SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
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. Bradley E. Cooper
Tel. No. (212) 898-8700
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
May 5, 1998
(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).
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 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 1,375,547 (1)(2)
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,375,547 (1)(2)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,375,547 (1)(2)
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)
23.4%
14 TYPE OF REPORTING PERSON
PN
(1) With respect to 16,017 shares of Common Stock, solely in its capacity as
managing general partner of IP/MCLP General Partnership IV.
(2) See Item 5 herein with respect to the shares of Common Stock issuable
upon the exercise of the IP Delaware Common Stock Purchase Warrant (as
defined herein).
<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 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 1,375,547 (1)(2)(3)
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,375,547 (1)(2)(3)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,375,547 (1)(2)(3)
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)
23.4%
14 TYPE OF REPORTING PERSON
PN
(1) Solely in its capacity as sole general partner of Insurance Partners,
L.P.
(2) With respect to 16,017 shares of Common Stock, solely in Insurance
Partners, L.P.'s capacity as managing general partner of IP/MCLP General
Partnership IV.
(3) See Item 5 herein with respect to the shares of Common Stock issuable to
Insurance Partners, L.P. upon the exercise of the IP Delaware Common
Stock Purchase Warrant.
<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 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 1,375,547 (1)(2)(3)
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,375,547 (1)(2)(3)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,375,547 (1)(2)(3)
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)
23.4%
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.
(2) With respect to 16,017 shares of Common Stock, solely in Insurance
Partners, L.P.'s capacity as managing general partner of IP/MCLP General
Partnership IV.
(3) See Item 5 herein with respect to the shares of Common Stock issuable to
Insurance Partners, L.P. upon the exercise of the IP Delaware Common
Stock Purchase Warrant.
<PAGE>
SCHEDULE 13D
CUSIP No. 868224106 Page 5 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 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 1,375,547 (1)(2)(3)
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
1,375,547 (1)(2)(3)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,375,547 (1)(2)(3)
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)
23.4%
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.
(2) With respect to 16,017 shares of Common Stock, solely in Insurance
Partners, L.P.'s capacity as managing general partner of IP/MCLP General
Partnership IV.
(3) See Item 5 herein with respect to the shares of Common Stock issuable to
Insurance Partners, L.P. upon the exercise of the IP Delaware Common
Stock Purchase Warrant.
<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 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 765,304 (1)(2)
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
765,304 (1)(2)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
765,304 (1)(2)
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%
14 TYPE OF REPORTING PERSON
PN
(1) With respect to 16,017 shares of Common Stock, solely in its capacity as
managing general partner of IP/MCLP General Partnership IV.
(2) See Item 5 herein with respect to the shares of Common Stock issuable
upon the exercise of the IP Bermuda Common Stock Purchase Warrant (as
defined herein).
<PAGE>
SCHEDULE 13D
CUSIP No. 868224106 Page 7 of 24 Pages
---------
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 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 765,304 (1)(2)(3)
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
765,304 (1)(2)(3)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
765,304 (1)(2)(3)
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%
14 TYPE OF REPORTING PERSON
PN
(1) Solely in its capacity as sole general partner of Insurance Partners
Offshore (Bermuda), L.P.
(2) With respect to 16,017 shares of Common Stock, solely in Insurance
Partners Offshore (Bermuda), L.P.'s capacity as managing general partner
of IP/MCLP General Partnership IV.
(3) See Item 5 herein with respect to the shares of Common Stock issuable to
Insurance Partners Offshore (Bermuda), L.P. upon the exercise of the IP
Bermuda Common Stock Purchase Warrant.
<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 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 765,304 (1)(2)(3)
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
765,304 (1)(2)(3)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
765,304 (1)(2)(3)
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%
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.
(2) With respect to 16,017 shares of Common Stock, solely in Insurance
Partners Offshore (Bermuda), L.P.'s capacity as managing general partner
of IP/MCLP General Partnership IV.
(3) See Item 5 herein with respect to the shares of Common Stock issuable to
Insurance Partners Offshore (Bermuda), L.P. upon the exercise of the IP
Bermuda Common Stock Purchase Warrant.
<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 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 765,304 (1)(2)(3)
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
765,304 (1)(2)(3)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
765,304 (1)(2)(3)
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%
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.
(2) With respect to 16,017 shares of Common Stock, solely in Insurance
Partners Offshore (Bermuda), L.P.'s capacity as managing general partner
of IP/MCLP General Partnership IV.
(3) See Item 5 herein with respect to the shares of Common Stock issuable to
Insurance Partners Offshore (Bermuda), L.P. upon the exercise of the IP
Bermuda Common Stock Purchase Warrant.
<PAGE>
SCHEDULE 13D
CUSIP No. 868224106 Page 10 of 24 Pages
---------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
IP/MCLP General Partnership IV
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
New York
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 16,017
WITH
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
16,017
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
16,017
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)
.3%
14 TYPE OF REPORTING PERSON
PN
<PAGE>
CUSIP NO. 868224106 Page 11 of 24 Pages
This Amendment No. 2 with respect to the Schedule 13D filed on April
21, 1997 and amended on January 9, 1998 (the "Statement"), relating to the
common stock, par value $.01 per share (the "Common Stock"), issued by Superior
National Insurance Group, Inc., a Delaware corporation (the "Company"), hereby
amends the Statement in the following respects only. Unless otherwise indicated,
all capitalized terms shall have the same meaning as provided in the Statement.
ITEM 4. PURPOSE OF THE TRANSACTION
Item 4 is hereby amended by inserting the following two paragraphs
immediately prior to the last paragraph thereof:
IP Delaware and IP Bermuda entered into a Stock Purchase Agreement,
dated as of May 5, 1998 (the "1998 Stock Purchase Agreement"), among the
Company, IP Delaware, IP Bermuda and Capital Z Partners, Ltd., a Bermuda
corporation, pursuant to which, subject to the terms and conditions contained
therein, (i) IP Delaware agreed to acquire the number of shares of Common Stock
(up to a maximum of 3,737,504 shares of Common Stock) equal to the sum of (a)
1,756,627 shares of Common Stock plus (b) the number of shares of Common Stock
equal to the product of (x) the total number of shares of Common Stock which are
not subscribed for in a "rights offering" of Common Stock to stockholders of the
Company that the Company has agreed to effect prior to the closing under the
1998 Stock Purchase Agreement pursuant to the terms of the 1998 Stock Purchase
Agreement (the "Rights Offering") and (y) 31.3016% and (ii) IP Bermuda agreed to
acquire the number of shares of Common Stock (up to a maximum of 1,516,227
shares of Common Stock) equal to the sum of (a) 712,627 shares of Common Stock
plus (b) the number of shares of Common Stock equal to the product of (x) the
total number of shares of Common Stock which are not subscribed for in the
Rights Offering and (y) 12.6984%. The 1998 Stock Purchase Agreement is attached
hereto as Exhibit 4 and is hereby incorporated by reference.
In addition, pursuant to the terms of the 1998 Stock Purchase
Agreement, the Company has agreed to pay a commitment fee (the "Commitment Fee")
to IP Delaware and IP Bermuda for agreeing to purchase the shares of Common
Stock referred to in the immediately preceding paragraph. The Commitment Fee
will be paid as follows: (i) IP Delaware will receive a Common Stock Purchase
Warrant (the "IP Delaware Common Stock Purchase Warrant") with respect to
229,754 shares of Common Stock (subject to adjustment as provided for therein)
and (ii) IP Bermuda will receive a Common Stock Purchase Warrant (the "IP
Bermuda Common Stock Purchase Warrant" and, together with the IP Delaware Common
Stock Purchase Warrant, the "IP Common Stock Purchase Warrant") with respect to
93,206 shares of Common Stock (subject to adjustment as provided for therein).
The Commitment Fee is deemed to be earned and payable to each of IP Delaware and
IP Bermuda as of the date of the signing of the 1998 Stock Purchase Agreement,
which was May 5, 1998. However, pursuant to the terms of the 1998 Stock Purchase
Agreement, the IP Common Stock Purchase Warrants will not be issued until the
earlier of the date of the closing under the 1998 Stock Purchase Agreement and
the date on which the 1998 Stock Purchase Agreement is terminated in accordance
with its terms. The closing under the 1998 Stock Purchase Agreement is not
expected to occur until the third or
<PAGE>
CUSIP NO. 868224106 Page 12 of 24 Pages
fourth quarter of 1998. The form of Common Stock Purchase Warrant which will be
issued to IP Delaware and IP Bermuda is attached as Exhibit 5 hereto and is
hereby incorporated by reference.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Item 5, paragraphs (a), (b) and (c) are hereby amended by the deletion
thereof in their entirety and the substitution therefore of the following:
To the best of the Reporting Persons' knowledge based on the
information contained in the 1998 Stock Purchase Agreement, the aggregate number
of shares of Common Stock of the Company outstanding as of May 5, 1998 was
5,874,584 shares.
As of the close of business on May 5, 1998:
(a)
IP DELAWARE
IP Delaware may, pursuant to Rule 13d-3 of the Exchange Act, be deemed
to be the beneficial owner of 1,375,547 shares of Common Stock, which
constitutes approximately 23.4% of the 5,874,584 shares of Common Stock deemed
outstanding pursuant to Rule 13d-3(d)(l)(i) of the Exchange Act. Of such shares,
1,359,530 shares are owned directly by IP Delaware and 16,017 shares are owned
directly by IPMCLP, for which IP Delaware acts as a managing general partner.
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 1,375,547 shares of Common Stock, which constitutes
approximately 23.4% of the 5,874,584 shares of Common Stock deemed outstanding
pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. Of such shares, 1,359,530
shares are owned directly by IP Delaware and 16,017 shares are owned directly by
IPMCLP, for which IP Delaware acts as a managing general partner.
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 1,375,547 shares of
Common Stock, which constitutes approximately 23.4% of the 5,874,584 shares of
Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Exchange
Act. Of such shares, 1,359,530 shares are owned directly by IP Delaware and
16,017 shares are owned directly by IPMCLP, for which IP Delaware acts as a
managing general partner.
<PAGE>
CUSIP NO. 868224106 Page 13 of 24 Pages
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 1,375,547 shares of the Stock, which constitutes
approximately 23.4% of the 5,874,584 shares of Common Stock deemed outstanding
pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. Of such shares, 1,359,530
shares are owned directly by IP Delaware and 16,017 shares are owned directly by
IPMCLP, for which IP Delaware acts as a managing general partner.
IP BERMUDA
IP Bermuda may, pursuant to Rule 13d-3 of the Exchange Act, be deemed
to be the beneficial owner of 765,304 shares of Common Stock, which constitutes
approximately 13% of the 5,874,584 shares of Common Stock deemed outstanding
pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. Of such shares, 749,287
shares are owned directly by IP Bermuda and 16,017 shares are owned directly by
IPMCLP, for which IP Bermuda acts as a managing general partner.
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 765,304 shares of Common Stock, which constitutes
approximately 13% of the 5,874,584 shares of Common Stock deemed outstanding
pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. Of such shares, 749,287
shares are owned directly by IP Bermuda and 16,017 shares are owned directly by
IPMCLP, for which IP Bermuda acts as a managing general partner.
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
765,304 shares of Common Stock, which constitutes approximately 13% of the
5,874,584 shares of Common Stock deemed outstanding pursuant to Rule
13d-3(d)(1)(i) of the Exchange Act. Of such shares, 749,287 shares are owned
directly by IP Bermuda and 16,017 shares are owned directly by IPMCLP, for which
IP Bermuda acts as a managing general partner.
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
<PAGE>
CUSIP NO. 868224106 Page 14 of 24 Pages
deemed to be the beneficial owner of 765,304 shares of Common Stock, which
constitutes approximately 13% of the 5,874,584 shares of Common Stock deemed
outstanding pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. Of such shares,
749,287 shares are owned directly by IP Bermuda and 16,017 shares are owned
directly by IPMCLP, for which IP Bermuda acts as a managing general partner.
IPMCLP
IPMCLP may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be
the beneficial owner of 16,017 shares of Common Stock, which constitutes
approximately .3% of the 5,874,584 shares of Common Stock deemed outstanding
pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. Of such shares, 749,287
shares are owned directly by IP Bermuda and 16,017 shares are owned directly by
IPMCLP, for which IP Bermuda acts as a managing general partner.
IP Delaware, IP Bermuda and MCLP I Limited Partnership, a Massachusetts
limited partnership ("MCLP"), entered into a general partnership agreement (the
("Partnership Agreement"), dated as of January 9, 1998, but effective as of
April 11, 1997. Pursuant to the Partnership Agreement, IP Delaware, IP Bermuda
and MCLP contributed in the aggregate 16,017 shares of Common Stock as an
initial capital contribution to IPMCLP. The terms of the Partnership Agreement
provide that IP Delaware and IP Bermuda are each vested as managing general
partners of IPMCLP, with sole and exclusive responsibility and authority for the
management, conduct and operation of IPMCLP's business, including all authority
to vote and dispose of the 16,017 shares of Common Stock held by IPMCLP.
IP COMMON STOCK PURCHASE WARRANTS
Pursuant to Rule 13d-3 under the Securities and Exchange Act of 1934,
as amended, IP Delaware, Insurance GenPar, IMGPLP, IMGPI, IP Bermuda, Insurance
GenPar Bermuda, IBMGPLP and IBMGPI are not reporting beneficial ownership of the
shares of Common Stock which would be issuable upon the exercise of the IP
Common Stock Purchase Warrants as the IP Common Stock Purchase Warrants can not
be deemed to be exercisable within 60 days since they have not been issued and,
pursuant to the terms of the 1998 Stock Purchase Agreement, will not be issued
until the earlier of the date on which the 1998 Stock Purchase Agreement is
terminated in accordance with its terms and the date of the closing under the
1998 Stock Purchase Agreement, which is not expected to occur until the third or
fourth quarter of 1998.
(b)
IP DELAWARE
1. Sole power to vote or to direct
the vote -0-
2. Shared power to vote or to direct
the vote 1,375,547
<PAGE>
CUSIP NO. 868224106 Page 15 of 24 Pages
3. Sole power to dispose or to direct
the disposition -0-
4. Shared power to dispose of or to
direct the disposition 1,375,547
INSURANCE GENPAR
1. Sole power to vote or to direct
the vote -0-
2. Shared power to vote or to direct
the vote 1,375,547
3. Sole power to dispose or to direct
the disposition -0-
4. Shared power to dispose of or to
direct the disposition 1,375,547
IMGPLP
1. Sole power to vote or to direct
the vote -0-
2. Shared power to vote or to direct
the vote 1,375,547
3. Sole power to dispose or to direct
the disposition -0-
4. Shared power to dispose of or to
direct the disposition 1,375,547
IMGPI
1. Sole power to vote or to direct
the vote -0-
2. Shared power to vote or to direct
the vote 1,375,547
3. Sole power to dispose or to direct
the disposition -0-
4. Shared power to dispose of or to
direct the disposition 1,375,547
<PAGE>
CUSIP NO. 868224106 Page 16 of 24 Pages
IP BERMUDA
1. Sole power to vote or to direct
the vote -0-
2. Shared power to vote or to direct
the vote 765,304
3. Sole power to dispose or to direct
the disposition -0-
4. Shared power to dispose of or to
direct the disposition 765,304
INSURANCE GENPAR BERMUDA
1. Sole power to vote or to direct
the vote -0-
2. Shared power to vote or to direct
the vote 765,304
3. Sole power to dispose or to direct
the disposition -0-
4. Shared power to dispose of or to
direct the disposition 765,304
IBMGPLP
1. Sole power to vote or to direct
the vote -0-
2. Shared power to vote or to direct
the vote 765,304
3. Sole power to dispose or to direct
the disposition -0-
4. Shared power to dispose of or to
direct the disposition 765,304
IBMGPI
1. Sole power to vote or to direct
the vote -0-
2. Shared power to vote or to direct
the vote 765,304
<PAGE>
CUSIP NO. 868224106 Page 17 of 24 Pages
3. Sole power to dispose or to direct
the disposition -0-
4. Shared power to dispose of or to
direct the disposition 765,304
IPMCLP
1. Sole power to vote or to direct
the vote -0-
2. Shared power to vote or to direct
the vote 16,017
3. Sole power to dispose or to direct
the disposition -0-
4. Shared power to dispose of or to
direct the disposition 16,017
(c) Except as set forth herein, none of the persons named in response
to paragraph (a) has effected any transactions in shares of Common Stock during
the past 60 days.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDING OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER
Item 6 is hereby amended by the insertion of the following after the
last paragraph thereof:
IP Delaware and IP Bermuda have entered into the 1998 Stock Purchase
Agreement for the purpose of, among other things, providing the Company with
sufficient funds to meet its obligations under the Purchase Agreement, dated May
5, 1998 (the "FHC Purchase Agreement"), between the Company and Foundation
Health Corporation, a Delaware Corporation ("FHC"), pursuant to which, among
other things, the Company has agreed to purchase certain of FHC's assets.
At the request of FHC, which wishes to ensure the approval by the
stockholders of the Company of certain matters relating to the 1998 Stock
Purchase Agreement and the FHC Purchase Agreement, IP Delaware has entered into
a Voting Agreement, dated as of May 5, 1998 (the "IP Delaware Voting
Agreement"), between IP Delaware and FHC, and IP Bermuda has entered into a
Voting Agreement, dated as of May 5, 1998 (the "IP Bermuda Voting Agreement"
and, together with the IP Delaware Voting Agreement, the "Voting Agreements"),
between IP Bermuda and FHC. Pursuant to the Voting Agreements, IP Delaware and
IP Bermuda have agreed, at any meeting of the stockholders of the Company
relating to the transactions contemplated by the 1998 Stock Purchase Agreement
and the FHC Purchase Agreement, (a) to appear, or cause the holder of record on
the applicable record date
<PAGE>
CUSIP NO. 868224106 Page 18 of 24 Pages
(the "Record Holder") to appear, for the purpose of obtaining a quorum; (b) to
vote, or cause the Record Holder to vote, in person or by proxy, all of the
shares of Common Stock owned or with respect to which IP Delaware or IP Bermuda,
as the case may be, has or shares voting power and shares of Common Stock which
shall, or with respect to which voting power shall, after the date of the Voting
Agreements, be acquired by IP Delaware or IP Bermuda in favor of (i) the
issuance of shares of Common Stock pursuant to the 1998 Stock Purchase Agreement
(and the related agreements referred to therein), (ii) the transactions
contemplated by (x) the 1998 Stock Purchase Agreement and (y) the offering of
debt securities of the Company which the Company has agreed to effect prior to
the closing under the 1998 Stock Purchase Agreement pursuant to the terms of the
1998 Stock Purchase Agreement for the financing of the transactions contemplated
by the FHC Purchase Agreement and (iii) any amendment to the certificate of
incorporation of the Company necessary to complete the transactions contemplated
by the 1998 Stock Purchase Agreement; and (c) vote, or cause the Record Holder
to vote, such shares against: (i) any extraordinary corporate transaction (other
than the transactions contemplated by the FHC Purchase Agreement), such as a
merger, consolidation, business combination, reorganization, recapitalization or
liquidation involving the Company or any of its subsidiaries and (ii) any sale
or transfer of a material amount of the assets of the Company or any of its
subsidiaries if the transactions described in clauses (i) or (ii) would
adversely effect the Company's ability to complete the transactions contemplated
under the FHC Purchase Agreement. In connection with the execution of the Voting
Agreements, IP Delaware and IP Bermuda each granted B. Curtis Westen and Michael
E. Jansen an irrevocable proxy with respect to the matters contained in this
paragraph. The IP Delaware Voting Agreement (including the irrevocable proxy
granted in connection therewith) and the IP Bermuda Voting Agreement (including
the irrevocable proxy granted in connection therewith) are attached as Exhibits
6 and 7, respectively, and are hereby incorporated by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Item 7 is amended by the addition thereto of the following:
Exhibit 4 Stock Purchase Agreement, dated as of May 5, 1998,
among Superior National Group, Inc., Insurance
Partners, L.P., Insurance Partners Offshore
(Bermuda), L.P. and Capital Z Partners, Ltd.
