AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 1, 1999
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 76-2370945
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
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)
STEPHEN J. GREENBERG, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
HIGHLANDS INSURANCE GROUP, INC.
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
(215) 751-2000
Approximate date of commencement of proposed sale to the public: As
soon as possible after the effective date of this Registration Statement and
from time to time as determined by market conditions.
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, please 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 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.[]
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If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
<S> <C> <C> <C> <C>
Proposed Proposed
Maximum Maximum Amount of
Title of Shares Amount to be Aggregate Price Aggregate Registration
to be Registered Registered Per Share(1) Offering Price(1) Fee(2)
- ---------------------------------------------------------------------------------------------
Common Stock, par
value $.01 per share 454,546 shares $10.625 $4,829,551.20 $1,342.62
<FN>
(1) Based on the average of the high and low prices of the Common Stock on the
New York Stock Exchange on June 29, 1999 and estimated solely for the
purpose of calculating the registration fee.
(2) Calculated pursuant to Section 6(b) as follows: proposed maximum offering
price multiplied by .000278.
</FN>
</TABLE>
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>
Vertical note left of this page:
The information in this Prospectus is not complete and may be changed.
The selling shareholder may not sell his shares until the registration statement
filed with the Securities and Exchange Commission is effective. This Prospectus
is not an offer to sell the shares and it is not soliciting an offer to buy the
shares in any state where the offer or sale is not permitted.
Prospectus, subject to completion, dated June __, 1999
HIGHLANDS INSURANCE GROUP, INC.
COMMON STOCK
454,546 Shares
The shareholder of Highlands Insurance Group, Inc. listed inside is
offering or selling 454,546 shares of Common Stock under this Prospectus.
The selling shareholder bought his shares from us in a private
purchase on May 10, 1999. The selling shareholder may offer his shares through
public or private transactions on or off the United States exchanges, at
prevailing market prices, or at privately negotiated prices. We will not receive
any of the proceeds from the sale of the shares by the selling shareholder.
Investing in our Common Stock involves risks. See the Risk Factors on
page 4 of this Prospectus.
Our Common Stock is quoted on the New York Stock Exchange under the
symbol "HIC." On June 29, 1999, the closing price of one share of Common Stock
on the New York Stock Exchange was $10.50.
We urge you to carefully read this Prospectus which describes the
terms of the offering before you make your investment decision.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is June __, 1999
<PAGE>
TABLE OF CONTENTS
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . .3
FORWARD LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . .4
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . .5
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . 10
SELLING SHAREHOLDER. . . . . . . . . . . . . . . . . . . . . . 11
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . 12
WHERE YOU CAN FIND MORE INFORMATION. . . . . . . . . . . . . . 12
LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . . . . . 13
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
THE COMPANY
We are an insurance holding company offering a broad range of property
and casualty insurance products in various regional markets in the United
States. We primarily distribute our products in Texas, New Jersey, California,
Pennsylvania, North Carolina, Iowa, New York and Louisiana. In addition, we
distribute lesser amounts of our insurance products in many of the remaining
jurisdictions of the United States and its territories.
We offer our insurance products principally through the following
subsidiaries:
* Highlands Insurance Company;
* Northwestern National Casualty Company; and
* Pacific National Insurance Company.
Our principal executive offices are located at 1000 Lenox Drive,
Lawrenceville, New Jersey 08648 and our telephone number is (609) 896-1921.
<PAGE>
FORWARD LOOKING STATEMENTS
This Prospectus contains forward-looking statements. Words such as
"expect," "anticipate," "should" and words of similar import identify these
statements. Actual results may differ significantly from those expressed or
implied by the forward-looking statements. Factors that might cause such a
difference include the various risks set forth below that we believe are
material to investors who purchase or own our securities. Before deciding to
purchase our Common Stock, you should carefully consider the following
information together with the other information contained in this Prospectus.
<PAGE>
RISK FACTORS
You should carefully consider the risks described below regarding us
and our Common Stock. The risks and uncertainties described below are not the
only ones we face. There may be additional risks and uncertainties. If any of
the following risks actually occur, our business, financial condition or results
of operations could be affected materially. In that case, the trading price of
our Common Stock could decline significantly.
We rely on the availability of reinsurance.
We transfer our exposure to certain risks to others through
reinsurance arrangements. Under these arrangements, other insurers assume a
portion of our losses and expenses associated with reported and unreported
claims in exchange for a portion of policy premiums. The availability, amount
and cost of reinsurance depend on general market conditions and may vary
significantly. Any decrease in the amount of our reinsurance will increase our
risk of loss. Furthermore, we face a credit risk with respect to reinsurance.
Our three largest reinsurance credit exposures as of December 31, 1998 are to an
underwriting syndicate at Lloyds of London in the amount of $123.5 million, to
American Reinsurance Company in the amount of $113.7 million and to General
Reinsurance Company in the amount of $70.1 million.
