UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Superior National Insurance Group, Inc.
(Name of Issuer)
Common Stock (par value $.01 per share)
(Title of Class of Securities)
868224106
(CUSIP Number)
Insurance Partners Advisors, L.P.
One Chase Manhattan Plaza, 44th Floor
New York, New York 10005
Attention: Mr. Steven B. Gruber
Tel. No. (212) 898-8700
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
April 11, 1997
(Date of Event which Requires Filing of
this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this statement because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Exhibit Index on Page 24
Page 1 of 24 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 868224106 Page 2 of 24 Pages
---------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Insurance Partners, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO -- Contributions from Partners
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
1,369,856
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,369,856
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,369,856
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
Not Applicable
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.5%
14 TYPE OF REPORTING PERSON
PN
<PAGE>
SCHEDULE 13D
CUSIP No. 868224106 Page 3 of 24 Pages
---------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Insurance GenPar, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
1,369,856
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,369,856
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,369,856(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
Not Applicable
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.5%
14 TYPE OF REPORTING PERSON
PN
(1) Solely in its capacity as sole general partner of Insurance Partners, L.P.
<PAGE>
SCHEDULE 13D
CUSIP No. 868224106 Page 4 of 24 Pages
---------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Insurance GenPar MGP, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
1,369,856
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,369,856
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,369,856(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
Not Applicable
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.5%
14 TYPE OF REPORTING PERSON
PN
(1) Solely in its capacity as sole general partner of Insurance GenPar, L.P.,
which is the sole general partner of Insurance Partners, L.P.
<PAGE>
SCHEDULE 13D
CUSIP No. 868224106 Page 5 of 24Pages
---------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Insurance GenPar MGP, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
1,369,856
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,369,856
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,369,856(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
Not Applicable
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.5%
14 TYPE OF REPORTING PERSON
CO
(1) Solely in its capacity as sole general partner of Insurance GenPar
MGP, L.P., which is the sole general partner of Insurance GenPar,
L.P., which is the sole general partner of Insurance Partners, L.P.
<PAGE>
SCHEDULE 13D
CUSIP No. 868224106 Page 6 of 24 Pages
---------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Insurance Partners Offshore (Bermuda), L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO -- Contributions from Partners
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Bermuda
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
754,978
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
754,978
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
754,978
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
Not Applicable
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.0%
14 TYPE OF REPORTING PERSON
PN
<PAGE>
SCHEDULE 13D
CUSIP No. 868224106 Page 7 of 24Pages
---------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Insurance GenPar (Bermuda), L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Bermuda
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
754,978
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
754,978
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
754,978(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
Not Applicable
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.0%
14 TYPE OF REPORTING PERSON
PN
(1) Solely in its capacity as sole general partner of Insurance Partners
Offshore (Bermuda), L.P.
<PAGE>
SCHEDULE 13D
CUSIP No. 868224106 Page 8 of 24 Pages
---------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Insurance GenPar (Bermuda) MGP, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Bermuda
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
754,978
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
754,978
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
754,978(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
Not Applicable
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.0%
14 TYPE OF REPORTING PERSON
PN
(1) Solely in its capacity as sole general partner of Insurance GenPar
(Bermuda), L.P., which is the sole general partner of Insurance
Partners Offshore (Bermuda), L.P.
<PAGE>
SCHEDULE 13D
CUSIP No. 868224106 Page 9 of 24 Pages
---------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Insurance GenPar (Bermuda) MGP, Ltd.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Bermuda
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON
WITH
8 SHARED VOTING POWER
754,978
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
754,978
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
754,978(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
Not Applicable
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.0%
14 TYPE OF REPORTING PERSON
CO
(1) Solely in its capacity as sole general partner of Insurance GenPar
(Bermuda) MGP, L.P., which is the sole general partner of Insurance
GenPar (Bermuda), L.P., which is the sole general partner of
Insurance Partners Offshore (Bermuda), L.P.
<PAGE>
CUSIP NO. 868224106 PAGE 10 OF 24 PAGES
ITEM 1. SECURITY AND ISSUER
The title of the class of equity securities of Superior National
Insurance Group, Inc., a Delaware corporation (the "Company"), to which this
Schedule 13D (this "Statement") relates is the Company's common stock, par value
$.01 per share (the "Common Stock"). The address of the principal executive
offices of the Company is 26601 Agoura Road, Calabasas, California 91302.
ITEM 2. IDENTITY AND BACKGROUND
(a) Pursuant to Rules 13d-1(f)(1)-(2) of Regulation 13D-G of the General
Rules and Regulations promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), this Statement is hereby filed by Insurance
Partners, L.P., a Delaware limited partnership ("IP Delaware"), Insurance
GenPar, L.P., a Delaware limited partnership ("Insurance GenPar"), Insurance
GenPar MGP, L.P., a Delaware limited partnership ("IMGPLP"), Insurance GenPar
MGP, Inc., a Delaware corporation ("IMGPI"), Insurance Partners Offshore
(Bermuda), L.P., a Bermuda limited partnership ("IP Bermuda"), Insurance GenPar
(Bermuda), L.P., a Bermuda limited partnership ("Insurance GenPar Bermuda"),
Insurance GenPar (Bermuda) MGP, L.P., a Bermuda limited partnership ("IBMGPLP")
and Insurance GenPar (Bermuda) MGP, Ltd., a Bermuda corporation ("IBMGP"). IP
Delaware, Insurance GenPar, IMGPLP, IMGPI, IP Bermuda, Insurance GenPar Bermuda,
IBMGPLP and IBMGPI are sometimes hereinafter collectively referred to as the
"Reporting Persons." IP Delaware and IP Bermuda are sometimes hereinafter
collectively referred to as "Insurance Partners." The Reporting Persons are
making this single, joint filing because they may be deemed to constitute a
"group" within the meaning of Section 13(d)(3) of the Exchange Act, although
neither the fact of this filing nor anything contained herein shall be deemed an
admission by the Reporting Persons that a group exists.
(b)-(c)
IP DELAWARE
IP Delaware is a Delaware limited partnership, formed to invest in
securities of insurance entities to be selected by its investment committee. The
principal business address of IP Delaware, which also serves as its principal
office, is 201 Main Street, Fort Worth, Texas 76102. Pursuant to Instruction C
to Schedule 13D of the Exchange Act, information with respect to Insurance
GenPar, the sole general partner of IP Delaware, is set forth below.
INSURANCE GENPAR
Insurance GenPar is a Delaware limited partnership, the principal business
of which is serving as the sole general partner of IP Delaware. The principal
business
<PAGE>
CUSIP NO. 868224106 PAGE 11 OF 24 PAGES
address of Insurance GenPar, which also serves as its principal office, is 201
Main Street, Forth Worth, Texas 76102. Pursuant to Instruction C to Schedule 13D
of the Exchange Act, information with respect to IMGPLP, the sole general
partner of Insurance GenPar, is set forth below.
IMGPLP
IMGPLP is a Delaware limited partnership, the principal business of which
is serving as the sole general partner of Insurance GenPar. The principal
business address of IMGPLP, which also serves as its principal office, is 201
Main Street, Fort Worth, Texas 76102. Pursuant to Instruction C to Schedule 13D
of the Exchange Act, information with respect to IMGPI, the sole general partner
of IMGPLP, is set forth below.
IMGPI
IMGPI is a Delaware corporation, the principal business of which is
serving as the sole general partner of IMGPLP. The principal business address of
IMGPI, which also serves as its principal office, is 201 Main Street, Fort
Worth, Texas 76102. Pursuant to Instruction C to Schedule 13D of the Exchange
Act, the name, residence or business address, and present principal occupation
or employment of each director, executive officer and controlling person of
IMGPI are as follows:
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
- ---- ---------------- --------------------
Robert A. Spass One Chase Manhattan Plaza Managing Partner of Insurance
44th Floor Partners Advisors, L.P.
New York, NY 10005
Daniel L. Doctoroff 65 East 55th Street Managing Partner of Insurance
New York, NY 10022 Partners Advisors, L.P.
Steven B. Gruber 65 East 55th Street Managing Partner of Insurance
New York, NY 10022 Partners Advisors, L.P.
Insurance Partners Advisors, L.P. is a Delaware limited partnership, the
principal business of which is performing investment banking services for IP
Delaware, IP Bermuda and their portfolio companies. The principal business
address of Insurance Partners Advisors, L.P. is One Chase Manhattan Plaza, 44th
Floor, New York, New York 10005.
<PAGE>
CUSIP NO. 868224106 PAGE 12 OF 24 PAGES
IP BERMUDA
IP Bermuda is a Bermuda limited partnership, formed to invest in
securities of insurance entities to be selected by its investment committee. The
principal business address of IP Bermuda, which also serves as its principal
office, is Cedar House, 41 Cedar Avenue, P.O. Box HM 1179, Hamilton, HM EX,
Bermuda. Pursuant to Instruction C to Schedule 13D of the Exchange Act,
information with respect to Insurance GenPar Bermuda, the sole general partner
of IP Bermuda, is set forth below.
INSURANCE GENPAR BERMUDA
Insurance GenPar Bermuda is a Bermuda limited partnership, the principal
business of which is serving as the general partner of IP Bermuda. The principal
business address of Insurance GenPar Bermuda, which also serves as its principal
office, is Cedar House, 41 Cedar Avenue, P.O. Box HM 1179, Hamilton, HM EX,
Bermuda. Pursuant to Instruction C to Schedule 13D of the Exchange Act,
information with respect to IBMGPLP, the sole general partner of Insurance
GenPar Bermuda, is set forth below.
IBMGPLP
IBMGPLP is a Bermuda limited partnership, the principal business of which
is serving as the sole general partner of Insurance GenPar Bermuda. The
principal business address of IBMGPLP, which also serves as its principal
office, is Cedar House, 41 Cedar Avenue, P.O. Box HM 1179, Hamilton, HM EX,
Bermuda. Pursuant to Instruction C to Schedule 13D of the Exchange Act,
information with respect to IBMGPI, the sole general partner of IBMGPLP, is set
forth below.
IBMGPI
IBMGPI is a Bermuda corporation, the principal business of which is
serving as the sole general partner of IBMGPLP. The principal business address
of IBMGPI, which also serves as its principal office, is Cedar House, 41 Cedar
Avenue, P.O. Box HM 1179, Hamilton, HM EX, Bermuda. Pursuant to Instruction C to
Schedule 13D of the Exchange Act, the name, residence or business address, and
present principal occupation or employment of each director, executive director
and controlling person of IBMGPI are as follows:
<PAGE>
CUSIP NO. 868224106 PAGE 13 OF 24 PAGES
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
- ---- ---------------- --------------------
Robert A. Spass See above See above
Daniel L. Doctoroff See above See above
Steven B. Gruber See above See above
(d) None of the entities or persons identified in this Item 2 has, during
the last five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) None of the entities or persons identified in this Item 2 has, during
the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
(f) All of the natural persons identified in this Item 2 are citizens of
the United States of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS
As more fully described in Item 6 below, IP Delaware purchased an
aggregate of 1,369,856 shares of Common Stock for an aggregate purchase price of
$10,315,015 and IP Bermuda purchased an aggregate of 754,978 shares of Common
Stock for an aggregate purchase price of $5,684,984. Both IP Delaware and IP
Bermuda used contributions from their respective partners to fund such
purchases.
ITEM 4. PURPOSE OF TRANSACTION
The Reporting Persons consummated the transactions described herein in
order to acquire a significant interest in the Company and for investment
purposes. The Reporting Persons do not intend to obtain control (as defined in
Rule 12b-2 of the Exchange Act) of the Company.