Exhibit 5 Form of Common Stock Purchase Warrant
Exhibit 6 Voting Agreement, dated as of May 5, 1998, between
Insurance Partners, L.P. and Foundation Health
Corporation (including the Irrevocable Proxy attached
as Exhibit A thereto)
<PAGE>
CUSIP NO. 868224106 Page 19 of 24 Pages
Exhibit 7 Voting Agreement, dated as of May 5, 1998, between
Insurance Partners Offshore (Bermuda), L.P. and
Foundation Health Corporation (including the
Irrevocable Proxy attached as Exhibit A thereto)
<PAGE>
CUSIP NO. 868224106 Page 20 of 24 Pages
Signature
After reasonable inquiry and to the best of the knowledge and belief of
the undersigned, the undersigned hereby certifies that the information set forth
in this statement is true, complete and correct.
Dated: May 29, 1998
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/ Robert A. Spass
-----------------------
Name: Robert A. Spass
Title: 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/ Robert A. Spass
-----------------------
Name: Robert A. Spass
Title: President
<PAGE>
CUSIP NO. 868224106 Page 21 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/ Robert A. Spass
-----------------------
Name: Robert A. Spass
Title: President
INSURANCE GENPAR MGP, INC.,
a Delaware corporation
By: /s/ Robert A. Spass
-----------------------
Name: Robert A. Spass
Title: 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/ Robert A. Spass
-----------------------
Name: Robert A. Spass
Title: President
<PAGE>
CUSIP NO. 868224106 Page 22 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/ Robert A. Spass
-----------------------
Name: Robert A. Spass
Title: President
INSURANCE GENPAR (BERMUDA) MGP, L.P., a
Bermuda corporation
By: Insurance GenPar (Bermuda) MGP, Ltd., a
Bermuda corporation, its General Partner
By: /s/ Robert A. Spass
-----------------------
Name: Robert A. Spass
Title: President
INSURANCE GENPAR (BERMUDA) MGP, LTD., a
Bermuda corporation
By: /s/ Robert A. Spass
-----------------------
Name: Robert A. Spass
Title: President
<PAGE>
CUSIP NO. 868224106 Page 23 of 24 Pages
IP/MCLP GENERAL PARTNERSHIP IV, a New York
general partnership
By: Insurance Partners, L.P., a Delaware limited
partnership, its Managing General Partner
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/ Robert A. Spass
-----------------------
Name: Robert A. Spass
Title: President
<PAGE>
CUSIP NO. 868224106 Page 24 of 24 Pages
EXHIBIT INDEX
Page on which
Number Document Exhibit appears
------ -------- ---------------
4 Stock Purchase Agreement, dated
as of May 5, 1998, among
Superior National Group, Inc.,
Insurance Partners, L.P.,
Insurance Partners Offshore
(Bermuda), L.P. and Capital Z
Partners, Ltd.
5 Form of Common Stock Purchase
Warrant
6 Voting Agreement, dated as of
May 5, 1998, between Insurance
Partners, L.P. and Foundation
Health Corporation (including the
Irrevocable Proxy attached as
Exhibit A thereto)
7 Voting Agreement, dated as of
May 5, 1998, between Insurance
Partners Offshore (Bermuda),
L.P. and Foundation Health
Corporation (including the
Irrevocable Proxy attached as
Exhibit A thereto)
EXHIBIT 4
EXECUTION COPY
------------------------------------------------
STOCK PURCHASE AGREEMENT
among
SUPERIOR NATIONAL INSURANCE GROUP, INC.,
INSURANCE PARTNERS, L.P.,
INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P.
AND
CAPITAL Z PARTNERS, LTD.
------------------------------------------
Dated as of May 5, 1998
------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I THE TRANSACTIONS.................................................2
1.1 Purchase and Sale................................................2
1.2 Closing Matters..................................................2
1.3 The Closing......................................................2
1.4 Commitment Fee...................................................3
1.5 Transaction Fee..................................................3
1.6 Additional Fee...................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS................................................4
2.1 Organization.....................................................4
2.2 Authority........................................................4
2.3 No Violation.....................................................5
2.4 Brokers..........................................................5
2.5 Funds Available..................................................6
2.6 Securities Act Representation....................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY...................................................6
3.1 Corporate Organization...........................................6
3.2 Capital Stock....................................................6
3.3 Newly Issued Shares..............................................7
3.4 Authority........................................................7
3.5 No Violation.....................................................8
3.6 SEC Filings......................................................9
3.7 Litigation......................................................10
3.8 Compliance with Laws............................................10
3.9 No Material Adverse Change; Ordinary Course of Business.........11
3.10 Private Offering................................................11
3.11 Taxes...........................................................11
3.12 Brokers.........................................................12
3.13 Fairness Opinion................................................12
ARTICLE IV COVENANTS AND AGREEMENTS........................................12
4.1 Proxy Statement and Meeting of Company's Stockholders...........12
4.2 Standstill......................................................13
4.3 Transfer of Shares..............................................15
4.4 Rights Offering; Debt Offering..................................16
4.5 Best Efforts....................................................17
4.6 Indemnification by the Company..................................17
4.7 Indemnification by the Purchasers...............................18
4.8 Consents........................................................19
4.9 Use of Proceeds.................................................19
<PAGE>
Page
----
4.10 HSR Reports.....................................................19
4.11 Exclusivity.....................................................19
4.12 SEC Filings.....................................................19
4.13 Amendment of Purchase Agreement.................................20
4.14 Rights Offering Notice..........................................20
ARTICLE V CONDITIONS PRECEDENT............................................20
5.1 Conditions to Each Party's Obligations..........................20
5.2 Conditions to the Obligations of the Company....................20
5.3 Conditions to the Obligations of Purchasers.....................21
ARTICLE VI MISCELLANEOUS...................................................23
6.1 Termination.....................................................23
6.2 Amendment.......................................................23
6.3 Waiver..........................................................23
6.4 Survival........................................................23
6.5 Notices.........................................................23
6.6 Headings; Agreement.............................................24
6.7 Publicity.......................................................25
6.8 Entire Agreement................................................25
6.9 Conveyance Taxes................................................25
6.10 Assignment......................................................25
6.11 Counterparts....................................................26
6.12 Governing Law...................................................26
6.13 Third Party Beneficiaries.......................................26
6.14 Costs and Expenses..............................................26
EXHIBITS
Exhibit A-1 Purchasers of the Shares of Common Stock
Exhibit A-2 Warrants
Exhibit A-3 Transaction Fee
Exhibit B Form of Warrant
Exhibit C Form of Amended and Restated Registration Rights Agreement
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT ("Agreement") dated as of May 5, 1998 by
and among Superior National Insurance Group, Inc., a Delaware corporation (the
"Company"), Insurance Partners, L.P., a Delaware limited partnership ("IP
Delaware"), Insurance Partners Offshore (Bermuda), L.P., a Bermuda limited
partnership ("IP Bermuda"), and Capital Z Partners, Ltd., a Bermuda corporation
("Cap Z", and together with IP Delaware and IP Bermuda, the "Purchasers").
R E C I T A L S:
WHEREAS, the Purchasers wish to purchase from the Company, and the
Company wishes to issue and sell to the Purchasers, the number of shares of
common stock, par value $.01 per share (the "Common Stock"), of the Company as
is set forth in Section 1.1 below, on the terms and subject to the conditions
set forth herein;
WHEREAS, concurrently with the execution of this Agreement, the
Company and Foundation Health Corporation, a Delaware corporation ("FHC"), are
entering into a Purchase Agreement (the "Purchase Agreement") pursuant to which
the Company will acquire certain subsidiaries of FHC;
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") has approved this Agreement and the transactions contemplated
hereby, upon the terms and subject to the conditions set forth herein;
WHEREAS, in accordance with Section 4.2(b) and (c) of the Amended
and Restated Stock Purchase Agreement, dated as of September 17, 1996 as amended
and restated effective as of February 17, 1997 (the "September 1996 Stock
Purchase Agreement"), among the Company, IP Delaware, IP Bermuda and the other
persons or entities who executed the subscription agreements attached thereto,
the limitations set forth in Section 4.2(a) and (c) of the September 1996 Stock
Purchase Agreement have been waived with respect to the transactions
contemplated hereby with the approval of the Board of Directors of the Company
in accordance with Section 4.2(b) of the September 1996 Stock Purchase
Agreement; and
WHEREAS, the Board of Directors of the Company has approved the
transfer or assignment by Cap Z of (i) this Agreement and all of its rights,
interests and obligations hereunder and (ii) the Shares and the Warrants (each
as defined herein) to be issued to Cap Z hereunder (x) to a partnership of which
Cap Z will be, directly or indirectly, the general partner, (y) to or from
Zurich Centre Investments
<PAGE>
2
Ltd. ("ZCIL") or its affiliates in accordance with the terms of the letter
agreement, dated May 5, 1998 (the "Zurich Letter"), among the Company, Cap Z and
ZCIL or (z) in the case of the Warrants, as otherwise provided in Section 1.4
hereof.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and conditions
contained herein, the sufficiency of which is hereby acknowledged, and in order
to set forth the terms and conditions of the transactions described herein and
the mode of carrying the same into effect, the parties hereby agree as follows:
ARTICLE I
THE TRANSACTIONS
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, each of the Purchasers agrees to purchase from the Company and the
Company agrees to issue and sell to each of the Purchasers (the "Purchase") at
the Closing (as defined below) the aggregate number of shares of Common Stock
(the "Shares") equal to the sum of (a) the number of shares of Common Stock set
forth opposite such Purchaser's name on Exhibit A-1 hereto under the heading
"Shares to be Purchased" at a purchase price for each share of Common Stock of
Sixteen Dollars and Seventy-Five Cents ($16.75) (the "Share Price"), plus (b) if
all the shares of Common Stock offered in the Rights Offering (as defined
herein) are not subscribed for, the aggregate number of shares of Common Stock
that is equal to the product of the total number of shares of Common Stock which
are not subscribed for in the Rights Offering (which number shall be set forth
in the notice to be delivered by the Company to the Purchasers pursuant to
Section 4.14 hereof) and the percentage set forth opposite such Purchaser's name
on Exhibit A-1 hereto under the heading "Percentage of Unsubscribed Shares" at a
purchase price for each share of Common Stock equal to the Share Price;
provided, that in no event shall any Purchaser be obligated to purchase in
excess of the number of shares of Common Stock set forth opposite such
Purchaser's name on Exhibit A-1 hereto under the heading "Maximum Number of
Shares" (the aggregate amount to be paid by a Purchaser under this Section being
the "Purchase Price" with respect to such Purchaser).
1.2 Closing Matters. At the Closing each of the Purchasers shall
wire transfer or otherwise make available in same day funds to the Company the
Purchase Price to be paid by such Purchaser and the Company shall deliver to
such Purchaser certificates representing the Shares purchased by such Purchaser.
1.3 The Closing. Subject to the fulfillment of the conditions
precedent specified in Article V (any or all of which may be waived in writing
by the respective parties whose performance is conditioned upon satisfaction of
such
<PAGE>
3
conditions precedent), the purchase and sale of the Shares shall be consummated
at a closing (the "Closing") to be held at the offices of Riordan & McKinzie in
Los Angeles, California, subject to the satisfaction or waiver of all conditions
precedent specified in Article V hereof, simultaneous with the Closing (as
defined in the Purchase Agreement) under the Purchase Agreement, or at such
other place and time as the Company and the Purchasers shall mutually agree in
writing after the satisfaction or waiver of all conditions precedent specified
in Article V; provided, that the Closing Date shall not be less than 10 business
days after the date on which the Rights Offering Notice is delivered by the
Company to the Purchasers pursuant to Section 4.14 hereof; and provided,
further, that in no circumstance shall the Closing occur on or after November
30, 1998 or such later date as may be required by Section 7.1(b)(i) of the
Purchase Agreement, but in no event later than December 31, 1998 (such date and
time being herein referred to as the "Closing Date").
1.4 Commitment Fee. Whether or not the transactions contemplated
hereby are consummated, the Company shall pay a commitment fee to each Purchaser
or its designee (or, in the case of Cap Z, assignee) and ZCIL or its designee
(the "Commitment Fee") as compensation, in the case of each Purchaser, for
agreeing to purchase the Shares referred to in Section 1.1(b) hereof, and, in
the case of ZCIL, for providing the Zurich Letter in respect of the Shares
referred to in Section 1.1(b) hereof. The Commitment Fee due hereunder shall be
earned and payable as of the date of execution of this Agreement and shall be
paid by issuing to each Purchaser or its designee (or, in the case of Cap Z,
assignee) and ZCIL or its designee, except to the extent set forth in the Zurich
Letter, the number of Common Stock Purchase Warrants (the "Warrants") set forth
opposite such Purchaser's or ZCIL's name on Exhibit A-2 hereto registered in the
name of such Purchaser or ZCIL. The Warrants shall be in the form of Exhibit B
hereto and shall be issued to each Purchaser or its designee (or, in the case of
Cap Z, assignee) and ZCIL or its designee in definitive form on the earlier of
the Closing Date and the date this Agreement is terminated in accordance with
its terms. Notwithstanding the provisions of Section 6.4 hereof, this Section
1.4 shall survive the termination of this Agreement.
1.5 Transaction Fee. If the transactions contemplated hereby are
consummated, at the Closing, the Company shall pay to each Purchaser or its
designee (or, in the case of Cap Z, assignee), in immediately available funds, a
transaction fee in the amount set forth opposite such Purchaser's name on
Exhibit A-3 hereto.
1.6 Additional Fee. If FHC shall pay to the Company the breakup
fee (the "Breakup Fee") as described in Section 7.3 of the Purchase Agreement in
accordance with Section 7.3 of the Purchase Agreement, then the Company shall
pay to each Purchaser or its designee promptly following the Company's receipt
of the Breakup Fee, an amount equal to the product of (x) the Breakup Fee and
(y) a fraction, the numerator of which is equal to the sum of (i) the number of
shares of Common Stock set forth opposite such Purchaser's name on Exhibit A-1
hereto under the heading "Maximum Number of Shares" plus (ii) the number of
shares of Common
<PAGE>
4
Stock issuable, as of the date the Breakup Fee is paid to the Company, to such
Purchaser upon the exercise of the number of Warrants set forth opposite such
Purchaser's name on Exhibit A-2 hereto (which, in the case of Cap Z, shall also
include the Warrants set forth opposite ZCIL's name on such Exhibit), and the
denominator of which is the number of outstanding shares of Common Stock on a
fully-diluted basis on the date the Breakup Fee is paid to the Company, assuming
the issuance to the Purchasers of the maximum number of shares of Common Stock
issuable hereunder as if the purchase by the Purchasers contemplated hereunder
shall have occurred (notwithstanding that no such purchases shall have taken
place) and the exercise, as of the date of such payment, of all of the Warrants
issuable hereunder into the aggregate number of Shares of Common Stock issuable
thereunder as of the date the Breakup Fee is paid to the Company.
Notwithstanding the provisions of Section 6.4 hereof, this Section 1.6 shall
survive the termination of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS
Each of the Purchasers, severally but not jointly, represents and
warrants to the Company, solely as to such Purchaser, as to all matters relevant
thereto, as follows:
2.1 Organization. Each such Purchaser is a corporation or limited
partnership, as the case may be, duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation or
formation, as the case may be.
2.2 Authority. (i) Each such Purchaser has full corporate or
partnership, as the case may be, power and authority to execute and deliver this
Agreement and each other agreement contemplated hereby to which it is a party,
to carry out its obligations hereunder and thereunder and to consummate the
transactions contemplated on its part hereby and thereby, (ii) the execution,
delivery and performance by such Purchaser of this Agreement and each other
agreement contemplated hereby to which it is a party have been duly authorized
by all necessary corporate or partnership, as the case may be, action on the
part of such Purchaser, (iii) no other action on the part of such Purchaser (or,
in the case of a Purchaser that is a limited partnership, its respective
partners) is necessary to authorize the execution and delivery of this Agreement
and each other agreement contemplated hereby by such Purchaser or the
performance by such Purchaser of its obligations hereunder and (iv) this
Agreement has been duly executed and delivered by such Purchaser and (assuming
due execution and delivery by the other parties hereto) constitutes a legal,
valid and binding agreement of such Purchaser, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting creditors' rights generally
and subject to
<PAGE>
5
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Each other agreement to be
executed by such Purchaser in connection with this Agreement on or prior to the
Closing Date will be duly executed and delivered by such Purchaser, and
(assuming due execution and delivery by the other party or parties thereto) will
constitute a legal, valid and binding obligation of such Purchaser, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting creditors'
rights generally and subject to general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
2.3 No Violation. The execution and delivery by such Purchaser of
this Agreement and each other agreement contemplated hereby to which it is a
party, the performance by such Purchaser of its obligations hereunder and
thereunder and the consummation by it of the transactions contemplated hereby
and thereby will not (a) violate any provision of law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award applicable to such
Purchaser (b) require such Purchaser to obtain the consent, waiver, approval,
license or authorization of or make any filing with any person or governmental
authority except for, (i) filings to be made in connection with or in compliance
with the provisions of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), Regulation D as promulgated under the Securities Act of 1933,
as amended (the Securities Act"), and applicable state securities laws, (ii) if
required, the filing of a pre-merger notification report under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (an "HSR
Report"), and (iii) the filing of a Form A Information Statement ("Form A") by
the Purchaser with the insurance departments of such states as may be required
in connection with the transactions contemplated by this Agreement or the
Purchase Agreement or (c) violate, result (with or without notice or the passage
of time, or both) in a breach of or give rise to the right to accelerate,
terminate or cancel any obligation under or constitute (with or without notice
or the passage of time, or both) a default under, any of the terms or provisions
of any charter or bylaw, partnership agreement, indenture, mortgage, agreement,
contract, order, judgment, ordinance, regulation or decree to which such
Purchaser is subject or by which such Purchaser is bound, except for any of the
foregoing matters which would not have, individually or in the aggregate, a
material and adverse effect upon the operations, condition, prospects or results
of operations of such party (a "Material Adverse Effect").
2.4 Brokers. Such Purchaser has not paid or become obligated to
pay any fee or commission to any broker, finder, investment banker or other
intermediary in connection with this Agreement.
<PAGE>
6
2.5 Funds Available. Such Purchaser has funds available, or
commitments from third parties to provide funds, sufficient to pay the Purchase
Price to be paid by such Purchaser, it being agreed by the Company that the
Zurich Letter constitutes such a commitment to provide funds to pay the Purchase
Price to be paid by Cap Z.
2.6 Securities Act Representation. As of the Closing hereunder,
such Purchaser will be an "accredited investor" as defined in Rule 501
promulgated as part of Regulation D under the Securities Act. Such Purchaser is
not purchasing its respective portion of the Shares with a view to a
distribution or resale of any of such securities in violation of any applicable
securities laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Purchasers as follows:
3.1 Corporate Organization. Each of the Company and its
Subsidiaries (as defined below) is a corporation or statutory business trust
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, with all requisite corporate or
trust, as the case may be, power and authority to lease the properties it
operates as lessee and to carry on its business as it is now being conducted as
described in the SEC Filings (as defined herein), and is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which it
currently carries on business, except where the failure to be so qualified or
licensed or be in good standing would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect on the Company. With
respect to the Company, a "Material Adverse Effect" shall refer to the Company
and its Subsidiaries on a consolidated basis. True and complete copies of the
Certificate of Incorporation and the Bylaws of the Company and respective
charter documents of the Subsidiaries, each as amended to date, have been
delivered to the Purchasers. "Subsidiaries" 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.
3.2 Capital Stock. The authorized capital stock of the Company
consists in its entirety of 25,000,000 shares of Common Stock, of which, as of
the date hereof, 5,874,584 shares are issued and outstanding. All of the
outstanding shares of Common Stock have been duly and validly authorized and
issued, are fully paid and nonassessable and were issued in compliance with all
applicable federal and state securities laws. Except for warrants described in
the SEC Filings (and the
<PAGE>
7
preemptive rights that are contained in such warrants) and except for options
and other stock rights authorized for issuance pursuant to the Company's stock
plans and employee stock purchase plans described in the SEC Filings and except
for the Warrants to be issued hereunder and the rights to purchase shares of
Common Stock to be offered in connection with the Rights Offering, there are no
preemptive rights, options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of capital stock or other securities of the Company or any of
the Subsidiaries.
