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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) APRIL 24, 1997 (APRIL 11, 1997)
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SUPERIOR NATIONAL INSURANCE GROUP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-25984 95-4610936
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
26601 AGOURA ROAD, CALABASAS, CALIFORNIA 91302
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (818) 880-1600
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REGISTRANT WAS FORMERLY A CALIFORNIA CORPORATION
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(Former name or former address, if changed since last report.)
Exhibit Index Appears on Page 10
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ITEM 2.
(a) On April 11, 1997 (the "Closing Date"), Superior National
Insurance Group, Inc. (the "Company") acquired Pac Rim Holding Corporation ("Pac
Rim") for approximately $42,000,000 in cash (the "Acquisition"). Through its
wholly-owned subsidiary, The Pacific Rim Assurance Company, to be renamed
Superior Pacific Casualty Company ("SPCC"), Pac Rim writes workers' compensation
insurance in California, Arizona, and other states. The Acquisition was
consummated pursuant to an Amended and Restated Agreement and Plan of Merger
(the "Agreement") dated as of September 17, 1996, as amended and restated
February 17, 1997, by and among the Company, Pac Rim and SNTL Acquisition Corp.
On the Closing Date, SNTL Acquisition Corp., a wholly-owned subsidiary of the
Company, was merged with and into Pac Rim. The approximately $42,000,000 paid
was distributed to Pac Rim's stockholders, option holders, warrant holders and
debenture holders as follows: (i) each outstanding share of Pac Rim common stock
was converted into the right to receive $2.105 in cash, resulting in a total
payment of $20,056,861 to such stockholders; (ii) the Company acquired the
in-the-money stock options of Pac Rim for approximately $44,000, (iii) the
Company acquired warrants convertible into Pac Rim common stock for $1,912,500;
and (iv) the Company purchased Pac Rim's outstanding $20,000,000 of Series A
Convertible Debentures for face value. The debentures and warrants were
acquired pursuant to a Series A Convertible Debentures and Series 1, 2 and 3
Detachable Warrant Purchase Agreement dated as of September 17, 1996, as
amended, effective February 17, 1997, by and among the Company, Prac Limited
Partnership and Allstate Insurance Company. All "out-of-the-money" options and
warrants of Pac Rim were cancelled without consideration.
The Acquisition was financed by an $18,000,000 private placement of
common stock of the Company (the "Stock Issuance"), and by a $44,000,000 term
loan (the "Term Loan"). The Term Loan was made pursuant to a Credit
Agreement dated April 11, 1997, by and among the Company, SNTL Acquisition
Corp., a syndicate of banks and The Chase Manhattan Bank, as Administrative
Agent ("Chase"). Proceeds of the Term Loan were used, in addition to
consummating the Acquisition and paying fees and expenses in connection
therewith, to repay existing long-term debt and to make a $10,000,000 capital
contribution to SPCC on the Closing Date. The Term Loan is due and payable
in full April 11, 2003. Principal payments on the Term Loan are due every
six months beginning October 11, 1997, and will be paid in eleven consecutive
installments of $3,650,000 and a final installment of $3,850,000. The
interest rate is a LIBOR-based variable rate, but will not exceed Chase's
prime commercial lending rate unless default interest becomes due. The
Credit Agreement contains customary covenants, including financial ratios.
The Term Loan is secured by a pledge of the stock of the Company's
subsidiaries, including Superior National Insurance Company ("SNIC") and
SPCC. As a condition to the Term Loan, the Company formed Superior Pacific
Holding Corporation ("Superior Pacific") as an intermediate holding company,
and Superior Pacific assumed the obligations of the borrower under the Term
Loan.
The Stock Issuance was consummated pursuant to that certain Stock
Purchase Agreement dated as of September 17, 1996, as amended and restated
February 17, 1997, by and among the Company, Insurance Partners, L.P., Insurance
Partners (Offshore) Bermuda, L.P. (together, "IP"), TJS Partners, L.P., and
members of the Company's management. The Company on the Closing Date sold
2,390,438 shares of its common stock, $.01 par value ("Common Stock") at $7.53
per share (the "Newly Issued Stock"). The Stock Issuance was exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to Section 4(2) of the Securities Act. The Stock Issuance was
approved by the shareholders of the Company at the Annual Meeting of
Shareholders on April 8, 1997. The $7.53 price was substantially below the
market price of the Company's Common Stock on the Closing Date, but reflective
of the market price of the Common Stock in September 1996, when the Stock
Purchase Agreement and the Agreement were signed. As a result of the Stock
Purchase, the Company believes that IP controls approximately 37% of the
Company's Common Stock. Under the terms of the Stock Purchase Agreement, IP is
subject to certain covenants intended
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to restrict IP and its Associates (as defined in the Stock Purchase Agreement)
from exercising control over the Company or its Board of Directors.
The Company has entered into a Registration Rights Agreement with IP.
The Registration Rights Agreement provides that, with respect to the shares of
Newly Issued Stock to be received by IP pursuant to the Stock Purchase
Agreement, IP and any Affiliate thereof (as defined in Rule 12b-2 promulgated
pursuant to the Securities Exchange Act of 1934, as amended ("Exchange Act")) to
whom or which such shares have been transferred may, on not more than three
occasions at any time commencing after the Closing Date, require the Company at
its sole expense to prepare and file with the SEC a registration statement under
the Securities Act, covering the public offer and sale of such shares, in
addition to other shares requested to be so covered by other securities holders
having similar, preexisting registration rights, and use its best efforts to
cause to be declared effective and remain effective for up to the lesser of 180
days or the period during which all of the shares requested to be so registered
by IP and any Affiliate thereof have been sold (a "Demand Registration").
Notwithstanding the terms described above, the Company is not required to file a
registration statement in response to a Demand Registration if certain
conditions are not met, including the anticipated failure of a Demand
Registration to earn an aggregate net offering price of $7.5 million or more.
In addition, IP's and its Affiliates' ability to request three Demand
Registrations shall be reduced to two such requests if the Company has
registered shares of Newly Issued Stock held by IP or any of its Affiliates
having an anticipated net offering price of not less than $5 million pursuant to
an exercise of their "piggyback rights." Under the Registration Rights
Agreement, IP and IP's Affiliates have customary "piggyback" registration rights
allowing them to register shares in the event the Company proposes to sell any
of its stock or other securities to the public in a transaction registered under
the Securities Act. The Registration Rights Agreement contains additional
customary terms and provisions, including reciprocal indemnification and
contribution provisions with respect to information furnished or provided by the
Company or IP for inclusion in any such registration statement.
The Purchase Price for Pac Rim was determined by representatives of
the Company and the Board of Directors of Pac Rim by means of arm's-length
bargaining between such parties, and was less than the market price of Pac Rim
common stock on February 14, 1997. The $42,000,000 price represents a reduction
of $12,000,000 from the $54,000,000 price originally agreed upon by the parties
in September 1996. The Company and the Board of Directors of Pac Rim arrived at
the revised price in negotiations following the decision by Pac Rim to book an
additional $12,000,000 in loss and loss adjustment expense reserves for accident
years 1995 and prior as of December 31, 1996. The Company believes that the
reserve adjustment resulted from questions raised as to the adequacy of Pac
Rim's loss reserves by the California Department of Insurance in the course of
the Department's Triennial Examination of Pac Rim completed in early 1997.
Prior to the Acquisition, there was no material relationship between
the Company or any of its affiliates (including their respective officers,
directors, partners and authorized representatives, and any associate of any
such individuals), on the one hand, and Pac Rim or any of their respective
affiliates (including their respective officers, directors, partners and any
associate of any such officer or director), on the other hand.
(b) Prior to the Acquisition, SPCC wrote workers' compensation
insurance in California, Arizona and other states, focusing in particular on the
Southern California market. SPCC is headquartered in Woodland Hills,
California, only eight miles from the Company's headquarters in Calabasas,
California. The Company intends to integrate the operations of SPCC with SNIC
as quickly as possible. To that end, the Company will now operate under the
name "Superior Pacific." The Company intends that substantially all new and
renewal business of SPCC will be written through SNIC, using SNIC's current
underwriting policies and claims management systems. SPCC will operate as a
subsidiary of Superior Pacific and continue to satisfy claims on existing
policies. The California Department of Insurance, in approving the Form A
application of
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the Company to acquire Pac Rim, requested that the Board of Directors of the
Company memorialize its intent to operate SPCC in this fashion, and the Board of
Directors has complied with the Department's request.
The assets acquired by the Company included all equipment and other
physical property, principally furnishings and information systems, previously
owned and operated by SPCC and its subsidiary, Regional Benefits Insurance
Services, Inc., which assets will continue to be utilized to operate SPCC as a
workers' compensation insurance company. No real property was acquired as a
result of the transaction.
ITEM 5.
On April 11, 1997, (the "Closing Date"), the Company reincorporated in
Delaware. The reincorporation was approved by the shareholders of the Company
at the Annual Meeting of Shareholders on April 8, 1997. The reincorporation was
accomplished by the merger of Superior National Insurance Group, Inc., a
California corporation ("SNIG-California"), with and into Superior National
Insurance Group, Inc., a Delaware corporation ("SNIG-Delaware") and a
wholly-owned subsidiary of SNIG-California. Each share of common stock of
SNIG-California has been converted into one share of SNIG-Delaware Common Stock,
par value $.01 per share. All warrants and options to purchase SNIG-California
common stock outstanding have likewise been converted into rights to purchase
the same number of shares of SNIG-Delaware Common Stock. None of the Company's
operations, properties or assets were affected by the reincorporation, and
SNIG-Delaware Common Stock is registered with the Securities and Exchange
Commission pursuant to Section 12(g) of the Exchange Act, by operation of
Rule 12g-2(b) under the Exchange Act. The Company's listing on the Nasdaq
National Market was not affected by the reincorporation. Stockholders of the
Company are being requested to exchange their certificates of SNIG-California
common stock for certificates of SNIG-Delaware Common Stock, as SNIG-Delaware
certificates contain a legend referring holders of such certificates to the
Transfer Restrictions (defined below) set forth in Article Sixth of the
Certificate of Incorporation of the Company. The Certificate of Incorporation
of the Company and the Bylaws of the Company are filed herewith.