The Reporting Persons intend to review continuously their position in the
Company. Depending upon future evaluations of the business prospects of the
Company and upon other developments, including, but not limited to, general
economic and business conditions and stock market conditions, each of the
Reporting Persons may retain or from time to time dispose of all or a portion of
its holdings,
<PAGE>
CUSIP NO. 868224106 PAGE 14 OF 24 PAGES
subject to any applicable legal and contractual restrictions on its ability to
do so, including, without limitation, the restrictions set forth in the
Company's Certificate of Incorporation described in Item 6 below.
In addition, the matters set forth in Item 6 below are incorporated in
this Item 4 by reference as if fully set forth herein.
Except as set forth in this Item 4, the Reporting Persons have no present
plans or proposals that relate to or that would result in any of the actions
specified in clauses (b) through (j) of Item 4 of Schedule 13D of the Exchange
Act.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a)
IP DELAWARE
IP Delaware may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to
be the beneficial owner of 1,369,856 shares of Common Stock, which constitutes
approximately 23.5% of the 5,837,144 shares of Common Stock deemed outstanding
pursuant to Rule 13d(d)(l)(i) of the Exchange Act.
INSURANCE GENPAR
In its capacity as the sole general partner of IP Delaware, Insurance
GenPar may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the
beneficial owner of 1,369,856 shares of Common Stock, which constitutes
approximately 23.5% of the 5,820,808 shares of Common Stock deemed outstanding
pursuant to Rule 13d- 3(d)(1)(i) of the Exchange Act.
IMGPLP
In its capacity as the sole general partner of Insurance GenPar, which is
the sole general partner of IP Delaware, IMGPLP may, pursuant to Rule 13d-3 of
the Exchange Act, be deemed to be the beneficial owner of 1,369,856 shares of
Common Stock, which constitutes approximately 23.5% of the 5,837,144 shares of
Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Exchange
Act.
IMGPI
In its capacity as the sole general partner of IMGPLP, which is the sole
general partner of Insurance GenPar, which is the sole general partner of IP
Delaware, IMGPI may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be
the beneficial owner of 1,369,856 shares of the Stock, which constitutes
approximately 23.5% of the 5,837,144 shares of Common Stock deemed outstanding
pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act.
<PAGE>
CUSIP NO. 868224106 PAGE 15 OF 24 PAGES
IP BERMUDA
IP Bermuda may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to
be the beneficial owner of 754,978 shares of Common Stock, which constitutes
approximately 13.0% of the 5,837,144 shares of Common Stock deemed outstanding
pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act.
INSURANCE GENPAR BERMUDA
In its capacity as the sole general partner of IP Bermuda, Insurance
GenPar Bermuda may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be
the beneficial owner of 754,978 shares of Common Stock, which constitutes
approximately 13.0% of the 5,837,144 shares of Common Stock deemed outstanding
pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act.
IBMGPLP
In its capacity as the sole general partner of Insurance GenPar Bermuda,
which is the sole general partner of IP Bermuda, IBMGPLP may, pursuant to Rule
13d-3 of the Exchange Act, be deemed to be the beneficial owner of 754,978
shares of Common Stock, which constitutes approximately 13.0% of the 5,837,144
shares of Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the
Exchange Act.
IBMGPI
In its capacity as the sole general partner of IBMGPLP, which is the sole
general partner of Insurance GenPar Bermuda, which is the sole general partner
of IP Bermuda, IBMGPI may, pursuant to Rule 13d-3 of the Exchange Act, be deemed
to be the beneficial owner of 754,978 shares of Common Stock, which constitutes
approximately 13.0% of the 5,837,144 shares of Common Stock deemed outstanding
pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act.
(b) Prior to the closing of the transactions contemplated by the Stock
Purchase Agreement described in Item 6 below, none of the Reporting Persons has
any power to vote or to direct the vote or to dispose or to direct the
disposition of any shares of Common Stock.
(c) Except as set forth herein or in the Exhibits filed herewith, none of
the persons named in response to paragraph (a) has effected any transactions in
shares of Common Stock during the past 60 days.
(d) Each of the Reporting Persons affirms that no person other than such
Reporting Person has the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the shares of Common Stock
owned by such Reporting Person.
<PAGE>
CUSIP NO. 868224106 PAGE 16 OF 24 PAGES
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE ISSUER
Pursuant to the Stock Purchase Agreement, dated as of September 17,
1996, as amended and restated effective as of February 17, 1997 (the "Stock
Purchase Agreement"), by and among the Company, IP Delaware, IP Bermuda and such
other persons or entities who execute the form of Stock Subscription Agreement
attached thereto as Exhibit A, the Company agreed to issue and sell to IP
Delaware and IP Bermuda, and IP Delaware and IP Bermuda agreed to purchase from
the Company, an aggregate of not more than $18,000,000 worth of shares of Common
Stock. The Company and Insurance Partners agreed that such $18,000,000 would be
reduced, and such $18,000,000 was reduced, by the amount of Common Stock
purchased by other persons or entities executing Stock Subscription Agreements
with the Company. As a result, IP Delaware agreed to purchase an aggregate of
1,369,856 shares of Common Stock for an aggregate purchase price of $10,315,016
and IP Bermuda agreed to purchase an aggregate of 754,978 shares of Common Stock
for an aggregate purchase price of $5,684,984. The description of the Stock
Purchase Agreement that follows is not, and does not purport to be, complete and
is qualified in its entirety by reference to the Stock Purchase Agreement. The
Stock Purchase Agreement is incorporated herein by reference to the Stock
Purchase Agreement filed by the Company with the Securities and Exchange
Commission (the "Commission") as Annex A of the Company's Proxy Statement, dated
March 10, 1997, and filed with the Commission.
As more fully described in Section 4.2 of the Stock Purchase
Agreement, so long as the shares of Common Stock owned by Insurance Partners and
its Associates (as hereinafter defined), directly or indirectly, represent 15%
(the "15% Threshold") of the outstanding shares of the Company on a fully
diluted basis (including, without limitation, the Company's 14.5% Senior
Subordinated Voting Notes due April 1, 2002 (the "Voting Notes")), the Company
and Insurance Partners agreed as follows:
(a) Pursuant to Section 4.2(a) of the Stock Purchase Agreement,
Insurance Partners agreed with respect to itself and any person or entity that
controls, is under common control with, or is controlled by Insurance Partners
or such persons or entities, and all individuals who are officers, directors or
control persons of any such entities, including Insurance Partners, that are not
signatories to the Stock Purchase Agreement (collectively, "Associates") that
Insurance Partners and Insurance Partners's Associates will not, subject to
certain exceptions set forth in Section 4.2 of the Stock Purchase Agreement, (a)
acquire or offer or agree to acquire, directly or indirectly, by purchase or
otherwise, any shares of Common Stock or voting securities of the Company (or
direct or indirect rights or options to acquire any such securities), (b) enter,
agree to enter into or propose to enter into, directly or indirectly, any merger
or business combination involving the Company, (c) make, or in any way
participate, directly or indirectly, in any "solicitation" of "proxies" (as such
terms are used in the rules of the Securities and Exchange Commission) or
consent to vote, or seek to advise or influence any person or entity with
respect to the voting of, any voting securities of the Company or (d) form, join
or in any way participate in a "group" (within the meaning of Section 13d-3 of
the Exchange Act) with any persons not referred to in Section 4.2 of the Stock
Purchase Agreement with
<PAGE>
CUSIP NO. 868224106 PAGE 17 OF 24 PAGES
respect to any of the foregoing, PROVIDED, HOWEVER, that nothing in Section
4.2(a) of the Stock Purchase Agreement shall restrict Insurance Partners or any
of its Associates from (A) acquiring shares of Common Stock or voting securities
as a result of a stock split, stock dividend or similar recapitalization of the
Company, (B) exercising the warrant issued to International Insurance Advisors,
Inc. pursuant to the Note Purchase Agreement, dated as of March 31, 1992, among
the Company and each of the several purchasers listed on Schedule I thereto and
the warrant issued to CentreLine Reinsurance Limited pursuant to the Preferred
Securities Purchase Agreement, dated as of June 30, 1994, among the Company,
Superior National Capital Holding Corporation, Superior National Capital, L.P.
and Centre Reinsurance Services (Bermuda) III Limited, (C) making, or in any way
participating, directly or indirectly, in any "solicitation" of "proxies" (as
such terms are defined in Rule 14a-1 under the Exchange Act) in connection with
the election to the Board of Directors of directors nominated by Insurance
Partners or any of its Associates (to the extent not otherwise inconsistent with
the Stock Purchase Agreement) or (D) with respect to a tender or exchange offer
or a merger or other business combination involving the Company (a "Business
Combination"), which was initiated without the encouragement by or the
participation of Insurance Partners or any of its Associates, making a tender or
exchange offer or a proposal with respect to a Business Combination, or forming,
joining or participating as a "group" to make such offer or proposal, in either
case upon more favorable terms than those of the unsolicited tender or exchange
offer or Business Combination; and PROVIDED FURTHER, that nothing contained in
Section 4.2(a) of the Stock Purchase Agreement shall affect or impair the right
of any director of the Company to (x) act as a member of the Board of Directors
or any committee thereof or (y) take any action necessary or advisable to carry
out his obligations and duties as a director of the Company. Notwithstanding
anything to the contrary contained in the Stock Purchase Agreement, nothing in
Section 4.2(a) of the Stock Purchase Agreement shall prohibit or restrict any
Associate who is a director of the Company from acquiring, in one or more
transactions, in his individual capacity, an aggregate of 25,000 shares of
Common Stock so long as such acquisition does not violate any provision of the
Company's charter as in effect from time to time.
(b) The limitations set forth in Section 4.2(a) of the Stock
Purchase Agreement and described in paragraph (a) above may be waived by the
affirmative vote of the nearest whole number representing 66 2/3% or more of (i)
the directors of the Company, excluding from the total number of directors
voting, those who are Associates of Insurance Partners and those who are
employees of the Company or (ii) the shares of the Company, not including in
such total number of shares voting, those beneficially owned by those executive
officers of the Company subject to the reporting requirements of Section 16 of
the Exchange Act and those owned by Insurance Partners and its Associates. In
addition, any material business relationship between the Company and Insurance
Partners or any Associate of Insurance Partners must be approved in the manner
described in the preceding sentence.
<PAGE>
CUSIP NO. 868224106 PAGE 18 OF 24 PAGES
(c) Other than with respect to the election of directors of the
Company, with respect to any vote of the stockholders of the Company on a
particular matter, if the aggregate number of all shares that are voted in like
manner by Insurance Partners and its Associates are greater than 35% of the
total number of shares voted, then those votes that exceed such 35% threshold
shall be voted in the same proportion as the other shareholders voted their
shares with respect to such matter.
The Company agreed that during the term of the Stock Purchase
Agreement, the Board of Directors of the Company (the "Board of Directors")
shall nominate one individual (the "IP Designee") designated by Insurance
Partners (provided that such individual is reasonably acceptable to the Board of
Directors) for election as a director of the Company at each annual meeting of
the shareholders, PROVIDED that, subject to the 15% Threshold, as more fully
described in Section 4.2(e) of the Stock Purchase Agreement, Insurance Partners
agreed that Insurance Partners and its Associates may not elect a total or more
than five persons (or the highest number that is less than a majority of the
Board of Directors, as the case may be), including the IP Designee, who are
Associates of Insurance Partners to be directors of the Company.