3.3 Newly Issued Shares. The Shares to be issued and sold by the
Company to the Purchasers in accordance with the terms of this Agreement have
been duly authorized and, when issued as contemplated hereby at the Closing,
will be validly issued, fully paid and non-assessable. At the Closing, the
Purchasers will acquire good and marketable title to the Shares free and clear
of any and all liens, encumbrances, security interests, preemptive rights,
adverse claims or equities or rights in favor of another ("Encumbrances"),
except such Encumbrances as may be created pursuant to this Agreement or imposed
by applicable federal and state securities laws. Upon receipt of the Warrants
pursuant to the terms hereof, the Purchasers or their designees will acquire
good and marketable title to the Warrants and the Common Stock to be issued upon
exercise thereof, in each case free and clear of any and all Encumbrances,
except such Encumbrances as may be created pursuant to this Agreement, imposed
by applicable federal and state securities laws or, prior to the Closing, the
Certificate of Incorporation. The Common Stock to be issued upon the exercise of
the Warrants is duly authorized, has been reserved for issuance, and, when so
issued, will be fully paid and non-assessable. No other person or entity has any
preemptive right, option, warrant, subscription agreement or other right with
respect to such Shares, Warrants or Common Stock to be issued upon exercise of
the Warrants, other than the preemptive rights held by the holders of the Common
Stock Purchase Warrants issued under each of the Note Purchase Agreement, dated
as of March 31, 1992 (the "Note Purchase Agreement") and the Preferred
Securities Purchase Agreement, dated as of June 30, 1994 (the "Preferred
Securities Purchase Agreement"), which preemptive rights will, as of the Closing
Date, have been duly exercised or waived by such holders.
3.4 Authority. The Company has full corporate power and authority
to execute and deliver this Agreement and each other agreement contemplated
hereby to which it is a party, to carry out its obligations hereunder and
thereunder and to consummate the transactions contemplated on its part hereby
and thereby. The execution, delivery and performance by the Company of this
Agreement and each other agreement contemplated hereby to which it is a party
and the consummation of the transactions contemplated on its part hereby have
been duly authorized by the Board of Directors, and no other corporate
proceedings on the part of the Company, except for the stockholder approval as
specified in Article V hereof, are necessary to authorize the execution and
delivery of this Agreement and each other agreement contemplated hereby by the
Company or the performance by the Company of its obligations hereunder or
thereunder. This Agreement has been duly executed and
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8
delivered by the Company and (assuming due execution and delivery by the other
parties hereto) constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting creditors' rights generally and subject to general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). Each other agreement to be executed by the
Company in connection with this Agreement on or prior to the Closing Date will
be duly executed and delivered by the Company, and (assuming due execution and
delivery by the other party or parties thereto) will constitute a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium, reorganization, or similar laws affecting creditors'
rights generally and subject to general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.5 No Violation. The execution, delivery and performance of this
Agreement and each other agreement contemplated hereby by the Company and the
consummation by it of the transactions contemplated hereby and thereby do not
(a) violate any provision of law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award (collectively, "Requirements of Law")
applicable to the Company or any of the Subsidiaries, (b) require the consent,
waiver, approval, license or authorization of or any notice or filing by the
Company or any of the Subsidiaries with any person or governmental authority
except for, (i) filings to be made in connection with or in compliance with the
provisions of the Securities Act, the Exchange Act and applicable state
securities laws, (ii) the filing of (A) HSR Reports by FHC and the Company in
connection with the transactions contemplated by the Purchase Agreement (the
"Acquisition"), (B) HSR Reports by the Purchasers, if required, in connection
with this Agreement, (C) Forms A by the Company with the insurance departments
of such states as may be required in connection with the Acquisition and (D)
Forms A by the Purchasers with the insurance departments of such states as may
be required in connection with this Agreement or (iii) any waiver required from
the holders of the 10 3/4% Trust Preferred Securities of the Company's
Subsidiary, Superior National Capital Trust I, in connection with the
transactions contemplated by this Agreement and the Purchase Agreement or (c)
violate, result (with or without notice or the passage of time, or both) in a
breach of or give rise to the right to accelerate, terminate or cancel any
obligation under, constitute (with or without notice or the passage of time, or
both) a default under, any of the terms or provisions of any charter or bylaw,
indenture, mortgage, agreement, contract, order, judgment, ordinance, regulation
or decree to which the Company or any of its Subsidiaries is subject or by which
the Company or any of its Subsidiaries is bound, except for any of the foregoing
matters which would not have, individually or in the aggregate, a Material
Adverse Effect on the Company. Neither the Company nor any of the Subsidiaries
previously entered into any agreement which is currently in effect, or by which
the Company or any of the Subsidiaries is currently bound, granting any rights
to any person which are inconsistent with the rights to be granted by the
Company in this Agreement and each other agreement contemplated hereby, other
<PAGE>
9
than the rights granted to the holders of the Common Stock Purchase Warrants
issued pursuant to the Note Purchase Agreement and the Preferred Securities
Purchase Agreement. The execution, delivery and performance of this Agreement
and each other agreement contemplated hereby by the Company and the consummation
by it of the transactions contemplated hereby and thereby will not result in a
"change of control" or similar event occurring under any agreement, indenture,
mortgage or contract to which the Company or any of its Subsidiaries is subject
or by which the Company or any of its Subsidiaries is bound or give rise to a
payment by the Company or any of its Subsidiaries under a change of control or
similar provision in any agreement, indenture, mortgage or contract to which the
Company or any of its Subsidiaries is subject or by which the Company or any of
its Subsidiaries is bound.
3.6 SEC Filings. The Company has filed all SEC Filings required to
be filed by it since September 17, 1996 under the Securities Act or the Exchange
Act, and all amendments thereto. The Company heretofore has delivered to each
Purchaser true and complete copies of (a) its audited consolidated financial
statements of the Company and the Subsidiaries (balance sheet and statements of
operations, cash flows and stockholders' equity, together with the notes
thereto) for the fiscal years ended and as at December 31, 1996 and December 31,
1997 (as such financial statements appear in the Company's Form 10-K for each of
the fiscal years ended December 31, 1996 and December 31, 1997, which were filed
with the Commission on March 10, 1997 and March 31, 1998, respectively
(collectively, the "Financial Statements")), (b) its Quarterly Reports on Form
10-Q for the quarters ended September 30, 1996, March 31, 1997, June 30, 1997,
and September 30, 1997, (c) its Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, (d) each of its Proxy Statements on Schedule 14A under
the Exchange Act, dated November 11, 1996 and March 10, 1997, respectively, and
(e) all other reports, statements, registration statements and other documents
(including Current Reports on Form 8-K) filed by it with the Securities and
Exchange Commission (the "Commission") under the Securities Act or the Exchange
Act, and all amendments and supplements thereto, since September 17, 1996 (the
foregoing subsections (a) through (e), including all exhibits and Schedules
thereto and documents incorporated by reference therein, are referred to in this
Agreement as the "SEC Filings"). As of the respective date that it was filed
with the Commission, each of the SEC Filings complied as to form and content, in
all material respects, with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations promulgated
thereunder, and did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements included in the SEC Filings were
prepared in accordance with generally accepted accounting principles,
consistently applied, and (except as may be indicated therein or in the notes
thereto) present fairly the consolidated financial position, results of
operations and cash flows of Company as of the dates and for the respective
periods indicated (subject, in the case of unaudited financial statements, to
normal recurring year-end adjustments and any other adjustments described
therein). The Company has (i) delivered to the Purchasers true
<PAGE>
10
and complete copies of (x) all correspondence relating to the Company between
the Commission and the Company or its legal counsel and, to the Company's
knowledge, accountants since September 17, 1996 (other than routine filing
package cover letters) and (y) all correspondence between the Company or its
counsel and the Company's auditors since September 17, 1996, relating to any
audit, financial review or preparation of financial statements of the Company
(other than correspondence which the Company reasonably believes is subject to a
privilege), and (ii) disclosed to the Purchasers the content of all material
discussions between the Commission and the Company or its legal counsel and, to
the Company's knowledge, accountants concerning the adequacy or form of any SEC
Filings filed with the Commission since September 17, 1996. The Company is not
aware of any issues raised by the Commission with respect to any of the SEC
Filings, other than those disclosed to the Purchasers pursuant to this
paragraph.
3.7 Litigation. Except as set forth in the SEC Filings, there are
no actions, suits, proceedings, claims, complaints, disputes or investigations
pending or, to the knowledge of the Company, threatened, at law, in equity, in
arbitration or before any governmental authority against the Company or any of
its Subsidiaries and with respect to which the Company or any of its
Subsidiaries is responsible by way of indemnity or otherwise, that would, if
adversely determined, (a) have a Material Adverse Effect on the Company or (b)
have a material adverse effect on the ability of the Company to perform its
obligations under this Agreement and each other agreement contemplated hereby to
which it is a party. No injunction, writ, temporary restraining order, decree or
order of any nature has been issued by any court or other governmental authority
against the Company or any of its Subsidiaries purporting to enjoin or restrain
the execution, delivery or performance of this Agreement or any other agreement
contemplated hereby.
3.8 Compliance with Laws.
(a) Each of the Company and the Subsidiaries is in compliance
with all Requirements of Law in all respects, except to the extent that the
failure to comply with such Requirements of Law would not have a Material
Adverse Effect on the Company.
(b) (i) Each of the Company and the Subsidiaries has all
licenses, permits, orders or approvals of any governmental authority
(collectively, "Permits") that are material to or necessary for the conduct of
the business of the Company in the manner described in the SEC Filings filed
with the SEC prior to the date hereof, except to the extent that the failure to
have such Permits would not have a Material Adverse Effect on the Company; (ii)
such Permits are in full force and effect; and (iii) no material violations are
recorded in respect to any Permit.
3.9 No Material Adverse Change; Ordinary Course of Business.
Except as set forth in the SEC Filings and except as previously disclosed to the
Purchasers in writing, since December 31, 1997, (i) there has not been any
material
<PAGE>
11
adverse change in operations, financial condition, prospects or results of
operations of the Company and the Subsidiaries, taken as a whole and (ii)
neither the Company nor any of the Subsidiaries has participated in any
transaction or acted outside the ordinary course of business.
3.10 Private Offering. No form of general solicitation or general
advertising was used by the Company or any of the Subsidiaries or their
respective representatives in connection with the offer or sale of the Shares or
Warrants. No registration of the Shares or Warrants, pursuant to the provisions
of the Securities Act or any state securities or "blue sky" laws, will be
required by the offer, sale or issuance of the Shares or Warrants.
3.11 Taxes. The Company and its Subsidiaries have filed or caused
to be filed, or have properly filed extensions for, all income tax returns that
are required to be filed and have paid or caused to be paid all amounts as shown
on said returns and on all assessments received by it to the extent that such
taxes have become due, except taxes the validity or amount of which is being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves, in accordance with generally accepted accounting principles,
have been set aside. The Company and its Subsidiaries have paid or caused to be
paid, or have established reserves in accordance with generally accepted
accounting principles that the Company or such Subsidiaries reasonably believes
to be adequate in all material respects, for all income tax liabilities
applicable to the Company and its Subsidiaries for all fiscal years that have
not been examined and reported on by the taxing authorities (or closed by
applicable statutes). United States federal income returns of the Company and
its Subsidiaries have been examined and closed through the fiscal year ended
December 31, 1993. The Company has delivered to the Purchasers (a) true and
complete copies of any tax sharing agreements to which it or any of the
Subsidiaries is party and such agreements have not been amended in any manner
and (b) an analysis of the ownership of capital stock of the Company by "5
percent shareholders" as such term is defined in Section 382 of the Internal
Revenue Code of 1986, as amended, and the Treasury regulations promulgated
thereunder (collectively, "Section 382").
3.12 Brokers. Except with respect to any investment banking fee
due to Donaldson, Lufkin & Jenrette Securities Corporation and any other
financial advisor of the Company with respect to the transactions contemplated
hereunder, the Company has not paid or become obligated to pay any fee or
commission to any broker, funder, investment banker or other intermediary in
connection with this Agreement.
3.13 Fairness Opinion. The Company has received the favorable
opinion of a financial advisor to the Company as to the fairness on a financial
basis of the terms of the transactions contemplated under this Agreement and the
Purchase Agreement, taken as a whole.
<PAGE>
12
ARTICLE IV
COVENANTS AND AGREEMENTS
4.1 Proxy Statement and Meeting of Company's Stockholders.
(a) The Company shall call a meeting of its stockholders (the
"Stockholders' Meeting") as soon as reasonably practicable after the date of
this Agreement, for the purpose of voting upon approval of the sale of Shares
pursuant to this Agreement and, to the extent required, the transactions
contemplated by the Financing Agreements (as defined in the Purchase Agreement)
and such other related matters as it deems appropriate. In connection with the
Stockholders' Meeting, (i) the Company shall prepare and file with the
Commission a Proxy Statement and mail such Proxy Statement to its stockholders,
(ii) the Board of Directors of the Company shall recommend to its stockholders
the approval of the sale of Shares pursuant to this Agreement and (iii) the
Board of Directors and officers of the Company shall use their reasonable
efforts to obtain such stockholders' approval. Each Purchaser agrees to assist
and co-operate with the Company in the preparation of the Proxy Statement with
respect to information therein concerning any such Purchaser.
(b) The Company, on the one hand, and each Purchaser, on the
other hand, hereby represents, warrants and agrees with the other that the Proxy
Statement will not, at the time the Proxy Statement is mailed, and at the date
of the Stockholders' Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading, or to correct any statement made in any earlier
communication with respect to the solicitation of any proxy or approval of the
transactions contemplated by this Agreement in connection with which the Proxy
Statement shall be mailed, except that no representation or warranty is being
made by any party hereto with respect to information supplied in writing by any
other party hereto for inclusion in the Proxy Statement. The Company further
represents, warrants and agrees that the Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act. The letter to
stockholders, notice of meeting, proxy statement and form of proxy, or any
information statement filed under the Exchange Act, as the case may be, that may
be provided to stockholders of the Company in connection with the transactions
contemplated by this Agreement (including any supplements), and any schedules
required to be filed with the Commission in connection therewith, as from time
to time amended or supplemented, are collectively referred to as the "Proxy
Statement."
(c) The Company shall take all actions necessary in accordance
with the Delaware General Corporation Law and the bylaws of the Company to duly
call, give notice of, convene and hold the Stockholders' Meeting within
forty-five (45) calendar days after the mailing of the Proxy Statement to
approve the matters set forth therein.
<PAGE>
13
4.2 Standstill.
(a) Each Purchaser's "Associates" (which term shall be defined
for this purpose to include CentreLine Reinsurance Limited, Centre Reinsurance
Limited, International Insurance Investors, L.P. ("III") and International
Insurance Advisors, Inc. ("IIA") and any person or entity that controls, is
under common control with, or is controlled by any of the Purchasers or such
persons or entities, and all individuals who are officers, directors or control
persons of any such entities, including any of the Purchasers) that is a
signatory hereto covenants and agrees with respect to itself, and each Purchaser
covenants and agrees with respect to itself and its Associates that are not
signatories hereto, that it or they will not (i) 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); (ii) enter, agree to enter into or
propose to enter into, directly or indirectly, any merger or business
combination involving the Company; (iii) make, or in any way participate,
directly or indirectly, in any "solicitation" of "proxies" (as such terms are
used in the rules of the 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 (iv) 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 referenced to herein with respect to any of the foregoing; provided,
however, that nothing in this Section 4.2(a) shall restrict any Purchaser 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 Warrants, the warrant issued to IIA pursuant to the
Note Purchase Agreement, the warrant issued to CentreLine pursuant to the
Preferred Securities Purchase Agreement and any other warrants with respect to
any capital stock of the Company issued prior to the date hereof (or any
preemptive rights granted pursuant to any of them), (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 any Purchaser
or any of its Associates (to the extent not otherwise inconsistent with this
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 any
Purchaser 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 this
Section 4.2(a) (I) 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 this Agreement, nothing in this Section 4.2(a) 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
<PAGE>
14
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 or
(II) prohibit or restrict ordinary trading transactions on behalf of third party
clients by an Associate engaged in the investment management business.
(b) The limitations set forth in Section 4.2(a) above and
Section 4.3 below 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
any Purchaser or (ii) the shares of the Company, not including in such total
number of shares voting those beneficially owned by any Purchaser and its
Associates.
(c) In furtherance of the standstill covenants set forth in
this Section 4.2, each of the Company and each of the Purchasers covenants and
agrees that any material business relationship between the Company and any
Purchaser or any Associate of any Purchaser must be approved in the manner
provided in Section 4.2(b) above.
(d) Other than with respect to the election of directors of
the Company, each Purchaser covenants and agrees that, 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 the Purchasers and their
respective Associates shall be greater of 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 stockholders voted their shares with respect to
such matter.
(e) Each Purchaser covenants and agrees that such Purchaser
and its Associates will not vote their shares of Common Stock, the Voting Notes
issued pursuant to the Note Purchase Agreement (the "Voting Notes") or shares of
Common Stock issued upon exercise of the Warrants or the Common Stock Purchase
Warrants issued to them under the Note Purchase Agreement or the Preferred
Securities Purchase Agreement, to elect a total of more than five (5) persons
(or the highest number that is less than a majority of the Board of Directors,
as the case may be), including the person nominated pursuant to Section 4.4 of
the September 1996 Stock Purchase Agreement, who are Associates of any Purchaser
or its Associates to be directors of the Company.
(f) The agreements set forth in this Section 4.2 shall
continue so long as the shares of Common Stock owned by the Purchasers and their
respective Associates, directly or indirectly, represent 15% of the outstanding
shares of the Company on a fully diluted basis (including, without limitation,
the Voting Notes).
(g) Upon consummation of the Closing hereunder, this Section
4.2 shall supersede in its entirety Section 4.2 of the September 1996 Stock
<PAGE>
15
Purchase Agreement, which as of such consummation shall be of no further force
and effect.
(h) It is hereby understood and agreed by the parties hereto
that CentreLine Reinsurance Limited, Centre Reinsurance Limited, III and IIA are
executing the Acknowledgment and Agreement attached hereto only with respect to
this Section 4.2 and each such person will have no liability or obligation under
this Agreement other than with respect to this Section 4.2.
4.3 Transfer of Shares. So long as the shares of Common Stock
owned by the Purchasers and their Associates, directly or indirectly, represent
15% of the shares of Common Stock outstanding on a fully diluted basis
(including, without limitation, the Voting Notes), the Purchasers shall not
transfer, assign, sell or otherwise dispose of (each, a "Transfer") any of its
shares of Common Stock, except for Transfers made in accordance with this
Section 4.3. The Purchasers may at any time Transfer any or all of its shares of
Common Stock (i) to any Associate of the Purchasers, 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 Section 4.2 and this Section
4.3, (ii) pursuant to Rule 144 under the Securities Act or any successor to 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 the Purchasers 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 Common Stock in any such transaction or series of
transactions execute and deliver to the Company prior to any such purchase 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 Section 4.2
hereof and this Section 4.3 (treating such purchaser or purchasers as an
"Associate" for purposes of such sections), (vii) pursuant to a registration
statement filed under the Securities Act pursuant to the Amended and Restated
Registration Rights Agreement, in the form attached hereto as Exhibit C (the
"Registration Rights Agreement"), or otherwise or (viii) pursuant to a pro rata
distribution to its partners. Upon the consummation of the Closing hereunder,
this Section 4.3 shall supersede in its entirety Section 4.3 of the September
1996 Stock Purchase Agreement, which as of such consummation shall be of no
further force and effect.
<PAGE>
16
4.4 Rights Offering; Debt Offering.
(a) As soon as practicable after the date of this Agreement,
the Company shall effect (i) a "rights offering" of Common Stock to its
stockholders at a price per share of Common Stock of Sixteen Dollars and
Seventy-Five Cents ($16.75) and in an aggregate amount of not less than One
Hundred Six Million Dollars ($106,000,000) (the "Rights Offering") and (ii) an
offering of debt securities of the Company in an aggregate amount of not less
than One Hundred Ten Million Dollars ($110,000,000) (or such lesser amount as
may be agreed upon between the Company and the Purchasers) (the "Debt
Offering"). The Rights Offering and the Debt Offering will each be on terms
reasonably acceptable to the Purchasers.