When we obtain reinsurance, we are still liable for those transferred
risks if the reinsurer cannot meet its obligations. Therefore, the inability of
our reinsurers' to meet their financial obligations could materially affect our
operations.
Our loss reserves are difficult to estimate.
We are required to maintain loss reserves. Our reserve amounts are
estimates of what we expect the ultimate settlement and administration of what
claims will cost. We base the reserve amounts on facts and circumstances of
which we are aware, predictions of future events, estimates of future trends in
claims severity and frequency and other subjective factors. However, there is no
method for precisely estimating our ultimate liability.
We regularly review our reserving techniques and our overall amount of
reserves. We also review:
* information regarding each claim for losses;
* our loss history and the industry's loss history;
* legislative enactments, judicial decisions and legal developments
regarding damages;
* changes in political attitudes; and
* trends in general economic conditions, including inflation.
We underestimated our loss reserves for 1997 and 1998 primarily due to
the difficulty of predicting environmental and pollution claims. We increased
our reserves during each year. If we continue to underestimate our reserves, we
will need to increase them. That would result in an increase in losses and a
reduction in our net income and stockholders' equity for the periods in which we
identify the deficiency in reserves.
Catastrophes and weather-related events may adversely affect us.
Property and casualty insurance companies frequently experience losses
from catastrophes. Catastrophes may have a material adverse effect on our
operations. Catastrophes include windstorms, hurricanes, earthquakes, tornadoes,
hail, severe winter weather and fires. We cannot predict how severe a particular
catastrophe may be until after it occurs. The extent of our losses from
catastrophes is a function of the total amount of losses our clients incur, the
number of our clients affected, the frequency of the events and the severity of
the particular catastrophe. Most catastrophes occur in small geographic areas.
However, windstorms, hurricanes and earthquakes may produce significant damage
in large, heavily populated areas.
We may be adversely affected by Year 2000 computer problems.
Many currently installed computer systems and software products use
only two digits to identify a year in the date field with the assumption that
the first two digits of the year are always "19." Consequently, on January 1,
2000, computers that are not "Year 2000" compliant may read the year as 1900.
Systems that calculate, compare or sort using the incorrect date may
malfunction. As a result, companies are upgrading computer systems or software
to comply with "Year 2000" requirements. Significant uncertainty exists in the
software industry concerning the potential effects associated with such
compliance.
We, like all users of automated information systems, are addressing
the potential "Year 2000" issues that could affect our automated information
systems, such as mainframe applications, personal computers and communications
systems. We are also addressing the "Year 2000" issues associated with the
information systems of our outside vendors. We are further addressing risks
associated with non-information systems exposures, such as telephones and other
facility related systems. We are at various stages in renovating or implementing
"Year 2000" compliant information and non-information systems. In addition, we
have been assessing if our outside vendors are "Year 2000" compliant. Our
renovation, implementation and assessments are not complete.
If we, or our outside vendors, fail to correct a material "Year 2000"
problem, we could have an interruption in, or a failure of, certain normal
business activities or operations such as policy underwriting and claim payment.
Such failures could materially and adversely affect our results of operations,
liquidity and financial condition. We are developing contingency plans to
address potentially adverse "Year 2000" situations which could affect material
areas of our internal information systems. However, unforseen "Year 2000"
problems could adversely affect us.
In addition to our systems, the Year 2000 issues may affect our
underlying business. We do not believe that our property and casualty policies
cover Year 2000 occurrences and we recently adopted exclusionary language that
clarifies that our policies do not cover Year 2000 occurrences. We attached the
language to the policies under which we believe policyholders may make claims
for Year 2000 losses. We cannot reasonably estimate our exposure for losses and
expenses for the claims under the policies.
Our largest customer will not continue its contract past December 31,
1999.
Halliburton Company, our former parent, was our largest customer in
1998, representing $53.9 million, or 13.9% of our net premiums earned.
Halliburton advised us it will not continue its contract with us past December
31, 1999. If we cannot replace Halliburton with new customers our net premiums
earned will decline after December 31, 1999.
Changes in our ratings may adversely affect us.
Rating agencies rate insurance companies based on financial stability
and an ability to pay claims, factors more relevant to policyholders than
investors. Ratings are not recommendations to buy, hold or sell our Common
Stock.
Currently, A.M. Best rates our principal insurance subsidiaries as
"B++" (Very Good). Ratings by A.M. Best in the insurance industry range from
"A++" (Superior) to "F" (in Liquidation). According to A.M. Best, an insurer
with"B++" rating has demonstrated very good financial strength and operating
performance.