In addition, subject to the 15% Threshold, Insurance Partners agreed
not to transfer, assign, sell or otherwise dispose of (each, a "Transfer") any
of its shares of Common Stock, except for Transfers made in accordance with
Section 4.3 of the Stock Purchase Agreement. Pursuant to Section 4.3 of the
Stock Purchase Agreement, Insurance Partners may at any time Transfer any or all
of its shares of Common Stock (i) to any Associate of Insurance Partners, if
such Associate executes and delivers to the Company, prior to any such Transfer,
an instrument in form and substance reasonably satisfactory to the Company
pursuant to which such Associate agrees to be bound by the provisions of
Sections 4.2 and 4.3 of the Stock Purchase Agreement, (ii) pursuant to Rule 144
under the Securities Act of 1933, as amended (the "Securities Act") or any
successor such rule, (iii) pursuant to a tender offer or exchange offer made by
the Company or any "Affiliate" (as such term is defined in Rule 12b-2 of the
Exchange Act) of the Company, (iv) pursuant to a tender offer or exchange offer
initiated by any person or "group" (within the meaning of Section 13d-3 of the
Exchange Act) other than Insurance Partners or any Associate thereof or a
Business Combination, which is approved or recommended by the Board of Directors
of the Company or with respect to which the Board of Directors of the Company
has announced its intention to remain neutral, (v) so long as the shares of
Common Stock to be transferred represent, in the aggregate, not greater than 10%
of the outstanding Common Stock, in a transaction or series of transactions
exempt from the registration and prospectus delivery requirements of the
Securities Act, (vi) by the Transfer of greater than 10% of the outstanding
shares of Common Stock in a transaction or series of transactions exempt from
the registration and prospectus delivery requirements of the Securities Act to
(x) one purchaser, (y) one purchaser and its Affiliates or (z) a "group" of
purchasers, if such purchaser or purchasers of
<PAGE>
CUSIP NO. 868224106 PAGE 19 OF 24 PAGES
Common Stock in any such transaction or series of transactions execute and
deliver to the Company prior to any such purchaser or purchases an instrument in
form satisfactory to the Company pursuant to which such purchaser or purchasers
agree to be bound by the provisions of Sections 4.2 and 4.3 of the Stock
Purchase Agreement (treating such purchaser or purchasers as an "Associate" for
purposes of such Sections 4.2 and 4.3) or (vii) pursuant to a registration
statement filed under the Securities Act pursuant to the Registration Rights
Agreement (as hereinafter defined) or otherwise.
In addition, the Transfer by Insurance Partners of its shares of
Common Stock is also restricted by the Company's Certificate of Incorporation,
which restricts, until three years after the closing date of the consummation of
the transactions contemplated by the Stock Purchase Agreement, any direct or
indirect transfer of "stock" (which term includes the Common Stock and any
interest in the Company that would be treated as stock under Section 382 of the
Internal Revenue Code of 1986, as amended, and the Treasury Regulations
promulgated thereunder (collectively, "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% of more of the Company's stock, would
otherwise increase the percentage of stock owned by a "5 percent shareholder"
(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.
Insurance Partners also agreed that Robert A. Spass will abstain
from the votes of the investment committees of each of IP Delaware and IP
Bermuda with respect to their investment in the Company. Mr. Spass is the sole
stockholder of the sole general partner of International Insurance Investors,
L.P. ("III"), which owns all of the issued and outstanding Voting Notes. The
Voting Notes may be voted in the election of directors of the Company, the
removal of such directors, votes on amending such right to vote and changes in
the authorized number of directors. On the date hereof, the number of votes
attached to the Voting Notes, and held by III by virtue of its ownership of the
Voting Notes, is equivalent to 1,566,465 shares of Common Stock.
In connection with the Stock Purchase Agreement, the Company, IP
Delaware and IP Bermuda entered into the Registration Rights Agreement, dated as
of April 11, 1997 (the "Registration Rights Agreement"). The description of the
Registration Rights Agreement that follows is not, and does not purport to be,
complete and is qualified in its entirety by reference to the Registration
Rights Agreement, a copy of which is attached hereto as Exhibit 1. Pursuant to
the Registration Rights Agreement, Insurance Partners and its affiliates (as
defined in Rule 12b-2 of the Exchange Act) to which shares of Common Stock are
transferred have the right, subject to certain limitations set forth in the
Registration Rights Agreement, to request the Company at any time to register
under the Securities Act, at the Company's expense, all or part of the shares of
Common Stock owned by Insurance Partners and its affiliates (a "Demand
Registration"). The Company agreed to pay such expenses in connection with three
Demand Registrations, PROVIDED that such number of Demand Registrations may be
reduced if the certain conditions set forth in Section 3(d) of the Registration
Rights Agreement are satisfied. IP Delaware and IP Bermuda also have certain
piggyback registration rights in connection with registrations by the Company
under the Securities Act.
<PAGE>
CUSIP NO. 868224106 PAGE 20 OF 24 PAGES
In connection with the Stock Purchase Agreement, the Company, IP Delaware,
IP Bermuda, International Insurance Advisors, Inc. ("IIA"), International
Insurance Investors, L.P. ("III") (including its general partner and those
limited partners that are signatories to the Letter Agreement), certain
individuals listed on Schedule 2 thereto (the "Management Warrantholders") and
Centreline Reinsurance Limited ("Centreline"), entered into a letter agreement
(the "Letter Agreement"), dated as of November 25, 1996. The description of the
Letter Agreement that follows is not, and does not purport to be, complete and
is qualified in its entirety by reference to the Letter Agreement, a copy of
which is attached hereto as Exhibit 2.
Insofar as the Letter Agreement specifically relates to Insurance
Partners, the Letter Agreement clarifies the relationship between the
registration rights of IP Bermuda and IP Delaware under the Registration Rights
Agreement and the registration rights of IIA, III, the Management Warrantholders
and Centreline (collectively, the "Warrantholders") under their respective
warrants. Specifically, the Letter Agreement provides that in the event of a
demand registration by either the Warrantholders or Insurance Partners, the
other party may participate in such registration, pro rata based on the number
of shares proposed to be registered. The letter agreement also provides that in
the event the Company proposes to register in an underwritten offering any
shares of its Common Stock, then the number of shares of Common Stock that are
entitled to be included in such offering shall be allocated (i) first, to the
Company for shares of Common Stock being sold for its own account, (ii) second,
among requesting Warrantholders and Insurance Partners, pro rata based on the
number of shares requested to be included in such offering and (iii) third, to
any other requesting shareholder.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Incorporated by reference to Annex Stock Purchase Agreement, dated as
A of the Company's Proxy Statement, of September 17, 1996, as amended
dated March 10, 1997, filed with and restated effective February 17,
the Commission 1997 by and among Superior National
Insurance Group, Inc., Insurance
Partners, L.P., Insurance Partners
Offshore (Bermuda), L.P. and such
other persons or entities who
execute the form of Stock
Subscription Agreement attached
thereto as Exhibit A.
Exhibit 1: Registration Rights Agreement,
dated as of April 11, 1997, among
the Superior National Insurance
Group, Inc., Insurance Partners,
L.P. and Insurance Partners
Offshore (Bermuda), L.P.
Exhibit 2: Letter Agreement, dated as of
November 25, 1996 among Superior
National Insurance Group, Inc. (the
"Company"), Insurance Partners, L.P.,
Insurance Partners Offshore
(Bermuda), L.P. and each of the
several holders of warrants of the
Company signatory thereto.
<PAGE>
CUSIP NO. 868224106 Page 21 of 24 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
Dated: April 21, 1997
INSURANCE PARTNERS, L.P., a Delaware limited
partnership
By: Insurance GenPar, L.P., a Delaware limited
partnership, its General Partner
By: Insurance GenPar MGP, L.P., a Delaware limited
partnership, its General Partner
By: Insurance GenPar MGP, Inc., a Delaware
corporation, its General Partner
By: /S/ DANIEL L. DOCTOROFF
---------------------------------------
Name: Daniel L. Doctoroff
Title: Vice President
INSURANCE GENPAR, L.P., a Delaware limited
partnership
By: Insurance GenPar MGP, L.P., a Delaware limited
partnership, its General Partner
By: Insurance GenPar MGP, Inc., a Delaware
corporation, its General Partner
By: /S/ DANIEL L. DOCTOROFF
---------------------------------------
Name: Daniel L. Doctoroff
Title: Vice President
<PAGE>
CUSIP NO. 868224106 Page 22 of 24 Pages
INSURANCE GENPAR MGP, L.P., a Delaware limited
partnership
By: Insurance GenPar MGP, Inc., a Delaware
corporation, its General Partner
By: /S/ DANIEL L. DOCTOROFF
---------------------------------------
Name: Daniel L. Doctoroff
Title: Vice President
INSURANCE GENPAR MGP, INC.,
a Delaware corporation
By: /S/ DANIEL L. DOCTOROFF
---------------------------------------
Name: Daniel L. Doctoroff
Title: Vice President
INSURANCE PARTNERS OFFSHORE (BERMUDA),
L.P., a Bermuda limited partnership
By: Insurance GenPar (Bermuda), L.P., a Bermuda
limited partnership, its General Partner
By: Insurance GenPar (Bermuda) MGP, L.P., a
Bermuda limited partnership, its General Partner
By: Insurance GenPar (Bermuda) MGP, Ltd., a
Bermuda corporation, its General Partner
By: /S/ DANIEL L. DOCTOROFF
---------------------------------------
Name: Daniel L. Doctoroff
Title: Vice President
<PAGE>
CUSIP NO. 868224106 Page 23 of 24 Pages
INSURANCE GENPAR (BERMUDA), L.P., a Bermuda
limited partnership
By: Insurance GenPar (Bermuda) MGP, L.P., a
Bermuda limited partnership, its General Partner
By: Insurance GenPar (Bermuda) MGP, Ltd., a
Bermuda corporation, its General Partner
By: /S/ DANIEL L. DOCTOROFF
---------------------------------------
Name: Daniel L. Doctoroff
Title: Vice President
INSURANCE GENPAR (BERMUDA) MGP, L.P., a
Bermuda corporation
By: Insurance GenPar (Bermuda) MGP, Ltd., a
Bermuda corporation, its General Partner
By: /S/ DANIEL L. DOCTOROFF
---------------------------------------
Name: Daniel L. Doctoroff
Title: Vice President
INSURANCE GENPAR (BERMUDA) MGP, LTD., a
Bermuda corporation
By: /S/ DANIEL L. DOCTOROFF
---------------------------------------
Name: Daniel L. Doctoroff
Title: Vice President
<PAGE>
CUSIP NO. 868224106 Page 24 of 24 Pages
EXHIBIT INDEX
Number Document Page on which
- ------ -------- Exhibit Appears
---------------
Stock Purchase Agreement, dated as of Incorporated by
September 17, 1996, as amended and reference to Annex A
restated effective February 17, 1997 by of the Company's
and among Superior National Insurance Proxy Statement,
Group, Inc., Insurance Partners, L.P., dated March 10,
Insurance Partners Offshore (Bermuda), 1996, filed with the
L.P. and such other persons or entities Commission
who execute the form of Stock
Subscription Agreement attached thereto
as Exhibit A
Registration Rights Agreement, dated as of
1 April 11, 1997, among Superior National
Insurance Group, Inc., Insurance Partners,
L.P. and Insurance Partners Offshore
(Bermuda), L.P. 25
Letter Agreement, dated as of November 25,
2 1996 among Superior National Insurance
Group, Inc. (the "Company"), Insurance
Partners, L.P., Insurance Partners Offshore
(Bermuda), L.P. and each of the several
holders of warrants of the Company signatory
thereto. 49
================================================================================
REGISTRATION RIGHTS AGREEMENT
among
SUPERIOR NATIONAL INSURANCE GROUP, INC.,
INSURANCE PARTNERS, L.P.
and
INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P.