(b) The Company will prepare and file with Commission
registration statements with respect to the Rights Offering and the Debt
Offering. The Company hereby represents, warrants and agrees with the Purchasers
that the Registration Statements will not, at the time any preliminary
prospectus, prospectus or prospectus supplement included in such Registration
Statements are mailed, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Company further represents, warrants and agrees that the
Registration Statements will comply as to form in all material respects with the
provisions of the Securities Act. Any registration statement, including, without
limitation, any preliminary prospectus, prospectus or prospectus supplement
included therein, filed under the Securities Act, as the case may be, in
connection with the Rights Offering or the Debt Offering, and any schedules
required to be filed with the Commission in connection therewith, as from time
to time amended or supplemented, are collectively referred to as the
"Registration Statements."
(c) The Company acknowledges that it has been advised that IP
Delaware and IP Bermuda will not be offered any rights to subscribe for, and
will not purchase any, shares of Common Stock in the Rights Offering.
4.5 Best Efforts. Upon the terms and subject to the conditions
herein provided, each of the Purchasers and the Company agrees to use its
reasonable best efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement and each other agreement
contemplated hereby including (a) to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby and (b) to fulfill all
conditions on its part to be fulfilled under this Agreement and each other
agreement contemplated hereby. In case at any time after the Closing Date any
further action is reasonably necessary or desirable to carry out the purposes of
this Agreement and each other agreement contemplated hereby, the proper
partners, officers or directors of all parties to this Agreement shall take all
such reasonably necessary action. No party hereto will take any action for the
purpose of delaying,
<PAGE>
17
impairing or impeding the receipt of any required consent, authorization, order
or approval or the making of any required filing. Each party hereto shall give
prompt notice to all other parties of (i) the occurrence, or failure to occur,
of any event which occurrence or failure would be likely to cause any
representation or warranty of such party contained in this Agreement, as the
case may be, to be untrue or inaccurate in any material respect any time from
the date hereof to the Closing Date and (ii) any material failure of such party,
as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder, and such party shall
use all reasonable efforts to remedy such failure.
4.6 Indemnification by the Company.
(a) The Company agrees to indemnify each of the Purchasers,
and each of the Purchaser's respective partners, members, employees, agents and
representatives, against and hold the Purchasers, and each of the Purchaser's
respective partners, members, employees, agents and representatives, harmless
from all claims, obligations, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses incurred by the Purchasers in any action
between the Purchasers and the Company or between the Purchasers and any third
party or otherwise) and liabilities of and damages to the Purchasers arising out
of the material breach of any representation, warranty, covenant or agreement of
the Company in this Agreement.
(b) The Purchasers agree to give the Company prompt written
notice of any claim, assertion, event or proceeding by or in respect of a third
party of which they have knowledge concerning any liability or damage as to
which they may request indemnification hereunder. The Company shall have the
right to direct, through counsel of its own choosing, the defense or settlement
of any such claim, assertion, event or proceeding (provided that the Company
shall have acknowledged its indemnification obligations hereunder specifically
in respect of such claim, assertion, event or proceeding) at its own expense,
which counsel shall be reasonably satisfactory to the Purchasers. If the Company
elects to assume the defense of any such claim, assertion, event or proceeding,
the Purchasers may participate in such defense, but in such case the expenses of
the Purchasers incurred in connection with such participation shall be paid by
the Purchasers. The Purchasers shall cooperate with the Company in the defense
or settlement of any such claim, assertion, event or proceeding. If the Company
elects to direct the defense of any such claim or proceeding, the Purchasers
shall not pay, or permit to be paid, any part of any claim or demand arising
from such asserted liability, unless the Company consents in writing to such
payment or unless the Company withdraws from the defense of such asserted
liability, or unless a final judgment from which no appeal may be taken by or on
behalf of the Company is entered against the Purchasers for such liability. If
the Company shall fail to defend, or if, after commencing or undertaking any
such defense, the Company fails to prosecute or withdraws from such defense, the
Purchasers shall have the right to undertake the defense or settlement thereof
at the Company's expense.
<PAGE>
18
4.7 Indemnification by the Purchasers.
(a) Each of the Purchasers, severally and not jointly, agrees
to indemnify the Company, and each of the Company's officers, directors,
employees, agents and representatives, against and hold the Company, and each of
the Company's officers, directors, employees, agents and representatives,
harmless from all claims, obligations, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses incurred by the Company in
any action between the Company and such Purchaser or between the Company and any
third party or otherwise) and liabilities of and damages to the Company arising
out of the material breach of any representation, warranty, covenant or
agreement of such Purchaser in this Agreement.
(b) The Company agrees to give the Purchasers prompt written
notice of any claim, assertion, event or proceeding by or in respect of a third
party of which it has knowledge concerning any liability or damage as to which
it may request indemnification hereunder. The indemnifying Purchasers shall have
the right to direct, through counsel of their own choosing, the defense or
settlement of any such claim, assertion, event or proceeding (provided that such
Purchasers shall have first acknowledged their indemnification obligations
hereunder specifically in respect of such claim, assertion, event or proceeding)
at their own expense, which counsel shall be reasonably satisfactory to the
Company. If the indemnifying Purchasers elect to assume the defense of any such
claim, assertion, event or proceeding, the Company may participate in such
defense, but in such case the expenses of the Company incurred in connection
with such participation shall be paid by the Company. The Company shall
cooperate with the indemnifying Purchasers in the defense or settlement of any
such claim, assertion, event or proceeding. If the indemnifying Purchasers elect
to direct the defense of any such claim, assertion, event or proceeding, the
Company shall not pay, or permit to be paid, any part of any claim or demand
arising from such asserted liability, unless such Purchasers consent in writing
to such payment or unless such Purchasers withdraw from the defense of such
asserted liability, or unless a final judgment from which no appeal may be taken
by or on behalf of such Purchasers is entered against the Company for such
liability. If the indemnifying Purchasers shall fail to defend, or if, after
commencing or undertaking any such defense, such Purchasers fail to prosecute or
withdraw from such defense, the Company shall have the right to undertake the
defense or settlement thereof at such Purchaser's expense.
4.8 Consents. The Company and each of the Purchasers will use its
reasonable best efforts to obtain all necessary waivers, consents and approvals
of all third parties and governmental authorities necessary to the consummation
of the transactions contemplated by this Agreement and each agreement
contemplated hereby, including, but not limited to, those required in connection
with the filing of any required HSR Reports and Forms A and any filings to be
made in connection with or in compliance with the provisions of each of the
Securities Act, the Exchange Act and any applicable state securities laws.
<PAGE>
19
4.9 Use of Proceeds. The Company covenants and agrees that it will
use the proceeds from the sale of the Shares hereunder to consummate the
transactions contemplated by the Purchase Agreement.
4.10 HSR Reports. If the Purchasers are required to file an HSR
Report in connection with the Purchase by the Purchasers pursuant to the terms
of this Agreement, then the Purchasers shall so notify the Company in writing
and, within fifteen (15) business days from the receipt by the Company of such
notice, each of the Purchasers and the Company shall file with the Federal Trade
Commission and the Antitrust Division of the Department of Justice, an HSR
Report and any supplemental information which may be requested in connection
with such HSR Reports. The Purchasers and the Company shall cooperate fully in
the preparation of such filings.
4.11 Exclusivity. The Company hereby agrees that prior to the
Closing Date, the Company shall not, directly or indirectly, solicit, entertain
or accept offers from persons (other than the Purchasers) for the investment
contemplated by this Agreement. The Company further agrees that, other than the
Rights Offering and the Debt Offering, it will not utilize any funds or sources
of financing to finance the transactions contemplated by the Purchase Agreement
without first consummating the Purchase.
4.12 SEC Filings. From and after the date hereof to the Closing
the Company shall make all SEC Filings required to be filed under the Securities
Act or the Exchange Act, and all amendments thereto, and the Company shall
deliver to the Purchasers a copy of each such SEC Filing.
4.13 Amendment of Purchase Agreement. The Company shall not amend
the Purchase Agreement without the prior written consent of the Purchasers
(which shall not be unreasonably withheld).
4.14 Rights Offering Notice. On the next business day following
the expiration of the subscription period of the Rights Offering, the Company
shall deliver to the Purchasers a notice (the "Rights Offering Notice") which
sets forth the number of shares of Common Stock which have been subscribed for
in the Rights Offering.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligations. The respective
obligations of each party to effect the transactions contemplated by this
Agreement
<PAGE>
20
shall be subject to the fulfillment or waiver by the Purchasers and the Company
on or prior to the Closing Date of the following conditions:
(a) No United States or state authority or other agency or
commission or United States or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary, or permanent) which
is in effect and has the effect of prohibiting consummation of the transactions
contemplated by this Agreement or restricting the operation of the business of
the Company and the Subsidiaries as conducted on the date hereof in a manner
that would have a Material Adverse Effect on the Company.
(b) Any waiting period applicable to the transactions
contemplated by this Agreement and each agreement contemplated hereby,
including, without limitation, those applicable to any HSR Report or Form A or
any filing in connection with or in compliance with the provisions of each of
the Securities Act, the Exchange Act and any applicable state securities laws
shall have expired or been terminated.
(c) The Closing provided for in Section 1.3 hereof shall occur
simultaneously with the closing of the transactions contemplated by the Purchase
Agreement.
5.2 Conditions to the Obligations of the Company. The obligation
of the Company to effect the transactions contemplated by this Agreement shall
be subject to the fulfillment or waiver by the Company on or prior to the
Closing Date of the following additional conditions:
(a) Purchasers shall have performed in all material respects
their obligations under this Agreement required to be performed by them on or
prior to the Closing Date pursuant to the terms hereof.
(b) The representations and warranties of the Purchasers
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing Date as if made at and as of such date, except to the
extent that any such representation or warranty is made as of a specified date
in which case such representation or warranty shall have been true and correct
as of such date. The Purchasers shall have delivered a certificate to the effect
set forth in Sections 5.2(a) and (b).
(c) The Company shall have received fully executed copies of
the Purchase Agreement, the Registration Rights Agreement and any and all other
agreements, documents, certificates or instruments contemplated by this
Agreement and any of the foregoing.
<PAGE>
21
(d) All of the conditions to Closing set forth in Article 6 of
the Purchase Agreement shall have been satisfied or waived.
(e) The stockholders of the Company (including, without
limitation, the holders of the Voting Notes) shall have duly approved at the
Stockholders' Meeting the issuance of the Shares pursuant to this Agreement and,
to the extent required, the transactions contemplated by the Financing
Agreements.
(f) The Company shall have received, in a form reasonably
satisfactory to the Company, the favorable opinion of its financial advisor in
connection with the transactions contemplated hereunder and under the Purchase
Agreement, as of the date of the mailing of the Proxy Statement, as to the
fairness on a financial basis of the terms of the Purchase and the transactions
contemplated by this Agreement.
(g) All necessary waivers or consents to, approvals of and
notices or filings with respect to the transactions contemplated by this
Agreement and each agreement contemplated hereby shall have been obtained or
made.
5.3 Conditions to the Obligations of Purchasers. The obligations
of the Purchasers to effect the transactions contemplated by this Agreement
shall be subject to the fulfillment or waiver by the Purchasers on or prior to
the Closing Date of the following additional conditions:
(a) The Company shall have performed in all material respects
its obligations under this Agreement required to be performed by it on or prior
to the Closing Date pursuant to the terms hereof.
(b) The representations and warranties of the Company set
forth in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.10, 3.12 and 3.13 of this Agreement
shall be true and correct in all material respects at and as of the Closing Date
as if made at and as of such date, except to the extent that any such
representation or warranty is made as of a specified date in which case such
representation or warranty shall have been true and correct as of such date. The
Company shall have delivered to the Purchasers a certificate to the effect set
forth in Sections 5.3(a) and (b).
(c) The Company shall have delivered (i) to each of the
Purchasers stock certificates in definitive form representing the number of
Shares to be purchased by such Purchaser pursuant to Section 1.1, registered in
the name of such Purchaser and (ii) to each of the Purchasers or its designee
(or, in the case of Cap Z, assignee) and ZCIL or its designee, except to the
extent set forth in the Zurich Letter, Warrants in definitive form representing
the number of Warrants set forth opposite such Purchaser's or ZCIL's name on
Exhibit A-2 hereto, registered in the name of each such Purchaser or its
designee (or, in the Case of Cap Z, assignee) or ZCIL or its designee.
<PAGE>
22
(d) The stockholders of the Company (including, without
limitation, the holders of the Voting Notes) shall have duly approved at the
Stockholders' Meeting the issuance of the Shares pursuant to this Agreement and,
to the extent required, the transactions contemplated by the Financing
Agreements.
(e) The Purchasers shall have received fully executed copies
of the Purchase Agreement, the Registration Rights Agreement and any and all
other agreements, documents, certificates or instruments contemplated by this
Agreement and any of the foregoing.
(f) All necessary waivers or consents to, approvals of and
notices or filings with respect to the transactions contemplated by this
Agreement and each other agreement contemplated hereby and thereby shall have
been obtained.
(g) The Debt Offering and Rights Offering shall have been
consummated simultaneously with the Closing of this Agreement and the Purchase
Agreement on terms and conditions reasonably satisfactory to the Purchasers, and
in no event shall the notes issued in connection with the Debt Offering have an
interest rate in excess of 12% per annum.
(h) The Purchase Agreement shall not have been materially
amended or modified, nor any material provision thereof waived by the Company,
except upon the consent of the Purchasers in their sole discretion (such consent
not to be unreasonably withheld).
ARTICLE VI
MISCELLANEOUS
6.1 Termination. This Agreement (including, without limitation,
Sections 4.2 and 4.3 hereof) shall terminate and the transactions contemplated
hereby may be abandoned (i) at any time simultaneous with or following the
termination of the Purchase Agreement, (ii) by the Company, on the one hand, or
the Purchasers, on the other hand, upon notice to the other, two (2) days after
the failure by the stockholders of the Company to approve at the Stockholders'
Meeting the issuance of the Shares pursuant to this Agreement and, to the extent
required, the transactions contemplated by the Financing Agreements in
accordance with Section 5.2(e) and 5.3(d) hereof or (iii) on the next date
following the date which is the last date on which, pursuant to Section 1.3
hereof, the Closing hereunder can occur by written notice of the Company to the
other parties or any Purchaser to the other parties. This Agreement shall
terminate at such time as, by their terms, all of the obligations under Sections
4.2 and 4.3 hereof are no longer in effect.
<PAGE>
23
6.2 Amendment. This Agreement may be amended by the parties
hereto. This Agreement may be amended by an instrument in writing without each
party's written agreement, but no such amendment shall be enforceable against
any party which has not signed such amendment.
6.3 Waiver. At any time prior to the Closing Date, the Company or
the Purchasers may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions herein, provided that any such waiver of or failure to insist on
strict compliance with any such representation, warranty, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Any agreement on the part of the Company or the Purchasers to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
6.4 Survival. The representations, warranties, covenants and
agreements set forth in Sections 1.4, 1.5 and 1.6 and Articles II, III and IV
shall survive the Closing.
6.5 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been given or
made if in writing and delivered personally, sent by commercial carrier or
registered or certified mail (postage prepaid, return receipt requested) or
transmuted by facsimile with automated receipt confirmation to the parties at
the following addresses and numbers:
If to the Company, to:
Superior National Insurance Group, Inc.
26601 Agoura Road
Calabasas, California 91302
Fax: (818) 880-8615
Attention: J. Chris Seaman
with copies to:
Riordan & McKinzie
5473 Corsa Avenue, Suite #116
Westlake Village, California 91362
Fax: (818) 706-2956
Attention: Dana M. Warren, Esq.
<PAGE>
24
If to the Purchasers, to:
Insurance Partners, L.P.
201 Main Street, Suite 2600
Fort Worth, TX 76102
Fax: (817) 338-2047
Attention: Mr. Charles Irwin
and
Insurance Partners Offshore (Bermuda), L.P.
Cedar House
41 Cedar Avenue
P.O. Box HM 1179
Hamilton, HM-EX, Bermuda
Fax: (809) 292-7768
Attention: Kenneth E.T. Robinson, Esq.
and
Capital Z Partners, Ltd.
One Chase Manhattan Plaza
44th Floor
New York, NY 10005
Fax: (212) 898-8720
Attention: Bradley E. Cooper
with copies to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Fax: (212) 757-3990
Attention: Marilyn Sobel, Esq.
and
Insurance Partners Advisors, L.P.
One Chase Manhattan Plaza
44th Floor
New York, NY 10005
Fax: (212) 898-8720
Attention: Steven B. Gruber
<PAGE>
25
6.6 Headings; Agreement. The headings contained in this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement. The term "Agreement" for purposes of representations and warranties
hereunder shall be deemed to include the Exhibits hereto to be executed and
delivered by parties relevant thereto.
6.7 Publicity. So long as this Agreement is in effect, except as
required by law, regulation or stock exchange requirements, the parties hereto
shall not, and shall cause their affiliates not to, issue or cause the
publication of any press release or other announcement with respect to the
transactions contemplated by this Agreement or the other agreements contemplated
hereby without the consent of the other parties, which consent shall not be
unreasonably withheld or delayed or without consulting with the other parties as
to the content of such press release or other announcement.
6.8 Entire Agreement. This Agreement (including all Exhibits
hereto) constitutes the entire agreement among the parties and supersedes all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
6.9 Conveyance Taxes. The Company agrees to assume liability for
and to hold the Purchasers harmless against any sales, use, transfer, stamp,
stock transfer, real property transfer or gains, and value added taxes, any
transfer, registration, recording or other fees, and any similar taxes incurred
as a result of the issuance and sale of the Shares or Warrants as contemplated
hereby.
6.10 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Cap Z may transfer or assign this
Agreement and all of its rights, interests and obligations hereunder (i) to ZCIL
or its affiliates pursuant to the Zurich Letter or (ii) to one or more of the
following entities: any partnership of which Cap Z is, directly or indirectly,
the general partner, any limited liability company of which Cap Z is, directly
or indirectly, the managing member or any Associate of Cap Z, and upon any such
transfer or assignment Cap Z shall have no further obligations hereunder except
under Section 4.2(a) hereof, in which event such assignee shall be a "Purchaser"
for all purposes under this Agreement. If Cap Z shall assign its rights,
interests and obligations hereunder to ZCIL, ZCIL may assign its rights,
interests and obligations hereunder to Cap Z or a partnership of which Cap Z is,
directly or indirectly, the general partner, any limited liability company of
which Cap Z is, directly or indirectly, the managing member or any Associate of
Cap Z, all in accordance with the terms of the Zurich Letter, and upon any such
transfer or assignment ZCIL shall have no further rights or obligations
hereunder to the extent its rights, interests and obligations have been so
transferred or assigned. Except as otherwise provided in the Exhibits to this
Agreement or the other agreements contemplated hereby, neither this Agreement
nor any of the rights, interests or
<PAGE>
26
obligations shall be assigned by any of the parties hereto without the prior
written consent of the other parties.
6.11 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
6.12 Governing Law. The validity and interpretation of this
Agreement shall be governed by the laws of the State of Delaware, without
reference to the conflict of laws principles thereof.
6.13 Third Party Beneficiaries. This Agreement is not intended to
confer upon any other person any rights or remedies hereunder.
6.14 Costs and Expenses. The Company will pay all costs and
expenses incurred by any of the Purchasers in connection with the transactions
contemplated hereby, including without limitation, the reasonable legal fees and
expenses of Paul, Weiss, Rifkind, Wharton & Garrison and any filing fees paid in
connection with the filing of HSR Reports by the Purchasers, whether or not the
transactions contemplated hereby are consummated.
<PAGE>
IN WITNESS WHEREOF, each of the Purchasers and the Company has
caused this Agreement to be duly signed as of the date first written above.
SUPERIOR NATIONAL INSURANCE GROUP, INC.,
a Delaware corporation
By: /s/ J. Chris Seaman
----------------------
Name: J. Chris Seaman
Title: Chief Financial Officer
INSURANCE PARTNERS, L.P.,
a Delaware limited partnership
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/ signature illegible
-----------------------
Name:
Title:
INSURANCE PARTNERS OFFSHORE (BERMUDA),
L.P., a Bermuda limited partnership
By: Insurance GenPar (Bermuda) L.P., its
General Partner
By: Insurance GenPar (Bermuda) MGP, L.P., its
General Partner
By: Insurance GenPar (Bermuda), Ltd., its
General Partner
By: /s/ signature illegible
-----------------------
Name:
Title:
<PAGE>
CAPITAL Z PARTNERS, LTD.