We also have a 1998 Financial Stability Rating of A (Exceptional) from
Demotech, Inc. According to Demotech, insurers with this rating possess
exceptional financial stability to withstand a general economic downturn or
deterioration of an underwriting cycle. Financial stability ratings by Demotech
for the industry range from A (Double Prime - Unsurpassed) to L (Below Average).
We cannot be sure that we will maintain our current A.M. Best or
Demotech ratings. Our business could be adversely affected if we receive a
significant downgrade in these ratings.
We rely upon independent insurance agents.
We market and sell almost all of our insurance products through
independent, non-exclusive insurance agencies and brokers. The agencies and
brokers may also sell our competitors' insurance products. Our business depends
in part on the marketing efforts of those agencies and brokers and we must offer
insurance products that meet the requirements of their clients. If those
agencies and brokers fail to market our products successfully, our business may
be adversely impacted.
Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda)
L.P. exert significant influence over our affairs.
Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda)
L.P. own 10% Convertible Debentures together with Common Stock Warrants in our
Company. The Debentures and Warrants represent significant equity ownership
potential. If Insurance Partners and Insurance Partners (Bermuda) convert the
Debentures and exercise the Warrants, they will own approximately 42% of our
Common Stock. In addition, by contract Insurance Partners designates 28% of the
members of our Board of Directors.
We face significant competition from other regional and national
insurance companies and from self-insurance and new market entrants.
We compete with regional and national insurance companies, including
direct writers of insurance coverage. Many of these competitors are larger than
we are and have greater financial, technical and operating resources. The
property and casualty insurance industry is highly competitive on the basis of
both price and service. There are many companies competing for the same
insurance customers in the geographic areas in which we operate. If our
competitors price their premiums more aggressively and we meet their pricing,
this may adversely affect our underwriting results. In addition, because our
insurance products are marketed through independent insurance agencies, which
represent more than one insurance company, we face competition within each
agency.
We also face competition from the implementation of self-insurance in
the commercial insurance area. Many of our customers and potential customers are
examining the risks of self-insuring as an alternative to traditional insurance.
We also face potential competition from banks. Banks are making efforts to cause
changes in laws and regulations which limit their ability to engage in
non-banking, financial service businesses, such as the underwriting of
insurance. If banks were able to write insurance, they could compete directly
with us by selling insurance through their own insurance agencies.
We are heavily regulated by the states in which we operate.
We are subject to extensive supervision and regulation in the states
in which we operate. The supervision and regulation relate to numerous aspects
of our business and financial condition. The primary purpose of the supervision
and regulation is the protection of our insurance policyholders, and not our
shareholders or other investors. The extent of regulation varies, but generally
is derived from state statutes. These statutes delegate regulatory, supervisory
and administrative authority to state insurance departments. The regulations or
the state insurance departments may impede us from obtaining rate increases or
taking other actions we might wish to take to increase our profitability.
We may be restricted in declaring dividends and distributions and
limited in our ability to pay our expenses and debt.
As an insurance holding company, our principal assets consist of the
capital stock of our insurance subsidiaries. We cannot declare cash dividends on
our Common Stock unless our insurance subsidiaries can pay cash dividends to us.
Our insurance subsidiaries may only pay dividends to us if they are permitted to
do so under the insurance regulations of their home states. All of the home
states of our insurance subsidiaries regulate the payment of dividends. In
addition, these regulations may adversely affect our ability to pay our expenses
and our debts.
State insurance laws may limit your ability to own 10% or more of our
Common Stock.
State insurance laws require prior approval by state insurance
departments of any acquisition of control of a domestic insurance company or of
any company which controls a domestic insurance company. "Control" is generally
presumed to exist through the ownership of 10% or more of the voting securities
of a domestic insurance company or of any company which controls a domestic
insurance company. Any purchaser of 10% or more of the outstanding shares of our
Common Stock will be presumed to have acquired control of our subsidiaries
unless the relevant insurance commissioner determines otherwise. Accordingly,
any purchase by you of 10% or more of our outstanding Common Stock would require
prior action by all or some of the insurance commissioners in the home states of
our insurance subsidiaries.
The property and casualty insurance industry is cyclical.
Historically, the property and casualty insurance industry has been
cyclical. Over the last several years, the industry has been in a downturn which
resulted in a decline in premium rates. The decline in premium rates adversely
affected our underwriting results. Furthermore, unpredictable developments
affect the industry's profitability. These developments include natural
disasters, fluctuations in interest rates and other changes in the investment
environment that affect returns on our investments, inflationary pressures that
affect the size of losses, and judicial decisions that affect insurers'
liabilities. The demand for property and casualty insurance, particularly
commercial lines, can also vary with the overall level of economic activity.
We employ certain anti-takeover measures.
Certain provisions of our organizational documents may discourage,
delay or prevent a change of control of our company. These include, among
others, provisions in our Amended and Restated Certificate of Incorporation and
Bylaws relating to staggered terms for our directors, notice requirements for
stockholders proposing director nominations or bringing business before
stockholder meetings and the ability of our Board of Directors to issue "blank
check" preferred stock without stockholder approval.