---------------------------
Dated: April 11, 1997
---------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
1. Definitions......................................................1
2. General; Securities Subject to this Agreement....................4
(a) Grant of Rights............................................4
(b) Registrable Securities.....................................4
(c) Holders of Registrable Securities..........................4
3. Demand Registration..............................................5
(a) Request for Demand Registration............................5
(b) Limitation on Demand Registrations.........................5
(c) Effective Demand Registration..............................6
(d) Expenses...................................................6
(e) Underwriting Procedures....................................6
(f) Selection of Underwriters..................................7
4. Incidental or "Piggy-Back" Registration..........................7
(a) Request for Incidental Registration........................7
(b) Reduction in Registrable Securities to be Registered.......8
(c) Expenses...................................................9
5. Holdback Agreements..............................................9
(a) Restrictions on Public Sale by Designated Holders..........9
(b) Restrictions on Public Sale by the Company.................9
6. Registration Procedures.........................................10
(a) Obligations of the Company................................10
(b) Seller Information........................................12
(c) Preparation; Reasonable Investigation.....................12
(d) Notice to Discontinue.....................................13
7. Indemnification; Contribution...................................13
(a) Indemnification by the Company............................13
i
<PAGE>
PAGE
(b) Indemnification by Designated Holders.....................14
(c) Conduct of Indemnification Proceedings....................15
(d) Other Indemnification.....................................16
(e) Contribution..............................................16
(f) Insurance.................................................16
8. Rule 144........................................................17
9. Miscellaneous...................................................17
(a) Recapitalizations, Exchanges, etc.........................17
(b) No Inconsistent Agreements................................17
(c) Remedies..................................................18
(d) Amendments and Waivers....................................18
(e) Notices...................................................18
(f) Successors and Assigns; Third Party Beneficiaries.........19
(g) Counterparts..............................................20
(h) Headings..................................................20
(I) GOVERNING LAW.............................................20
(j) Severability..............................................20
(k) Entire Agreement..........................................20
(l) Further Assurances........................................20
ii
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated April 11, 1997 (this
"Agreement"), among Superior National Insurance Group, Inc., a California
corporation (the "Company"), Insurance Partners, L.P., a Delaware limited
partnership ("IP"), and Insurance Partners Offshore (Bermuda), L.P., a Bermuda
limited partnership ("IP Bermuda" and, together with IP, "Insurance Partners").
WHEREAS, pursuant to the Amended and Restated Stock Purchase
Agreement, dated as of September 17, 1996, as amended and restated effective as
of February 17, 1997 (the "Stock Purchase Agreement"), by and among the Company,
IP, IP Bermuda and such other persons or entities that execute the form of
subscription agreement attached thereto as Exhibit A, pursuant to which the
Company has agreed to, among other things, issue and sell to (a) IP, and IP has
agreed to purchase from the Company, an aggregate of 1,369,856 shares of Common
Stock and (b) IP Bermuda, and IP Bermuda has agreed to purchase from the
Company, an aggregate of 754,978 shares of Common Stock; and
WHEREAS, in order to induce each of IP and IP Bermuda to purchase
its shares of Common Stock (in the aggregate, the "Shares"), the Company has
agreed to grant registration rights with respect to the Registrable Securities
(as hereinafter defined) as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereby agree
as follows:
1. DEFINITIONS. As used in this Agreement the following terms
have the meanings indicated:
"AFFILIATE" shall mean any Person who is an "affiliate" as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
"APPROVED UNDERWRITER" has the meaning set forth in Section
3(f).
"CENTRELINE" means CentreLine Reinsured Limited, a Bermuda
corporation.
"CENTRELINE WARRANT" means the Common Stock Purchase Warrant,
dated as of June 30, 1994, issued by the Company to CentreLine pursuant to the
Preferred Securities Purchase Agreement, dated as of June 30, 1994, by and
<PAGE>
2
between the Company, Superior National Capital Holding Corporation, Superior
National Capital, L.P. and Centre Reinsurance Services (Bermuda) III Limited.
"COMMISSION" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"COMMON STOCK" means the Common Stock, no par value per share,
of the Company or any other equity securities of the Company into which such
securities are converted, reclassified, reconstituted or exchanged.
"COMPANY" has the meaning assigned to such term in the recital
to this Agreement.
"COMPANY INDEMNIFIED PARTY" has the meaning set forth in
Section 7(b).
"DEMAND REGISTRATION" has the meaning set forth in Section
3(a).
"DESIGNATED HOLDER" means each of the Insurance Partners
Stockholders and any transferee thereof to whom Registrable Securities have been
transferred in accordance with Section 9(f).
"DESIGNATED INDEMNIFIED PARTY" has the meaning set forth in
Section 7(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"IIA" means International Insurance Advisors, Inc., a Delaware
corporation.
"III" means International Insurance Investors, L.P., a Bermuda
limited partnership.
"INCIDENTAL REGISTRATION" has the meaning set forth in Section
4(a).
"INDEMNIFIED PARTY" has the meaning set forth in Section 7(c).
"INITIATING HOLDER" has the meaning set forth in Section 3(a).
"INSURANCE PARTNERS" has the meaning assigned to such term in
the recital to this Agreement.
<PAGE>
3
"INSURANCE PARTNERS STOCKHOLDERS" means each of IP, IP Bermuda
and any Affiliate thereof to whom or which Registrable Securities are
transferred.
"IP" has the meaning assigned to such term in the recital to
this Agreement.
"IP BERMUDA" has the meaning assigned to such term in the
recital to this Agreement.
"1992 COMMON STOCK PURCHASE WARRANTS" means each of the Common
Stock Purchase Warrants, dated as of March 31, 1992, issued by the Company
pursuant to the Note Purchase Agreement, dated as of March 31, 1992, among the
Company and the purchasers listed on Schedule I thereto.
"OTHER RIGHTHOLDERS" has the meaning set forth in Section
3(a).
"PERSON" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, limited liability company, government (or an
agency or political subdivision thereof) or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
"REGISTRABLE SECURITIES" means each of the following: (a) any
and all Shares owned by the Designated Holders and (b) any shares of Common
Stock issued or issuable to any of the Designated Holders with respect to the
Shares by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise and shares of Common Stock issuable upon conversion,
exercise or exchange thereof.
"REGISTRATION EXPENSES" means all expenses arising from or
incident to the Company's performance of, or compliance with, this Agreement,
including, without limitation, all registration, filing and listing fees; all
fees and expenses of complying with securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue sky"
qualifications of Registrable Securities); all printing, messenger and delivery
expenses; the fees and disbursements of counsel for the Company and its
independent public accountants; the fees and disbursements of one firm of
counsel (other than in-house counsel) retained by the holders of Registrable
Securities being registered; the expenses of any special audits required by or
incident to such performance and compliance; and any liability insurance or
other premiums for insurance obtained in connection with any registration
pursuant to the terms of this Agreement; PROVIDED, HOWEVER, that Registration
Expenses shall not include underwriting discounts and commissions and transfer
taxes, if any; and PROVIDED FURTHER, that in any case where Registration
<PAGE>
4
Expenses are borne by the holders pursuant to Section 3(d), Registration
Expenses shall not include general overhead expenses of the Company or other
expenses for the preparation of financial statements or other data normally
prepared by the Company in the ordinary course of its business.
"REGISTRATION STATEMENT" means a registration statement filed
pursuant to the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SHARES" has the meaning assigned to such term in the recital
to this Agreement.
"STOCK PURCHASE AGREEMENT" has the meaning assigned to such
term in the recital to this Agreement.
"SUBSIDIARY" has the meaning set forth in Section 6(c).
2. GENERAL; SECURITIES SUBJECT TO THIS AGREEMENT.
(a) GRANT OF RIGHTS. The Company hereby grants registration
rights to the Insurance Partners Stockholders upon the terms and conditions set
forth in this Agreement.
(b) REGISTRABLE SECURITIES. For the purposes of this
Agreement, Registrable Securities will cease to be Registrable Securities when
(i) a Registration Statement covering such Registrable Securities has been
declared effective under the Securities Act by the Commission and such
Registrable Securities have been disposed of pursuant to such effective
Registration Statement, (ii) the entire amount of Registrable Securities
proposed to be sold in a single sale by a Designated Holder, in the opinion of
counsel satisfactory to the Company and the Designated Holder, each in their
reasonable judgment, may be distributed to the public without any limitation as
to volume pursuant to Rule 144 (or any successor provision then in effect) under
the Securities Act and the Designated Holder is not then an Affiliate of the
Company, or (iii) the Registrable Securities are proposed to be sold or
distributed by a Person not entitled to the registration rights granted by this
Agreement.
(c) HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to
be a holder of Registrable Securities whenever such Person owns of record
Registrable Securities, or holds an option to purchase, or a security
convertible into or exercisable or exchangeable for, Registrable Securities
whether or not such acquisition or conversion has actually been effected and
disregarding any legal restrictions upon the exercise of such rights. If the
Company receives conflicting
<PAGE>
5
instructions, notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company may act upon the basis of the
instructions, notice or election received from the registered owner of such
Registrable Securities. Registrable Securities issuable upon exercise of an
option or upon conversion of another security shall be deemed outstanding for
the purposes of this Agreement.
3. DEMAND REGISTRATION.
(a) REQUEST FOR DEMAND REGISTRATION. At any time any of the
Insurance Partners Stockholders (the "Initiating Holders") shall be entitled to
request in writing that the Company use its best efforts to effect the
registration under the Securities Act, and under the securities or "blue sky"
laws of any jurisdiction designated by such Initiating Holders, of all or part
of such Initiating Holders' Registrable Securities in accordance with this
Section 3 (a "Demand Registration"). Any such request for a Demand Registration
shall specify the amount of Registrable Securities proposed to be sold and the
intended method of disposition thereof. Upon receiving a request for a Demand
Registration, the Company will promptly, but in no event more than 10 days after
the receipt from the Initiating Holders of a request for a Demand Registration,
give written notice of such Demand Registration to all of the Insurance Partners
Stockholders (other than the Initiating Holders) and all holders of (x) the 1992
Common Stock Purchase Warrants and (y) the CentreLine Warrant (the "Other
Rightholders"), and thereupon will, as provided in Section 6, use its best
efforts to effect the registration under the Securities Act of (i) the
Registrable Securities which the Company has been so requested by the Initiating
Holders to register and (ii) all other shares of Common Stock which the Company
has been requested in writing to register by such Insurance Partners
Stockholders and Other Rightholders (which requests shall specify the number of
shares of Common Stock proposed to be sold and the intended method of
disposition thereof and shall be given to the Company within 30 days after the
giving of such written notice of the Demand Registration by the Company).
(b) LIMITATION ON DEMAND REGISTRATIONS. Notwithstanding
anything to the contrary set forth in Section 3(a), the Company shall not be
obligated to file a Registration Statement with respect to a Demand Registration
upon a request by the Initiating Holders under Section 3(a) if (i) the Company
has any other Registration Statement on file but not yet declared effective,
(ii) the Company has filed any other Registration Statement that has an
effective date within a period of 180 days prior to the filing of the
Registration Statement with respect to the Demand Registration, (iii)
Registrable Securities having an anticipated aggregate net offering price of
less than $7,500,000 are to be registered in such Demand Registration or (iv)
the Company has paid the Registration Expenses for the maximum number of Demand
Registrations for which it is obligated to pay under Section 3(d).
<PAGE>
6
(c) EFFECTIVE DEMAND REGISTRATION. A registration shall not
constitute a Demand Registration until it has become effective and remains
continuously effective for the lesser of (i) the period during which all
Registrable Securities registered in the Demand Registration are sold and (ii)
180 days; PROVIDED, HOWEVER, that a registration shall not constitute a Demand
Registration if (x) after such Demand Registration has become effective, such
registration or the related offer, sale or distribution of Registrable
Securities thereunder is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court for
any reason not attributable to the Initiating Holders and such interference is
not thereafter eliminated or (y) the conditions to closing specified in the
underwriting agreement, if any, entered into in connection with such Demand
Registration are not satisfied or waived, other than by reason of a failure by
the Initiating Holders.