By: /s/ Bradley Cooper
------------------
Name: Bradley Cooper
Title: Vice President
[Acknowledgment and Agreement on Following Page]
<PAGE>
Acknowledgment and Agreement:
Each of the undersigned acknowledges that this Agreement affects
its rights and by its signature below, the undersigned covenants and agrees that
it and its officers, directors and managing partners (and the officers,
directors and control persons of such managing partners) shall be bound by the
terms of this Agreement to the extent such terms apply to them.
CENTRELINE REINSURANCE LIMITED,
a Bermuda corporation
By: /s/ Tara Leonard
----------------
Name: Tara Leonard
Title: SUP & CAO
CENTRE REINSURANCE LIMITED,
a Bermuda corporation
By: /s/ Tara Leonard
----------------
Name: Tara Leonard
Title: SUP & CAO
INTERNATIONAL INSURANCE INVESTORS,
L.P., a Bermuda limited partnership
By: International Insurance Investors
(Bermuda) Limited, a Bermuda
corporation
Its: General Partner
By: /s/ Bradley Cooper
------------------
Name: Bradley Cooper
Title: Director
<PAGE>
INTERNATIONAL INSURANCE ADVISORS,
INC., a Delaware corporation
By: /s/ Robert A. Spass
----------------------
Name: Robert A. Spass
Title: President
<PAGE>
EXHIBIT A-1
PURCHASERS OF THE SHARES OF COMMON STOCK
- --------------------------------------------------------------------------------
Purchaser Percentage of Maximum
Shares to be Unsubscribed Number of
Purchased Shares Shares
- --------------------------------------------------------------------------------
IP Delaware 1,756,627 31.3016% 3,737,504
IP Bermuda 712,627 12.6984% 1,516,227
Cap Z 3,142,686 56% 6,686,567
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT A-2
WARRANTS
- --------------------------------------------------------------------------------
Purchaser Number of Warrants
- --------------------------------------------------------------------------------
IP Delaware 229,754
IP Bermuda 93,206
Cap Z 205,520
ZCIL 205,520
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT A-3
TRANSACTION FEE
- --------------------------------------------------------------------------------
Purchaser Fee Amount
- --------------------------------------------------------------------------------
IP Delaware $1,220,762
IP Bermuda $495,238
Cap Z $2,184,000
- --------------------------------------------------------------------------------
EXHIBIT 5
COMMON STOCK PURCHASE WARRANT
Dated as of ______________, 1998
Superior National Insurance Group, Inc., a Delaware corporation
(the "Company"), for value received, hereby certifies that [ ] ("[ ]"), is
entitled to purchase from the Company [ ] duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock (as defined in Section 14 herein)
at the purchase price per share of $16.75, at any time or from time to time
prior to 5:00 p.m. Pacific time, on __________, 2003 (or such later date as may
be determined pursuant to Section 19), all subject to the terms, conditions and
adjustments set forth below in this Warrant, and is entitled to exercise the
other rights, powers and privileges hereinafter specified.
This Warrant constitutes (or has been issued in exchange or
substitution for, or upon registration of transfer of one of) one of the Common
Stock Purchase Warrants issued and delivered pursuant to the Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated as of May 5, 1998, among the
Company, Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P.
and Capital Z Partners, Ltd. The Stock Purchase Agreement is available for
inspection by the holder of this Warrant during normal business hours at the
office or agency maintained by the Company pursuant to Section 12 and at the
principal office of the Company referred to in, or notice of which is given by
the Company pursuant to, Section 17, and, upon request therefor, the Company
will furnish to the holder of this Warrant a true and complete copy of the Stock
Purchase Agreement as in effect at the time. All the Warrants, as originally so
issued, evidenced the right to purchase an aggregate of 734,000 shares of Common
Stock, subject to adjustment as provided herein. The term "Warrants," when used
herein, means this Warrant and all Warrants issued in exchange or substitution
therefor or upon registration of transfer hereof. The Warrants, although issued
in connection with the issuance and sale of shares of Common Stock pursuant to
the Stock Purchase Agreement (the "Purchase Shares") and although containing
provisions that refer to the Stock Purchase Agreement, are detachable warrants
and, accordingly, are exercisable and transferable (subject to compliance with
Section 8, if applicable) without presentation of any of the Purchase Shares.
Certain terms used in this Warrant are defined in Section 14.
SECTION 1. EXERCISE OF WARRANT
ss. 1.1 Manner of Exercise. This Warrant may be exercised by the
holder hereof, in whole or in part, during normal business hours on any Business
Day by surrender of this Warrant, with the form of subscription at the end
hereof or
<PAGE>
2
a reasonable facsimile thereto duly executed by such holder, to the Company at
the office or agency maintained by the Company pursuant to Section 12,
(a) accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the amount (the
"Exercise Price") obtained by multiplying (i) the number of shares of Common
Stock (without giving effect to any adjustment therein) designated in such form
of subscription (or such reasonable facsimile) by (ii) $16.75, and such holder
shall thereupon be entitled to receive the number of duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided in Section 2; or
(b) accompanied by a notice to exercise its Cashless Exercise
Right (as defined herein). The holder hereof shall have the right to require the
Company to reduce the number of shares of Common Stock to be received by such
holder in lieu of paying the Exercise Price (the "Cashless Exercise Right"). If
the Cashless Exercise Right is exercised, the holder shall not be obligated to
pay the Exercise Price and the Company shall deliver to such holder (without
payment by such holder of any of the Exercise Price) the number of duly
authorized, validly issued, fully paid and non-assessable shares of Common Stock
(or Other Securities) determined by Section 2 reduced by that number of shares
of Common Stock (or Other Securities) equal to the quotient obtained by dividing
(i) the Exercise Price by (ii) the Market Price of one share of Common Stock (or
Other Securities) on the Business Day next preceding the date of exercise of the
Cashless Exercise Right; or
(c) accompanied by a notice to exercise its In-Kind Exercise
Right (as defined herein). The holder shall have the right to pay the Exercise
Price with shares of Common Stock (the "In-Kind Exercise Right") that either
accompany the notice or are acquired concurrently therewith pursuant to
paragraph (a), (b) or this paragraph (c). For purposes of this paragraph, any
share of Common Stock used to pay the Exercise Price shall be deemed to have a
value equal to the Market Price of one share of Common Stock on the Business Day
next preceding the date of exercise of the In-Kind Exercise Right.
ss. 1.2 When Exercise Effective. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant shall have been surrendered as
provided in ss. 1.1, and immediately prior to the close of business on such
Business Day the Person or Persons in whose name or names any certificate or
certificates for shares of Common Stock (or Other Securities) shall be issuable
upon such exercise as provided in ss. 1.3 shall be deemed to have become the
holder or holders of record thereof.
ss. 1.3 Delivery of Stock Certificate, etc. As soon as practicable
after the exercise of this Warrant in whole or in part, and in any event within
five Business Days thereafter, the Company at its expense (including the payment
by it of any
<PAGE>
3
applicable issue taxes) will cause to be issued in the name of and delivered to
the holder hereof or, subject to Section 8, as such holder (upon payment by such
holder of any applicable transfer taxes) may direct,
(a) a certificate or certificates for the number of fully paid
and non-assessable shares of Common Stock (or Other Securities) to which
such holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which such holder would otherwise be entitled, cash
in an amount equal to the same fraction (calculated to the nearest
1/100th of a share) of the Market Price of one full share on the
Business Day next preceding the date of such exercise, and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock equal (without giving
effect to any adjustment therein) to the number of such shares called
for on the face of this Warrant minus the number of such shares
designated by the holder upon such exercise as provided in ss. 1.1.
ss. 1.4 Company to Reaffirm Obligations. The Company will, at the
time of each exercise of this Warrant, acknowledge in writing its continuing
obligation to afford to such holder all rights to which such holder shall
continue to be entitled after such exercise in accordance with the terms of this
Warrant; provided, however, that if the Company shall fail to make any such
written acknowledgment, such failure shall not affect the continuing obligation
of the Company to afford such rights to such holder.
ss. 1.5 Compliance with Law, etc. Each exercise of this Warrant
shall at all times be subject to the provisions of any applicable law relating
to the rights of non-citizens of the United States of America or other classes
of Persons to own shares of the Company.
SECTION 2. ADJUSTMENT OF COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANT
ss. 2.1 General; Warrant Price. The number of shares of Common
Stock which the holder of this Warrant shall be entitled to receive upon the
exercise hereof shall be determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this Section 2) be
issuable upon such exercise, as designated by the holder hereof pursuant to ss.
1.1, by the fraction of which (a) the numerator is $16.75 and (b) the
denominator is the Warrant Price (as defined below in this ss. 2.1) in effect on
the date of such exercise. If a holder exercises a Cashless Exercise Right, the
number of shares of Common Stock such holder shall be entitled to receive upon
exercise of the warrant shall be reduced in accordance with Section 1.1(b). The
"Warrant Price" per share of Common Stock shall initially be
<PAGE>
4
$16.75, shall be adjusted and readjusted from time to time as provided in this
Section 2 and, as so adjusted or readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by this Section 2.
ss. 2.2 Adjustment of Warrant Price.
ss. 2.2.1 In case the Company, at any time or from time to time
after the Closing Date shall issue or sell Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
ss.ss. 2.3 or 2.4) without consideration or for a consideration per share less
than the Current Market Price in effect immediately prior to such issue or sale,
then, and in each such case, such Warrant Price shall be reduced, concurrently
with such issue or sale, to a price (calculated to the nearest cent) determined
by multiplying such Warrant Price by a fraction:
(a) the numerator of which shall be the number of shares of
Common Stock outstanding, which number shall for purposes of this ss.
2.2.l(a) include the Common Stock Deemed to be Outstanding, immediately
prior to such issue or sale, plus the number of shares of Common Stock
which the aggregate consideration received by the Company for the total
number of such Additional Shares of Common Stock so issued or sold would
purchase at the greater of such Current Market Price and such Warrant
Price; and
(b) the denominator of which shall be the number of shares of
Common Stock outstanding, which number shall for purposes of this ss.
2.2. l(b) include the Common Stock Deemed to be Outstanding, immediately
after such issue or scale;
provided, however, that for the purposes of this ss. 2.2.1, treasury shares
shall not be deemed to be outstanding; and provided, further, that if any such
Additional Shares of Common Stock are issued pursuant to a binding agreement
entered into prior to the date of issuance of such shares and the per share
consideration to be paid by the purchaser for each such Additional Share of
Common Stock under such agreement is at least eighty-five percent (85%) of the
Market Price per share of Common Stock on the Business Day next preceding the
date such agreement is entered into by the parties thereto, then no adjustment
shall be made to the Warrant Price pursuant to this ss. 2.2.1.
ss. 2.2.2 In case the Company, at any time or from time to time
after the Closing Date, shall declare, order, pay or make a dividend or other
distribution (including, without limitation, any distribution of other or
additional stock or other securities or property or Options by way of dividend
or spin-off, reclassification, recapitalization, merger or consolidation in
which the Company is the continuing or resulting corporation, or similar
corporate rearrangement) on the Common Stock, other
<PAGE>
5
than (a) a dividend payable in Additional Shares of Common Stock for which an
adjustment has been made pursuant to ss. 2.2.1 hereof and (b) regular periodic
cash dividends declared out of earned surplus of the Company in an aggregate
amount not greater than fifty cents ($.50) per share of Common Stock per annum
(as adjusted for any stock split, combination, reclassification or similar
events with respect to the Common Stock), then, and in each such case, the
Warrant Price in effect immediately prior to the close of business on the record
date fixed for the determination of the Persons entitled to receive such
dividend or distribution shall be adjusted, effective as of the close of
business on such record date, to a price (calculated to the nearest cent)
determined by multiplying such Warrant Price by a fraction:
(i) the numerator of which shall be the Current Market
Price in effect on such record date less the amount of such dividend
or distribution (as determined in good faith by the Board of
Directors of the Company) applicable to one share of Common Stock;
and
(ii) the denominator of which shall be such Current Market
Price.
ss. 2.3 Options and Convertible Securities. In case the Company,
at any time or from time to time after the Closing Date, shall issue, sell,
grant or assume, or shall fix a record date for the determination of holders of
any class of securities entitled to receive, any Options (other than those
provided for and reserved pursuant to the Stock Option Plan as of the date of
the original issuance of this Warrant) or Convertible Securities, then, and in
each such case, the maximum number of shares (as set forth in the instrument
relating thereto without regard to any provisions contained therein for a
subsequent adjustment of such number) of Common Stock issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue, sale,
grant or assumption or, in case such a record date shall have been fixed, as of
the close of business on such record date; provided, however, that Additional
Shares of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined in accordance with ss. 2.5) of such shares
would be less than the Current Market Price in effect on the date of and
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date, as the case may be, and provided,
further, that in any such case in which Additional Shares of Common Stock are
deemed to be issued:
(a) no further adjustment of the Warrant Price shall be made
upon the subsequent issue or sale of Convertible Securities or shares of
Common Stock upon the exercise of such Options or the conversion or
exchange of such Convertible Securities;
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6
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Company, or any increase or
decrease in the number of shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof (by change of rate or
otherwise), the Warrant Price computed upon the original issue, sale,
grant or assumption thereof (or upon the occurrence of a record date
with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects
such Options, or the rights of conversion or exchange under such
Convertible Securities, which are outstanding at such time;
(c) upon the expiration (or purchase by the Company and
cancellation) of any such Options or any rights of conversion or
exchange under such Convertible Securities which shall not have been
exercised, the Warrant Price computed upon the original issue, sale,
grant or assumption thereof (or upon the occurrence of a record date
with respect thereto), and any subsequent adjustments based thereon,
shall, upon such expiration (or such cancellation, as the case may be),
be recomputed as if:
(i) in the case of Convertible Securities or Options for
Common Stock, the only Additional Shares of Common Stock issued or
sold were the shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received
therefor was the consideration actually received by the Company for
the issue, sale, grant or assumption of all such Options, whether or
not exercised, plus the consideration actually received by the
Company upon such exercise, or for the issue or sale of all such
Convertible Securities which were actually converted or exchanged,
plus the additional consideration, if any, actually received by the
Company upon such conversion or exchange; and
(ii) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued or sold
upon the exercise thereof were issued at the time of the issue,
sale, grant or assumption of such Options, and the consideration
received by the Company for the Additional Shares of Common Stock
deemed to have then been issued was the consideration actually
received by the Company for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus the consideration
deemed to have been received by the Company (in accordance with ss.
2.5) upon the issue or sale of the Convertible Securities in respect
of the issue, sale, grant or assumption of such Options or
Convertible Securities; and
<PAGE>
7
(d) no readjustment pursuant to clause (b) or (c) above shall
have the effect of increasing the Warrant Price by an amount in excess of the
amount of the adjustment thereof originally made in respect of the issue, sale,
grant or assumption of such Options or Convertible Securities.
ss. 2.4 Stock Dividends, Stock Splits. etc. In case the Company,
at any time or from time to time after the Closing Date, shall declare or pay
any dividend on the Common Stock or any other security, payable in Common Stock,
or shall effect a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in Common Stock), then, and in each such case, the
Warrant Price in effect immediately prior to the payment of such dividend or
effectiveness of such subdivision shall be proportionately reduced (a) in the
case of any such dividend, immediately after the close of business on the record
date for the determination of holders of any class of securities entitled to
receive such dividend, or (b) in the case of any such subdivision, at the close
of business on the day immediately prior to the day upon which such corporate
action becomes effective.
ss. 2.5 Computation of Consideration. For the purposes of this
Section 2:
(a) the consideration for the issue or sale of any Additional
Shares of Common Stock shall, irrespective of the accounting treatment
of such consideration:
(i) insofar as it consists of cash, be computed at the net
amount of cash received by the Company, before deducting any
expenses paid or incurred by the Company and all commissions and
compensation paid and concessions and discounts allowed to
underwriters, dealers or others performing similar services in
connection with such issue or sale;
(ii) insofar as it consists of property (including
securities) other than cash, be computed at the fair value thereof
at the time of such issue or sale, as determined in good faith by
the Board of Directors of the Company; and
(iii) in case Additional Shares of Common Stock are issued
or sold together with other stock or securities or other assets of
the Company for a consideration which covers both, by the applicable
proportion of such consideration so received, computed as provided
in clauses (i) and (ii) above, as determined in good faith by the
Board of Directors of the Company.
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8
(b) Additional Shares of Common Stock deemed to have been
issued pursuant to ss. 2.3, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per
share determined by dividing:
(i) the total amount, if any, received and receivable by
the Company as consideration for the issue, sale, grant or
assumption of the Options or Convertible Securities in question,
plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise of such
Options or the conversion or exchange of such Convertible Securities
or, in the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and the conversion or
exchange of such Convertible Securities, in each case computing such
consideration as provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
and
(c) Additional Shares of Common Stock deemed to have been
issued pursuant to ss. 2.4, relating to stock dividends and stock
splits, shall be deemed to have been issued for no consideration.
ss. 2.6 Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in Section 3) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any other issuer or Person), the computations,
adjustments and readjustments provided for in this Section 2 with respect to the
Warrant Price shall be made as nearly as possible in the manner so provided and
applied to determine the amount of Other Securities from time to time receivable
upon the exercise of the Warrants, so as to protect the holders of the Warrants
against the effect of the dilution of the purchase rights granted by the
Warrants.
<PAGE>
9
ss. 2.7 Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then, and in each
such case, the Warrant Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
ss. 2.8 Other Adjustments. Adjustments shall also be made at the
times and under the circumstances specified in Sections 3 and 4.
ss. 2.9 Determinations by Board of Directors. All determinations
by the Board of Directors of the Company under the provisions of this Warrant
shall be made in good faith with due regard to the interests of the holder of
this Warrant, and in accordance with good financial practice.
SECTION 3. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE
OF ASSETS, REORGANIZATION, ETC.
In case the Company, after the Closing Date, (a) shall consolidate
with or merge into any other Person and shall not be the continuing or surviving
corporation in such consolidation or merger, (b) shall permit any other Person
to consolidate with or merge into the Company and the Company shall be the
continuing or surviving Person but, in connection with such consolidation or
merger, the Common Stock or Other Securities shall be changed into or exchanged
for stock of other securities of any other Person or cash or any other property,
(c) shall transfer all or substantially all of its properties or assets to any
other Person, or (d) shall effect a capital reorganization or reclassification
of the Common Stock or Other Securities (other than a capital reorganization or
reclassification resulting in the issue of Additional Shares of Common Stock for
which adjustment in the Warrant Price is provided in ss. 2.2), then, and in each
such case, proper provision shall be made so that, upon the basis and the terms
and in the manner provided in this Section 3, the holder of this Warrant, upon
the exercise hereof at any time after the consummation of such consolidation,
merger, transfer, reorganization or reclassification, shall be entitled to
receive (at the aggregate Warrant Price in effect at the time of such
consummation for all Common Stock or Other Securities issuable upon such
exercise immediately prior to such consummation), in lieu of the Common Stock or
Other Securities issuable upon such exercise prior to such consummation, the
stock and other securities, cash and property to which such holder would have
been entitled upon such consummation if such holder had exercised this Warrant
immediately prior thereto, subject to adjustments (subsequent to such corporate
action) as nearly equivalent as possible to the adjustments provided for in
Section 2 and this Section 3; provided, however (and the Company covenants),
that (1) the Company shall not effect any of the transactions described in
clauses (a) through (c) above with any Person other than a corporation, and that
(2) the Company shall not effect any of the transactions described in clauses
(a) through (d) above unless, immediately after the
<PAGE>
10
date of the consummation of such transaction, the Acquiring Corporation or its
Parent is required to file, and in each of its three fiscal years immediately
preceding the date of the consummation of such transaction has filed, reports
with the Commission pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act. In the event that the Acquiring Corporation fulfills the
requirements contained in the immediately preceding proviso, then, if the holder
of this Warrant shall elect (or shall be deemed to elect) to receive common
stock pursuant to clause (b) above, such holder shall be entitled to receive,
upon the basis stated in such clause (b), the common stock of the Acquiring
Corporation and not of its Parent. Notwithstanding anything contained herein to
the contrary, the Company will not effect any of the transactions described in
clauses (a) through (d) above unless, prior to the consummation thereof, each
Person (other than the Company) which may be required to deliver any stock,
securities, cash or property upon the exercise hereof shall assume, by written
instrument delivered and satisfactory to the holder of this Warrant, the
obligation to deliver to such holder such shares of stock, securities, cash or
property as in accordance with the foregoing provisions, such holder may be
entitled to purchase, and such Person shall have furnished to the holder hereof
an opinion of counsel for such Person, which counsel shall be satisfactory to
such holder, stating that this Warrant shall thereafter continue in full force
and effect and the terms hereof (including, without limitation, all of the
provisions of Section 2 and this Section 3) shall be applicable to the stock,
securities, cash or property which such Person may be required to deliver upon
the exercise hereof.