These provisions could have the effect of depriving you of an
opportunity to receive a premium over the prevailing market price in the event
of an attempted hostile takeover.
USE OF PROCEEDS
All of the net proceeds from the sale of the Common Stock will go to
the selling shareholder. Accordingly, we will not receive any proceeds from
sales of the Common Stock.
<PAGE>
<TABLE>
SELLING SHAREHOLDER
<CAPTION>
<S> <C> <C> <C>
Owned Prior To Shares Being Owned After
Selling Shareholder Offering (1) Offered Offering(2)
- ------------------- ------------ ------- -----------
Willis T. King, Jr. 454,546 454,546 0
Chairman, President and
Chief Executive Officer
of Highlands
<FN>
(1) Assumes that all of the shares beneficially owned by the selling
shareholder and being offered under this Prospectus are sold, and that the
selling shareholder acquires no additional shares of Common Stock before
the completion of this offering.
(2) Does not include 150,000 shares of Common Stock pursuant to an option
granted to Mr. King on May 10, 1999 which becomes exercisable in part on
May 10, 2000. Also does not include 250,000 shares of Common Stock awarded
to Mr. King pursuant to Highlands Restricted Stock Plan which will not vest
until May 10, 2002.
</FN>
</TABLE>
<PAGE>
PLAN OF DISTRIBUTION
The selling shareholder may offer his Highlands shares at various
times in one or more of the following transactions:
* on any of the United States securities exchanges where our
capital stock is listed;
* in the over-the-counter market;
* in transactions other than on such exchanges or in the
over-the-counter market;
* by pledge to secure debts and other obligations;
* in connection with the writing of non-traded and exchange-traded
call options, in hedge transactions and in settlement of other
transactions in standardized or over-the-counter options; or
* in a combination of any of the above transactions.
The selling shareholder may sell his shares at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices.
The selling shareholder may use broker-dealers to sell his shares. If
this happens, broker-dealers will either receive discounts or commissions from
the selling shareholder, or they will receive commissions from purchasers of
shares for whom they acted as agents.
The selling shareholder may also transfer his shares in other ways not
involving market makers or established trading markets, including a transfer
without consideration. Upon such a transfer the transferee would have the same
rights of sale as the selling shareholder under this Prospectus. The transferee
will be named in a prospectus supplement.
We agreed to indemnify the selling shareholder for certain liabilities
including Securities Act liabilities.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C. at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public from the SEC's Website at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this Prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
2. Our definitive Proxy Statement dated April 1, 1999, filed in
connection with our May 10, 1999 Annual Meeting of Stockholders;
and
3. Quarterly Report on Form 10-Q for the quarter ended March 31,
1999;
4. The descriptions of the Common Stock in our registration
statements filed pursuant to Section 12 of the Securities
Exchange Act of 1934, and any amendment or report filed for the
purpose of updating those descriptions.
You may request a copy of these filings, at no cost, by calling or
writing to:
Stephen J. Greenberg, Esquire
Vice President, General Counsel and Secretary
Highlands Insurance Group, Inc.
1000 Lenox Drive
Laurenceville, New Jersey 08648
(609) 896-1921
This Prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided in this
Prospectus. We gave no one the authority to provide you with different
information. The selling shareholder is not making an offer of these securities
in any state where the offer is not permitted. You should not assume that the
information in this Prospectus is accurate as of any date other than the date on
the front of the document.
LEGAL OPINION
Schnader Harrison Segal & Lewis LLP is giving its opinion on the
validity of the shares the selling shareholder is offering.
EXPERTS
The consolidated financial statements and related schedules of
Highlands as of December 31, 1998 and 1997, and for each of the years in the
three-year period ended December 31, 1998, have been incorporated by reference
herein and in the registration statement in reliance upon the reports of KPMG
LLP, independent certified public accountants, and upon the authority of said
firm as experts in accounting and auditing.
<PAGE>
PROSPECTUS
--------------------------
HIGHLANDS INSURANCE GROUP, INC.
454,546 Shares
--------------------------
COMMON STOCK
June ______, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Securities and Exchange Commission
Registration Fee. . . . . . . . . . . . . . . . .$1,342.62
Accounting Fees and Expenses. . . . . . . . . . .$2,500.00
Legal Fees and Expenses . . . . . . . . . . . . $15,000.00
NYSE Additional Listing Fees. . . . . . . . . . .$1,600.00
Total Expenses. . . . . . . . . . . . $20,442.62
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.
Item 16. Exhibits.
Exhibit No. Description of Exhibits
4.15 Stock Purchase Agreement between the Registrant and the
selling shareholder.
