REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") entered into
and effective as of April 30, 1997 between Highlands Insurance Group, Inc., a
Delaware corporation (the "Company") and American Re-Insurance Company, a
Delaware insurance company ("Am-Re").
W I T N E S S E T H:
WHEREAS, Vik Brothers Insurance, Inc., an Indiana corporation
("VBI"), the Company and Highlands Acquisition Corp., a subsidiary of the
Company ("HAC"), have entered into an amended and restated merger agreement (as
so amended and restated and as supplemented, extended or otherwise modified from
time to time, the "Merger Agreement"), dated as of February 13, 1997, pursuant
to which HAC and VBI are merging (the "Merger") as of the date hereof with VBI
being the surviving corporation of the Merger;
WHEREAS, as a result of the consummation of the Merger, Am-Re
is receiving shares of Common Stock, par value $.01 per share (the "Common
Stock"), of the Company; and
WHEREAS, in connection with and as a condition to the
consummation of the Merger, the parties hereto have entered into this Agreement
in order to define certain rights, duties and obligations of such parties.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Definitions. Except as otherwise set forth below,
terms defined in the Stockholders Agreement (as defined below)
are used herein as therein defined.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized by
law to close.
"Common Stock Equivalents" means (without duplication with any
other Common Stock or Common Stock Equivalents) rights, warrants, options,
convertible securities or exchangeable securities or indebtedness, or other
rights, exercisable for or convertible or exchangeable into, directly or
indirectly, Common Stock, whether at the time of issuance or upon the passage of
time or the occurrence of some future event.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fully-Diluted Common Stock" means, at any time, the then
outstanding shares of Common Stock plus (without duplication) all shares of
Common Stock issuable, whether at such time or upon the passage of time or the
occurrence of some future event, upon the exercise, conversion or exchange of
all then-outstanding Common Stock Equivalents.
"Holder" means any Person who holds Registrable Securities.
"Indemnified Party" has the meaning set forth in Section 8(c)
below.
"Indemnifying Party" has the meaning set forth in Section 8(c)
below.
"Material Adverse Effect" has the meaning set forth in Section
2(d) below.
"Registrable Securities" means the Common Stock issued to
Am-Re pursuant to the Merger Agreement, any other Common Stock beneficially
owned by Am-Re and any other securities issuable with respect to such Common
Stock by way of a stock dividend or stock split or in connection with a
combination of shares,
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recapitalization, merger, consolidation or reorganization; provided that
(1) any Registrable Security will cease to be a Registrable
Security when (a) a registration statement covering such
Registrable Security has been declared effective by the SEC
and it has been disposed of pursuant to such effective
registration statement, (b) it is sold under circumstances in
which all of the applicable conditions of Rule 144 (or any
similar provisions then in force) under the Securities Act are
met or (c) (i) it has been otherwise transferred and (ii) the
Company has delivered a new certificate or other evidence of
ownership for it not bearing the legend pertaining to the
Securities Act required pursuant to Section 6.4 of the
Stockholders Agreement and (iii) it may be resold without
subsequent registration under the Securities Act;
(2) with respect to any Demand Registration, Registrable
Securities shall only include such Registrable Securities
which any Requesting Holder could not otherwise sell pursuant
to Rule 144 under the Securities Act, without restriction as a
result of volume limitations, whether under subsection (k) of
Rule 144 or otherwise.
"Registration Expenses" has the meaning set forth in Section 7
below.
"Requesting Holder" means any Holder who makes a Demand
Request.
"Selling Holder" means a Holder who is selling Registrable
Securities pursuant to a registration statement under the Securities Act.
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"Stockholders Agreement" means the Stockholders Agreement,
dated as of the date hereof, among the Company, Insurance Partners, L.P.,
Insurance Partners Offshore (Bermuda), L.P. and, ▇▇▇▇ ▇. ▇▇▇, The Scandinavia
Company, Inc. and Manoeuvre Ltd.
"Underwriter" means a securities dealer which purchases any
Registrable Securities as principal and not as part of such dealer's
market-making activities.