SECTION 4. OTHER DILUTIVE EVENTS
In case any event shall occur as to which the provisions of
Section 2 or Section 3 are not strictly applicable but the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles of such Sections,
then, in each such case, the Company shall appoint a firm of independent
certified public accountants of recognized national standing (which may be the
regular independent auditors of the Company), which shall give their opinion
upon the adjustment, if any, on a basis consistent with the essential intent and
principles established in Sections 2 and 3, necessary to preserve, without
dilution, the purchase rights represented by this Warrant. Upon receipt of such
opinion, the Company will promptly mail a copy thereof to the holder of this
Warrant and shall make the adjustments described therein.
SECTION 5. NO DILUTION OR IMPAIRMENT
The Company will not, by amendment of its charter or through any
consolidation, merger, reorganization, transfer of assets, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Warrants, but will at all
times in good faith carry out all such terms and take all such action as may be
necessary or appropriate in order
<PAGE>
11
to protect the rights of the holders of the Warrants against dilution or other
impairment. Without limiting the generality of the foregoing, the Company (a)
will not permit the par value of any shares of stock receivable upon the
exercise of the Warrants to exceed the amount payable therefor upon such
exercise, (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue, free from preemptive
rights, fully paid and non-assessable shares of stock upon the exercise of all
Warrants from time to time outstanding, (c) will not take any action which
results in any adjustment of the Warrant Price if the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of shares of Common Stock
(or Other Securities) then authorized by the Company's charter and available for
the purpose of issue upon such exercise, and (d) will not issue any capital
stock of any class which is preferred as to dividends or as to the distribution
of assets upon voluntary or involuntary dissolution, liquidation or winding-up,
unless the rights of the holders thereof shall be limited to a fixed sum or
percentage of par value in respect of participation in dividends and in any such
distribution of assets.
SECTION 6. ACCOUNTANTS' REPORT AS TO ADJUSTMENTS
In the case of any adjustment or readjustment in the shares of
Common Stock (or Other Securities) issuable upon the exercise of the Warrants,
the Company at its expense will promptly compute such adjustment or readjustment
in accordance with the terms of the Warrants and cause independent public
accountants of recognized national standing selected by the Company to verify
such computation and prepare a report setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (a) the consideration received
or to be received by the Company for any Additional Shares of Common Stock
issued or sold or deemed to have been issued, (b) the number of shares of Common
Stock outstanding or deemed to be outstanding, and (c) the Warrant Price in
effect immediately prior to such issue or sale and as adjusted and readjusted
(if required by Section 2) on account thereof. The Company will forthwith mail a
copy of each such report to each holder of a Warrant, and will, upon the written
request at any time of any holder of a Warrant, furnish to such holder a like
report setting forth the Warrant Price at the time in effect and showing how it
was calculated. The Company will also keep copies of all such reports at its
principal office and at the office or agency maintained by the Company pursuant
to Section 12, and will cause the same to be available for inspection at such
offices during normal business hours by any holder of a Warrant or any
prospective purchaser of a Warrant designated by the holder thereof.
SECTION 7. NOTICES OF CORPORATE ACTION
In the event of a proposal by the Company (or of which the Company
shall have knowledge) for:
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12
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash
dividend payable out of earned surplus at the rate most recently
established by the Board of Directors of the Company) or other
distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company
or any consolidation, merger or exchange of shares involving the Company
and any other Person or any transfer of all or substantially all the
assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, and (ii) the date or expected date on
which any such reorganization, reclassification, recapitalization,
consolidation, merger, exchange of shares, transfer, dissolution, liquidation or
winding-up is to take place and the time, if any such time is to be fixed, as of
which the holders of record of Common Stock (or Other Securities) shall be
entitled to exchange their shares of Common Stock (or Other Securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, exchange of shares,
transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at
least 30 days prior to the date therein specified.
SECTION 8. RESTRICTIONS ON TRANSFER; REGISTRATION
ss. 8.1 Restrictive Legends. Except as otherwise permitted by this
Section 8, the Warrant originally issued pursuant to the Stock Purchase
Agreement, each Warrant issued in exchange or substitution for any Warrant
pursuant to Section 13, and each Warrant issued upon the registration of
transfer of any Warrant, shall be stamped or otherwise imprinted with a legend
in substantially the following form:
"This Warrant and any securities acquired upon the exercise of
this Warrant have not been registered under the Securities Act of
1933 and may not be transferred in the absence of such
registration or an exemption therefrom under such Act, except
under circumstances where neither such registration nor such an
exemption is
<PAGE>
13
required by law. This Warrant and such securities may be
transferred only upon the fulfillment of the conditions specified
in this Warrant."
Except as otherwise permitted by this Section 8, each certificate representing
shares of Common Stock (or Other Securities) issued upon the exercise of any
Warrant, and each certificate issued upon the registration of transfer of any
shares of such Common Stock (or Other Securities), shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 and may not be
transferred in the absence of such registration or an exemption
therefrom under such Act, except under circumstances where neither
such registration nor such an exemption is required by law. Such
securities may be transferred only upon the fulfillment of the
conditions specified in certain Common Stock Purchase Warrants
issued pursuant to the Stock Purchase Agreement, dated as of May
5, 1998, between Superior National Insurance Group, Inc. (the
"Company"), Insurance Partners, L.P., Insurance Partners Offshore
(Bermuda), L.P., and Capital Z Partners, Ltd. and in the Stock
Purchase Agreement. A complete and correct copy of the form of
such warrants and the Stock Purchase Agreement are available for
inspection at the principal office of the Company and will be
furnished to the holder of such securities upon written request
and without charge."
ss. 8.2 Notice of Proposed Transfer; Opinions of Counsel. Prior to
any transfer of any Restricted Securities, the holder thereof will give written
notice to the Company of such holder's intention to effect such transfer and to
comply in all other respects with this ss. 8.2. Each such notice (a) shall
describe the manner and circumstances of the proposed transfer in sufficient
detail to enable counsel to render the opinions referred to below, and (b) shall
designate counsel for the holder giving such notice (who may be in-house counsel
for such holder). The holder giving such notice will submit a copy thereof to
the counsel designated in such notice and the Company will promptly submit a
copy thereof to its counsel. The following provisions shall then apply:
(i) If in the opinion of each such counsel the proposed
transfer may be effected without registration of such Restricted
Securities under the Securities Act, the Company will promptly
notify the holder thereof and such holder shall thereupon be
entitled to transfer such Restricted Securities in accordance with
the terms of the notice
<PAGE>
14
delivered by such holder to the Company. Each Warrant or
certificate, if any, issued upon or in connection with such
transfer shall bear the applicable restrictive legend set forth in
ss. 8.1, unless in the opinion of each such counsel such legend is
no longer required to ensure compliance with the Securities Act.
If for any reason counsel for the Company (after having been
furnished with the information required to be furnished by clause
(a) of this ss. 8.2) shall fail to deliver an opinion to the
Company, or the Company shall fail to notify such holder thereof
as aforesaid, within 15 days after counsel for such holder shall
have delivered its opinion to such holder (with a copy to the
Company), then for all purposes of this Warrant the opinion of
counsel for such holder shall be sufficient to authorize the
proposed transfer and the opinion of counsel for the Company shall
not be required in connection with such proposed transfer; and
(ii) If in the opinion of either or both of such counsel the
proposed transfer may not be effected without registration of such
Restricted Securities under the Securities Act, the Company will
promptly so notify the holder thereof and such holder shall not be
entitled to transfer such Restricted Securities until receipt of a
further notice from the Company under clause (i) above or until
registration of such Restricted Securities under the Securities
Act has become effective.
Notwithstanding the foregoing provisions of this ss. 8.2 but subject to the
provisions of the Stock Purchase Agreement, [ ] shall be permitted at any time
or from time to time to transfer any Restricted Securities to a limited number
of institutional investors; provided, however, that (w) each such investor
represents in writing that it is acquiring such Restricted Securities for
investment and not with a view to the distribution thereof (subject, however, to
any requirement of law to the effect that the disposition thereof shall at all
times be within the control of such transferee), (x) each such investor agrees
in writing to be bound by all the restrictions on transfer of such Restricted
Securities contained in this ss. 8.2, (y) [ ] delivers to the Company an opinion
of [Paul, Weiss, Rifkind, Wharton & Garrison] or in-house counsel for [ ], or
other counsel satisfactory to the Company, stating that such transfer may be
effected without registration under the Securities Act, and (z) [ ] delivers to
the Company, at least 10 days prior to such transfer, the name of the counsel
who will deliver the opinion referred to in clause (y) above. The Company will
pay the reasonable fees and disbursements of counsel (other than in-house
counsel) for any holder of Restricted Securities and of counsel for the Company
in connection with all opinions rendered by them pursuant to this ss. 8.2 and
pursuant to ss. 8.3.
ss. 8.3 Termination of Restrictions. The restrictions imposed by
this Section 8 upon the transferability of Warrants and Common Stock (or Other
Securities) shall cease and terminate as to any particular Warrants or Common
Stock (or Other Securities) (a) when such securities shall have been effectively
registered under the
<PAGE>
15
Securities Act and disposed of in accordance with the registration statement
covering such securities, or (b) when, in the opinions of both counsel for the
holder thereof and counsel for the Company, or when, on the basis of a pertinent
Commission rule or regulation promulgated under the Securities Act, or a
pertinent "no-action" position taken by the staff of the Commission, such
restrictions are no longer required in order to ensure compliance with the
Securities Act. Whenever such restrictions shall terminate as to any Warrants or
Common Stock (or Other Securities), the holder thereof shall be entitled to
receive from the Company, without expense (other than transfer taxes, if any),
new securities of like tenor not bearing the applicable legend set forth in ss.
8.1.
SECTION 9. AVAILABILITY OF INFORMATION
If and so long as the Company is a Public Company, the Company
will comply with the reporting requirements of Sections 13 and 15(d) of the
Securities Exchange Act and will comply with all other public information
reporting requirements of the Commission (including the requirements of Rule 144
promulgated by the Commission under the Securities Act) from time to time in
effect and relating to the availability of an exemption from the Securities Act
for the sale of any Restricted Securities or the sale of securities by
affiliates. The Company will also cooperate with each holder to complete and
file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of an exemption from the
Securities Act for the sale of any Restricted Securities or the sale of
securities by affiliates. The Company will deliver to each holder of a Warrant,
promptly upon their becoming available, copies of all financial statements,
reports, notices and proxy statements sent or made available generally by the
Company to its stockholders, and copies of all regular and periodic reports and
all registration statements and prospectuses filed by the Company with any
securities exchange, or with the Commission.
SECTION 10. RESERVATION OF STOCK, ETC.
The Company will at all times reserve and keep available, solely
for issuance and delivery upon the exercise of the Warrants and free from
preemptive rights, all shares of Common Stock (or Other Securities) from time to
time issuable upon the exercise of the Warrants at the time outstanding. All
such shares (and any such Other Securities consisting of shares of capital
stock) shall be duly authorized and, when issued upon such exercise, shall be
validly issued, fully paid and nonassessable with no liability on the part of
the holders thereof. Any such Other Securities (other than shares of capital
stock) shall be duly authorized and, when issued upon such exercise, shall be
validly issued and legally binding obligations, enforceable in accordance with
their terms, with no liability on the part of the holders thereof. Without
limiting the generality of the foregoing, if any shares of Common Stock (or
Other Securities) required to be reserved for the purposes of exercise of this
Warrant require
<PAGE>
16
registration with or approval of any governmental authority under any federal
law (other than the Securities Act) or under any state law before such shares
(or Other Securities) may be issued upon exercise of this Warrant, the Company
will at its expense, as expeditiously as possible, cause such shares (or Other
Securities) to be duly registered or approved, as the case may be. The Company,
in addition, will review its stock ledgers, stock transfer books and other
corporate records periodically (and not less often than once in each calendar
quarter) in order to determine whether, as a result of any action taken by the
Company or any officer of the Company, any holder of a Warrant is or shall have
become, directly or indirectly, the beneficial owner of more than such
percentage of any class of its equity securities (as defined in the Securities
Exchange Act) as shall cause such holder to be required to make any filings or
declarations to the Company, the Commission or any national securities exchange
pursuant to the provisions of the Securities Exchange Act or any comparable
federal statute, and the Company will give prompt written notice to such holder
whenever it shall have determined, upon the basis of the information disclosed
by any such review, that such holder is or has become such a holder because of
such action, which notice shall also specify the information upon which the
Company bases such determination; provided, however, that the Company need give
such notice only once in each fiscal year to any holder whose percentage of
beneficial ownership of any class of the Company's equity securities has not
changed since the date of the giving of the immediately preceding notice.
SECTION 11. LISTING ON SECURITIES EXCHANGES
The Company will list on each national securities exchange (or the
Nasdaq National Market System) on which any Common Stock may at any time be
listed, subject to official notice of issuance upon the exercise of the
Warrants, and will maintain such listing of, all shares of Common Stock from
time to time issuable upon the exercise of the Warrants; and the Company will so
list on each national securities exchange (or the Nasdaq National Market
System), and will maintain such listing of, any Other Securities if at the time
any securities of the same class shall be listed on such national securities
exchange (or the Nasdaq National Market System) by the Company.
SECTION 12. MAINTENANCE OF OFFICE OR AGENCY
The Company will maintain an office or agency in Los Angeles
County, California where books for the registration and registration of transfer
of the Warrants will be kept and where the Warrants may be presented for
exercise, registration of transfer, exchange and replacement pursuant to the
provisions hereof. The principal office of the Company shall be such office or
agency unless the Company, by at least 10 days' prior written notice to each
holder of any Warrants, shall designate the principal office of a law firm or a
bank or trust company in such city or area as such office or
<PAGE>
17
agency, in which case the principal office of such other law firm or bank or
trust company shall thereafter be such office or agency.
SECTION 13. OWNERSHIP, REGISTRATION OF TRANSFER, EXCHANGE AND SUBSTITUTION OF
WARRANTS
ss. 13.1 Ownership of Warrants. Until due presentment for
registration of transfer as permitted by Section 8, the Company may treat the
Person in whose name any Warrant is registered on the register kept at the
office or agency of the Company maintained pursuant to Section 12 as the owner
and holder thereof for all purposes, notwithstanding any notice to the contrary.
Subject to the foregoing provisions and to Section 8, a Warrant, if properly
assigned, may be exercised by the assignee without first having a new Warrant
issued.
ss. 13.2 Transfer and Exchange of Warrants. Upon the surrender of
any Warrant, properly endorsed, for registration of transfer or for exchange
(for the purpose of combination of Warrants, split-up of Warrants or any other
purpose) at the office or agency maintained by the Company pursuant to Section
12, the Company at its expense will (subject to compliance with Section 8, if
applicable) promptly execute and deliver to or upon the order of the holder
thereof a new Warrant or Warrants of like tenor, in the name of such holder or
as such holder (upon payment by such holder of any applicable transfer taxes)
may direct, calling in the aggregate on the face or faces thereof for the number
of shares of Common Stock called for on the face or faces of the Warrant or
Warrants so surrendered, and thereupon the old Warrant shall be canceled.
ss. 13.3 Replacement of Warrants. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction of any Warrant held by a Person other than [ ] or any institutional
investor, upon delivery of indemnity reasonably satisfactory to the Company in
form and amount, or, in the case of any such mutilation, surrender of such
Warrant for cancellation at the office or agency maintained by the Company
pursuant to Section 12, the Company at its expense will promptly execute and
deliver, in lieu thereof, a new Warrant of like tenor.
ss. 13.4 Expenses. The Company will pay all expenses, taxes (other
than transfer taxes) and other charges payable in connection with the
preparation, issuance and delivery from time to time of Warrants.
SECTION 14. DEFINITIONS
For all purposes of this Warrant, the following definitions shall
apply (the definitions to be applicable to both the singular and the plural
forms of the terms defined where either such form is used in this Warrant):
<PAGE>
18
"Acquiring Corporation" means the continuing or surviving
corporation in a consolidation or merger with the Company (if other than the
Company), the transferee of all or substantially all the properties or assets of
the Company, the corporation consolidating with or merging into the Company in a
consolidation or merger in connection with which the Common Stock (or Other
Securities) is (or are) changed into or exchanged for stock or other Securities
of any other Person or cash or any other property, or, in the case of a capital
reorganization or reclassification, the Company.
"Additional Shares of Common Stock" means all shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to ss.ss. 2.3 or
2.4, deemed to be issued) by the Company after the Closing Date, whether
subsequently reacquired or retired) by the Company, other than shares issued,
upon the exercise of the Warrants.
"Business Day" means any day other than a Saturday, Sunday or day
upon which banking institutions are authorized or required by law or executive
order to be closed in Los Angeles, California or in the Borough of Manhattan in
The City of New York, New York.
"Cashless Exercise Right" has the meaning set forth in Section 1.1
of this Warrant.
"Closing Date" means the date of original issuance and delivery of
the Warrants being ________, 1998.
"Commission" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" means the Common Stock, $0.01 par value, of the
Company as constituted on the Closing Date, any stock into which such Common
Stock shall have been changed or any stock resulting from any reclassification
of such Common Stock, and all other stock of any class or classes (however
designated) of the Company, the holders of which have the right, without
limitation as to amount, either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
"Common Stock Deemed to be Outstanding" means all shares of Common
Stock that (a) can be acquired upon the conversion of any then outstanding
shares of Convertible Securities, (b) can be purchased upon the exercise of any
then outstanding rights, Options or warrants including, but not limited to,
these Warrants and all Options issued or available for issuance under the Stock
Option Plan or (c) can be acquired upon the conversion of any Convertible
Securities that can be purchased upon the exercise of any then outstanding
rights, Options or warrants.
<PAGE>
19
"Company" has the meaning set forth in the opening paragraph of
this Warrant, and any corporation which shall succeed to or assume the
obligations of the Company hereunder in compliance with Section 3.
"Convertible Securities" means any evidences of indebtedness,
shares of stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Common Stock.
"Current Market Price" on any date of determination means the
average of the daily Market Price per share of Common Stock during the period of
the 20 consecutive days on which national securities exchanges were open for
trading, ending on the day immediately preceding such date of determination;
provided, however, that if and so long as there shall be no exchange or
over-the-counter market for the Common Stock, the Current Market Price shall be
deemed to be the greater of the Warrant Price on the date of determination or
such price, if any, at which the most recent issue and sale by the Company of
Common Stock in a good faith arm's-length transaction has been effected.
"Exercise Price" has the meaning set forth in Section 1.1 of this
Warrant.
"Expiration Date" has the meaning set forth in Section 19 of this
Warrant.
"Market Price" per share of Common Stock on any date of
determination means (a) the last sale price, regular way, on such date or, if no
such sale takes place on such date, the average of the closing bid and asked
prices on such date, in each case as officially reported on the principal
national securities exchange on which the Common Stock is then listed or
admitted to trading, or (b) if the Common Stock is not then listed or admitted
to trading on any national securities exchange, the average of the reported
closing bid and asked prices on such date as shown by the Nasdaq National Market
System, or, if such notices are not at the time so shown, as determined in good
faith by any member of the National Association of Securities Dealers, Inc.
selected by the Company and satisfactory to the holder of this Warrant;
provided, however, that if and so long as there shall be no exchange or
over-the-counter market for the Common Stock, the Market Price shall be deemed
to be the greater of the Warrant Price on the date of determination or such
price, if any, at which the most recent issue and sale by the Company of Common
Stock in a good faith arm's-length transaction has been effected.
"Options" means rights, options or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities.
"Other Securities" means any stock (other than Common Stock) and
other securities of the Company or any other Person which the holders of the
Warrants at any time shall be entitled to receive, or shall have received, upon
the exercise of the
<PAGE>
20
Warrants in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 3 or otherwise.