5.1 Opinion of Schnader Harrison Segal & Lewis LLP.*
23.1 Consent of KPMG LLP.*
23.2 Consent of Schnader Harrison Segal & Lewis LLP (contained in
Exhibit 5.1).*
24.1 Power of Attorney (included on page II-3 of the Registration
Statement).*
* Filed herewith.
Item 17. Undertakings
The undersigned registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement (other than as
provided in the proviso and instructions to Item 512(a) of Regulation S-K) (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 SEC pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent 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.
(2) That, for the purpose of determining any liability under the
Securities Act, 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.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or 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.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant 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 registrant 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 Securities
Act and will be governed by the final adjudication of such issue.
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 for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 29 day of June, 1999.
HIGHLANDS INSURANCE GROUP, INC.
By: /s/ Willis T. King, Jr.
-------------------------
Willis T. King, Jr.
Chairman, President and
Chief Executive Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Willis T. King, Jr., Stephen J.
Greenberg, Charles J. Bachand and Stephen L. Kibblehouse, jointly and severally,
his true and lawful attorneys-in-fact, each with full power of substitution, for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact or any of them, or his or their substitute or
substitutes, may lawfully do or cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Willis T. King, Jr.
- ----------------------- Chairman, President and June 29, 1999
Willis T. King, Jr. Chief Executive Officer
/s/ Charles J. Bachand
- ----------------------- Vice President, Treasurer June 29, 1999
Charles J. Bachand Principal Accounting Officer
/s/ Robert A. Spass
- ----------------------- Director June 29, 1999
Robert A. Spass
/s/ Bradley E. Cooper
- ----------------------- Director June 29, 1999
Bradley E. Cooper
/s/ W. Bernard Pieper
- ----------------------- Director June 29, 1999
W. Bernard Pieper
/s/ Kenneth S. Crews
- ----------------------- Director June 29, 1999
Kenneth S. Crews
/s/ Philip J. Hawk
- ----------------------- Director June 29, 1999
Philip J. Hawk
/s/ Robert W. Shower
- ----------------------- Director June 29, 1999
Robert W. Shower
/s/ Richard M. Haverland
- ----------------------- Director June 29, 1999
Richard M. Haverland
<PAGE>
INDEX OF EXHIBITS
----------------------
Exhibit No. Description of Exhibits
4.15 Stock Purchase Agreement between the Registrant and the
selling shareholder.*
5.1 Opinion of Schnader Harrison Segal & Lewis LLP.*
23.1 Consent of KPMG LLP.*
23.2 Consent of Schnader Harrison Segal & Lewis LLP (contained
in Exhibit 5.1).*
24.1 Power of Attorney (included on page II-4 of the Registra-
tion Statement).*
* Filed herewith.
EXHIBIT 4.15
STOCK PURCHASE AGREEMENT
THIS AGREEMENT, dated as of May 10, 1999, is by and between HIGHLANDS
INSURANCE GROUP, INC. (the "Company"), a Delaware corporation with offices at
1000 Lenox Drive, Lawrenceville, New Jersey 08648, and WILLIS T. KING, JR. (the
"Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Agreement
and for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
SECTION 1. Authorization of Shares. The Company has authorized the
sale of $5 million of the Company's Common Stock, $.01 par value (the "Common
Stock") at a price per share equal to the closing price of the Common Stock on
the New York Stock Exchange ("NYSE") on May 10, 1999.
SECTION 2. Agreement to Sell and Purchase the Shares. At the Closing
(as defined in Section 4), the Company will sell to the Purchaser, and the
Purchaser will buy from the Company, upon the terms and conditions hereinafter
set forth, 454,546 shares of the Common Stock (the "Shares") at an aggregate a
purchase price equal to $5 million (the "Purchase Price").
SECTION 3. Payment of Purchase Price. On the Closing Date, as defined
below, the Purchaser will deliver to the Company the full amount of the
aggregate Purchase Price for the Shares purchased hereunder by check or wire
transfer of funds.
SECTION 4. The Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall occur on the date hereof
(the "Closing Date") at the offices of the Company. At or within 60 days after
the Closing, the Company shall deliver to the Purchaser one or more common stock
certificates registered in the name of the Purchaser, representing the Shares to
be purchased by him.
SECTION 5. Representations, Warranties and Covenants of the Company.
The Company hereby represents and warrants to, and covenants with, the Purchaser
that the following statements are true correct:
5.1 Organization. The Company is duly organized and validly
existing in good standing under the laws of the State of Delaware. The Company
has full power and authority to own, operate and occupy its properties and to
conduct its business as presently conducted and is registered or qualified to do
business and in good standing in each jurisdiction in which it owns or leases
property or transacts business and where the failure to be so qualified would
have a material adverse effect upon the business, financial condition,
properties or operations of the Company.