The Certificate of Incorporation of the Company, as adopted upon
reincorporation, includes restrictions on the transfer of Common Stock (the
"Transfer Restrictions") intended to preserve the full availability of the
Company's net operating loss carry forwards ("NOLs") under Section 382 of the
Internal Revenue Code of 1986, as amended (the "Code"). As of December 31,
1996, the Company held $86.1 million of NOLs which could be applied to reduce
future income taxes payable by the Company. The NOLs begin to expire in
material amounts in 2006.
The following description of the Transfer Restrictions is qualified in
its entirety by reference to the complete text of Article Sixth of the
Certificate of Incorporation of the Company, filed herewith. The Certificate of
Incorporation generally restricts, until three years after the Closing Date or
April 12, 2000, any direct or indirect transfer of "stock" (which term, for
purposes of the Transfer Restrictions, includes the Common Stock and any other
equity security treated as "stock" under Section 382) of the Company if the
effect would be to increase the ownership of stock by any person who during the
preceding three-year period owned 4.90% or more of the Company's stock, would
otherwise increase the percentage of stock owned by a "5 percent stockholder"
(as defined in Section 382, substituting "4.90 percent" for "5 percent"), or
otherwise would cause an ownership change of the Company within the meaning of
Section 382. Transfers included under the Transfer Restrictions include sales
to persons whose resulting percent ownership would exceed the thresholds
discussed above, or to persons whose ownership of shares would by attribution
cause another person to exceed such thresholds, as well as sales by persons who
exceeded such thresholds prior to the Transfer Restrictions' becoming effective.
Numerous rules of attribution, aggregation, and calculation prescribed under the
Code (and related regulations) will be applied in determining whether the 4.90%
threshold has been met and whether a group of less than 4.90% stockholders will
be treated as a "public group" that is a 5 percent
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stockholder under Section 382. As a result of these attribution rules, the
Transfer Restrictions could result in prohibiting ownership of the Company's
stock as a result of a change in the relationship between two or more persons or
entities, or a transfer of an interest other than the Company's stock, such as
an interest in an entity that, directly or indirectly, owns the Company's stock.
The Transfer Restrictions may also apply to proscribe the creation or transfer
of certain "options" (which are broadly defined by Section 382) in respect of
the Company's stock to the extent, generally, that exercise of the option would
result in a proscribed level of ownership.
Generally, the Transfer Restrictions are imposed only with respect to
the amount of the Company's stock (or options with respect to the Company's
stock) purportedly transferred in excess of the threshold established in the
Transfer Restrictions. In any event, the restrictions will not prevent a
transfer if the purported transferee obtains the approval of the Board of
Directors, which approval shall be granted or withheld in the sole and absolute
discretion of the Board of Directors, after considering all facts and
circumstances including but not limited to future events deemed by the Board of
Directors to be reasonably possible. Such approval may be granted to permit a
transaction to raise additional capital, at a level likely to result in an
ownership change, but the Board of Directors will weigh the risks of a
limitation on the use of the NOLs against the need for additional capital before
granting such approval.
All certificates representing the Company's stock, including the stock
issued in the Stock Issuance and stock issued on a negotiated or other transfer
since April 11, 1997, will bear the following legend: "THE TRANSFER OF THE
SECURITIES REPRESENTED HEREBY IS SUBJECT TO RESTRICTIONS PURSUANT TO
ARTICLE SIXTH OF THE CERTIFICATE OF INCORPORATION OF SUPERIOR NATIONAL INSURANCE
GROUP, INC." The Company has also issued instructions to the transfer agent of
the Company (the "Transfer Agent") to implement the Transfer Restrictions. The
Transfer Restrictions provide that the Transfer Agent shall not record any
transfer of the Company's stock purportedly transferred in excess of the
threshold established in the Transfer Restrictions. The Transfer Agent also has
the right, prior to and as a condition to registering any transfers of the
Company's stock on the Company's stock transfer records, to request an affidavit
from the purported transferee of the stock regarding such purported transferee's
actual and constructive ownership of the Company's stock, and if the Transfer
Agent does not receive such affidavit or the affidavit evidences that the
transfer would violate the Transfer Restrictions, the Transfer Agent is required
to notify the Company and not to enter the transfer in the Company's stock
transfer records. These provisions may result in the delay or refusal of
certain requested transfers of the Company's stock.
Beginning on the Closing Date, any direct or indirect transfer of
stock attempted in violation of the restrictions is void AB INITIO as to the
purported transferee, and the purported transferee would not be recognized as
the owner of the shares owned in violation of the restrictions for any purpose,
including for purposes of voting and receiving dividends or other distributions
in respect of such stock, or in the case of options, receiving stock in respect
of their exercise. Stock acquired in violation of the Transfer Restrictions is
referred to as "Excess Stock."
Excess Stock automatically will be transferred to a trustee for the
benefit of a charitable beneficiary designated by the Company, effective as of
the close of business on the business day prior to the date of the violative
transfer. Any dividends or other distributions paid prior to discovery by the
Company that the stock has been transferred to the trustee are treated as held
by the purported transferee as agent for the trustee and must be paid to the
trustee upon demand, and any dividends or other distributions declared but
unpaid after such time shall be paid to the trustee. Votes cast by a purported
transferee with respect to Excess Stock prior to the discovery by the Company
that the Excess Stock was transferred to the trustee will be rescinded as void
and recast in accordance with the desire of the trustee acting for the benefit
of the charitable beneficiary. The trustee shall have all rights of ownership
of the Excess Stock. As soon as practicable
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following the receipt of notice from the Company that Excess Stock was
transferred to the trustee, the trustee is required to sell such Excess Stock in
an arms-length transaction that would not constitute a violation under the
Transfer Restrictions. The net proceeds of the sale, after deduction of all
costs incurred by the Company, the Transfer Agent, and the trustee, will be
distributed first to the violating stockholder in an amount equal to the lesser
of such proceeds or the cost incurred by the stockholder to acquire such Excess
Stock, and the balance of the proceeds, if any, will be distributed to the
charitable beneficiary together with any other distributions with respect to
such Excess Stock received by the trustee. If the Excess Stock is sold by the
purported transferee, such person will be treated as having sold the Excess
Stock as an agent for the trustee, and shall be required to remit all proceeds
to the trustee (less, in certain cases, an amount equal to the amount such
person otherwise would have been entitled to retain had the trustee sold such
shares).
If the violative transaction results from indirect ownership of stock,
the Transfer Restrictions provide a mechanism that is intended to invalidate the
ownership of the Company's stock actually owned by the violating stockholder and
any persons within such stockholder's control group. Only if such provisions
will not be effective to prevent a violation of the Transfer Restrictions will
ownership of stock by other persons be invalidated under the Transfer
Restrictions.
The Transfer Restrictions provide that any person who knowingly
violates the Transfer Restrictions or any persons in the same control group with
such person shall be jointly and severally liable to the Company for, and shall
indemnify and hold the Company harmless against, any and all damages suffered as
a result of such violation, including but not limited to damages resulting from
a reduction in or elimination of the Company's ability to use its NOLs.
The Transfer Restrictions do not apply to (i) any transfer described
in Section 382(1)(3)(B) of the Code (relating to transfers upon death or divorce
and certain gifts) if the transferor held the stock transferred for longer than
the entire three-year period preceding the date of the transfer, (ii) any sale
of Common Stock by a person who owns more than 4.90% of the outstanding Common
Stock on the Closing Date if such sale would not result in a net increase in the
amount of stock owned by 5 percent stockholders (as determined for purposes of
Section 382) during the three-year period ending on the date of such sale,
provided such sale would not otherwise be prohibited under the Transfer
Restrictions but for such transferor's ownership of stock of the Company, and
(iii) any transfer which the Board of Directors has approved in writing, which
approval may be given in the sole and absolute discretion of Board of Directors
after considering all facts and circumstances, including but not limited to
future events the occurrence of which are deemed to be reasonably possible.
Such approval may be granted to issue additional stock if the benefits of doing
so outweigh the costs of limitations on the availability of the NOLs.
The Company believes that the Stock Issuance has resulted in the
Company having undergone changes in aggregate percentage ownership, as defined
in Section 382, such that any additional 5% increment in change of aggregate
ownership occurring in the two-year period (and possibly the three-year period)
following the Closing Date would result in an ownership change, which in turn
would result in a dramatic reduction in the availability of the NOLs to the
Company under Section 382. The Company believes that such a reduction would
have a negative impact on the Company's earnings per share and on the market for
the Company's Common Stock.
The Company has obtained Standstill Agreements from those holders of
warrants to purchase Common Stock who, by exercising such warrants in the
three-year period following the Closing Date, might cause the Company to undergo
an ownership change within the meaning of Section 382. The Company believes the
rights granted to it in the Standstill Agreements are sufficient to block an
ownership change through warrant exercise.
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As a result of the Closing of the Stock Issuance and the
reincorporation, Steven B. Gruber, a designee of Insurance Partners, and Roger
W. Gilbert, who has no prior affiliation with the Company, have each become
members of the Company's Board of Directors. Messrs. Gilbert and Gruber were
elected to the Board, contingent on the closing of the Stock Issuance at the
Annual Meeting of Shareholders held on April 8, 1997.
As discussed above under Item 2, pursuant to the Credit Agreement,
Superior Pacific has been established as a subsidiary of the Company and as an
intermediate holding company holding the stock of SNIC, SPCC, and certain other
subsidiaries of the Company. Superior Pacific has pledged all of its assets,
including the stock of the operating subsidiaries, as security for the Term Loan
to Chase as Administrative Agent under the Credit Agreement.
In order to secure the consent of CRS III Limited (formerly known as
Centre Reinsurance Services (Bermuda) III Limited) to the Term Loan, the Company
agreed to extend the term of a warrant to purchase Common Stock issued June 30,
1994 to Centreline Reinsurance Limited (the "Centreline Warrant"), an affiliate
of CRS III Limited and Centre Reinsurance Limited. The Centreline Warrant's
expiration date was set at April 30, 2002, an extension from June 30, 2001. A
warrant issued to Centre Reinsurance Limited in connection with a 1992 financing
transaction also expires in April 2002. CRS III Limited is the holder of
$20,000,000 in Preferred Securities issued June 30, 1994 by Superior National
Capital, L.P., a Bermuda limited partnership ("SNAC"). The proceeds of the
issuance of the Preferred Securities were loaned to the Company by SNAC. Under
the terms of that loan agreement, the Company was required to secure the consent
of CRS III Limited, as the holder of the Preferred Securities, to the Term Loan.