"Parent" means as to any Acquiring Corporation, any corporation
which (a) controls the Acquiring Corporation directly or indirectly through one
or more intermediaries, (b) is (or, if not required to file such reports, would,
if so required, be) required to include the Acquiring Corporation in the
consolidated financial statements contained in such Parent's Annual Report on
Form 10-K under the Securities Exchange Act and (c) is not itself included in
the consolidated financial statements of any other Person (other than its
consolidated subsidiaries).
"Persons" means individuals, corporations, partnerships (including
"joint ventures"), trusts, estates, unincorporated organizations and governments
(including political subdivisions), authorities and agencies.
"Public Company" means the Company, if and so long as the Common
Stock is "held of record" (within the meaning of Rule 12g5-1, as promulgated by
the Commission under the Securities Exchange Act and in effect on ____________,
1998) by 500 or more Persons, and a registration statement with respect thereto
is effective under Section 12 of the Securities Exchange Act.
"Purchase Shares" has the meaning set forth in the second opening
paragraph of this Warrant.
"Restricted Securities" means (a) any Warrants bearing the
applicable legend set forth in ss. 8.1, (b) any shares of Common Stock (or Other
Securities) which have bean issued upon the exercise of Warrants and which are
evidenced by a certificate or certificates bearing the applicable legend set
forth in ss. 8.1, and (c) unless the context otherwise requires, any shares of
Common Stock (or Other Securities) which are at the time issuable upon the
exercise of Warrants and which, when so issued, will be evidenced by a
certificate or certificates bearing the applicable legend set forth in ss. 8.1.
"Securities Act" means the Securities Act of 1933, or any similar
federal statute replacing said statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Securities Exchange Act" means the Securities Exchange Act of
1934, or any similar federal statute replacing said statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"Stock Option Plan" means, collectively, all equity incentive
plans or arrangements for employees, directors or consultants of the Company
which, in each case, are approved by the Board of Directors of the Company.
<PAGE>
21
"Stock Purchase Agreement" has the meaning set forth in the second
opening paragraph of this Warrant.
"Transfer" means, with respect to any Restricted Securities, any
sale, assignment, pledge or other disposition thereof, or of any interest
therein, which could constitute a "sale" thereof, as that term is defined in
Section 2(3) of the Securities Act.
"Warrant Price" shall have the meaning specified in ss. 2.1.
"Warrants" has the meaning set forth in the second opening
paragraph of this Warrant.
SECTION 15. REMEDIES
The Company hereby expressly acknowledges and stipulates to the
understanding of the holder of this Warrant that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and agrees that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
SECTION 16. NO RIGHTS OR LIABILITIES AS STOCKHOLDER
Nothing contained in this Warrant shall be construed as conferring
upon the holder hereof any rights as a stockholder of the Company, and nothing
shall be construed as imposing any liabilities on such holder to purchase any
securities or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company.
SECTION 17. NOTICES
All notices and other communications provided for herein shall be
mailed by first class mail, postage prepaid, addressed (a) if to any holder of
any Warrant, at the registered address of holder as set forth in the register
kept at the office or agency maintained by the Company pursuant to Section 12,
or (b) if to the Company, at its principal office, being an that date of
original issuance of this Warrant 26601 Agoura Road, Calabasas, California
91302, or at such other address of the principal office of the Company of which
the Company shall have given notice to each holder of any Warrants in writing;
provided, however, that the exercise of any Warrant shall be effective if
effected in the manner provided in Section 1.
<PAGE>
22
SECTION 18. MISCELLANEOUS
This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge, or termination is
sought. THIS WARRANT AND THE STOCK PURCHASE AGREEMENT ARE TO BE GOVERNED BY AND
TO BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF DELAWARE.
The headings in this Warrant are inserted for convenience only and shall not be
deemed to constitute a part hereof.
SECTION 19. EXPIRATION
The right to exercise this Warrant shall expire at 5:00 p.m.
Pacific Time, on __________, 2003 (or, if such date shall not be a Business Day,
on the next day that is a Business Day) (the "Expiration Date").
On the 30th day prior to the Expiration Date, the Company shall
give written notice of the expiration of this Warrant to the holder hereof. In
the event the Company fails to give such written notice, the right to exercise
this Warrant shall be extended to 5:00 p.m. Pacific time on the 30th day
following the date on which such written notice is given (or, if such date shall
not be a Business Day, on the next day that is a Business Day).
SUPERIOR NATIONAL INSURANCE GROUP, INC.
By:____________________________________
Name:
Title:
<PAGE>
23
SUBSCRIPTION NOTICE
SUPERIOR NATIONAL INSURANCE GROUP, INC.
The undersigned, the registered holder of the foregoing Warrant,
hereby elects to exercise purchase rights represented by said Warrant for, and
to purchase thereunder, ___________________ shares of the Common Stock covered
by said Warrant and [herewith makes payment in full therefor of $_______________
by certified or official bank check payable to the order of the Company] [hereby
exercises its Cashless Exercise Right] and requests that (a) certificates for
such shares (and any Other Securities issuable upon such exercise) be issued in
the name of and delivered to ___________________________
________________________, whose address is _________________, and (b) if such
shares (or Other Securities) shall not include all of the shares (or Other
Securities) issuable as provided in said Warrant, then a new Warrant of like
tenor and date for the balance of the shares (or Other Securities) issuable
thereunder be delivered to the undersigned.
------------------------------
Signature guaranteed:
Dated: ______________________________
<PAGE>
24
ASSIGNMENT
For Value Received, the undersigned registered owner hereby sells,
assigns and transfers unto ________________________, the rights represented by
the foregoing Warrant of Superior National Insurance Group, Inc., and appoints
___________________ attorney to transfer said rights on the books of said
corporation, with full power of substitution in the premises.
------------------------------
Signature guaranteed:
Dated: ______________________________
EXHIBIT 6
VOTING AGREEMENT
VOTING AGREEMENT, dated as of May 5, 1998 (this "Agree ment"), between
Foundation Health Corporation, a Delaware corporation ("Seller"), and Insurance
Partners, L.P. (the "Stockholder").
WHEREAS, Seller and Superior National Insurance Group, Inc., a Delaware
corporation (the "Company") have, contemporaneously with the execution of this
Agreement, entered into a Purchase Agreement, dated as of the date hereof (as
the same may be amended or supplemented, the "Purchase Agree ment"), which
provides, among other things, that the Company desires to purchase from Seller,
and Seller desires to sell to the Company, all of the shares of the Business
Insurance Group, Inc., a Delaware insurance holding company ("BIG"), subject to
the terms and conditions of the Purchase Agreement (the "Purchase"); and
WHEREAS, as of the date hereof, the Stockholder is the Beneficial Owner
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended)
of 1,375,547 shares of Common Stock entitled to vote, par value $.01 per share,
of the Company ("Company Common Stock"); and
WHEREAS, as a condition to the willingness of Seller to enter into the
Purchase Agreement, Seller has required that the Stockholder agree, and in order
to induce Seller to enter into the Purchase Agreement, the Stockholder has
agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
VOTING OF SHARES
Section 1.1 Voting Agreement. The Stockholder hereby agrees, during the
time this Agreement is in effect, at any meeting of the stockholders of the
Company relating to the Purchase, to: (a) appear, or cause the holder of record
on the applicable record date (the "Record Holder") to appear, at any annual or
special meeting of stockholders of the Company for the purpose of obtaining a
quorum; (b) vote, or cause the Record Holder to vote, in person or by proxy, all
of the shares of the Company Common Stock owned or with respect to which the
Stockholder has or shares voting power and shares of the Company Common Stock
which shall, or with respect to which voting power shall, hereafter be acquired
by the Stockholder (collectively, the "Shares") in favor of (i) the issuance of
shares of common stock, par value $.01 per share, of the Company pursuant to the
purchase agreement (and related letter agreement with the Zurich Centre
Investments Ltd. ("ZCI")) with Insurance Partners, L.P. ("IP"), Insurance
Partners Offshore (Bermuda), L.P. ("IPB"), and Capital Z Partners, Ltd.
("Capital Z") (collectively, the "1998 Stock Purchase Agreement"), dated the
date hereof, (ii) the transactions contemplated by (x) the 1998 Stock Purchase
Agreement and (y) the Debt Offering (as defined in the 1998 Stock Purchase
Agreement) (together, the "Financing Agreements") for the financing of the
transactions contemplated by the Purchase Agreement and (iii) any amendment to
the certificate of incorporation of the Company necessary to complete the
transactions contemplated by the 1998 Stock Purchase Agreement; and (c) vote, or
cause the Record Holder to vote, such Shares against: (i) any extraordinary
corporate transaction (other than the Purchase), such as a merger,
consolidation, business combination, reorganization, recapitalization or
liquidation involving the Company or any of its subsidiaries, and (ii) any sale
or transfer of a material amount of the assets of the Company or any of its
subsidiaries if the transactions described in clauses (i) or (ii) would
adversely effect the Company's ability to complete the Purchase. The Stockholder
acknowledges receipt and review of a copy of the Purchase Agreement.
Notwithstanding anything to the contrary contained herein, the parties hereto
understand and agree that (i) the Shares are subject to Section 4.2 of the Stock
Purchase Agreement, dated as of September 17, 1996, as amended and restated as
of February 17, 1997 (the "1996 Stock Purchase Agreement"), among the Company,
IP and IPB and (ii) the Stockholder shall have no obligation under Section 1.1
of this Agreement so long as the Proxy referred to below is in effect.
C(2)-2
<PAGE>
Section 1.2 Irrevocable Proxy. (a) In furtherance of the transac tions
contemplated hereby, concurrently with the execution of this Agreement, the
Stockholder shall execute and deliver to Seller a proxy in the form attached
hereto as Exhibit A (the "Proxy"). THE PROXY IS IRREVOCABLE AND COUPLED WITH AN
INTEREST. Such irrevocable Proxy is executed and intended to be irrevocable in
accordance with the provisions of Section 212(e) of the Delaware General
Corporation Law (the "DGCL").
(b) The Stockholder hereby revokes all other proxies and
powers of attorney with respect to the Shares which the Stockholder may have
heretofore appointed or granted only to the extent it relates to the matters
referred to in Section 1.1 hereof, and no subsequent proxy or power of attorney
shall be given or written consent executed only to the extent it relates to the
matters referred to in Section 1.1 hereof (and if given or executed, such proxy
or power of attorney shall not be effective) by such Stockholder with respect
thereto. All authority conferred by this Section 1.2 or agreed to be conferred
shall survive the death or incapacity of the Stockholder and any obligation of
the Stockholder under this Agreement shall be binding upon the heirs, personal
representatives, assigns and successors of the Stockholder.
(c) The Seller hereby agrees, during the time this Agreement
is in effect, to take any and all actions necessary to cause the Proxies to be
voted at any meeting of the Company's stockholders in favor of all the
transactions contem plated by the Financing Agreements.
(d) The Seller hereby agrees not to consent to any amendment
or modification to the Purchase Agreement, including, but not limited to,
Article VII or the definition of "Closing Date" as contained therein, which
would adversely effect the Stockholder pursuant to the terms of this Agreement
without the prior written consent of the Stockholder.
Section 1.3 No Inconsistent Agreements. The Stockholder hereby
covenants and agrees that, except as contemplated by this Agreement and the
Purchase Agreement, the Stockholder shall not (i) enter into any voting
agreement or arrangement with respect to the Shares only to the extent it
relates to the matters referred to in Section 1.1 hereof, (ii) grant a proxy or
power of attorney or other authorization with respect to the Shares only to the
extent it relates to the matters referred to in Section 1.1 hereof or (iii) take
any other action, in each case, that
C(2)-3
<PAGE>
would in anyway restrict, limit or interfere with the performance of the Stock
holder's obligations hereunder or the transactions contemplated hereby.
ARTICLE II
RESTRICTIONS ON TRANSFER
Section 2.1 Transfer of Title or Beneficial Ownership. The Stock holder
hereby covenants and agrees that the Stockholder will not, prior to the
termination of this Agreement, either directly or indirectly, offer, agree or
other wise sell, assign, pledge, hypothecate, transfer, exchange, or dispose of
any Shares or any interest therein, owned either directly or indirectly by the
Stockholder or with respect to which the Stockholder has the power of
disposition, whether now or hereafter acquired, other than pursuant to an
agreement which specifically provides that the purchaser of such Shares will
assume the Stockholder's obliga tions hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Seller as follows:
Section 3.1 Authority Relative to This Agreement. The Stock holder has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the transac
tions contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Stockholder and, assuming the due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of the
Stockholder, enforceable against the Stockholder in accordance with its terms,
except that the enforcement hereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereinafter in effect
relat ing to creditors' rights generally and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
Section 3.2 No Conflict. The execution and delivery of this Agreement
by the Stockholder does not, and the performance of this Agreement by the
Stockholder shall not result in any breach of or constitute a default (or an
event
C(2)-4
<PAGE>
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or encumbrance on any of the Shares pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Stockholder is
a party or by which the Stockholder or the Shares are bound or affected, except,
in the case of each of the foregoing, for any such conflicts, violations,
breaches, defaults or other occurrences which would not prevent or delay the
performance by the Stockholder of its obligations under this Agreement.
Section 3.3 Title to the Shares. As of the date hereof, the Stock
holder is the record or Beneficial Owner of 1,375,547 shares of Company Com mon
Stock, which are all of the securities of the Company with voting rights owned,
either of record or beneficially, by the Stockholder. The Shares are owned free
and clear of any limitations on the Stockholder's voting rights, except as set
forth in Section 4.2 of the 1996 Stock Purchase Agreement. Except as provided in
this Agreement, the Stockholder has not appointed or granted any proxy, which
appointment or grant is still effective, with respect to the Shares.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Termination. This Agreement shall terminate upon the
earliest to occur of (a) the termination of the Purchase Agreement in accordance
with its terms pursuant to Article VII of the Purchase Agreement, as in effect
on the date hereof, and (b) the Closing Date (as defined in the Purchase
Agreement, as in effect on the date hereof). In the event of termination of this
Agreement pursuant to (a) above, written notice thereof shall forthwith be given
to the Stockholder.
Section 4.2 Enforcement of Agreement. The Stockholder agrees that
irreparable damage would occur and that Seller would not have any adequate
remedy at law in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that Seller shall be entitled to an injunction or
injunctions to prevent breaches by the Stockholder of this Agreement and to
enforce specifically the terms and provisions of this Agreement in the federal
courts of the United States of America located in Los Angeles County, California
(and federal courts
C(2)-5
<PAGE>
having jurisdiction over appeals therefrom), this being in addition to any other
remedy to which Seller is entitled at law or in equity. In addition, each of the
parties hereto (i) irrevocably submits to the exclusive jurisdiction of the
federal courts of the United States of America located in Los Angeles County,
California (and federal courts having jurisdiction over appeals therefrom) in
respect of this Agreement, (ii) agrees that such party will not attempt to deny
or defeat such per sonal jurisdiction by motion or other request for leave from
any such court and (iii) agrees that such party will not bring any action
relating to this Agreement in any court other than the federal courts of the
United States of America located in Los Angeles County, California.
Section 4.3 Successors and Affiliates. This Agreement shall inure to
the benefit of and shall be binding upon the parties hereto and their respective
heirs, legal representatives and assigns. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise, by the Stockholder or the
Seller without the prior written consent of the other party, except by laws of
descent. If the Stockholder shall acquire ownership of, or voting power with
respect to, any addi tional Shares in any manner, whether by the exercise of any
options or any securities or rights convertible into or exchangeable for Company
Common Stock, operation of law or otherwise, such Shares shall be held subject
to all of the terms of this Agreement, and by taking and holding such Shares,
the Stockholder shall be conclusively deemed to have agreed to be bound by and
to comply with all of the terms and provisions of this Agreement. Without
limiting the foregoing, the Stockholder specifically agrees that the obligations
of the Stockholder hereunder shall not be terminated by operation of law,
whether by the death or incapacity of the Stockholder or otherwise.
Section 4.4 Entire Agreement. This Agreement constitutes the entire
agreement between Seller and the Stockholder with respect to the subject matter
hereof and supersedes all prior agreements and understandings, both written and
oral, between Seller and the Stockholder with respect to the subject matter
hereof.
Section 4.5 Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
C(2)-6
<PAGE>
Section 4.6 Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
Section 8.14 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
neverthe less remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent to the parties as closely as possible to the fullest
extent permitted by applica ble law in a mutually acceptable manner in order
that the terms of this Agreement remain as originally contemplated to the
fullest extent possible.
Section 8.16 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made and shall be effective upon receipt, if delivered personally,
mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like changes of address) or sent by
electronic transmission (provided that a confirmation copy is sent by another
approved means):
(i) if to Seller,
Foundation Health Systems, Inc.
225 North Main
Pueblo, CO 81003
Telephone No.: (719) 585-8077
Telecopy No.: (719) 585-8175
Attn: General Counsel
C(2)-7
<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher &
Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Telephone No.: (312) 407-0700
Telecopy No.: (312) 407-0411
Attn: Peter C. Krupp, Esq.
(ii) if to Stockholder,
Insurance Partners, L.P.
201 Main Street, Suite 2600
Fort Worth, TX 76102
Telecopy Co.: (817) 338-2047
Attn: Mr. Charles Irwin
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Telecopy No.: 212 757-3990
Attn: Marilyn Sobel, Esq.
Insurance Partners Advisors, L.P.
One Chase Manhattan Plaza
44th Floor
New York, NY 10005
Telecopy No.: (212) 898-8720
Bradley Cooper
Section 8.18 Governing Law. The laws of the State of Delaware
(irrespective of its choice of law principles) shall govern all issues
concerning the validity of this Agreement, the construction of its terms, and
the interpretation and enforcement of the rights and duties of the parties.
C(2)-8
<PAGE>
Section 8.20 Counterparts. For the convenience of the parties hereto,
this Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
C(2)-9
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be duly executed on the date hereof.
Insurance Partners, L.P.
INSURANCE PARTNERS, L.P.
a Delaware limited partnership
By: Insurance GenPar, L.P., its
General Partner
By: Insurance Gen Par MGP, L.P., its
General Partner
By: Insurance GenPar MGP, Inc., its
General Partner
By: /s/ Bradley E. Cooper
-------------------------
Name: Bradley E. Cooper
Title: First Vice President
Foundation Health Corporation
FOUNDATION HEALTH CORPORATION
a Delaware Corporation
By: /s/ B. Curtis Westen
------------------------
Name: B. Curtis Westen
Title: Senior Vice President
C(2)-10
<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
to Vote
Superior National Insurance Group, Inc.
COMMON STOCK
The undersigned stockholder of Superior National Insurance Group, Inc.,
a Delaware corporation (the "Company"), hereby irrevocably (to the full extent
permitted by the General Corporation Law of the State of Delaware (the "DGCL")),
appoints B. Curtis Westen and Michael E. Jansen, and each of them, as the sole
and exclusive attorneys and proxies of the undersigned, with full power of
substitution and resubstitution, to vote and exercise all voting and related
rights (to the full extent that the undersigned is entitled to do so) with
respect to all of the shares of capital stock of the Company that now are or
hereafter may be benefi cially owned or owned of record by the undersigned, and
any and all other shares or securities of the Company issued or issuable in
respect thereof on or after the date hereof (collectively, the "Shares") in
accordance with the terms of this Proxy. The Shares beneficially owned or owned
of record by the undersigned stockholder of the Company as of the date of this
Proxy are listed on the final page of this Proxy. Upon the undersigned's
execution of this Proxy, any and all prior proxies given by the undersigned with
respect to any Shares only to the extent it relates to the matters referred to
in the third paragraph of this proxy are hereby revoked and the undersigned
agrees not to grant any subsequent proxies only to the extent it relates to the
matters referred to in the third paragraph of this proxy with respect to the
Shares until after the Expiration Date (as defined below).
This Proxy is irrevocable (to the extent permitted by the DGCL), is
granted pursuant to that certain Voting Agreement, dated as of May 5, 1998,
between Seller and the undersigned stockholder of the Company (the "Voting
Agreement"), and is granted in consideration of Seller and the Company entering
into that certain Purchase Agreement, dated as of May 5, 1998 (the "Purchase
Agreement"). The Purchase Agreement provides for the Purchase of all of the
shares of the Business Insurance Group, Inc., a Delaware insurance holding
company ("BIG") upon the terms of the Purchase Agreement. As used herein, the
A-1
<PAGE>
term "Expiration Date" shall mean the earlier to occur of (i) the termination of
the Voting Agreement in accordance with its terms, and (ii) such date and time
as the Purchase shall have become effective in accordance with the terms and
provisions of the Purchase Agreement as in effect on the date hereof.
