishing this opinion in connection with the
above-captioned Registration Statement relating to the issuance and sale of
500,000 shares of Common Stock, par value $.01 per share, of the Company (the
"Shares") pursuant to the Company's Agency Stock Purchase Plan. We have
participated in the preparation of the Registration Statement and have also
examined the Company's Certificate of Incorporation and By-laws and resolutions
of the Board of Directors of the Company.
Our opinion set forth below is limited to the General Corporation Law
of the State of Delaware.
In our opinion, the Shares have been duly authorized and, when issued
and payment has been received therefor, will be legally issued, fully paid and
non-assessable.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement.
Very truly yours,
/s/ Schnader Harrison Segal & Lewis, LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Highlands Insurance Group, Inc.
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Houston, Texas
May 1, 998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement on Form S-3 pertaining
to the Agency Stock Purchase Plan of Highlands Insurance Group, Inc. of our
report dated March 8, 1996 included in Highlands Insurance Group, Inc.'s Form
10-K for the year ended December 31, 1997 and to all references to our firm
included in this registration statement.
Arthur Andersen LLP
Houston, Texas
May 1, 1998