5.2 Due Authorization. The Company has all requisite power and
authority to execute, deliver and perform its obligations under this Agreement,
and this Agreement has been duly authorized and validly executed and delivered
by the Company and constitutes legal, valid and binding agreements of the
Company enforceable against the Company in accordance with their respective
terms, except as rights to indemnity and contribution may be limited by state or
federal securities laws or the public policy underlying such laws, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
5.3 Additional Information. The Company has filed in a timely
manner all documents that the Company was required to file under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") during the 12 months
preceding the date of this Agreement. Such documents complied in all material
respects with the requirements of the Exchange Act as of their respective filing
dates, and the information contained therein was true and correct in all
material respects as of the date of such documents, and each of the following
documents as of the date thereof did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
5.4 Listing. The Company shall use its best efforts to comply
with all requirements of the NYSE with respect to the issuance of the Shares and
the listing of the Shares on the NYSE.
SECTION 6. Representations, Warranties and Covenants of the Purchaser.
(a) The Purchaser represents and warrants to, and covenants
with, the Company, as of the date hereof that: (i) the Purchaser is an
"accredited investor" as defined in Rule 501(a) of Regulation D under the
Securities Act of 1933 ("Securities Act"); (ii) the Purchaser is acquiring the
Shares for his own account for investment and with no present intention of
distributing any of the Shares (this representation and warranty not limiting
the Purchaser's right to sell pursuant to an effective registration statement
registering the Shares for resale or to be indemnified pursuant to the
provisions hereof); (iii) the Purchaser will not, directly or indirectly,
voluntarily offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Shares, except in compliance with the Securities Act and the rules and
regulations promulgated thereunder; (iv) the Purchaser has had an opportunity to
ask questions and receive answers from the management of the Company regarding
the Company, its business and the offering of the Shares; (v) the Purchaser has
completed or caused to be completed the Purchaser Signature Page and
Questionnaire which is a part hereof and the answers thereto are true and
correct to the best knowledge of the Purchaser as of the date hereof and will be
true and correct as of the effective date of the registration statement referred
to in Section 9.1; (vi) the Purchaser will notify the Company immediately of any
change in any of such information until such time as the Purchaser has sold all
of his Shares or until the Company is no longer required to keep such
registration statements effective pursuant to Sections 9.1(c); and (vii) the
Purchaser has, in connection with its decision to purchase Shares, relied solely
upon the documents described in Section 5.3 and the representations and
warranties of the Company contained herein.
(b) The Purchaser agrees not to make any sale of the Shares,
pursuant to the registration statement referred to in Section 9.1 without
effectively causing the prospectus delivery requirements under the Securities
Act to be satisfied. The Purchaser acknowledges that there may occasionally be
times when the Company must suspend the use of the prospectus forming a part of
the registration statement until such time as an amendment to such registration
statement has been filed by the Company and declared effective by the Securities
and Exchange Commission ("SEC") or until the Company has amended or supplemented
such prospectus. The Company agrees to use its best efforts to cause such
amended registration statement to be declared effective and/or to deliver such
amended or supplemented prospectus as soon as possible. The Purchaser hereby
covenants that it will not sell any Shares pursuant to said prospectus during
the period commencing at the time at which the Company gives the Purchaser
notice of the suspension of the use of said prospectus and ending at the time
the Company gives the Purchaser notice that the Purchaser may thereafter effect
sales pursuant to said prospectus.
(c) The Purchaser further represents and warrants to, and
covenants with, the Company that (i) the Purchaser has full right, power,
authority and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery and performance of this Agreement, and (ii) upon the
execution and delivery of this Agreement, this Agreement shall constitute a
valid and binding obligation of the Purchaser enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally, except as enforceability may be subject
to general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and except as the
indemnification agreements of the Purchaser herein may be legally unenforceable.
SECTION 7. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein shall survive the execution of this Agreement, the delivery
to the Purchaser of the Shares being purchased and the payment therefor.
SECTION 8. Conditions to Closing. The obligations of the Company to
consummate the transactions contemplated hereby shall be subject to the
Purchaser having paid the Purchase Price in accordance with Section 3.
SECTION 9. Registration of the Shares; Compliance with the Securities
Act.