(d) EXPENSES. The Company will pay all Registration Expenses
in connection with three Demand Registrations under this Section 3 that either
become effective under the Securities Act or are withdrawn prior to the
effective date thereof; PROVIDED, HOWEVER, that the Company shall be obligated
to pay all Registration Expenses in connection with only two Demand
Registrations under this Section 3 that either become effective under the
Securities Act or are withdrawn prior to the effective date thereof if (i) there
shall have been an Incidental Registration pursuant to Section 4(a) and (ii) the
Company shall have registered in such Incidental Registration Registrable
Securities held by the Insurance Partners Stockholders having an anticipated
aggregate net offering price of not less than $5,000,000; PROVIDED FURTHER, that
any such withdrawal as the result of the actions of any Person or Persons other
than the Initiating Holders, or based upon material adverse information relating
to the Company that is different from the information known by or available
(upon request from the Company or otherwise) to the Initiating Holders at the
time of their request for a Demand Registration under this Section 3, shall not
diminish the number of registrations in connection with which the Company agrees
to pay Registration Expenses; and PROVIDED FURTHER, that if such withdrawal is
the result of the actions of the Initiating Holders, then such Initiating
Holders may in their sole and unlimited discretion elect to bear the
Registration Expenses of such Demand Registration, in which case such
registration shall not be counted as a Demand Registration pursuant to this
Section 3. In the event that the Initiating Holders elect to bear the
Registration Expenses (and underwriting discounts and commissions and transfer
taxes, if any) in connection with any Demand Registration requested under this
Section 3, such Registration Expenses shall be apportioned among the holders
whose shares of Common Stock are then being registered, on the basis of the
respective amounts (by number of shares) of Common Stock then being registered
by them or on their behalf.
(e) UNDERWRITING PROCEDURES. If the Initiating Holders so
elect, the offering of Registrable Securities pursuant to a Demand Registration
shall be in the form of a firm commitment underwritten offering and the managing
<PAGE>
7
underwriter or underwriters selected for such offering shall be the Approved
Underwriter (as hereinafter defined) selected in accordance with Section 3(f).
In connection with any Demand Registration under this Section 3 involving an
underwriting, none of the Registrable Securities held by any of the Insurance
Partners Stockholders (other than the Initiating Holders) or shares of Common
Stock held by any Other Rightholders making a request for inclusion thereof
pursuant to Section 3(a) shall be included in such underwriting unless such
Insurance Partners Stockholders or Other Rightholders, as the case may be,
accept the terms of the underwriting as agreed upon by the Company, the
Initiating Holders and the Approved Underwriter, and then only in such quantity
as will not, in the opinion of the Approved Underwriter, jeopardize the success
of such offering. If the Approved Underwriter advises the Company in writing
that in its opinion the aggregate amount of Common Stock requested to be
included in such offering is sufficiently large to have a material adverse
effect on the success of such offering, then the Company shall include in such
registration only the aggregate amount of Common Stock that in the opinion of
the Approved Underwriter may be sold without any such material adverse effect
and shall reduce, as to the Initiating Holders, the Insurance Partners
Stockholders (other than the Initiating Holders) and the Other Rightholders as a
group, the amount of Common Stock to be included in such registration, pro rata
within such group based on the number of Registrable Securities and other shares
of Common Stock included in the request for registration pursuant to Section
3(a).
(f) SELECTION OF UNDERWRITERS. If any Demand Registration of
Registrable Securities is in the form of an underwritten offering, the
Initiating Holders holding a majority of the Registrable Securities held by all
such Initiating Holders shall select and obtain an investment banking firm of
national reputation to act as the managing underwriter of the offering (the
"Approved Underwriter"); PROVIDED, HOWEVER, that the Approved Underwriter shall,
in any case, be acceptable to the Company in its reasonable judgment.
4. INCIDENTAL OR "PIGGY-BACK" REGISTRATION.
(a) REQUEST FOR INCIDENTAL REGISTRATION. If the Company, at
any time or from time to time, proposes to register any of its shares of Common
Stock for its own account under the Securities Act (other than a registration of
shares of Common Stock solely in connection with any plan for the acquisition of
shares of Common Stock by employees of the Company or any dividend reinvestment
plan, and other than a registration of shares of Common Stock, the Registration
Statement pertaining to which does not permit secondary sales or include
substantially the same information as would be required to be included in a
Registration Statement covering the sale of Registrable Securities), then it
will at each such time give written notice (given at least 30 days prior to the
proposed filing date) describing the proposed registration and distribution to
each of the Designated Holders of its intention to do so and, upon the written
request of each of the Designated Holders, made within 30 days
<PAGE>
8
after the receipt of any such notice (which request shall specify the amount of
Registrable Securities proposed to be sold by such Designated Holder and the
intended method of disposition thereof), the Company will, as provided in
Section 6, use its best efforts to effect the registration under the Securities
Act of all of the Registrable Securities that the Company has been so requested
to register by the Designated Holders, to the extent required to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Registrable Securities to be registered (each, an "Incidental
Registration"); PROVIDED, HOWEVER, that if, at any time after giving written
notice of its intention to register any of its shares of Common Stock and prior
to the effective date of the Registration Statement filed in connection with
such Incidental Registration, the Company shall determine for any reason not to
register such shares of Common Stock, the Company may, at its election, give
written notice of such determination to each of the Designated Holders and,
thereupon, shall be relieved from its obligation to register any Registrable
Securities in connection with such Incidental Registration (but not from its
obligation to pay the Registration Expenses in connection therewith), without
prejudice, however, to the rights of any Insurance Partners Stockholder to
request that such registration be effected as a Demand Registration under
Section 3. In connection with any Incidental Registration under this Section
4(a) involving an underwriter, or a distribution with the assistance of a
selling agent, the right of any Designated Holder to participate in such
Incidental Registration shall be conditioned upon such Designated Holder's
participation in such underwriting or distribution.
(b) REDUCTION IN REGISTRABLE SECURITIES TO BE REGISTERED.
Notwithstanding anything to the contrary set forth in Section 4(a), if a
proposed Incidental Registration is for a registered public offering involving
an underwriting and the representative of the underwriters advises the Company
in writing that the registration of all or part of the shares of Common Stock to
be underwritten in such Incidental Registration would materially adversely
effect such offering, then the Company shall so advise the Designated Holders
and any other holders of shares of Common Stock requesting registration in such
Incidental Registration, and the number of shares of Common Stock that are
entitled to be included in the Incidental Registration shall be allocated (i)
first, to the Company for shares of Common Stock being sold for its own account,
(ii) second, among the Designated Holders and any other holders of shares of
Common Stock entitled to "incidental" registration rights and requesting
inclusion of shares of Common Stock in such Incidental Registration, pro rata on
the basis of the number of shares of Common Stock requested to be included in
such Incidental Registration, and (iii) third, any other shares of Common Stock
requested to be included in such Incidental Registration; PROVIDED, HOWEVER,
that if any Insurance Partners Stockholder or Other Rightholder does not request
inclusion of the maximum number of shares of Common Stock allocated to it
pursuant to the foregoing procedure, then the remaining portion of its
allocation shall be reallocated among those Insurance Partners Stockholders and
Other Rightholders whose allocations were not satisfied on the basis of the
number of shares of Common
<PAGE>
9
Stock requested to be included in such Incidental Registration, and this
procedure shall be repeated until all of the shares of Common Stock that may be
included in the registration on behalf of the Insurance Partners Stockholders
and the Other Rightholders have been so allocated. The Company shall not limit
the number of shares of Common Stock to be included in an Incidental
Registration pursuant to this Agreement in order to include shares held by
stockholders with no registration rights or to include any shares of stock
issued to employees, officers, directors or consultants pursuant to any stock
option plan, or in order to include in such registration securities registered
for the Company's own account.
If any shares of Common Stock are withdrawn from the Incidental
Registration or if the number of shares of Common Stock to be included in such
Incidental Registration was previously reduced as a result of marketing factors,
then the Company shall then offer to all Persons who have retained the right to
include Common Stock in the Incidental Registration the right to include
additional shares of Common Stock in the registration in an aggregate amount
equal to the number of shares of Common Stock so withdrawn, with such shares of
Common Stock to be allocated among the Persons requesting additional inclusion
pro rata in accordance with the terms of this Section 4(b).
(c) EXPENSES. The Company shall pay all Registration Expenses
in connection with any Incidental Registration pursuant to this Section 4,
whether or not such Incidental Registration becomes effective. No Incidental
Registration under this Section 4 shall relieve the Company of its obligations
to effect a Demand Registration upon request under Section 3(a).
5. HOLDBACK AGREEMENTS.
(a) RESTRICTIONS ON PUBLIC SALE BY DESIGNATED HOLDERS. Each of
the Designated Holders agrees not to effect any public sale or distribution of
any Registrable Securities being registered or of any securities convertible
into or exchangeable or exercisable for such Registrable Securities, including a
sale pursuant to Rule 144 under the Securities Act, during the 90 day period
beginning on the effective date of such Registration Statement (except as part
of such registration), (i) in the case of a non-underwritten public offering, if
and to the extent requested by the Company or (ii) in the case of an
underwritten public offering, if and to the extent requested by the Approved
Underwriter (in the event of a Demand Registration pursuant to Section 3) or the
Company's underwriters (in the event of an Incidental Registration pursuant to
Section 4(a)), as the case may be.
(b) RESTRICTIONS ON PUBLIC SALE BY THE COMPANY. The Company
agrees not to effect any public sale or distribution of any of its securities,
or any securities convertible into or exchangeable or exercisable for such
securities (except pursuant to registrations on Form S-4 or Form S-8 or any
successor thereto),
<PAGE>
10
during the period beginning on the effective date of any Registration Statement
in which the Designated Holders of Registrable Securities are participating and
ending on the earlier of (i) the date on which all Registrable Securities
registered on such Registration Statement are sold and (ii) 180 days after the
effective date of such Registration Statement.
6. REGISTRATION PROCEDURES.
(a) OBLIGATIONS OF THE COMPANY. If and whenever the Company is
requested to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 3 and 4, then the Company will promptly
use its best efforts to:
(i) prepare and (in any event within 90 days after the
end of the period within which requests for registration may be given to
the Company) file with the Commission a Registration Statement with
respect to such Registrable Securities and use its best efforts to cause
such Registration Statement to become effective;
(ii) prepare and file with the Commission such
amendments and supplements to such Registration Statement and the
prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by such Registration Statement until such time as all
of such securities have been disposed of in accordance with the intended
methods of disposition thereof by the seller or sellers thereof set forth
in such Registration Statement, but in no event for a period of more than
six months (or, with respect to any Registration Statement covering
Registrable Securities the distribution of which has been deferred
pursuant to Section 4(c), nine months) after such Registration Statement
becomes effective;
(iii) as soon as reasonably possible, furnish to each
seller of Registrable Securities, prior to filing a Registration
Statement, such number of conformed copies of such Registration Statement
and of each such amendment and supplement thereto (in each case including
all exhibits, except that the Company shall not be obligated to furnish
any seller of Registrable Securities with more than two copies of such
exhibits), such number of copies of the prospectus contained in such
Registration Statement (including each preliminary prospectus and any
summary prospectus), in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by
such seller;
<PAGE>
11
(iv) register or qualify such Registrable Securities
covered by such Registration Statement under such other securities or
"blue sky" laws of such jurisdictions as each seller of Registrable
Securities shall request, and do any and all other acts and things which
may be necessary or advisable to enable such seller to consummate the
disposition in such jurisdic tions of the Registrable Securities owned by
such seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified, or to subject itself to
taxation in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(v) cause the Registrable Securities covered by such
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the seller or sellers of
Registrable Securities to consummate the disposition of such Registrable
Securities;
(vi) notify each seller of any Registrable Securities
covered by such Registration Statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make
statements therein not misleading in the light of the circumstances then
existing, and prepare and furnish to such seller a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(vii) advise each seller of Registrable Securities as to
the time when such Registration Statement becomes effective and as to the
threat of or the issuance by the Commission of any stop order suspending
the effectiveness of such Registration Statement or the institution of any
proceedings for that purpose, and use its best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible the
removal thereof, if issued;
(viii)comply with all applicable rules and regulations
of the Commission, and make available to each seller of Registrable
Securities, as soon as reasonably practicable, an earnings statement
covering the period of
<PAGE>
12
at least 12 months, but not more than 18 months, beginning with the first
month after the effective date of the Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(ix) list all the Registrable Securities on any
securities exchange (or The Nasdaq Stock Market, Inc. or the
over-the-counter market) on which similar securities are then listed, if
such securities are not already so listed and such listing is then
permitted under the rules of such exchange;
(x) cooperate with each seller of Registrable Securities
and each underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the National Association of Securities Dealers,
Inc.; and
(xi) furnish to each seller a signed counterpart,
addressed to the sellers, of (x) an opinion of counsel representing the
Company for purposes of such registration, dated the effective date of
such Registration Statement, and (y) a "comfort letter" signed by the
independent public accountants of the Company who have certified the
Company's financial statements included in such Registration Statement, in
each case, covering substantially the same matters with respect to such
Registration Statement (and the prospectus included therein) and, in the
case of such accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities; PROVIDED,
HOWEVER, that the Company shall not be obligated to furnish such
accountants' letter except in connection with an underwritten offering.