2. Demand Registration. (a) Request for Registration. Am-Re
may make a written request of the Company (a "Demand Request") for registration
under the Securities Act (a "Demand Registration") of all or part of its
Registrable Securities. Such Demand Request shall specify the number of shares
of Registrable Securities proposed to be sold. Upon any such Demand Request, the
Company will promptly, but in any event within 15 days, give written notice
thereof (the "Demand Registration Notice") to all Holders of Registrable
Securities and subject to Section 4(c), the Company shall file the Demand
Registration promptly, but in any event within 60 days after receiving a Demand
Request (the "Required Filing Date") covering the Registrable Securities covered
by the Demand Request and all other Registrable Securities which the Company has
been requested to register by the Holders thereof by written request given to
the Company within 20 days after the giving of the Demand Registration Notice,
all to the extent required to permit the disposition of the Registrable
Securities so to be registered in accordance with the intended method or methods
of disposition of each seller of such Registrable Securities and shall use its
best efforts to cause the same to be declared effective by the SEC as promptly
as practicable after such filing; provided that the Company need effect only one
Demand Registration in the aggregate pursuant hereto.
(b) Effective Registration and Expenses. A registration made
pursuant to a Demand Request will not count as a Demand Registration until it
has become effective with respect to all of the Registrable Securities whose
registration was requested pursuant to such Demand Request or (i) if, within 180
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days after the registration relating to such Demand Request has become
effective, such registration is interfered with by any stop order, injunction or
other order or requirement of the SEC or other governmental agency or court for
any reason and the Company fails to have such stop order, injunction or other
order or requirement removed, withdrawn or resolved to the Vik Parties'
reasonable satisfaction or (ii) the conditions to closing speci fied in any
purchase agreement or indemnity agreement entered into in connection with the
registration relating to such Demand Request are not satisfied (other than as a
result of a default or breach thereunder by any of the Holders), and such
closing does not occur as a result thereof.
(c) Selection of Underwriters. If the offering of Registrable
Securities pursuant to a Demand Registration shall be in the form of a "firm
commitment" underwritten offering, the Requesting Holders of a majority of the
shares of Registrable Securities to be registered in a Demand Registration (the
"Majority Requesting Holders") shall select the book-running managing
Underwriter or Underwriters (the "Managing Underwriter") and such additional
Underwriters to be used in connection with the offering, provided that the
selection of the Managing Underwriter shall be subject to the consent of the
Company, which consent shall not be unreasonably withheld.
(d) Priority on Demand Registrations. No securities to be sold
for the account of any Person (including the Company) other than a Requesting
Holder shall be included in a Demand Registration relating to a "firm
commitment" underwritten offering if the Managing Underwriter shall advise the
Requesting Holders and the Company in writing that the inclusion of such
securities would materially and adversely affect the price or success of the
offering (a "Material Adverse Effect"). Furthermore, in the event that the
Managing Underwriter shall advise the Requesting Holders that even after
exclusion of all securities of other Persons pursuant to the immediately
preceding sentence, the amount of Registrable Securities proposed to be included
in such Demand Registration by Requesting Holders would be sufficiently large to
cause a Material Adverse Effect, the Registrable Securities of Requesting
Holders to be included in
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such Demand Registration shall be allocated pro rata among the Requesting
Holders on the basis of the number of shares of Registrable Securities requested
to be included in such registration by each such Requesting Holder.
3. Piggy-Back Registration. (a) Subject to the provisions of
this Agreement, if the Company proposes to file a registration statement under
the Securities Act with respect to an offering of any equity securities (as such
term is defined in Section 3(a) of the Exchange Act) by the Company, whether or
not for its own account, and the registration form to be used may be used for
the registration of the Registrable Securities, then the Company shall give
prompt written notice of such proposed filing to Holders of the Registrable
Securities. Upon the written request of any such Holder made within 20 days
after the receipt of any such notice, subject to Section 3(b) hereof, the
Company shall include in each such registration (a "Piggyback Registration") all
Registrable Securities requested to be included in the registration for such
offering.