9.1 Registration Procedures and Expenses. The Company shall:
(a) prepare and file with the SEC a registration statement
(the "Registration Statement") covering the resale of the Shares by the
Purchaser from time to time on the NYSE or on such exchange, securities market
or system on which the Company's Common Stock shall then be publicly traded, or
in privately negotiated transactions, no later than 60 days following the date
hereof;
(b) use its best efforts, subject to receipt of necessary
information from the Purchaser, to cause the Registration Statement to become
effective as soon as possible thereafter;
(c) prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act until the later of such time as all of the Shares have been sold pursuant
thereto or, by reason of Rule 144(k) under the Securities Act or any other rule
of similar effect, such shares are no longer required to be registered for the
unrestricted sale thereof by the Purchaser;
(d) furnish to the Purchaser such number of copies of
prospectuses and preliminary prospectuses in conformity with the requirements of
the Securities Act and such other documents as the Purchaser may reasonably
request, in order to facilitate the public sale or other disposition of all or
any of the Shares held by the Purchaser, provided, however, that the obligation
of the Company to deliver copies of prospectuses or preliminary prospectuses to
the Purchaser shall be subject to the receipt by the Company of reasonable
assurances from the Purchaser that the Purchaser will comply with the applicable
provisions of the Securities Act and of such other securities or blue sky laws
as may be applicable in connection with any use of such prospectuses or
preliminary prospectuses;
(e) file documents required of the Company for normal blue
sky clearance in all states, provided, however, that the Company shall not be
required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented;
(f) bear all expenses in connection with the procedures in
paragraphs (a) through (c) of this Section 9.1, other than brokerage commissions
or placement agent fees and fees and expenses, if any, of counsel or other
advisers to the Purchaser with respect to the registration and resale of the
Shares; and
(g) prepare and file additional listing applications for the
Shares on the NYSE.
The Company understands that the Purchaser disclaims being an underwriter, but
the Purchaser being deemed an underwriter shall not relieve the Company of any
obligations it has hereunder.
9.2 Transfer of Shares After Registration. The Purchaser agrees
that it will not effect any disposition of the Shares, that would constitute a
sale within the meaning of the Securities Act except as contemplated in the
Registration Statement referred to in Section 9.1 or pursuant to an available
exemption from registration under the Securities Act and applicable state
securities laws.
9.3 Indemnification.
(a) For the purpose of this Section 9.3:
(i) the term "Selling Shareholder" shall mean any
person or entity selling Shares pursuant to the Registration Statement, and any
affiliate thereof ;
(ii) the term "Registration Statement" shall include
any preliminary prospectus, final prospectus, exhibit, supplement or amendment
included in or relating to the Registration Statement; and
(iii) the term "untrue statement" shall mean any untrue
statement or alleged untrue statement of a material fact in the Registration
Statement, or any omission or alleged omission to state in the Registration
Statement a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) The Company agrees to indemnify and hold harmless each
Selling Shareholder from and against any losses, claims, damages or liabilities
to which such Selling Shareholder may become subject (under the Securities Act
or otherwise) insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of, or are based upon, any untrue
statement, or arise out of any failure by the Company to fulfill any undertaking
included herein or in the Registration Statement, and the Company promptly will
reimburse such Selling Shareholder for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon, an untrue statement made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Selling Shareholder specifically for use in preparation of the Registration
Statement, or the failure of such Selling Shareholder to comply with the
covenants and agreements contained herein; provided further, that the
indemnification contained in this Section 9.3 with respect to any prospectus
after it has been amended or supplemented, shall not inure to the benefit of any
Selling Shareholder (or any person controlling such Selling Shareholder) from
whom the person asserting such loss, claim, damage, or liability shall have
purchased Shares, that are the subject thereof if, after copies thereof have
been delivered by the Company to such Selling Shareholder, such Selling
Shareholder shall have failed to send or give a copy of the prospectus as then
amended or supplemented, as the case may be, to such person at or prior to the
confirmation of such sale of such Shares, to such person, and, if such loss,
claim, damage or liability would not have arisen but for the failure of such
Selling Shareholder to deliver the same.
(c) The Purchaser agrees to indemnify and hold harmless the
Company (and each other person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, each officer of the Company who
signs the Registration Statement and each director of the Company) from and
against any losses, claims, damages or liabilities to which the Company (or any
such officer, director or controlling person) may become subject (under the
Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any failure of the Purchaser to comply with his covenants and
agreements contained herein, or any untrue statement if such untrue statement
was made in reliance upon and in conformity with written information furnished
by or on behalf of the Purchaser specifically for use in preparation of the
Registration Statement, and the Purchaser promptly will reimburse the Company
(or such officer, director or controlling person), as the case may be, for any
legal or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim.
(d) Promptly after receipt by any indemnified person of a notice
of a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 9.3, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof. In the event that the
indemnifying party shall have assumed the defense of such action, such
indemnifying party shall not enter into any compromise or settlement without the
indemnified party's prior written consent, which consent shall not be
unreasonably withheld, delayed or denied.
9.4 Termination of Conditions and Obligations. The restrictions
imposed by Section 6 or Section 9.2 upon the transferability of the Shares shall
cease and terminate as to any particular Shares when such Shares shall have been
effectively registered under the Securities Act and sold or otherwise disposed
of in accordance with the intended method of disposition set forth in the
Registration Statement or at such time as an opinion of counsel satisfactory to
the Company shall have been rendered to the effect that such restrictions are
not necessary in order to comply with the Securities Act. The Company will use
its best efforts to maintain the effectiveness of the Registration Statement
until the Purchaser has disposed of all of his Shares, or the Shares have become
freely tradable without restriction under Rule 144(k).