The Company announced on April 16, 1997, that William L. Gentz had
suffered a mild heart attack, been hospitalized and undergone surgery.
Mr. Gentz is expected to resume his duties as President and Chief Executive
Officer of the Company in late May 1997.
On April 12, 1997, the Company retained Prime Advisors, Inc. ("Prime
Advisors") as an investment adviser. Prime Advisors will provide portfolio
management services and other investment advice to SNIC, Superior (Bermuda),
Ltd. and SPCC (the "Regulated Subsidiaries"). Previously, the Company managed
its investment portfolio with its own personnel, but used Prime Advisors as an
outside consultant from time-to-time. The Regulated Subsidiaries will pay
annual investment management fees of $200,000 to Prime Advisors.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
As of the date hereof, it is impractical for the Company to provide
the required audited financial information. The Company will file the required
audited financial information under cover of Form 8-K/A as soon as practicable,
but not later than June 24, 1997.
(B) PRO FORMA FINANCIAL INFORMATION.
As of the date hereof, it is impractical for the Company to provide
the required pro forma financial information. The Company will file the
required pro forma financial information under cover of Form 8-K/A as soon as
practicable, but not later than June 24, 1997. Selected pro forma financial
information for the Company and Pac Rim has been prepared by the Company for the
period ending December 31, 1996, and is set forth in the definitive Proxy
Statement of the Company dated March 10, 1997; however, investors
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should review such data in light of the cautionary statements contained
therewith and in the "Certain Considerations" section of said Proxy Statement.
(C) EXHIBITS.
2.1 Amended and Restated Agreement and Plan of Merger, dated as
of February 17, 1997, among the Company, SNTL Acquisition
Corp., and Pac Rim Holding Corporation*
2.2 Series A Convertible Debentures and Series 1, 2 and 3
Detachable Warrant Purchase Agreement ("Debenture Purchase
Agreement"), dated September 17, 1997, among the Company,
Prac Limited Partnership and Allstate Insurance Company**
2.3 First Amendment to Debenture Purchase Agreement, dated as of
February 17, 1997*
2.4 Agreement and Plan of Merger by and between Superior
National Insurance Group, Inc., a California corporation and
Superior National Insurance Group, Inc., a Delaware
corporation, dated as of April 8, 1997
3.1 Certificate of Incorporation of the Company, as currently in
effect
3.2 Bylaws of the Company, to date
10.1 Stock Purchase Agreement dated as of September 17, 1996, as
amended and restated effective as of February 17, 1997,
among the Company, Insurance Partners, L.P., Insurance
Partners (Offshore) Bermuda, L.P., TJS Partners, L.P. and
certain members of the Company's management*
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* Previously filed as an exhibit to the Company's statement on Schedule
13D filed for Pac Rim Holding Corporation, as filed with the
Securities and Exchange Commission ("SEC") on February 27, 1997
** Previously filed as an exhibit to the Company's statement on Schedule
13D filed for Pac Rim Holding Corporation, as filed with the SEC on
September 26, 1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: APRIL 24, 1997
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SUPERIOR NATIONAL
INSURANCE GROUP, INC.
By: /S/ J. Chris Seaman
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J. Chris Seaman
Executive Vice President
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EXHIBIT INDEX
Exhibit
NUMBER DESCRIPTION
2.1 Amended and Restated Agreement and Plan of Merger, dated as of
February 17, 1997, among the Company, SNTL Acquisition Corp., and
Pac Rim Holding Corporation*
2.2 Series A Convertible Debentures and Series 1, 2 and 3 Detachable
Warrant Purchase Agreement (Debenture Purchase Agreement), dated
September 17, 1997, among the Company, Prac Limited Partnership
and Allstate Insurance Company**
2.3 First Amendment to Debenture Purchase Agreement, dated as of
February 17, 1997*
2.4 Agreement and Plan of Merger by and between Superior National
Insurance Group, Inc., a California corporation and Superior
National Insurance Group, Inc., a Delaware corporation, dated as
of April 8, 1996
3.1 Certificate of Incorporation of the Company, as currently in
effect
3.2 Bylaws of the Company, to date
10.1 Stock Purchase Agreement dated as of September 17, 1996, as
amended and restated effective as of February 17, 1997, among the
Company, Insurance Partners, L.P., Insurance Partners (Offshore)
Bermuda, L.P., TJS Partners, L.P. and certain members of the
Company's management*
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* Previously filed as an exhibit to the Company's statement on Schedule
13D filed for Pac Rim Holding Corporation, as filed with the
Securities and Exchange Commission ("SEC") on February 27, 1997
** Previously filed as an exhibit to the Company's statement on Schedule
13D filed for Pac Rim Holding Corporation, as filed with the SEC on
September 26, 1996
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EXHIBIT 2.4
AGREEMENT AND PLAN OF MERGER
BETWEEN
SUPERIOR NATIONAL INSURANCE GROUP, INC.
A CALIFORNIA CORPORATION,
AND
SUPERIOR NATIONAL INSURANCE GROUP, INC.,
A DELAWARE CORPORATION
THIS AGREEMENT AND PLAN OF MERGER (this "Merger Agreement") is
entered into as of this 8th day of April, 1997 by and between
Superior National Insurance Group, Inc., a California corporation ("Merging
Corporation"), and Superior National Insurance Group, Inc., a Delaware
corporation ("Surviving Corporation").
1. Merging Corporation is authorized to issue 25,000,000 shares
of common stock, no par value (the "Merging Corporation Common Stock"). As
of the date hereof, there are 3,446,706 shares of Merging Corporation
Common Stock outstanding.
2. Surviving Corporation is authorized to issue 25,000,000
shares of common stock, $.01 par value (the "Surviving Corporation Common
Stock"). As of the date hereof, one share of Surviving Corporation Common
Stock is outstanding.
3. Merging Corporation shall be merged with and into Surviving
Corporation (the "Merger") in accordance with the California General
Corporation Law and the General Corporation Law of the State of Delaware and
on the terms and conditions hereinafter set forth. At the Effective Time of
the Merger (as hereinafter defined), the separate existence of Merging
Corporation shall cease, Surviving Corporation shall be the surviving
corporation and Surviving Corporation shall succeed, without other transfer,
to all the rights and property of Merging Corporation and shall be subject to
all the debts and liabilities thereof in the same manner as if Surviving
Corporation had itself incurred them. All rights of creditors and all liens
put on the property of each corporation shall be preserved unimpaired;
provided that such liens upon property of Merging Corporation shall be
limited to the property affected thereby immediately prior to the Effective
Time of the Merger.
4. At the Effective Time of the Merger, each share of Merging
Corporation Common Stock outstanding immediately prior to the Effective Time
of the Merger (collectively, the "Shares") shall be converted into one (1)
share of Surviving Corporation Common Stock.
5. The conversion of Shares as provided in this Agreement shall
occur automatically upon the Effective Time of the Merger without action by
the holders thereof.
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Each holder of such Shares thereupon shall surrender his cerificate or
certificates to Surviving Corporation and shall be entitled to receive in
exchange therefor a certificate or certificates representing the number of
shares into which his Shares theretofore represented by a certificate or
certificates so surrendered shall have been converted as aforesaid.
6. As of the Effective Time of the Merger, Surviving
Corporation will assume and continue Merging Corporation's 1995 Stock
Incentive Plan, (the "1995 Plan") and 1986 Non-Statutory Stock Option and
1986 Non-Statutory Stock Purchase Plan, and (i) the outstanding and
unexercised portions of all options to buy Common Stock of Merging
Corporation shall become options to purchase the same number of shares of
Common Stock of Surviving Corporation, with no other changes in the terms and
conditions of such options, including exercise prices, and, as of the
Effective Time of the Merger, Surviving Corporation hereby assumes the
outstanding and unexercised portions of such options and the obligations of
Merging Corporation with respect thereto and (ii) the restricted shares of
Common Stock of Merging Corporation granted under the 1995 Plan to which the
restrictions have not lapsed shall become the same number of restricted
shares of Common Stock of Surviving Corporation, with no other changes in the
terms and conditions of such grants, and, as of the Effective Time of the
Merger, Surviving Corporation hereby assumes the portions of such grants to
which the restrictions have not lapsed and the obligations of Merging
Corporation with respect thereto.
7. As of the Effective Time of the Merger, Surviving
Corporation will assume all obligations under all outstanding warrants and
other rights to purchase shares of Common Stock of Merging Corporation, and
the outstanding but unexercised portions of all such warrants or other rights
to purchase Common Stock of Merging Corporation shall represent the right to
acquire the same number of shares of Common Stock of Surviving Corporation,
with no other changes in the terms and conditions of such warrants and other
rights, including exercise prices.
8. As of the Effective Time of the Merger, Surviving
Corporation will assume all obligations under all outstanding voting notes of
Merging Corporation, and the outstanding principal amount of such voting
notes of Merging Corporation shall represent the obligation of Surviving
Corporation, with no other changes in the terms and conditions of such voting
notes, with all voting rights of the holders thereof in effect with respect
to the Surviving Corporation.
9. The Certificate of Incorporation and Bylaws of Surviving
Corporation as in effect at the Effective Time of the Merger shall continue
to be the Certificate of Incorporation and Bylaws of Surviving Corporation
after consummation of the Merger.
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10. From time to time as and when required by Surviving
Corporation or its successors or assigns, there shall be executed and
delivered on behalf of Merging Corporation such deeds and other instruments,
and there shall be taken or caused to be taken such further and other actions
as shall be appropriate or necessary in order to vest or perfect in or to
confirm in record or otherwise in Surviving Corporation the title to and
possession of all the property, interest, assets, rights, privileges,
immunities, powers, franchises and authority of Merging Corporation, and
otherwise to carry out the purposes of this Merger Agreement, and the
officers and directors of Surviving Corporation are fully authorized in the
name and on behalf of Merging Corporation or otherwise to take any and all
such actions and to execute and deliver any and all such deeds and other
instruments.