(b) The Company shall use its best efforts to cause the
Managing Underwriter of a proposed underwritten offering to permit the
Registrable Securities requested by the Holder thereof to be included in the
registration statement for such offering under Section 3(a) or pursuant to other
piggyback registration rights granted by the Company to such Holder ("Piggyback
Securities"), to be included on the same terms and conditions as any similar
securities included therein. Notwithstanding the foregoing, the Company shall
not be required to include such Holder's Piggyback Securities in such offering
if the Managing Underwriter of a proposed underwritten offering advises the
Company and the holders of Piggyback Securities in writing that in its opinion
the total amount of securities, including Piggyback Securities and the
securities of any other Person who has requested the inclusion thereof in the
registration statement for such offering pursuant to any contractual "piggyback"
rights of such Person, to be included in such offering exceeds the number which
can be sold in such offering without causing a Material Adverse Effect. If the
Managing Underwriter so advises the Company, the Company will include in such
registration, to
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the extent of the number which the Company is so advised can be sold in such
offering without causing a Material Adverse Effect, first the securities being
sold by the Company, and next any other securities pro rata among the holders of
Piggyback Securities and any other Person which possesses comparable contractual
"piggyback" registration rights on the basis of the number of shares of
Fully-Diluted Common Stock requested to be included in such registration by each
such Person.
(c) No registration effected under this Section 3 shall
relieve the Company from its obligation to effect registrations under Section 2.
4. Holdback Agreements. (a) Restrictions on Public Sale by
Holder of Registrable Securities. Each Holder of Registrable Securities (whether
or not such Registrable Securities are included in a registration statement
pursuant hereto) agrees not to effect any public sale or distribution of the
issue being registered or of any securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to Rule 144 under the
Securities Act, during the 7 days prior to, and during the 90-day period
beginning on the effective date of a registration statement with respect to any
securities of the Company except as part of such registration if and to the
extent requested by the Company in the case of a non-underwritten public
offering or if and to the extent requested by the Managing Underwriter in the
case of an underwritten public offering.
(b) Restrictions on Public Sale by the Company and Others. The
Company agrees (i) not to effect any public sale or distribution of any
securities similar to those being registered, or any securities convertible into
or exchangeable or exercisable for such securities, during the 7 days prior to,
and during the 90-day period beginning on, the effective date of any
registration statement which includes Registrable Securities (unless such sale
or distribution is pursuant to such registration statement and either (A) the
Holders of a majority of the shares of Registrable Securities to be included in
such registration statement consent or (B) Holders are participating
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pursuant to Section 3 hereof in such registration statement, such registration
statement was filed by the Company with respect to the sale of securities by the
Company and no Holder is simultaneously participating in a registration
statement pursuant to Section 2 hereof); and (ii) that any agreement entered
into after the date of the Agreement pursuant to which the Company issues or
agrees to issue any privately placed securities shall contain a provision under
which holders of such securities agree not to effect any public sale or
distribution of any such securities during the period described in (i) above,
including a sale pursuant to Rule 144 under the Securities Act (except as part
of any such registration, if permitted); provided, however, that the provisions
of this paragraph (b) shall not prevent the conversion or exchange of any
securities of the Company pursuant to their terms into or for other securities.
(c) Deferral of Filing. The Company may defer the filing of a
registration statement required by Section 2 until a date not later than 90 days
after the Required Filing Date (or, if longer, 90 days after the effective date
of the registration statement contemplated by clause (ii) below) if (i) at the
time the Company receives the Demand Request, the Company or its Subsidiaries
are engaged in confidential negotiations or other confidential business
activities or developments (such negotiations, activities or developments
referred to herein as "Pending Matters"), disclosure of which may, in the good
faith judgment of the Board of Directors, materially and adversely affect the
Company (and the Company shall use its best efforts to resolve such Pending
Matters as soon as possible), or (ii) prior to receiving the Demand Request, the
Board of Directors had been considering a registered underwritten public
offering of the Company's securities for the Company's account and the Board of
Directors determines, in its good faith judgment, after consultation with a firm
of nationally recognized underwriters, that there will be a Material Adverse
Effect on the proposed public offering; provided, however, that the aggregate
number of days such filings are so deferred may not exceed 120 days during any
consecutive 360 day period. A deferral of the filing of a registration statement
pursuant to this Section 4(c) shall be lifted, and the requested registration
statement shall be filed
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forthwith, if, in the case of a deferral pursuant to clause (i) of the preceding
sentence, the negotiations, other activities or developments are publicly
disclosed or terminated, or, in the case of a deferral pursuant to clause (ii)
of the preceding sentence, the proposed registration for the Company's account
is abandoned. In order to defer the filing of a registration statement pursuant
to this Section 4(c), the Company shall promptly, upon determining to seek such
deferral, deliver to each Requesting Holder a certificate signed by the
President of the Company stating that the Company is deferring such filing
pursuant to this Section 4(c). Within five days after receiving such
certificate, the Holders of a majority of the Registrable Securities held by the
Requesting Holders and for which registration was previously requested may
withdraw such request by giving notice to the Company; if withdrawn, the Demand
Request shall be deemed not to have been made for all purposes of this
Agreement.