9.5 Information Available. So long as the Registration Statement
is effective covering the resale of Shares owned by the Purchaser, the Company
will furnish to the Purchaser upon request:
(a) any document filed by the Company with the SEC;
(b) upon the reasonable request of the Purchaser, any other
information concerning the Company that is generally available to the public;
and
(c) an adequate number of copies of the prospectuses
relating to the resale of the Shares to supply to any party requiring such
prospectuses.
SECTION 10. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified mail, postage prepaid, and shall be deemed given when so
mailed:
(a) if to the Company to:
Highlands Insurance Group, Inc.
1000 Lenox Drive Lawrenceville,
New Jersey 08648
Attention: Secretary
(b) if to the Purchaser, at his address as set forth at the
end of this Agreement, or at such other address or addresses as may have been
furnished to the Company in writing.
SECTION 11. Termination.
(a) By the Purchaser. The Purchaser may terminate this
Agreement at any time prior to the Closing.
(b) By the Company. The Company may terminate this Agreement
at any time prior to the Closing.
SECTION 12. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 13. Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 14. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware and
United States federal law.
SECTION 15. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be executed by their duly authorized representatives as of the
following date.
Dated: May 10, 1999
HIGHLANDS INSURANCE GROUP, INC.
By: /s/ Stephen J. Greenberg
__________________________
Stephen J. Greenberg, Vice President
[Purchaser Signature Page Continues on the Following Page]
<PAGE>
PURCHASER SIGNATURE PAGE AND QUESTIONNAIRE
The undersigned, Willis T. King, Jr., hereby executes the Stock
Purchase Agreement with Highlands Insurance Group, Inc. (the "Company") and
hereby authorizes this signature page to be attached to a counterpart of such
document executed by a duly authorized officer of the Company.
No. of Shares to be Purchased: 454,546
Aggregate Purchase Price: $5 million
Purchaser is an "accredited investor" as defined in Regulation D under the
Securities Act of 1933.
Name in which Shares are to be registered: Willis T. King, Jr.
Address of registered holder: _______________________________
_______________________________
Social Security or Tax ID Number: ______________________________
/s/ Willis T. King, Jr.
______________________________
Willis T. King, Jr.
<PAGE>
EXHIBIT 5.1
OPINION AND CONSENT OF SCHNADER HARRISON SEGAL & LEWIS LLP
June 30, 1999
The Board of Directors Highlands Insurance Group, Inc.
1000 Lenox Drive
Lawrenceville, New Jersey 08648
Gentlemen:
We have acted as counsel to Highlands Insurance Group, Inc., a
Delaware corporation (the "Company"), in connection with the preparation and
filing by the Company with the Securities and Exchange Commission of a
Registration Statement on Form S-3 (the "Registration Statement"), under the
Securities Act of 1933, as amended, registering 454,546 shares of common stock,
par value $.01 per share (the "Common Stock"), of the Company, which shares are
being offered or sold by a selling shareholder.
In so acting, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such corporate records, agreements,
documents and other instruments, and such certificates or comparable documents
of public officials and of officers and representatives of the Company, and have
made such inquiries of such officers and representatives, as we have deemed
relevant and necessary as a basis for the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to all questions of
fact material to this opinion that have not been independently established, we
have relied upon certificates or comparable documents of officers and
representatives of the Company.
Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that:
1. The 454,546 shares of Common Stock registered by the Registration
Statement have been duly authorized and are validly issued, fully paid and
nonassessable.
The opinions expressed herein are limited to the corporate laws of the
State of Delaware and we express no opinion as to the effect on the matters
covered by this letter or the laws of any other jurisdiction.
<PAGE>
The opinions expressed herein are rendered solely for your benefit in
connection with the transactions described herein. Those opinions may not be
used or relied upon by any other person, nor may this letter or any copies
thereof be furnished to a third party, filed with a governmental agency, quoted,
cited or otherwise referred to without our prior written consent.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/Schnader Harrison Segal & Lewis LLP
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
The Board of Directors
Highlands Insurance Group, Inc.
We consent to the incorporation by reference in this Registration
Statement on Form S-3 of Highlands Insurance Group, Inc. of our report dated
March 26, 1999, with respect to the consolidated balance sheets of Highlands
Insurance Group, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity,
comprehensive income and cash flows and related schedules for each of the years
in the three-year period ended December 31, 1998, which report appears in the
December 31, 1998 Annual Report on Form 10-K of Highlands Insurance Group, Inc.
and to the reference to our Firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
June 29, 1999
Houston, Texas