11. Prior to the filing of this Merger Agreement with the
Secretary of Sate of the State of California and with the Secretary of State
of the State of Delaware, this Merger Agreement may be amended or terminated
by written agreement of the boards of directors of Merging Corporation and
Surviving Corporation, or by their respective officers authorized by such
boards of directors, notwithstanding approval of this Merger Agreement by the
shareholders of Merging Corporation. In furtherance and not in limitation of
the foregoing, this Merger Agreement may be terminated by resolution of the
Board of Directors of the Merging Corporation if the conditions which have
made this Merger advisible no longer exist.
12. The effective date of the Merger is the date the Certificate
of Merger is duly accepted for filing by the Secretary of State of the State
of California (the "Effective Time of the Merger").
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13. This Merger Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original.
IN WITNESS WHEREOF, the parties have caused this Agreement and Plan
of Merger to be executed as of the date first above written.
MERGING CORPORATION:
SUPERIOR NATIONAL INSURANCE GROUP, INC.
a California corporation
By: /s/ William L. Gentz
----------------------------------
William L. Gentz
President
Attest:
/s/ Robert E. Nagle
- ------------------------------
Robert E. Nagle
Secretary
SURVIVING CORPORATION:
SUPERIOR NATIONAL INSURANCE GROUP, INC.,
a Delaware corporation
By: /s/ William L. Gentz
----------------------------------
William L. Gentz
President
Attest:
/s/ Robert E. Nagle
- --------------------------------
Robert E. Nagle
Secretary
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EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
SUPERIOR NATIONAL INSURANCE GROUP, INC.
I, the undersigned, for the purposes of incorporating and organizing a
corporation under the General Corporation Law of the State of Delaware, do
execute this Certificate of Incorporation and do hereby certify as follows:
FIRST. The name of the corporation is Superior National Insurance
Group, Inc. (the "Corporation").
SECOND. The address of the Corporation's registered office in the
State of Delaware is One Rodney Square, 10th Floor, Tenth and King Streets, in
the City of Wilmington, County of New Castle, 19801. The name of its
registered agent at such address is RL&F Service Corp.
THIRD. The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH. The total number of shares of stock which the Corporation
shall have authority to issue is twenty-five million (25,000,000.00). All such
shares are to be common stock, par value of $.01 per share (the "Common
Stock"), and are to be of one class.
FIFTH. (a) Each holder of the Corporation's 14.5% Senior Subordinated
Voting Notes due April 1, 2002 (the "Special Voting Notes") issued pursuant to
the Note Purchase Agreement dated March 31, 1992 (the "Note Purchase
Agreement") shall be entitled to vote only for the election or removal of
directors to (or from) the board of directors of the Corporation (the "Board"),
and shall have that number of votes arrived at by the following calculations:
(i) dividing the principal amount of the Special Voting Note held by a
particular holder by the total principal amount of all outstanding Special
Voting Notes; and (ii) multiplying the result of (i) by the total number of
shares of this Corporation's Common Stock issuable upon exercise of all the
warrants issued pursuant to the Note Purchase Agreement and outstanding on the
record date for any vote of this Corporation's shareholders for the election or
removal of directors. To the extent of this limited right to vote granted to
holders of the Special Voting Notes, the holders of the Common Stock and of the
Special Voting Notes shall vote together and not as separate classes.
(b) The terms of paragraph (a) of article FIFTH may not be amended
without the approval of the holders of the Special Voting Notes then
outstanding, voting as a separate class.
(c) The Board of Directors shall consist of eleven (11) members unless
changed by an amendment to the Certificate of Incorporation. Any change in the
authorized number
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of directors or the provisions regarding the election of directors shall
require the affirmative vote of the majority of the outstanding Special Voting
Notes, voting as a separate class.
SIXTH. (a) PROHIBITED TRANSFER; EXCESS STOCK. Except as provided in
Section F, until the Restriction Termination Date, any attempted direct or
indirect Transfer of Stock shall be deemed a "Prohibited Transfer" if (i) such
Transfer would increase the Percentage of Stock Owned by any Person that (or by
any person whose Stock is or by virtue of such Transfer would be attributed to
any Person that), either after giving effect to the attribution rules
(including the option attribution rules) of Section 382 or without regard to
such attribution rules, Owns, by virtue of such Transfer would Own, or has at
any time since the period beginning three years prior to the date of such
Transfer Owned, Stock in excess of the Limit, or (ii) such Transfer would cause
an "ownership change" of the corporation within the meaning of Section 382.
Except at otherwise provided in Section E, the Stock or Option sought to be
Transferred in the Prohibited Transfer shall be deemed "Excess Stock."
(b) TRANSFER OF EXCESS STOCK TO TRANSFEREE. Except as otherwise
provided in Section E, a Prohibited Transfer shall be void ab initio as to the
Purported Transferee in the Prohibited Transfer and such Purported Transferee
shall not be recognized as the owner of the Excess Stock for any purpose and
shall not be entitled to any rights as a stockholder of the corporation arising
from the ownership of Excess Stock, including, but not limited to, the right to
vote such Excess Stock or to receive dividends or other distributions in
respect thereof or, in the case of Options, to receive Stock in respect of
their exercise. Any Excess Stock shall automatically be transferred to the
Trustee in trust for the benefit of the Charitable Beneficiary, effective as of
the close of business on the business day prior to the date of the Prohibited
Transfer; provided, however, that if the transfer to the trust is deemed
ineffective for any reason, such Excess Stock shall nevertheless be deemed to
have been automatically transferred to the person selected as the Trustee at
such time, and such person shall have rights consistent with those of the
Trustee as described in this section and in Section C below. Any dividend or
other distribution with respect to such Excess Stock paid prior to the
discovery by the corporation that the Excess Stock has been transferred to the
Trustee ("Prohibited Distributions") shall be deemed to be held by the
Purported Transferee as agent for the Trustee, and shall be paid to the Trustee
upon demand, and any dividend or distribution declared but unpaid shall be paid
when due to the Trustee. Any vote cast by a Purported Transferee with respect
to Excess Stock prior to the discovery by the corporation that the Excess Stock
has been transferred to the Trustee will be rescinded as void and shall be
recast in accordance with the desires of the Trustee acting for the sole
benefit of the Charitable Beneficiary. The Purported Transferee and any other
Person holding certificates representing Excess Stock shall immediately
surrender such certificates to the Trustee. The Trustee shall have all the
rights of the owner of the Excess Stock, including the right to vote, to
receive dividends
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or other distributions, and to receive proceeds from liquidation, which
rights shall be exercised for the sole benefit of the Charitable Beneficiary.
(c) DISPOSITION OF EXCESS STOCK. As soon as practicable following
receipt of notice from the corporation that Excess Stock has been transferred
to the Trustee, the Trustee shall take such actions as it deems necessary to
dispose of the Excess Stock in an arm's-length transaction that would not
constitute a Prohibited Transfer. Upon the disposition of such Excess Stock,
(i) the interest of the Charitable Beneficiary in the Excess Stock shall
terminate, and (ii) the Trustee shall distribute the net proceeds of the sale
as follows: (a) the Purported Transferee shall receive an amount of the net
proceeds of such sale not to exceed the Purported Transferee's cost incurred to
acquire such Excess Stock, or, if such Excess Stock was Transferred for less
than fair market value on the date of the Prohibited Transfer, the fair market
value of the Excess Stock on the date of the Prohibited Transfer, in each case
less all costs incurred by the corporation, the Trustee and the Transfer Agent
in enforcing the Restrictions, and (b) the Charitable Beneficiary shall receive
the balance of the net proceeds from the sale of the Excess Stock, if any,
together with any Prohibited Distributions received from the Purported
Transferee and any other distributions with respect to such Excess Stock while
such Stock was held by the Trustee. In the event the Purported Transferee has
disposed of the Excess Stock and distributed the proceeds and other amounts
otherwise than in accordance with this section, then (w) such Purported
Transferee shall be deemed to have disposed of such Excess Stock as an agent
for the Trustee, (x) such Purported Transferee shall be deemed to hold such
proceeds and any Prohibited Distributions as an agent for the Trustee, (y) such
Purported Transferee shall be required to return to the Trustee the proceeds
from such sale, together with any Prohibited Distributions theretofore received
by the Purported Transferee with respect to such Excess Stock, provided that
upon receipt of written permission from the Trustee, the Purported Transferee
will be entitled to retain an amount of such sale proceeds not to exceed the
amount that such purported Transferee would have received from the Trustee if
the Trustee had obtained and resold the Excess Stock, and (z) the Trustee shall
transfer any remaining proceeds to the Charitable Beneficiary. Neither the
Trustee, the corporation, the Purported Transferee nor any other party shall
claim an income tax deduction with respect to any transfer to the Charitable
Beneficiary and neither the Trustee nor the corporation shall benefit in any
way from the enforcement of the Restrictions, except insofar as these
restrictions protect the corporation's Income Tax Net Operating Loss Carryover.
Neither the Trustee, the corporation nor the Transfer Agent shall have any
liability to any Person for any loss arising from or related to a Prohibited
Transfer.
(d) TRANSFER AGENT'S RIGHTS AND RESPONSIBILITIES. The Transfer Agent
shall not register any Transfer of Stock on the corporation's stock transfer
records if it has knowledge that such Transfer is a Prohibited Transfer. The
Transfer Agent shall have the right, prior and as a condition to registering
any Transfer of Stock on the corporation's stock transfer records, to request
any transferee of the Stock to submit an affidavit, on a form agreed to by the
Transfer Agent and the corporation, stating the number of shares of each class
of Stock Owned by the transferee (and by Persons who would Own the transferee's
Stock) before the proposed Transfer and that would, if effect were given to the
proposed Transfer, be Owned by the transferee (and by Persons who would Own the
prospective Transferee's Stock) after the proposed Transfer. If either (i) the
Transfer Agent does not receive such affidavit, or (ii) such affidavit
evidences that the Transfer was a Prohibited Transfer, the Transfer Agent shall
notify the corporation and shall not enter the Prohibited Transfer into the
corporation's stock
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transfer records, and the Trustee, the corporation and the Transfer Agent shall
take such steps as provided in the Restrictions in order to dispose of the
Excess Stock purportedly Owned by such Purported Transferee. If the Transfer
Agent, for whatever reason, enters a Prohibited Transfer in the corporation's
stock transfer records, such Transfer shall be nonetheless void AB INITIO and
shall have no force and effect, in accordance with the Restrictions, and the
corporation's stock transfer records shall be revised to so provide.