(b) SELLER INFORMATION. The Company may require each seller of
Registrable Securities as to which any registration is being effected to furnish
to the Company such information regarding the distribution of such securities as
the Company may from time to time reasonably request in writing and as shall be
required by law in connection therewith.
(c) PREPARATION; REASONABLE INVESTIGATION. In connection with
the preparation and filing of each Registration Statement registering
Registrable Securities under the Securities Act, the Company will give the
holders of such Registrable Securities so registered and their underwriters, if
any, and their respective counsel and financial advisors, the opportunity to
participate in the preparation of such Registration Statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each
<PAGE>
13
of them such access to its books and records (including the books and records of
its Subsidiaries (as hereinafter defined)) and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
opinion of such holders' and such underwriters' respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act; PROVIDED,
HOWEVER, that the Company shall not be obligated to give such opportunities and
access to any holder of Registrable Securities holding less than 150,000
Registrable Securities other than the Initiating Holders, as a group, requesting
a Demand Registration pursuant to Section 3(c). A "Subsidiary" means, with
respect to the Company, a corporation or other entity of which 50% or more of
the voting power of the outstanding voting securities or 50% or more of the
outstanding equity interests is held, directly or indirectly, by the Company.
(d) NOTICE TO DISCONTINUE. Each Designated Holder of
Registrable Securities agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 6(a)(vi), such
Designated Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Designated Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 6(a)(vi) and, if so
directed by the Company, such Designated Holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Designated Holder's possession, of the prospectus covering such Registrable
Securities that is current at the time of receipt of such notice. If the Company
shall give any such notice, the Company shall extend the period during which
such Registration Statement shall be maintained effective pursuant to this
Agreement (including, without limitation, the period referred to in Section
6(a)(ii)) by the number of days during the period from and including the date of
the giving of such notice pursuant to Section 6(a)(vi) to and including the date
when the Designated Holder shall have received the copies of the supplemented or
amended prospectus contemplated by and meeting the requirements of Section
6(a)(vi).
7. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any
registration of any Registrable Securities pursuant to the terms of Section 3 or
Section 4, (i) the Company will indemnify and hold harmless, to the fullest
extent permitted by law, each of the Designated Holders and their respective
directors, officers, partners, trustees, employees, legal counsel, accountants,
financial advisors and agents, and each other Person, if any, who controls
(within the meaning of the Securities Act and the Exchange Act) such Designated
Holder or any such directors, officers, partners, trustees, employees, legal
counsel, accountants, financial advisors and agents (each of the foregoing, a
"designated indemnified party") against any and
<PAGE>
14
all losses, claims, damages, liabilities and expenses (including reasonable
costs of investigation), joint or several, to which such designated indemnified
party may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions or proceedings in
respect thereof) arise out of or are based upon (x) any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement under which such Registrable Securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, any notification or offering circular, or any
amendment or supplement thereto or (y) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and (ii) the Company will reimburse such
designated indemnified party for any legal or any other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, liability or action; PROVIDED, HOWEVER, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability (or actions or proceedings in respect thereof) arises out of or is
based upon (x) any untrue statement or alleged untrue statement of any material
fact made in such Registration Statement, any such preliminary prospectus, final
prospectus, summary prospectus, notification or offering circular, or any
amendment or supplement thereto or (y) any omission or alleged omission to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in reliance upon and in conformity with
written information concerning such Designated Holder and furnished to the
Company through an instrument duly executed by such Designated Holder
specifically stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such designated indemnified party and shall survive the
transfer of such securities by any Designated Holder.
(b) INDEMNIFICATION BY DESIGNATED HOLDERS. The Company may
require, as a condition to including any Registrable Securities in any
Registration Statement filed pursuant to Section 3 or Section 4, that the
Company shall have received an undertaking from each Designated Holder selling
such Registrable Securities to indemnify and hold harmless the Company, its
directors, officers, legal counsel, accountants and financial advisors and each
other Person, if any, who controls (within the meaning of the Securities Act and
the Exchange Act) the Company or any such directors, officers, legal counsel,
accountants and financial advisors (each of the foregoing, a "Company
indemnified party") against any losses, claims, damages, liabilities or
expenses, joint or several, to which such Company indemnified party may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
arise out of or are based upon any statement of a material fact or omission to
state a material fact in such Registration Statement, any preliminary prospectus
or final prospectus contained therein, any notification or offering circular, or
any amendment or supplement thereto, if such statement or omission was made in
<PAGE>
15
reliance upon and in conformity with written information concerning such
Designated Holder and furnished to the Company through an instrument duly
executed by such Designated Holder specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus, final
prospectus, summary prospectus, notification or offering circular, or amendment
or supplement thereto. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Company indemnified
party and shall survive the transfer of such securities by any Designated
Holder.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after
receipt by any designated indemnified party or Company indemnified party (each,
an "indemnified party") of notice of the commencement of any action, suit,
proceeding or investigation or threatened thereof in writing for which the
indemnified party intends to claim indemnification or contribution pursuant to
this Agreement, such indemnified party will give written notice thereof to the
indemnifying party; PROVIDED, HOWEVER, that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under this Agreement, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. If notice of
commencement of any such action is brought against an indemnified party, the
indemnifying party may (and, upon request by the indemnified party, will), at
its expense, participate in and assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; PROVIDED, HOWEVER, that in
the event of any failure by the indemnifying party diligently to assume and
conduct such defense, the indemnifying party will pay all costs and expenses
(including legal fees and expenses) incurred by such indemnified party in
connection with such claim or litigation. The indemnified party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be paid by the
indemnified party unless (i) the indemnifying party agrees to pay the same, (ii)
the indemnifying party fails to assume the defense of such action with counsel
satisfactory to the indemnified party in its reasonable judgment or (iii) the
named parties to any such action (including any impleaded parties) have been
advised by such counsel in writing that either (x) representation of such
indemnified party and the indemnifying party by the same counsel would be
inappropriate under applicable standards of professional conduct or (y) there
may be one or more legal defenses available to the indemnified party which are
different from or additional to those available to the indemnifying party. In
either of such cases, the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
written consent of each indemnified party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation.
<PAGE>
16
(d) OTHER INDEMNIFICATION. Indemnification similar to that
specified in this Section 7 (with appropriate modifications) shall be given by
the Company and each seller of Registrable Securities with respect to any
registration or other qualification of such Registrable Securities under any
federal or state law or regulation of governmental authority other than the
Securities Act.
(e) CONTRIBUTION. If the indemnification provided for in this
Section 7 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative faults of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Sections 7(a), 7(b) and 7(c), any legal
or other fees, charges or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(e) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person.
(f) INSURANCE. In connection with any Demand Registration or
Incidental Registration, the Company will provide at its expense a binder or
binders of insurance in form satisfactory to the Designated Holders
participating in such registration, and, as soon as practicable thereafter, a
policy or policies of insurance, insuring each such Designated Holder, and each
Person, if any, who controls such Designated Holder within the meaning of the
Securities Act and the Exchange Act, for the aggregate amount of the public
offering price received for the Registrable Securities disposed of by such
Designated Holder (subject to such deductible as is customarily contained in
underwriting insurance policies at such time) against all losses, claims,
damages, liabilities and expenses which arise out of or are based upon any
untrue statement, alleged untrue statement, omission or alleged
<PAGE>
17
omission of the character described in this Section 7 in connection with such
registration and disposition and which are customarily covered under
underwriting insurance policies; PROVIDED, HOWEVER, that the Company shall not
be obligated to provide such insurance if it determines in good faith that such
insurance is not available on commercially reasonable terms at the time of such
registration, and the holders of a majority of the Registrable Securities to be
registered reasonably agree.
8. RULE 144. The Company covenants that it shall file (a) any
reports required to be filed by it under the Exchange Act and (b) take such
further action as each Designated Holder of Registrable Securities may
reasonably request (including providing any information necessary to comply with
Rule 144 under the Securities Act), all to the extent required from time to time
to enable such Designated Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such rule may be amended
from time to time, or (ii) any similar rules or regulations hereafter adopted by
the Commission. The Company shall, upon the request of any Designated Holder of
Registrable Securities, deliver to such Designated Holder a written statement as
to whether it has complied with such requirements.
9. MISCELLANEOUS.
(a) RECAPITALIZATIONS, EXCHANGES, ETC. The provisions of this
Agreement shall apply, to the full extent set forth herein, with respect to (i)
the shares of Common Stock and (ii) any and all equity securities of the Company
or any suc cessor or assign of the Company (whether by merger, consolidation,
sale of assets or otherwise), which may be issued in respect of, in conversion
of, in exchange for or in substitution of, the shares of Common Stock, and shall
be appropriately adjusted for any stock dividends, splits, reverse splits,
combinations, recapitalizations and the like occurring after the date hereof.
The Company shall cause any successor or assign (whether by merger,
consolidation, sale of assets or otherwise) to enter into a new registration
rights agreement with the Designated Holders on terms substantially similar to
this Agreement as a condition of any such transaction.
(b) NO INCONSISTENT AGREEMENTS. The Company shall not enter
into any agreement with respect to its securities that is inconsistent with the
registration rights granted in this Agreement or grant any additional
registration rights to any Person or with respect to any securities that are not
Registrable Securities that are prior in right to or inconsistent with the
rights granted in this Agreement. If at any time after the date hereof, any
Person other than an Other Rightholder shall advise or give notice to the
Company of such Person's exercise of registration rights granted by the Company
to such Person prior to the date hereof, the Company shall use its best efforts
to cause such Person to acknowledge the registration rights granted pursuant to
this Agreement and agree that such Person's registration rights shall not be
prior in right to the rights granted in this Agreement.
<PAGE>
18
(c) REMEDIES. The Designated Holders, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
shall be entitled to specific performance of their rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive in any action for specific performance the
defense that a remedy at law would be adequate.
(d) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless consented to in writing by (i) the Company and (ii) the
Insurance Partners Stockholders holding Registrable Securities representing
(after giving effect to any adjustments) at least 60% of the aggregate number of
Registrable Securities owned by all of the Insurance Partners Stockholders. Any
such written consent shall be binding upon the Company and all of the Designated
Holders.
(e) NOTICES. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be made
by registered or certified first-class mail, return receipt requested,
telecopier, courier service, overnight mail or personal delivery:
(i) if to the Company:
Superior National Insurance Group, Inc.