The attorneys and proxies named above, and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares
(including, without limitation, the power to execute and deliver written
consents pursuant to the DGCL) at every annual, special or adjourned meeting of
the stock holders of the Company and in every written consent in lieu of such
meeting: (a) in favor of (i) the issuance of shares of common stock, par value
$.01 per share, of the Company pursuant to the purchase agreement (and related
letter agreement with the Zurich Centre Investments Ltd. ("ZCI")) with Insurance
Partners L.P. ("IP"), Insurance Partners Offshore (Bermuda), L.P. ("IPB"), and
Capital Z Partners, Ltd. ("Capital Z") (collectively, the "1998 Stock Purchase
Agreement"), dated the date hereof, (ii) the transactions contemplated by (x)
the 1998 Stock Purchase Agreement and (y) the Debt Offering (as defined in the
1998 Stock Purchase Agreement) (together, the "Financing Agreements") for the
financing of the transactions contemplated by the Purchase Agreement and (iii)
any amendment to the certificate of incorporation of the Company necessary to
complete the transac tions contemplated by the 1998 Stock Purchase Agreement;
and (b) against (i) any extraordinary corporate transaction (other than the
Purchase) such as a merger, consolidation, business combination, reorganization,
recapitalization or liquidation involving the Company or any of its
subsidiaries, and (ii) any sale or transfer of a material amount of the assets
of the Company or any of its subsidiaries if the transactions described in
clauses (i) or (ii) would adversely effect the Company's ability to complete the
Purchase. The attorneys and proxies named above may not exercise this Proxy on
any other matter except as provided in clauses (a) and (b) above. The
undersigned stockholder may vote the Shares on all other matters.
A-2
<PAGE>
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
Dated: May 5, 1998
Insurance Partners, L.P.
INSURANCE PARTNERS, L.P.
a Delaware limited partnership
By: Insurance GenPar, L.P., its
General Partner
By: Insurance Gen Par MGP, L.P., its
General Partner
By: Insurance GenPar MGP, Inc., its
General Partner
By: /s/ Bradley E. Cooper
-------------------------
Name: Bradley E. Cooper
Title: First Vice President
Shares beneficially owned:
1,375,547 shares of Common Stock of the Company
A-3
EXHIBIT 7
VOTING AGREEMENT
VOTING AGREEMENT, dated as of May 5, 1998 (this "Agree ment"),
between Foundation Health Corporation, a Delaware corporation ("Seller"), and
Insurance Partners Offshore (Bermuda), L.P. (the "Stockholder").
WHEREAS, Seller and Superior National Insurance Group, Inc., a
Delaware corporation (the "Company") have, contemporaneously with the execution
of this Agreement, entered into a Purchase Agreement, dated as of the date
hereof (as the same may be amended or supplemented, the "Purchase Agree ment"),
which provides, among other things, that the Company desires to purchase from
Seller, and Seller desires to sell to the Company, all of the shares of the
Business Insurance Group, Inc., a Delaware insurance holding company ("BIG"),
subject to the terms and conditions of the Purchase Agreement (the "Purchase");
and
WHEREAS, as of the date hereof, the Stockholder is the Beneficial
Owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) of 765,304 shares of Common Stock entitled to vote, par value $.01 per
share of the Company ("Company Common Stock"); and
WHEREAS, as a condition to the willingness of Seller to enter into
the Purchase Agreement, Seller has required that the Stockholder agree, and in
order to induce Seller to enter into the Purchase Agreement, the Stockholder has
agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
VOTING OF SHARES
----------------
Section 1.1 Voting Agreement. The Stockholder hereby agrees,
during the time this Agreement is in effect, at any meeting of the stockholders
of the Company relating to the Purchase, to: (a) appear, or cause the holder of
record on the applicable record date (the "Record Holder") to appear, at any
annual or special meeting of stockholders of the Company for the purpose of
obtaining a quorum; (b) vote, or cause the Record Holder to vote, in person or
by proxy, all of the shares of the Company Common Stock owned or with respect to
which the Stockholder has or shares voting power and shares of the Company
Common Stock which shall, or with respect to which voting power shall, hereafter
be acquired by the Stockholder (collectively, the "Shares") in favor of (i) the
issuance of shares of common stock, par value $.01 per share, of the Company
pursuant to the purchase agreement (and related letter agreement with the Zurich
Centre Investments Ltd. ("ZCI")) with Insurance Partners L.P. ("IP"), Insurance
Partners Offshore (Bermuda), L.P. ("IPB"), and Capital Z Partners, Ltd.
("Capital Z") (collectively, the "1998 Stock Purchase Agreement"), dated the
date hereof, (ii) the transactions contemplated by (x) the 1998 Stock Purchase
Agreement and (y) the Debt Offering (as defined in the 1998 Stock Purchase
Agreement) (together, the "Financing Agreements") for the financing of the
transactions contemplated by the Purchase Agreement and (iii) any amendment to
the certificate of incorporation of the Company necessary to complete the
transactions contemplated by the 1998 Stock Purchase Agreement; and (c) vote, or
cause the Record Holder to vote, such Shares against: (i) any extraordinary
corporate transaction (other than the Purchase), such as a merger,
consolidation, business combination, reorganization, recapitalization or
liquidation involving the Company or any of its subsidiaries, and (ii) any sale
or transfer of a material amount of the assets of the Company or any of its
subsidiaries if the transactions described in clauses (i) or (ii) would
adversely effect the Company's ability to complete the Purchase. The Stockholder
acknowledges receipt and review of a copy of the Purchase Agreement.
Notwithstanding anything to the contrary contained herein, the parties hereto
understand and agree that (i) the Shares are subject to Section 4.2 of the Stock
Purchase Agreement, dated as of September 17, 1996, as amended and restated as
of February 17, 1997 (the "1996 Stock Purchase Agreement"), among the Company,
IP and IPB and (ii) the Stockholder shall have no obligation under Section 1.1
of this Agreement so long as the Proxy referred to below is in effect.
C(2)-2
<PAGE>
Section 1.2 Irrevocable Proxy. (a) In furtherance of the transac
tions contemplated hereby, concurrently with the execution of this Agreement,
the Stockholder shall execute and deliver to Seller a proxy in the form attached
hereto as Exhibit A (the "Proxy"). THE PROXY IS IRREVOCABLE AND COUPLED WITH AN
INTEREST. Such irrevocable Proxy is executed and intended to be irrevocable in
accordance with the provisions of Section 212(e) of the Delaware General
Corporation Law (the "DGCL").
(b) The Stockholder hereby revokes all other proxies and
powers of attorney with respect to the Shares which the Stockholder may have
heretofore appointed or granted only to the extent it relates to the matters
referred to in Section 1.1 hereof, and no subsequent proxy or power of attorney
shall be given or written consent executed only to the extent it relates to
matters referred to in Section 1.1 hereof (and if given or executed, such proxy
or power of attorney shall not be effective) by such Stockholder with respect
thereto. All authority conferred by this Section 1.2 or agreed to be conferred
shall survive the death or incapacity of the Stockholder and any obligation of
the Stockholder under this Agreement shall be binding upon the heirs, personal
representatives, assigns and successors of the Stockholder.
(c) The Seller hereby agrees, during the time this
Agreement is in effect, to take any and all actions necessary to cause the
Proxies to be voted at any meeting of the Company's stockholders in favor of all
the transactions contem plated by the Financing Agreements.
(d) The Seller hereby agrees not to consent to any amend
ment or modification to the Purchase Agreement, including, but not limited to,
Article VII or the definition of "Closing Date" as contained therein, which
would adversely effect the Stockholder pursuant to the terms of this Agreement
without the prior written consent of the Stockholder.
Section 2.6 No Inconsistent Agreements. The Stockholder hereby
covenants and agrees that, except as contemplated by this Agreement and the
Purchase Agreement, the Stockholder shall not (i) enter into any voting
agreement or arrangement with respect to the Shares only to the extent it
relates to the matters referred to in Section 1.1 hereof, (ii) grant a proxy or
power of attorney or other authorization with respect to the Shares only to the
extent it relates to the matters referred to in Section 1.1 hereof or (iii) take
any other action, in each case, that
C(2)-3
<PAGE>
would in anyway restrict, limit or interfere with the performance of the Stock
holder's obligations hereunder or the transactions contemplated hereby.
ARTICLE IV
RESTRICTIONS ON TRANSFER
------------------------
Section 4.2 Transfer of Title or Beneficial Ownership. The Stock
holder hereby covenants and agrees that the Stockholder will not, prior to the
termination of this Agreement, either directly or indirectly, offer, agree or
other wise sell, assign, pledge, hypothecate, transfer, exchange, or dispose of
any Shares or any interest therein, owned either directly or indirectly by the
Stockholder or with respect to which the Stockholder has the power of
disposition, whether now or hereafter acquired, other than pursuant to an
agreement which specifically provides that the purchaser of such Shares will
assume the Stockholder's obliga tions hereunder.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
-------------------------------------------------
The Stockholder hereby represents and warrants to Seller as
follows:
Section 6.2 Authority Relative to This Agreement. The Stock holder
has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the transac
tions contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Stockholder and, assuming the due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of the
Stockholder, enforceable against the Stockholder in accordance with its terms,
except that the enforcement hereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereinafter in effect
relat ing to creditors' rights generally and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
Section 6.4 No Conflict. The execution and delivery of this
Agreement by the Stockholder does not, and the performance of this Agreement by
the Stockholder shall not result in any breach of or constitute a default (or an
event
C(2)-4
<PAGE>
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or encumbrance on any of the Shares pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Stockholder is
a party or by which the Stockholder or the Shares are bound or affected, except,
in the case of each of the foregoing, for any such conflicts, violations,
breaches, defaults or other occurrences which would not prevent or delay the
performance by the Stockholder of its obligations under this Agreement.
Section 6.6 Title to the Shares. As of the date hereof, the Stock
holder is the record or Beneficial Owner of 765,304 shares of Company Common
Stock, which are all of the securities of the Company with voting rights owned,
either of record or beneficially, by the Stockholder. The Shares are owned free
and clear of any limitations on the Stockholder's voting rights, except as set
forth in Section 4.2 of the 1996 Stock Purchase Agreement. Except as provided in
this Agreement, the Stockholder has not appointed or granted any proxy, which
appointment or grant is still effective, with respect to the Shares.
ARTICLE VIII
MISCELLANEOUS
-------------
Section 8.2 Termination. This Agreement shall terminate upon the
earliest to occur of (a) the termination of the Purchase Agreement in accordance
with its terms pursuant to Article VII of the Purchase Agreement, as in effect
on the date hereof, and (b) the Closing Date (as defined in the Purchase
Agreement, as in effect on the date hereof). In the event of termination of this
Agreement pursuant to (a) above, written notice thereof shall forthwith be given
to the Stockholder.
Section 8.4 Enforcement of Agreement. The Stockholder agrees that
irreparable damage would occur and that Seller would not have any adequate
remedy at law in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that Seller shall be entitled to an injunction or
injunctions to prevent breaches by the Stockholder of this Agreement and to
enforce specifically the terms and provisions of this Agreement in the federal
courts of the United States of America located in Los Angeles County, California
(and federal courts
C(2)-5
<PAGE>
having jurisdiction over appeals therefrom), this being in addition to any other
remedy to which Seller is entitled at law or in equity. In addition, each of the
parties hereto (i) irrevocably submits to the exclusive jurisdiction of the
federal courts of the United States of America located in Los Angeles County,
California (and federal courts having jurisdiction over appeals therefrom) in
respect of this Agreement, (ii) agrees that such party will not attempt to deny
or defeat such per sonal jurisdiction by motion or other request for leave from
any such court and (iii) agrees that such party will not bring any action
relating to this Agreement in any court other than the federal courts of the
United States of America located in Los Angeles County, California.
Section 8.6 Successors and Affiliates. This Agreement shall inure
to the benefit of and shall be binding upon the parties hereto and their
respective heirs, legal representatives and assigns. Neither this Agreement nor
any of the rights, interests or obligations under this Agreement shall be
assigned, in whole or in part, by operation of law or otherwise, by the
Stockholder or the Seller without the prior written consent of the other party,
except by laws of descent. If the Stockholder shall acquire ownership of, or
voting power with respect to, any addi tional Shares in any manner, whether by
the exercise of any options or any securities or rights convertible into or
exchangeable for Company Common Stock, operation of law or otherwise, such
Shares shall be held subject to all of the terms of this Agreement, and by
taking and holding such Shares, the Stockholder shall be conclusively deemed to
have agreed to be bound by and to comply with all of the terms and provisions of
this Agreement. Without limiting the foregoing, the Stockholder specifically
agrees that the obligations of the Stockholder hereunder shall not be terminated
by operation of law, whether by the death or incapacity of the Stockholder or
otherwise.
Section 8.8 Entire Agreement. This Agreement constitutes the
entire agreement between Seller and the Stockholder with respect to the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, between Seller and the Stockholder with respect to the subject
matter hereof.
Section 8.10 Amendment. This Agreement may not be amended except
by an instrument in writing signed by the parties hereto.
C(2)-6
<PAGE>
Section 8.12 Waivers. Except as provided in this Agreement, no
action taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
Section 8.14 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
neverthe less remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent to the parties as closely as possible to the fullest
extent permitted by applica ble law in a mutually acceptable manner in order
that the terms of this Agreement remain as originally contemplated to the
fullest extent possible.
Section 8.16 Notices. All notices and other communications given
or made pursuant hereto shall be in writing and shall be deemed to have been
duly given or made and shall be effective upon receipt, if delivered personally,
mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like changes of address) or sent by
electronic transmission (provided that a confirmation copy is sent by another
approved means):
(i) if to Seller,
Foundation Health Systems, Inc.
225 North Main
Pueblo, CO 81003
Telephone No.: (719) 585-8077
Telecopy No.: (719) 585-8175
Attn: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher &
C(2)-7
<PAGE>
Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Telephone No.: (312) 407-0700
Telecopy No.: (312) 407-0411
Attn: Peter C. Krupp, Esq.
(ii) if to Stockholder,
Insurance Partners Offshore (Bermuda), L.P.
Cedar House
41 Cedar Avenue
P.O. Box HM 1179
Hamilton, HM-EX Bermuda
Telecopy No.: (809) 292-7768
Attention: Kenneth E.T. Robinson, Esq.
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Telecopy No.: 212 757-3990
Attn: Marilyn Sobel, Esq.
Insurance Partners Advisors, L.P.
One Chase Manhattan Plaza
44th Floor
New York, NY 10005
Telecopy No.: (212) 898-8720
Attn: Bradley Cooper
Section 8.18 Governing Law. The laws of the State of Delaware
(irrespective of its choice of law principles) shall govern all issues
concerning the validity of this Agreement, the construction of its terms, and
the interpretation and enforcement of the rights and duties of the parties.
Section 8.20 Counterparts. For the convenience of the parties
hereto, this Agreement may be executed in any number of counterparts, each such
C(2)-8
<PAGE>
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
C(2)-9
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be duly executed on the date hereof.
Insurance Partners Offshore (Bermuda), L.P.
- -------------------------------------------
INSURANCE PARTNERS OFFSHORE (BERMUDA),
L.P., a Bermuda limited partnership
By: Insurance GenPar (Bermuda) L.P., its
General Partner
By: Insurance GenPar (Bermuda) MGP, L.P., its
General Partner
By: Insurance GenPar (Bermuda), Ltd., its
General Partner
By: /s/ Bradley E. Cooper
-------------------------
Name: Bradley E. Cooper
Title: First Vice President
Foundation Health Corporation
FOUNDATION HEALTH CORPORATION
a Delaware Corporation
By: /s/ B. Curtis Westen
------------------------
Name: B. Curtis Westen
Title: Senior Vice President
C(2)-10
<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
to Vote
Superior National Insurance Group, Inc.
COMMON STOCK
The undersigned stockholder of Superior National Insurance Group,
Inc., a Delaware corporation (the "Company"), hereby irrevocably (to the full
extent permitted by the General Corporation Law of the State of Delaware (the
"DGCL")), appoints B. Curtis Westen and Michael E. Jansen, and each of them, as
the sole and exclusive attorneys and proxies of the undersigned, with full power
of substitution and resubstitution, to vote and exercise all voting and related
rights (to the full extent that the undersigned is entitled to do so) with
respect to all of the shares of capital stock of the Company that now are or
hereafter may be benefi cially owned or owned of record by the undersigned, and
any and all other shares or securities of the Company issued or issuable in
respect thereof on or after the date hereof (collectively, the "Shares") in
accordance with the terms of this Proxy. The Shares beneficially owned or owned
of record by the undersigned stockholder of the Company as of the date of this
Proxy are listed on the final page of this Proxy. Upon the undersigned's
execution of this Proxy, any and all prior proxies given by the undersigned with
respect to any Shares only to the extent it relates to the matters referred to
in the third paragraph of this proxy are hereby revoked and the undersigned
agrees not to grant any subsequent proxies only to the extent it relates to the
matters referred to in the third paragraph of this proxy with respect to the
Shares until after the Expiration Date (as defined below).
This Proxy is irrevocable (to the extent permitted by the DGCL),
is granted pursuant to that certain Voting Agreement, dated as of May 5, 1998,
between Seller and the undersigned stockholder of the Company (the "Voting
Agreement"), and is granted in consideration of Seller and the Company entering
into that certain Purchase Agreement, dated as of May 5, 1998 (the "Purchase
Agreement"). The Purchase Agreement provides for the Purchase of all of the
shares of the Business Insurance Group, Inc., a Delaware insurance holding
company ("BIG") upon the terms of the Purchase Agreement. As used herein, the
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term "Expiration Date" shall mean the earlier to occur of (i) the termination of
the Voting Agreement in accordance with its terms, and (ii) such date and time
as the Purchase shall have become effective in accordance with the terms and
provisions of the Purchase Agreement as in effect on the date hereof.
The attorneys and proxies named above, and each of them, are
hereby authorized and empowered by the undersigned, at any time prior to the
Expiration Date, to act as the undersigned's attorney and proxy to vote the
Shares (including, without limitation, the power to execute and deliver written
consents pursuant to the DGCL) at every annual, special or adjourned meeting of
the stock holders of the Company and in every written consent in lieu of such
meeting: (a) in favor of (i) the issuance of shares of common stock, par value
$.01 per share, of the Company pursuant to the purchase agreement (and related
letter agreement with the Zurich Centre Investments Ltd. ("ZCI")) with Insurance
Partners L.P. ("IP"), Insurance Partners Offshore (Bermuda), L.P. ("IPB"), and
Capital Z Partners, Ltd. ("Capital Z") (collectively, the "1998 Stock Purchase
Agreement"), dated the date hereof, (ii) the transactions contemplated by (x)
the 1998 Stock Purchase Agreement and (y) the Debt Offering (as defined in the
1998 Stock Purchase Agreement) (together, the "Financing Agreements") for the
financing of the transactions contemplated by the Purchase Agreement and (iii)
any amendment to the certificate of incorporation of the Company necessary to
complete the transac tions contemplated by the 1998 Stock Purchase Agreement;
and (b) against (i) any extraordinary corporate transaction (other than the
Purchase) such as a merger, consolidation, business combination, reorganization,
recapitalization or liquidation involving the Company or any of its
subsidiaries, and (ii) any sale or transfer of a material amount of the assets
of the Company or any of its subsidiaries if the transactions described in
clauses (i) or (ii) would adversely effect the Company's ability to complete the
Purchase. The attorneys and proxies named above may not exercise this Proxy on
any other matter except as provided in clauses (a) and (b) above. The
undersigned stockholder may vote the Shares on all other matters.
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Any obligation of the undersigned hereunder shall be binding upon
the successors and assigns of the undersigned.
Dated: May 5, 1998
Insurance Partners Offshore (Bermuda), L.P.
INSURANCE PARTNERS OFFSHORE (BERMUDA),
L.P., a Bermuda limited partnership
By: Insurance GenPar (Bermuda) L.P., its
General Partner
By: Insurance GenPar (Bermuda) MGP, L.P., its
General Partner
By: Insurance GenPar (Bermuda), Ltd., its
General Partner
By: /s/ Bradley E. Cooper
-------------------------
Name: Bradley E. Cooper
Title: First Vice President
Shares beneficially owned:
765,851 shares of Common Stock of the Company
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