(e) CERTAIN INDIRECT PROHIBITED TRANSFERS. In the event a Transfer
would be a Prohibited Transfer as a result of attribution to the Purported
Transferee of the Ownership of Stock by a person (an "Other Person") who is not
controlling, controlled by or under common control with the Purported
Transferee, which Ownership is nevertheless attributed to the Purported
Transferee, the Restrictions shall not apply in a manner that would invalidate
any Transfer to such Other Person, and the Purported Transferee and any Persons
controlling, controlled by or under common control with the Purported
Transferee (collectively, the "Purported Transferee Group") shall automatically
be deemed to have transferred to the Trustee at the time and in a manner
consistent with Section B hereof, sufficient Stock (which Stock shall (i)
consist only of Stock held legally or beneficially, whether directly or
indirectly, by any member of the Purported Transferee Group, but not Stock held
through any Other Person, other than shares held through a Person acting as
agent or fiduciary for any member of the Purported Transferee Group, (ii) be
deemed transferred to the Trustee, in the inverse order in which it was
acquired by members of the Purported Transferee Group, and (iii) be treated as
Excess Stock) to cause the Purported Transferee, following such transfer to the
Trustee, not to be in violation of the Restrictions; provided, however, that to
the extent the foregoing provisions of this Section E would not be effective to
prevent a Prohibited Transfer, the Restrictions shall apply to such other Stock
Owned by the Purported Transferred (including Stock actually owned by Other
Persons), in a manner designed to minimize the amount of Stock subject to the
Restrictions or as otherwise determined by the Board of Directors to be
necessary to prevent a Prohibited Transfer (which Stock shall be treated as
Excess Stock).
(f) EXCEPTIONS. The term "Prohibited Transfer" shall not include:
(i) the original issuance of Common Stock pursuant to the Stock Purchase
Agreement, (ii) any Transfer described in Section 382(1)(3)(B) of the Code
(relating to transfers upon death or divorce and certain gifts) if all Persons
who would Own the Stock Transferred would be treated for purposes of Section
382 as having Owned such Stock at all times beginning more than three (3) years
prior to the date of the Transfer, and (iii) any Transfer with respect to which
the Person who would otherwise be the Purported Transferee obtains or is
granted the prior written approval of the Board of Directors of the
corporation, which approval shall be granted in its sole and absolute
discretion after considering all facts and circumstances, including but not
limited to future events the occurrence of which are deemed by the Board of
Directors of the corporation to be reasonably possible.
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(g) LEGEND. All certificates or other instruments evidencing
Ownership of Stock shall bear a conspicuous legend describing the
restrictions. The Board of Directors shall take such actions as it deems
necessary to substitute certificates evidencing ownership of Stock and
bearing such legend for certificates not bearing such legend.
(h) PROMPT ENFORCEMENT; FURTHER ACTIONS. As soon as practicable and
within thirty (30) business days of learning of a purported Prohibited
Transfer, the corporation through its Secretary or any assistant Secretary
shall demand that the Purported Transferee (or any other member of the
Purported Transferee Group) surrender to the Trustee the certificates
representing the Excess Stock or any resale proceeds therefrom, and any
Prohibited Distributions or other dividends or distributions received thereon,
and if such surrender is not made within twenty (20) business days from the
date of such demand, the corporation shall institute legal proceedings to
compel such surrender and for compensatory damages on account of any failure to
take such actions; provided, however, that nothing in this Section H shall
preclude the corporation in its discretion from immediately bringing legal
proceedings without a prior demand, and also provided that failure of the
corporation to act within the time periods set out in this section shall not
constitute a waiver of any right of the corporation to compel any transfer
required hereby. Upon a determination by the Board of Directors that there has
been or is threatened a Prohibited Transfer, the Board of Directors may
authorize such additional action as its deems advisable to give effect to the
Restrictions, including, without limitation, refusing to give effect on the
books of the Company to any such purported Prohibited Transfer or instituting
proceedings to enjoin any such purported Prohibited Transfer. Nothing
contained in the Restrictions shall limit the authority of the Board of
Directors to take such other action to the extent permitted by law as it deems
necessary or advisable to protect the corporation and the interests of the
holders of its securities in preserving the Income Tax Net Operating Loss
Carryover, including, but not limited to, refusing to give effect to any
Prohibited Transfer or other action on the books of the corporation or
instituting proceedings to enjoin any Prohibited Transfer or other action;
provided, however, that any Prohibited Transfer shall nevertheless result in
the consequences otherwise described in the Restrictions.
(i) BOARD AUTHORITY TO INTERPRET. The Board of Directors shall have
the authority to interpret the provisions of the Restrictions for the purpose
of protecting the Income Tax Net Operating Loss Carryover. Any such
interpretation shall be final and binding on any Person who Owns or purports to
acquire Ownership of Stock.
(j) DAMAGES. Any person who knowingly violates the Restrictions, and
any persons controlling, controlled by or under common control with such a
person, shall be jointly and several liable to the corporation for, and shall
indemnify and hold the corporation harmless against, any and all damages
suffered as a result of such violation, including but not limited to damages
resulting from a reduction in or elimination of the corporation's ability to
utilize its Income Tax Net Operating Loss Carryover, and attorneys' and
accountants' fees incurred in connection with such violation.
(k) SEVERABILITY. If any part of the Restrictions is judicially
determined to be invalid or otherwise unenforceable, such invalidity or
unenforceability shall not affect
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the remainder of the Restrictions, which shall be thereafter interpreted as
if the invalid or unenforceable part were not contained herein, and, to the
maximum extent possible, in a manner consistent with preserving the ability
of the corporation to utilize to the greatest extent possible the Income Tax
Operating Loss Carryover.
(l) EFFECT ON STOCK EXCHANGE TRANSACTIONS. Nothing in the
Restrictions shall preclude the settlement of a transaction entered into
through the facilities of Nasdaq. The Stock that is the subject of such
transaction shall continue to be subject to the terms and Restrictions after
such settlement.
(m) DEFINITIONS:
"Charitable Beneficiary" shall mean one or
more organizations described in Sections 170(b)(1)(A), 170(c)(2) and
501(c)(3) of the Code designated in writing by the corporation.
"Code" shall mean the Internal Revenue Code
of 1986, as amended and as it may be amended from time to time
hereafter.
"Common Stock" shall mean the common stock of
the Corporation, $0.01 par value per share.
"Control" shall mean the possession, direct
or indirect, of the power to direct or cause the direction of the
management, policies or decisions of a Person, whether through the
ownership of voting securities, by contract, family relationship or
otherwise. The terms "controlling," "controlled by" and "under common
control with" shall have correlative meanings. A Person shall be
deemed to control or be under common control with a Purported
Transferee if the Excess Stock Owned by such Person is treated as
Owned by the Purported Transferee by virtue of the family attribution
rules of Section 318 of the Code.
"5% Shareholder" shall mean any Person or
Public Group who is a "5-percent shareholder" of the corporation
within the meaning of Section 382, substituting "4.9 percent" for "5
percent" each place it appears therein.
"Income Tax Net Operating Loss Carryover"
shall mean the net operating loss, capital loss, net unrealized
built-in loss, general business credit, alternative minimum tax
credit, foreign tax credit and any other carryovers or losses as
determined for United States federal income tax purposes that are or
could become subject to limitation under Section 382, and to which the
corporation is entitled under the Code and Regulations, at any time
during which the Restrictions are in force.
"IP Delaware" shall mean Insurance Partners,
L.P., a Delaware limited partnership.
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"IP Bermuda" shall mean Insurance Partners
Offshore (Bermuda), L.P., a Bermuda limited partnership.
"Limit" shall mean 4.9 Percent of the Stock.
"Option" shall mean any interest that could
give rise to the Ownership of Stock and that is an option, contract,
warrant, convertible instrument, put, call, stock subject to a risk of
forfeiture, pledge of stock or any interest that is similar to any of
such interests or any other interest that would be treated, under
paragraph (d)(9) of Treasury Regulation Section 1.382-4, in the same
manner as an option, whether or not any of such interests is subject
to contingencies.
"Own," and all derivations of the word "Own,"
shall mean any direct or indirect, actual or beneficial interest,
including, except as otherwise provided, a constructive ownership
interest under the attribution rules (including the option attribution
rules) of Section 382. In determining whether a Person Owns an amount
of Stock in excess of the Limit, Options Owned by such Person (or
other Persons whose Ownership of Stock is or would be attributable
under Section 382 to such Person) shall be treated as exercised (and
the Stock that would be acquired by such exercise as outstanding) and
Options Owned by other Persons shall be treated as not exercised (and
the Stock that would be acquired by such exercise as outstanding) and
Options Owned by other Persons shall be treated as not exercised (and
the Stock that would be acquired if such Options owned by other
Persons were exercised shall be treated as not outstanding), in each
case without regard to whether such treatment would result in an
ownership change within the meaning of Section 382. In determining
whether a Transfer that is an exercise, conversion or similar
transaction with respect to an Option increases the Percentage
Ownership of Stock of any Person or Public Group, such Option shall be
treated as if it were not Owned by such Person immediately prior to
such Transfer.
"Percent," "Percentage" or "%" shall mean
percent or percentage by value.
"Person" shall mean any individual (other
than a Public Group treated as an individual under Section 382) or any
"entity" as that term is defined in Regulations Section 1.382-3(a).
"Public Group" shall have the meaning
assigned to such term in the applicable Regulations under Section 382.
"Purported Transferee" shall mean a Person or
Public Group who acquires Ownership of Excess Stock in a Prohibited
Transfer or, except as otherwise provided in the Restrictions, any
subsequent transferee of such Excess Stock.