26601 Agoura Road
Calabasas, California 91302
Telecopy: (818) 880-8615
Attention: Chief Financial Officer
with a copy to:
Riordan & McKinzie
5743 Corsa Avenue, Suite 116
Westlake Village, California 91362
Telecopy: (818) 706-2956
Attention: Dana M. Warren, Esq.
<PAGE>
19
(ii) if to IP or IP Bermuda
c/o Insurance Partners Advisors, L.P.
One Chase Manhattan Plaza
44th Floor
New York, New York 10005
Telecopy: (212) 898-8720
Attention: Mr. Steven B. Gruber
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Judith R. Thoyer, Esq.
(iii) if to any other Designated Holder, at its address
as it appears on the record books of the
Company.
All such notices and communications shall be deemed to have been
duly given when delivered by hand, if personally delivered; when delivered by
courier or overnight mail, if delivered by commercial courier service or
overnight mail; five (5) Business Days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is mechanically acknowledged, if
telecopied.
(f) SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto. The Demand Registration rights of the
Insurance Partners Stockholders contained in Section 3 and the other rights of
each of the Insurance Partners Stockholders with respect thereto and the
incidental or "piggyback" registration rights of the Designated Holders
contained in Section 4 and the other rights of each of the Designated Holders
with respect thereto shall be, with respect to any Registrable Security,
automatically transferred to any Person who is the transferee of such
Registrable Security, provided that such transfer was made in compliance with
applicable securities laws and such transferee is made a party to this Agreement
and, after such transfer, is the holder of not less than 150,000 Registrable
Securities. All of the obligations of the Company hereunder shall survive any
such transfer. Subject to Section 7, no Person other than the parties hereto and
their successors and permitted assigns is intended to be a beneficiary of any of
the rights granted hereunder.
<PAGE>
20
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(I) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
(j) SEVERABILITY. If any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, it being
intended that all of the rights and privileges of the Designated Holders shall
be enforceable to the fullest extent permitted by law.
(k) ENTIRE AGREEMENT. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and in the Stock Purchase Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
(l) FURTHER ASSURANCES. Each of the parties shall execute
such documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.
<PAGE>
21
IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Agreement on the date first written above.
SUPERIOR NATIONAL INSURANCE
GROUP, INC.
By: /S/ J. CHRIS SEAMAN
-------------------------------
Name:
Title:
INSURANCE PARTNERS, L.P.
By: Insurance GenPar, L.P., its
General Partner
By: Insurance GenPar MGP, L.P., its
General Partner
By: Insurance GenPar MGP, Inc., its
General Partner
By: /S/ STEVEN B. GRUBER
-------------------------------
Name: Steven B. Gruber
Title: Vice President
INSURANCE PARTNERS OFFSHORE
(BERMUDA), L.P.
By: Insurance GenPar (Bermuda), L.P.,
its General Partner
By: Insurance GenPar (Bermuda) MGP,
L.P., its General Partner
By: Insurance GenPar (Bermuda) MGP,
Ltd., its General Partner
By: /S/ STEVEN B. GRUBER
-------------------------------
Name: Steven B. Gruber
Title: Vice President
Exhibit 2
SUPERIOR NATIONAL INSURANCE GROUP, INC.
26601 Agoura Road
Calabasas, California 91320
November 25, 1996
Insurance Partners, L.P.
201 Main Street, Suite 2600
Fort Worth, Texas 76102
Insurance Partners Offshore (Bermuda), L.P.
Cedar House
41 Cedar Avenue
P.O. Box HM 1179
Hamilton HM EX, Bermuda
International Insurance Advisors, Inc.
One Chase Manhattan Plaza
44th Floor
New York, New York 10005
International Insurance Investors, L.P.
c/o International Insurance Investors (Bermuda) Limited
Cumberland House
One Victoria Street
Hamilton HM HX, Bermuda
The persons listed on Schedule 1 hereto
at the addresses set forth opposite
the names of such persons
CentreLine Reinsurance Limited
Cumberland House
One Victoria Street
Hamilton HM HX, Bermuda
The persons listed on Schedule 2 hereto
c/o Superior National Insurance Group, Inc.
26601 Agoura Road
Calabasas, California 91320
EXERCISE OF WARRANTS AND REGISTRATION RIGHTS
Ladies and Gentlemen:
Reference is made to the Note Purchase Agreement, dated as of March
31, 1992 (the "Note Purchase Agreement"), among Superior National Insurance
<PAGE>
2
Group, Inc. (the "Company") and each of the several purchasers listed on
Schedule I thereto and the Preferred Securities Purchase Agreement, dated as of
June 30, 1994 (the "Preferred Securities Purchase Agreement"), among the
Company, Superior National Capital Holding Corporation, Superior National
Capital, L.P. and Centre Reinsurance Services (Bermuda) III Limited.
Pursuant to (a) Section 1.2 of the Note Purchase Agreement, the
Company issued to (i) International Insurance Advisors, Inc. ("IIA"), as agent
for the general partner and the limited partners of International Insurance
Investors, L.P. ("III"), warrants (the "IIA Warrants") to purchase (subject to
adjustment) 1,474,306 shares, no par value per share, of Common Stock of the
Company (the "Common Stock") and (ii) the individuals listed on Schedule 2
hereto (the "Management Warrantholders") warrants (the "Management Warrants") to
purchase (subject to adjustment) 92,159 shares of Common Stock and (b) Section
5.8 of the Preferred Securities Purchase Agreement, the Company issued to
CentreLine Reinsurance Limited ("CentreLine") a warrant (the "CentreLine
Warrant") to purchase (subject to adjustment) 579,356 shares of Common Stock.
Each of the IIA Warrants, the Management Warrants and the CentreLine Warrant may
be hereinafter referred to collectively as the "Warrants" or individually as a
"Warrant".
Pursuant to Section 5.2(e) of the Stock Purchase Agreement, dated as
of September 17, 1996 (as amended, the "Stock Purchase Agreement"), by and among
the Company, Insurance Partners, L.P. ("IP"), Insurance Partners Offshore
(Bermuda), L.P. ("IP Bermuda") and certain other persons or entities who
executed the form of subscription agreement attached thereto as Exhibit A, it is
a condition to close the transactions contemplated by the Stock Purchase
Agreement that IIA distribute the IIA Warrants to the general partner and the
limited partners of III listed on Schedule 1 hereto (the "III Partners").
Concurrently with the execution and delivery of this letter agreement, IIA is
distributing the IIA Warrants to the III Partners.
1. RESTRICTION ON EXERCISE OF WARRANTS AND REGISTRATION RIGHTS. Each
of the III Partners, the Management Warrantholders and CentreLine acknowledge
and agree that the exercise of a Warrant could cause, or increase the risk of,
an "ownership change" within the meaning of Section 382 of the Internal Revenue
Code of 1986, as amended, and the Treasury Regulations (as amended from time to
time, the "Regulations") promulgated thereunder (collectively, "Section 382").
Notwithstanding anything to the contrary set forth in this letter agreement or
in each of the IIA Warrants, the Management Warrants or the CentreLine Warrant,
from and after the date hereof through and including the end of the 36th month
following the date of the closing of the transactions contemplated by the Stock
Purchase Agreement (the "Restriction Termination Date"), each of the III
Partners, the Management Warrantholders and CentreLine covenant and agree that
(a) it or he shall not exercise or attempt to exercise its or his Warrant, (b)
it or he shall not Transfer (as hereinafter defined) or attempt to Transfer its
or his Warrant to any individual or any "entity" (as
<PAGE>
3
that term is defined in Regulations Section 1.382-3(a)) unless, prior to such
Transfer, it or he shall deliver to the Company an instrument, in form and
substance reasonably satisfactory to the Company, duly executed by the
transferee of such Warrant pursuant to which such transferee has agreed to be
bound by the terms and conditions of this letter agreement, (c) it or he shall
not exercise or attempt to exercise the registration rights granted by its or
his Warrant and (d) any exercise or attempted exercise thereof in violation of
subsection (a) or subsection (c) above or any Transfer or attempted Transfer
thereof in violation of subsection (b) above shall be void ab initio; PROVIDED,
HOWEVER, that notwithstanding the foregoing, prior to the Restriction
Termination Date, (i) each of the III Partners, the Management Warrantholders
and CentreLine may exercise its or his Warrant in the event of a tender or
exchange offer or a merger or other business combination involving the Company,
which is approved by the Board of Directors of the Company (the "Board of
Directors") or with respect to which the Board of Directors has announced its
intention to remain neutral and (ii) each of the III Partners, the Management
Warrantholders and CentreLine may exercise its or his (x) Warrant other than in
the event of a tender or exchange offer or a merger or business combination
described in clause (i) above or (y) registration rights upon the prior written
approval of the Board of Directors, which approval shall be granted in its sole
and absolute discretion after considering all facts and circumstances,
including, without limitation, future events the occurrence of which are deemed
by the Board of Directors to be reasonably possible; and PROVIDED FURTHER, that
the Company hereby consents to the distribution by IIA of the IIA Warrants to
the III Partners. Each of IIA and each of the III Partners hereby acknowledges
and represents that no consideration was or shall be given or received by any
such party in connection with the distribution of the IIA Warrants to the III
Partners as contemplated hereunder. For purposes of this letter agreement,
"Transfer" means, with respect to the Warrants, any direct or indirect
acquisition or disposition thereof, whether by sale, exchange, merger,
consolidation, transfer, assignment, conveyance, distribution, pledge,
inheritance, gift, mortgage, creation of a 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.
2. LEGEND. All Warrants shall bear the following conspicuous legend
describing the restrictions set forth in paragraph 1 hereof and the Board of
Directors shall take such actions as it deems necessary to substitute for the
Warrants, new warrants bearing such legend:
THE EXERCISE AND TRANSFER OF THIS WARRANT AND THE EXERCISE OF THE
REGISTRATION RIGHTS CONTAINED HEREIN ARE SUBJECT TO CERTAIN RESTRICTIONS
PURSUANT TO THE CHARTER OF SUPERIOR NATIONAL INSURANCE GROUP, INC. ("THE
COMPANY") AND THAT CERTAIN LETTER AGREEMENT, RELATING TO THIS WARRANT,
AMONG THE COMPANY, THE RECORD HOLDER OF THIS WARRANT AND CERTAIN OTHER
PARTIES
<PAGE>
4
THERETO (THE "LETTER AGREEMENT"). ANY EXERCISE OR TRANSFER OF THIS WARRANT
OR EXERCISE OF REGISTRATION RIGHTS IN VIOLATION OF THE CHARTER OF THE
COMPANY OR THE LETTER AGREEMENT SHALL BE VOID AB INITIO. A COPY OF THE
CHARTER OF THE COMPANY AND THE LETTER AGREEMENT MAY BE OBTAINED FROM THE
COMPANY WITHOUT CHARGE UPON WRITTEN REQUEST.
3. REGISTRATION RIGHTS AGREEMENT. The parties hereto acknowledge
that on the date hereof, the Company, IP and IP Bermuda are entering into a
Registration Rights Agreement (the "Registration Rights Agreement").
4. DEMAND REGISTRATIONS. Subject to paragraph 1 hereof, if at any
time pursuant to Section 8.3 of the IIA Warrants, the Management Warrants or the
CentreLine Warrant any holder (the "Initiating Holder") thereof requests in
writing that the Company effect the registration under the Securities Act of
1933, as amended (the "Securities Act"), and under the securities or "blue sky"
laws of any jurisdiction designated by such holder (a "Demand Registration"), of
all or part of such holder's shares of Common Stock issued or issuable upon
exercise of its Warrant, then the Company shall, in addition to its obligations
under Section 8.3 of each of the Warrants, promptly give written notice of such
Demand Registration to the Insurance Partners Stockholders (as defined in the
Registration Rights Agreement) and use its best efforts to effect the
registration under the Securities Act of the Registrable Securities (as defined
in the Registration Rights Agreement) which the Company has been requested by
the Insurance Partners Stockholders to register. In connection with any Demand
Registration involving an underwriting, if the managing underwriter of the
offering advises the Company in writing that in its opinion the aggregate amount
of shares of Common Stock requested to be included in such offering is
sufficiently large to have a material adverse effect on the success of such
offering, then the Company shall include in such registration only the aggregate
amount of shares of Common Stock that in the opinion of such managing
underwriter may be sold without such material adverse effect and shall reduce,
as to each Initiating Holder, each holder of Warrants (other than the Initiating
Holder) requesting registration of shares of Common Stock in such Demand
Registration pursuant to Section 8.3 of such Warrants (the "Other Rightholders")
and the Insurance Partners Stockholders as a group, the amount of Common Stock
to be included in such registration, pro rata within such group based on the
number of shares of Common Stock included in the request for registration by
such Initiating Holder, Other Rightholders and Insurance Partners Stockholders.
The Insurance Partners Stockholders covenant and agree that in the event that
any of the Insurance Partners Stockholders requests a Demand Registration
pursuant to the Registration Rights Agreement (an "IP Demand Registration"),
each of the holders of the IIA Warrants, the Management Warrants and the
CentreLine Warrant shall be entitled to participate in such IP Demand
Registration to the same extent that the Insurance Partners Stockholders are
entitled to participate in a Demand Registration pursuant to this paragraph 4.
<PAGE>
5
5. INCIDENTAL REGISTRATIONS. Subject to paragraph 1 hereof, if (a)
the Company, at any time or from time to time, proposes to register in an
underwriting any of its shares of Common Stock for its own account under the
Securities Act (subject to the limitations set forth in Section 4(a) of the
Registration Rights Agreement) (an "Incidental Registration") and (b) the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation of the number of shares of Common Stock to be
underwritten, then the number of shares of Common Stock that are entitled to be
included in the Incidental Registration shall be allocated (i) first, to the
Company for shares of Common Stock being sold for its own account, (ii) second,
among each holder of Warrants requesting registration of shares of Common Stock
in such Incidental Registration pursuant to Section 8.4(a) of such Warrants,
each of the Insurance Partners Stockholders requesting registration of its
Registrable Securities in such Incidental Registration pursuant to Section 4(a)
of the Registration Rights Agreement and any other holders of Common Stock
entitled to "incidental" registration rights and requesting inclusion of shares
of Common Stock in such Incidental Registration, pro rata on the basis of the
number of shares of Common Stock requested to be included in such Incidental
Registration and (iii) third, any other shares of Common Stock requested to be
included in such Incidental Registration. The Insurance Partners Stockholders
covenant and agree that pursuant to the Registration Rights Agreement, in the
event of an Incidental Registration in which marketing factors require a
limitation of the number of shares of Common Stock to be underwritten, the
allocation of the shares of Common Stock that are entitled to be included in
such Incidental Registration shall be identical to the allocation described in
the preceding sentence.
6. WAIVER OF ADJUSTMENTS OF WARRANT PRICE AND PREEMPTIVE RIGHTS. The
parties hereto acknowledge that pursuant to the Stock Purchase Agreement, the
Company agreed to issue an aggregate of $18,000,000 worth of shares of Common
Stock (the "Shares") for a purchase price per share of $7.53. With respect to
the issuance by the Company of the Shares pursuant to the Stock Purchase
Agreement, (a) each of the III Partners hereby waives its or his rights to any
adjustments under Section 2 of the IIA Warrants, including, without limitation,
Section 2.2.1 thereof, and its or his preemptive rights under Section 9 of the
IIA Warrants, (b) each of the Management Warrantholders hereby waives his rights
to any adjustments under Section 2 of the Management Warrants, including,
without limitation, Section 2.2.1 thereof, and his preemptive rights under
Section 9 of the Management Warrants and (c) CentreLine hereby waives its rights
to any adjustments under Section 2 of the CentreLine Warrant, including, without
limitation, Section 2.3.1 thereof, and its preemptive rights under Section 9 of
the CentreLine Warrant.
7. CONSENTS AND NOTICES. Each of IIA, CentreLine, the III Partners
and the Management Warrantholders acknowledges receipt of notice duly given from
the Company of any and all transactions described or mentioned in the Company's
Proxy Statement to its shareholders dated November 11, 1996, and consents to
each such transaction.
<PAGE>
6
8. WAIVER OF COVENANTS. With respect to the issuance by the Company
of the Shares pursuant to the Stock Purchase Agreement and the acquisition by
the Company of Pac Rim Holding Corporation ("Pac Rim") pursuant to the Agreement
and Plan of Merger, dated as of September 17, 1996, among the Company, SNTL
Acquisition Corp. and Pac Rim, International Insurance Investors, L.P. hereby
waives its rights under Section 7 of the Note Purchase Agreement.
9. COUNTERPARTS. This letter agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same letter agreement.
10. GOVERNING LAW. This letter agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to the principles of conflicts of law thereof.
11. BINDING EFFECT. This letter agreement shall be binding upon and
inure to the benefit of the parties hereto and their permitted successors and
assigns.
12. RATIFICATION OF WARRANTS. Except as otherwise expressly provided
herein, all of the terms and conditions of each of the IIA Warrants, the
Management Warrants and the CentreLine Warrant are ratified and shall remain in
full force and effect.
13. TERMINATION. If the transactions contemplated by the Stock
Purchase Agreement are not consummated and such agreement thereby terminates,
then upon such termination, this letter agreement shall immediately terminate
without further action by the parties hereto, and all terms, rights,
restrictions and conditions created hereunder, including, without limitation,
all terms, rights, restrictions and conditions created by paragraph 1 hereof,
and the enforceability and effect of the restrictive legend placed on each of
the Warrants as contemplated by paragraph 2 hereof, shall terminate and have no
further force and effect.
<PAGE>
7
14. FURTHER ASSURANCES. Each of the parties shall execute such
documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this letter agreement.
Very truly yours,
SUPERIOR NATIONAL INSURANCE GROUP, INC.
By: /S/ SUPERIOR NATIONAL INSURANCE GROUP, INC.
----------------------------------------------
Name:
Title:
Agreed and accepted on this
25th day of November, 1996
INSURANCE PARTNERS, L.P.
By: Insurance GenPar, L.P., its General Partner
By: Insurance GenPar MGP, L.P., its General Partner
By: Insurance GenPar MGP, Inc., its General Partner
By: /S/ INSURANCE PARTNERS, L.P.
--------------------------------------------------
Name:
Title:
INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P.
By: Insurance GenPar (Bermuda), L.P., its General Partner
By: Insurance GenPar (Bermuda) MGP, L.P., its General Partner
By: Insurance GenPar (Bermuda) MGP, Ltd., its General Partner
By: /S/ INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P.
--------------------------------------------------
Name:
Title:
<PAGE>
8
INTERNATIONAL INSURANCE ADVISORS, INC.
By: /S/ INTERNATIONAL INSURANCE ADVISORS, INC.
--------------------------------------------------
Name:
Title:
INTERNATIONAL INSURANCE INVESTORS, L.P.
By: International Insurance Investors (Bermuda) Limited,
its General Partner
By: /S/ INTERNATIONAL INSURANCE INVESTORS, L.P.
--------------------------------------------------
Name:
Title:
INTERNATIONAL INSURANCE INVESTORS (BERMUDA) LIMITED
By: /S/ INTERNATIONAL INSURANCE INVESTORS (BERMUDA) LIMITED
--------------------------------------------------------
Name:
Title:
CENTRE REINSURANCE LIMITED [transferred warrant to Centre Reinsurance
Bermuda Limited]
By: /S/ CENTER REINSURANCE LIMITED
----------------------------------
Name:
Title:
TRUSTEES OF THE ESTATE OF BERNICE P. BISHOP
By: /S/ TRUSTEES OF THE ESTATE OF BERNICE P. BISHOP
---------------------------------------------------
Name:
Title:
CARLISLE VENTURES, INC.
By: /S/CARLISLE VENTURES, INC.
------------------------------
Name:
Title:
<PAGE>
9
J.P. MORGAN CAPITAL CORP.
By:
-------------------------
Name:
Title:
BEACH HAVEN INVESTORS, INC.
By: /S/ BEACH HAVEN INVESTORS, INC.
-----------------------------------
Name:
Title:
BACARDI CAPITAL LTD.
By: /S/ BARCARDI CAPITAL LTD.
-----------------------------
Name:
Title:
FLUOR REINSURANCE INVESTMENTS, INC.
By: /S/ FLOUR REINSURANCE INVESTMENTS, INC.
------------------------------------------
Name:
Title:
INTERNATIONAL INSURANCE ADVISORS, INC. 401(K)
AND PENSION PLANS
By: /S/ INTERNATIONAL INSURANCE ADVISORS, INC. 401(K) AND PENSION PLANS
-----------------------------------------------------------------------
Name:
Title:
<PAGE>
10
/S/ ROBERT A. SPASS
- ------------------------------------------
Robert A. Spass
/S/ PAUL H. WARREN
- ------------------------------------------
Paul H. Warren
/S/ BRADLEY E. COOPER
- ------------------------------------------
Bradley E. Cooper
/S/ CRAIG SCHWARBERG
- ------------------------------------------
Craig Schwarberg
CENTRELINE REINSURANCE LIMITED
By: /S/ CENTRELINE REINSURANCE LIMITED
--------------------------------------
Name:
Title:
/S/ KARL O. JOHNSON
- ------------------------------------------
Karl O. Johnson
/S/ JOSEPH P. WOLONSKY
- ------------------------------------------
Joseph P. Wolonsky
/S/ J. CHRIS SEAMAN
- ------------------------------------------
J. Chris Seaman
/S/ RICHARD D. HOTCHKISS
- ------------------------------------------
Richard D. Hotchkiss
/S/ EDWIN J. WILSON
- ------------------------------------------
Edwin J. Wilson
<PAGE>
SCHEDULE 1
III PARTNERS
------------
III PARTNER ADDRESS
----------- -------
International Insurance Investors Cumberland House
(Bermuda) Limited One Victoria Street, Seventh Floor
Hamilton HM HX, Bermuda
Centre Reinsurance Limited Cumberland House
One Victoria Street, Seventh Floor
Hamilton HM HX, Bermuda
Trustees of the Estate of Bernice P. 567 South King Street
Bishop Suite 200
Honolulu, Hawaii 96813
Carlisle Ventures, Inc. 720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
J.P. Morgan Capital Corp. 60 Wall Street
New York, New York 10260
Beach Haven Investors, Inc. 10 Floral Court
Westfield, New Jersey 07090
Bacardi Capital Ltd. Pitts Bay Road
Hamilton, Bermuda
Fluor Reinsurance Investments, Inc. 3333 Michaelson Drive
Irvine, California 92730
Robert A. Spass One Chase Manhattan Plaza
44th Floor
New York, New York 10005
Paul H. Warren One Chase Manhattan Plaza
44th Floor
New York, New York 10005
Bradley E. Cooper One Chase Manhattan Plaza
44th Floor
New York, New York 10005
Craig Schwarberg 221 West 48th Street, #1802
Kansas City, Missouri 64112
International Insurance Advisors, Inc. One Chase Manhattan Plaza
401(k) and Pension Plans 44th Floor
New York, New York 10005
<PAGE>
SCHEDULE 2
MANAGEMENT WARRANTHOLDERS
-------------------------
Karl O. Johnson
Joseph P. Wolonsky
J. Chris Seaman
Richard D. Hotchkiss
Edwin J. Wilson