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"Purported Transferor" shall mean a Person
who Transfers Excess Stock in a Prohibited Transfer.
"Regulations" shall mean Treasury
Regulations, including proposed or temporary regulations, promulgated
under the Code, as the same may be amended from time to time.
References herein to specific provisions of temporary Regulations
shall include the analogous provisions of final Regulations or other
successor Regulations.
"Restriction Effective Date" shall mean the
date of the closing of the purchase of 2,390,438 shares of Common
Stock by IP Delaware, IP Bermuda and the Subscribing Stockholders
pursuant to the Stock Purchase Agreement.
"Restriction Termination Date" shall mean the
earliest to occur of (a) the end of the thirty-sixth (36th) month
following the Restriction Effective Date, (b) the first day of the
first taxable year following the taxable year (or years) in which the
Income Tax Net Operating Loss Carryover has been reduced to zero, or
(c) the date upon which the Board of Directors has determined that
there has been a change in law (including but not limited to the
repeal of Section 382 without a successor provision that places
restrictions on the Income Tax Net Operating Loss Carryover based on
changes of ownership of the corporation's Stock similar to Section
382) eliminating the need for the Restrictions in order to preserve
the corporation's ability to utilize the Income Tax Net Operating Loss
Carryover.
"Restrictions" shall mean the restrictions on
the Transfer and Ownership of Stock as set forth in this Article VI.
"Section 382" shall mean Section 382 of the
Code and the Regulations promulgated thereunder, and any successor
statute and regulations.
"Stock" shall mean the Common Stock and any
interest in the corporation that would be treated as stock under
Section 382, without regard to clauses (ii)(B) and (iii)(B) of
paragraph (f)(18) of Temporary Treasury Regulation Section 1.382-2T
(but only if, in determining the Ownership by any Person of Stock, the
uniform treatment of such interest as Stock or as not Stock, as the
case may be, would increase such Person's Percentage Ownership of
Stock), and shall also include any Stock the ownership of which may be
acquired by the exercise of an Option.
"Stock Purchase Agreement" shall mean
that Stock Purchase Agreement among the corporation, IP
Delaware, IP Bermuda, TJS and the Subscribing Stockholders,
dated as of September 17, 1996.
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"Subscribing Stockholders" shall mean those
individuals who execute the subscription agreements attached to the
Stock Purchase Agreement as exhibits thereto.
"Transfer" shall mean any direct or indirect
acquisition or disposition of stock, whether by sale, exchange,
merger, consolidation, transfer, assignment, conveyance, distribution,
pledge, inheritance, gift, mortgage, the creation of any security
interest in, or lien or encumbrance upon, or any other acquisition or
disposition of any kind and in any manner, whether voluntary or
involuntary, knowing or unknowing, by operation of law or otherwise.
Notwithstanding any understandings or agreements to which an Owner of
Stock is a party, any arrangement, the effect of which is to transfer
any or all of the rights arising from Ownership of Stock, shall be
treated as a Transfer. A Transfer shall also include (i) a transfer
of an interest in an entity and a change in the relationship between
two or more Persons that results in a change in the Ownership of Stock
and (ii) the creation, grant, exercise, conversion, Transfer or other
disposition of or with respect to an Option, regardless of whether
such Option previously had been treated as exercised or converted for
any other purpose.
"Transfer Agent" means the Person responsible
for maintaining the books and records in which are recorded the
ownership and transfer of shares of Stock or any Person engaged by the
corporation for the purpose of fulfilling the duties required to be
fulfilled by the Transfer Agent hereunder.
"Trustee" means the trustee of the trust
appointed by the corporation, provided that the Trustee shall be a
Person unaffiliated with the corporation, any 5% Shareholder, and any
Person purchasing or disposing of Stock in a Prohibited Transfer.
SEVENTH. The holders of the Special Voting Notes and the Common
Stock, voting together as a single class, shall be entitled at all elections of
directors to as many votes as shall equal the number of votes which (except for
this provision as to cumulative voting) he would be entitled to cast for the
election of directors with respect to his shares of stock multiplied by the
number of directors to be elected, and such holder may cast all of such votes
for a single director or may distribute them among the number to be voted for,
or for any two or more of them as he or she may see fit. The holders of the
Common Stock shall be entitled to one vote for each share upon all other
matters.
EIGHTH. The incorporator of the Corporation is C. Stephen Bigler, P.O
Box 551, Wilmington, DE 19899.
NINTH. Unless and except to the extent that the by-laws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
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TENTH. In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board is expressly authorized to
make, alter and repeal the by-laws of the Corporation, subject to the power of
the stockholders of the Corporation to alter or repeal any by-law whether
adopted by them or otherwise.
ELEVENTH. A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any
amendment, modification or repeal of the foregoing sentence shall not adversely
affect any right or protection of a director of the Corporation hereunder in
respect of any act or omission occurring prior to the time of such amendment,
modification or repeal.
TWELFTH. The Corporation reserves the right at any time, and from
time to time, to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, and other provisions authorized by the laws of
the State of Delaware at the time in force may be added or inserted, in the
manner now or hereafter prescribed by law; and all rights, preferences and
privileges of whatsoever nature conferred upon stockholders, directors or any
other persons whomsoever by and pursuant to this Certificate of Incorporation
in its present form or as hereafter amended are granted subject to the rights
reserved in this article.
The undersigned incorporator hereby acknowledges that the foregoing
certificate of incorporation is his act and deed on December 2, 1996.
/s/ C. Stephen Bigler
---------------------------------
C. Stephen Bigler
Incorporator
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EXHIBIT 3.2
BY-LAWS
OF
SUPERIOR NATIONAL INSURANCE GROUP, INC.
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ARTICLE I
STOCKHOLDERS
Section 1.1. ANNUAL MEETINGS. An annual meeting of stockholders
shall be held for the election of directors at such date, time and place,
either within or without the State of Delaware, as may be designated by
resolution of the Board of Directors from time to time. Any other proper
business may be transacted at the annual meeting.
Section 1.2. SPECIAL MEETINGS. Special meetings of stockholders
for any purpose or purposes may be called at any time by the Board of
Directors, any officer of the Corporation or by ten percent (10%) of the
stockholders.
Section 1.3. NOTICE OF MEETINGS. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice of
the meeting shall be given that shall state the place, date and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the
certificate of incorporation or these by-laws, the written notice of any
meeting shall be given not less than ten nor more than sixty days before the
date of the meeting to each stockholder entitled to vote at such meeting. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as
it appears on the records of the corporation.
Section 1.4. ADJOURNMENTS. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business
which might have been transacted at the original meeting. If the adjournment
is for more than thirty days, or if after the adjournment a new record date
is fixed for the adjourned meeting, notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 1.5. QUORUM. Except as otherwise provided by law, the
certificate of incorporation or these by-laws, at each meeting of
stockholders the presence in person or by proxy of the holders of a majority
in voting power of the outstanding shares of stock entitled
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to vote at the meeting shall be necessary and sufficient to constitute a
quorum. In the absence of a quorum, the stockholders so present may, by a
majority in voting power thereof, adjourn the meeting from time to time in
the manner provided in Section 1.4 of these by-laws until a quorum shall
attend. Shares of its own stock belonging to the corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors of such other corporation is held, directly or indirectly, by the
corporation, shall neither be entitled to vote nor be counted for quorum
purposes; provided, however, that the foregoing shall not limit the right of
the corporation or any subsidiary of the corporation to vote stock, including
but not limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. ORGANIZATION. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
his absence by a Vice President, or in the absence of the foregoing persons
by a chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 1.7. VOTING; PROXIES. Except as otherwise provided by the
certificate of incorporation, each stockholder entitled to vote at any
meeting of stockholders shall be entitled to one vote for each share of stock
held by him which has voting power upon the matter in question. Each
stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless
the proxy provides for a longer period. A proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A stockholder
may revoke any proxy which is not irrevocable by attending the meeting and
voting in person or by filing an instrument in writing revoking the proxy or
by delivering a proxy in accordance with applicable law bearing a later date
to the Secretary of the corporation. Voting at meetings of stockholders need
not be by written ballot. At all meetings of stockholders for the election of
directors a plurality of the votes cast shall be sufficient to elect. All
other elections and questions shall, unless otherwise provided by law, the
certificate of incorporation or these by-laws, be decided by the affirmative
vote of the holders of a majority in voting power of the shares of stock
which are present in person or by proxy and entitled to vote thereon.
Section 1.8. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(A) ANNUAL MEETINGS OF STOCKHOLDERS. (1) Nominations
of persons for election to the Board of Directors of the Corporation and the
proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders (a) pursuant to the Corporation's notice of
meeting delivered pursuant to Section 1.3 of these By-laws, (b) by or at the
direction of the Chairman of the Board of Directors or (c) by any stockholder
of the Corporation who is entitled to vote at the meeting, who complied with
the notice procedures set forth in clauses (2) and (3) of this paragraph (A)
of this By-law and who was a stockholder of record at the time such notice is
delivered to the Secretary of the Corporation.
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(2) For nominations or other business to be
properly brought before an annual meeting by a stockholder pursuant to clause
(c) of paragraph (A)(1) of this By-law, the stockholder must have given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not less than seventy days nor
more than ninety days prior to the first anniversary of the preceding year's
annual meeting; PROVIDED, HOWEVER, that in the event that the date of the
annual meeting is advanced by more than twenty days, or delayed by more than
seventy days, from such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the ninetieth day prior to such
annual meeting and not later than the close of business on the later of the
seventieth day prior to such annual meeting or the tenth day following the
day on which public announcement of the date of such meetings if first made.
Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including such person's written
consent to being named in the proxy statement as a nominee and to serving as
a director if elected; (b) as to any other business desired to be brought
before the meeting, the reasons for conducting such business at the meeting
and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such
beneficial owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and or record by such stockholder and such
beneficial owner.
(3) Notwithstanding anything in the second
sentence of paragraph (A)(2) of this By-law to the contrary, in the event
that the number of directors to be elected to the Board of Directors of the
Corporation is increased and there is no public announcement naming all of
the nominees for director or specifying the size of the increased Board of
Directors made by the Corporation at least eighty days prior to the first
anniversary of the preceding year's annual meeting, a stockholder's notice
required by this By-law shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it
shall be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth day following
the day on which such public announcement is first made by the Corporation.
(B) SPECIAL MEETINGS OF STOCKHOLDERS. Only such
business shall be conducted at a special meeting of stockholders as shall
have been brought before the meeting pursuant to the Corporation's notice of
meeting pursuant to Section 1.3 of these By-laws. Nominations of persons for
election to the Board of Directors may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the
Corporation's
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notice of meeting (a) by or at the direction of the Board of Directors or (b)
by any stockholder of the Corporation who is entitled to vote at the meeting,
who complies with the notice procedures set forth in this By-law and who is a
stockholder of record at the time such notice is delivered to the Secretary
of the Corporation. Nominations by stockholders of persons for election to
the Board of Directors may be made at such a special meeting of stockholders
if the stockholder's notice as required by paragraph (A)(2) of this By-law
shall be delivered to the Secretary at the principal executive offices of the
Corporation not earlier than the ninetieth day prior to such special meeting
and not later than the close of business on the later of the seventieth day
prior to such special meeting or the tenth day following the day on which
public announcement is first made of the date of the special meeting and of
the nominees proposed by the Board of Directors to be elected at such
meeting. In no event shall the public announcement of an adjournment of a
special meeting commence a new time period for the giving of a stockholder's
notice as described above.
(C) GENERAL.
(1) Only persons who are nominated in
accordance with the procedures set forth in this By-law shall be eligible to
serve as director and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this By-law. Except as otherwise provided by
law, the Certificate of Incorporation or these By- laws, the chairman of the
meeting shall have the power and duty to determine whether a nomination or
any business proposed to be brought before the meeting was made in accordance
with the procedures set forth in this By-law and, if any proposed nomination
or business is not compliance with this By-law, to declare that such
defective proposal or nomination shall disregarded.
(2) For purposes of this By-law, "public
announcement" shall mean disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of
this By-law, a stockholder shall also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this By-law. Nothing in this By-law shall be deemed
to affect any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 1.9. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD. In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the
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Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which record date: (1) in the case of determination
of stockholders entitled to vote at any meeting of stockholders or
adjournment thereof, shall, unless otherwise required by law, not be more
than sixty nor less than ten days before the date of such meeting; (2) in the
case of determination of stockholders entitled to express consent to
corporate action in writing without a meeting, shall not be more than ten
days from the date upon which the resolution fixing the record date is
adopted by the Board of Directors; and (3) in the case of any other action,
shall not be more than sixty days prior to such other action. If no record
date is fixed: (1) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day
on which the meeting is held; (2) the record date for determining
stockholders entitled to express consent to corporate action in writing
without a meeting, when no prior action of the Board of Directors is required
by law, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the
corporation in accordance with applicable law, or, if prior action by the
Board of Directors is required by law, shall be at the close of business on
the day on which the Board of Directors adopts the resolution taking such
prior action; and (3) the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 1.10. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary
shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in
the notice of the meeting, or if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof and may be inspected
by any stockholder who is present. Upon the willful neglect or refusal of
the directors to produce such a list at any meeting for the election of
directors, they shall be ineligible for election to any office at such
meeting. Except as otherwise provided by law, the stock ledger shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list of stockholders or the books of the corporation, or to vote
in person or by proxy at any meeting of stockholders.
Section 1.11. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING.
(a) Any action required to be taken at any annual or special
meeting of stockholders of the Corporation, or any action which may be taken
at any annual or special
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meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting for
the action so taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Corporation
by delivery to its registered office in Delaware, its principal place of
business, or an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be made by hand or by
certified or registered mail, return receipt request.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent and no written consent shall be
effective to take the corporate action referred to therein unless, within
sixty (60) days of the date the earliest dated consent is delivered to the
Corporation, a written consent or consents signed by a sufficient number of
holders to take action are delivered to the Corporation in the manner
prescribed in paragraph (c) of this Section.
(c) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which date shall not be more than ten (10) days after
the date upon which the resolution fixing the record date is adopted by the
Board of Directors. Any stockholder of record seeking to have the
stockholders authorize or take corporate action by written consent shall, by
written notice to the Secretary, request the Board of Directors to fix a
record date. The Board of Directors shall promptly, but in all events within
ten (10) days after the date on which such a request is received, adopt a
resolution fixing the record date. If no record date has been fixed by the
Board of Directors within ten (10) days of the date on which such a request
is received, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is required by applicable law, shall be the first date on
which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the Corporation in accordance with paragraphs (a)
and (b) of this Section. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by
applicable law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the
close of business on the date on which the Board of Directors adopts the
resolution taking such prior action.
(d) Within five (5) business days after receipt of the earliest
dated consent delivered to the Corporation in the manner provided in this
Section, the Corporation, shall retain nationally recognized independent
inspectors of elections for the purposes of performing a ministerial review
of the validity of consents and any revocations thereof. The cost of
retaining inspectors of election shall be borne by the Corporation.
(e) At any time that stockholders soliciting consents in writing
to corporate action have a good faith belief that the requisite number of
valid and unrevoked consents to
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authorize or take the action specified has been received by them, the
consents shall be delivered by the soliciting stockholders of the
Corporation's registered office in the State of Delaware or principal place
of business or to the Secretary of the Corporation, together with a
certificate stating their belief that the requisite number of valid and
unrevoked consents has been received as of a specific date, which date shall
be identified in the certificate. In the event that delivery shall be made
to the Corporation's registered office in Delaware, such delivery shall be
made by hand or by certified or registered mail, return receipt requested.
Upon receipt of such consents, the Corporation shall cause the consents to be
delivered promptly to the inspectors of election. The Corporation also shall
deliver promptly to the inspectors of election any revocations of consents in
its possession, custody or control as of the time of receipt of the consents.
(f) As promptly as practicable after the consents and
revocations are received by them, the inspectors of election shall issue a
preliminary report to the Corporation stating: (i) the number of shares
represented by valid and unrevoked consents; (ii) the number of shares
represented by invalid consents; (iii) the number of shares represented by
invalid revocations; and (iv) the number of shares entitled to submit
consents as of the record date. Unless the Corporation and the soliciting
stockholders agree to a shorter or longer period, the Corporation and the
soliciting stockholders shall have five (5) days to review the consents and
revocations and to advise the inspectors and the opposing party in writing as
to whether they intend to challenge the preliminary report. If no timely
written notice of an intention to challenge the preliminary report is
received, the inspectors shall certify the preliminary report (as corrected
or modified by virtue or the detection by the inspectors of clerical errors)
as their final report and deliver it to the Corporation. If the Corporation
or the soliciting stockholders give timely written notice of an intention to
challenge the preliminary report, a challenge session shall be scheduled by
the inspectors as promptly as practicable. A transcript of the challenge
session shall be recorded by a certified court reporter. Following
completion of the challenge session, the inspectors shall issue as promptly
as practicable their final report and deliver it to the Corporation. A copy
of the final report shall be included in the book in which the proceedings of
meetings of stockholders are required.
(g) The Corporation shall give prompt notice to the stockholders
of the results of any consent solicitation or the taking of corporate action
without a meeting by less than unanimous written consent.
(h) This Section shall in no way impair or diminish the right of
any stockholder or director, or any officer whose title to office is
contested, to contest the validity of any consent or revocation thereof, or
to take any other action with respect thereto.
Section 1.12. INSPECTORS OF ELECTION. The corporation may, and
shall if required by law, in advance of any meeting of stockholders, appoint
one or more inspectors of election, who may be employees of the corporation,
to act at the meeting or any adjournment thereof and to make a written report
thereof. The corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. In the event that no
inspector so appointed or designated is able to act at a meeting of
stockholders, the person presiding at the
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meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his or her duties, shall
take and sign an oath to execute faithfully the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspector or inspectors so appointed or designated shall (i) ascertain the
number of shares of capital stock of the corporation outstanding and the
voting power of each such share, (ii) determine the shares of capital stock
of the corporation represented at the meeting and the validity of proxies and
ballots, (iii) count all votes and ballots, (iv) determine and retain for a
reasonable period a record of the disposition of any challenges made to any
determination by the inspectors, and (v) certify their determination of the
number of shares of capital stock of the corporation represented at the
meeting and such inspectors' count of all votes and ballots. Such
certification and report shall specify such other information as may be
required by law. In determining the validity and counting of proxies and
ballots cast at any meeting of stockholders of the corporation, the
inspectors may consider such information as is permitted by applicable law.
No person who is a candidate for an office at an election may serve as an
inspector at such election.
Section 1.13. CONDUCT OF MEETINGS. The date and time of the
opening and the closing of the polls for each matter upon which the
stockholders will vote at a meeting shall be announced at the meeting by the
person presiding over the meeting. The Board of Directors of the corporation
may adopt by resolution such rules and regulations for the conduct of the
meeting of stockholders as it shall deem appropriate. Except to the extent
inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of stockholders shall have the right
and authority to prescribe such rules, regulations and procedures and to do
all such acts as, in the judgment of such chairman, are appropriate for the
proper conduct of the meeting. Such rules, regulations or procedures,
whether adopted by the Board of Directors or prescribed by the chairman of
the meeting, may include, without limitation, the following: (i) the
establishment of an agenda or order of business for the meeting; (ii) rules
and procedures for maintaining order at the meeting and the safety of those
present; (iii) limitations on attendance at or participation in the meeting
to stockholders of record of the corporation, their duly authorized and
constituted proxies or such other persons as the chairman of the meeting
shall determine; (iv) restrictions on entry to the meeting after the time
fixed for the commencement thereof; and (v) limitations on the time allotted
to questions or comments by participants. Unless and to the extent determined
by the Board of Directors or the chairman of the meeting, meetings of
stockholders shall not be required to be held in accordance with the rules of
parliamentary procedure.
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ARTICLE II
BOARD OF DIRECTORS
Section 2.1. NUMBER; QUALIFICATIONS. The Board of Directors shall
consist of eleven (11) members unless changed by an amendment to the
Certificate of Incorporation. Any change in the authorized number of
directors or the provisions regarding the election of directors as shall
require the affirmative vote of the majority of the outstanding 14.5% Senior
Subordinated Voting Notes (the "Special Voting Notes"), voting as a separate
class. For purposes of this Section 2.1 and any By-law provisions regarding
the number or election of directors and the ability of the holders of the
Special Voting Notes to effect their rights, the Special Voting Notes shall
be considered outstanding shares entitled to vote. Directors need not be
stockholders.
Section 2.2. ELECTION; RESIGNATION; VACANCIES. The Board of
Directors shall initially consist of the persons named as directors in the
certificate of incorporation, and each director so elected shall hold office
until the first annual meeting of stockholders or until his successor is
elected and qualified. At the first annual meeting of stockholders and at
each annual meeting thereafter, the stockholders and the holders of the
Special Voting Notes (as described in the certificate of incorporation of the
corporation), voting together as one class, shall elect directors each of
whom shall hold office for a term of one year or until his successor is
elected and qualified. Any director may resign at any time upon written
notice to the corporation. Any newly created directorship or any vacancy
occurring in the Board of Directors by reason of death or resignation may be
filled by a majority of the remaining members of the Board of Directors,
although such majority is less than a quorum, or by a plurality of the votes
cast at a meeting of stockholders. Any vacancy occurring in the Board of
Directors by reason of removal of a director by the vote or written consent
of the shareholders may be filled only by a majority of the shares entitled
to vote represented at a duly held meeting at which a quorum is present, or
by the written consent of the holders of the outstanding shares entitled to
vote. Each director elected in accordance with either of the two preceding
sentences shall hold office until the expiration of the term of office of the
director whom he has replaced or until his successor is elected and qualified.
Section 2.3. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware
and at such times as the Board of Directors may from time to time determine,
and if so determined notices thereof need not be given.
Section 2.4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the President, any Vice President, the Secretary,
or by any member of the Board of Directors.
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Notice of a special meeting of the Board of Directors shall be given by the
person or persons calling the meeting at least twenty-four hours before the
special meeting.
Section 2.5. TELEPHONIC MEETINGS PERMITTED. Members of the Board
of Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
by-law shall constitute presence in person at such meeting.
Section 2.6. QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of
the Board of Directors a majority of the whole Board of Directors shall
constitute a quorum for the transaction of business. Except in cases in
which the certificate of incorporation, these by-laws or applicable law
otherwise provides, the vote of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors.
Section 2.7. ORGANIZATION. Meetings of the Board of Directors
shall be presided over by the Chairman of the Board, if any, or in his
absence by the Vice Chairman of the Board, if any, or in his absence by the
President, or in their absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.8. ACTION BY WRITTEN CONSENT OF DIRECTORS. Unless
otherwise restricted by the certificate of incorporation or these by- laws,
any action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board of Directors or such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or such committee.
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ARTICLE III
COMMITTEES
Section 3.1. COMMITTEES. The Board of Directors may designate one
or more committees, each committee to consist of one or more of the directors
of the corporation. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of the committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent permitted by law and
to the extent provided in the resolution of the Board of Directors, shall
have and may exercise all the powers and authority of the Board of Directors
in the management of the business and affairs of the corporation, and may
authorize the seal of the corporation to be affixed to all papers which may
require it.
Section 3.2. COMMITTEE RULES. Unless the Board of Directors
otherwise provides, each committee designated by the Board of Directors may
make, alter and repeal rules for the conduct of its business. In the absence
of such rules each committee shall conduct its business in the same manner as
the Board of Directors conducts its business pursuant to Article II of these
by-laws.
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ARTICLE IV
OFFICERS
Section 4.1. EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS; TERM OF
OFFICE; RESIGNATION; REMOVAL; VACANCIES. The Board of Directors shall elect
a President and Secretary, and it may, if it so determines, choose a Chairman
of the Board and a Vice Chairman of the Board from among its members. The
Board of Directors may also choose one or more Vice Presidents, one or more
Assistant Secretaries, a Chief Financial Officer or a Treasurer and one or
more Assistant Treasurers. Each such officer shall hold office until the
first meeting of the Board of Directors after the annual meeting of
stockholders next succeeding his election, and until his successor is elected
and qualified or until his earlier resignation or removal. Any officer may
resign at any time upon written notice to the corporation. The Board of
Directors may remove any officer with or without cause at any time, but such
removal shall be without prejudice to the contractual rights of such officer,
if any, with the corporation. Any number of offices may be held by the same
person. Any vacancy occurring in any office of the corporation by death,
resignation, removal or otherwise may be filled for the unexpired portion of
the term by the Board of Directors at any regular or special meeting.
Section 4.2. POWERS AND DUTIES OF EXECUTIVE OFFICERS. The officers
of the corporation shall have such powers and duties in the management of the
corporation as may be prescribed in a resolution by the Board of Directors
and, to the extent not so provided, as generally pertain to their respective
offices, subject to the control of the Board of Directors. The Board of
Directors may require any officer, agent or employee to give security for the
faithful performance of his duties.
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ARTICLE V
STOCK
Section 5.1. CERTIFICATES. Every holder of stock shall be entitled
to have a certificate signed by or in the name of the corporation by the
Chairman or Vice Chairman of the Board of Directors, if any, or the President
or a Vice President, and by the Chief Financial Officer or Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary, of the
corporation certifying the number of shares owned by him in the corporation.
Any of or all the signatures on the certificate may be a facsimile. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent, or registrar at the date of issue.
Section 5.2. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE
OF NEW CERTIFICATES. The corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it, alleged to have been
lost, stolen or destroyed, and the corporation may require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give
the corporation a bond sufficient to indemnify it against any claim that may
be made against it on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate.
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ARTICLE VI
INDEMNIFICATION
Section 6.1. RIGHT TO INDEMNIFICATION. The corporation shall
indemnify and hold harmless, to the fullest extent permitted by applicable
law as it presently exists or may hereafter be amended, any person (an
"Indemnitee") who was or is made or is threatened to be made a party or is
otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding"), by reason of the
fact that he, or a person for whom he is the legal representative, is or was
a director or officer of the corporation or, while a director or officer of
the corporation, is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust, enterprise or nonprofit entity, including
service with respect to employee benefit plans, against all liability and
loss suffered and expenses (including attorneys' fees) reasonably incurred by
such Indemnitee. Notwithstanding the preceding sentence, except as otherwise
provided in Section 6.3, the corporation shall be required to indemnify an
Indemnitee in connection with a proceeding (or part thereof) commenced by
such Indemnitee only if the commencement of such proceeding (or part thereof)
by the Indemnitee was authorized by the Board of Directors of the corporation.
Section 6.2. PREPAYMENT OF EXPENSES. The corporation shall pay the
expenses (including attorneys' fees) incurred by an Indemnitee in defending
any proceeding in advance of its final disposition, PROVIDED, HOWEVER, that,
to the extent required by law, such payment of expenses in advance of the
final disposition of the proceeding shall be made only upon receipt of an
undertaking by the Indemnitee to repay all amounts advanced if it should be
ultimately determined that the Indemnitee is not entitled to be indemnified
under this Article VI or otherwise.
Section 6.3. CLAIMS. If a claim for indemnification or payment of
expenses under this Article VI is not paid in full within sixty days after a
written claim therefor by the Indemnitee has been received by the
corporation, the Indemnitee may file suit to recover the unpaid amount of
such claim and, if successful in whole or in part, shall be entitled to be
paid the expense of prosecuting such claim. In any such action the
corporation shall have the burden of proving that the Indemnitee is not
entitled to the requested indemnification or payment of expenses under
applicable law.
Section 6.4. NONEXCLUSIVITY OF RIGHTS. The rights conferred on any
Indemnitee by this Article VI shall not be exclusive of any other rights
which such Indemnitee may have or hereafter acquire under any statute,
provision of the certificate of incorporation, these by-laws, agreement, vote
of stockholders or disinterested directors or otherwise.
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Section 6.5. OTHER SOURCES. The corporation's obligation, if any,
to indemnify or to advance expenses to any Indemnitee who was or is serving
at its request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, enterprise or nonprofit
entity shall be reduced by any amount such Indemnitee may collect as
indemnification or advancement of expenses from such other corporation,
partnership, joint venture, trust, enterprise or non-profit enterprise.
Section 6.6. AMENDMENT OR REPEAL. Any repeal or modification of
the foregoing provisions of this Article VI shall not adversely affect any
right or protection hereunder of any Indemnitee in respect of any act or
omission occurring prior to the time of such repeal or modification.
Section 6.7. OTHER INDEMNIFICATION AND PREPAYMENT OF EXPENSES.
This Article VI shall not limit the right of the corporation, to the extent
and in the manner permitted by law, to indemnify and to advance expenses to
persons other than Indemnitees when and as authorized by appropriate
corporate action.
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ARTICLE VII
MISCELLANEOUS
Section 7.1. FISCAL YEAR. The fiscal year of the corporation shall
be determined by resolution of the Board of Directors.
Section 7.2. SEAL. The corporate seal shall have the name of the
corporation inscribed thereon and shall be in such form as may be approved
from time to time by the Board of Directors.
Section 7.3. WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS,
DIRECTORS AND COMMITTEES. Any written waiver of notice, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at nor
the purpose of any regular or special meeting of the stockholders, directors,
or members of a committee of directors need be specified in any written
waiver of notice.
Section 7.4. INTERESTED DIRECTORS; QUORUM. No contract or
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be
void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the Board of
Directors or committee thereof which authorizes the contract or transaction,
or solely because his or their votes are counted for such purpose, if: (1)
the material facts as to his relationship or interest and as to the contract
or transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than
a quorum; or (2) the material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof, or the
stockholders. Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
Section 7.5. FORM OF RECORDS. Any records maintained by the
corporation in the regular course of its business, including its stock
ledger, books of account, and minute books, may be kept on, or be in the form
of, punch cards, magnetic tape, photographs,
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microphotographs, or any other information storage device, provided that the
records so kept can be converted into clearly legible form within a
reasonable time.
Section 7.6. AMENDMENT OF BY-LAWS. These by-laws may be altered or
repealed, and new by-laws made, by the Board of Directors, but the
stockholders may make additional by-laws and may alter and repeal any by-laws
whether adopted by them or otherwise.
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