5. Registration Procedures. Whenever the Holders have
requested that any Registrable Securities be registered pursuant to Section 2 or
3 hereof, the Company will, at its expense, use its best efforts to effect the
registration and the sale of such Registrable Securities under the Securities
Act in accordance with the intended method of disposition thereof, and in
connection with any such request, the Company will (subject to Section 4(c)
hereof):
(a) prepare and, as soon as practicable, but in any event
within 60 days after notice is given by the Company to Holders pursuant to
Sections 2(a) or 3(a), file with the SEC a registration statement on any form
for which the Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of the Registrable
Securities to be registered thereunder in accordance with the intended method of
distribution thereof, and use its best efforts to cause such filed registration
statement to become effective under the Securities Act; provided that before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company will furnish to all Selling Holders and to one counsel
reasonably acceptable to the Company
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selected by the Selling Holders, copies of all such documents proposed to be
filed, which document will be subject to the review of and comment by such
counsel;
(b) prepare and promptly file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period (except as provided in the last paragraph of this Section 5) of not
less than 180 consecutive days or, if shorter, the period terminating when all
Registrable Securities covered by such registration statement have been sold
(but not before the expiration of the applicable period referred to in Section
4(3) of the Securities Act and Rule 174 thereunder, if applicable) and comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the Selling Holders
thereof set forth in such registration statement;
(c) furnish to each such Selling Holder such number of copies
of such registration statement, each amendment and supplement thereto (in each
case including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) and such other
documents as such Selling Holder may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Selling Holder;
(d) notify the Selling Holders promptly, and (if requested by
any such Person) confirm such notice in writing, (i) when the registration
statement or any post-effective amendment has become effective under the
Securities Act and applicable state law, (ii) of any request by the SEC or any
other Federal or state governmental authority for amendments or supplements to a
registration statement or related prospectus or for additional information,
(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of a registration statement or the initiation of any proceedings for that
purpose, (iv) of the receipt by the Company of any notification with respect to
the
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suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and (v) of the happening of any
event which makes any statement made in such registration statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in such registration statement, prospectus or documents so that, in the
case of the registration statement, it will 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 not misleading, and that in the case
of the prospectus, it will 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;
(e) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest practicable
moment;
(f) use its best efforts to cooperate with the Selling Holders
and any Managing Underwriter to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depositary Trust Company; and enable such
Registrable Securities to be registered in such names as the Managing
Underwriter or Selling Holders request at least two business days prior to any
sale of Registrable Securities;
(g) use its best efforts to register or qualify such
Registrable Securities as promptly as practicable under such other securities or
blue sky laws of such jurisdictions as any Selling Holder or Managing
Underwriter reasonably (in light of the intended plan of distribution) requests
and do any and all
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other acts and things which may be reasonably necessary or advisable to enable
such Selling Holder or Managing Underwriter to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such Selling Holder;
provided that the Company will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this paragraph (g), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(h) use its best efforts to cause such Registrable Securities
to be registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of the
Company to enable the Selling Holder thereof to consummate the disposition of
such Registrable Securities;
(i) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities;
(j) furnish to each Selling Holder an opinion of counsel to
the Company, dated the effective date of the registration statement (and, if
such registration includes an underwritten public offering, dated the date of
the closing under the underwriting agreement) and a comfort letter from the
Company's independent public accountants, dated the effective date of such
registration statement (and if such registration includes an underwritten public
offering, dated the date of the closing under the underwriting agreement) in
customary form and covering such matters of the type customarily covered by
comfort letters and such other matters as the Selling Holders of a majority of
the shares of Registrable Securities being sold or the Managing Underwriter
reasonably requests;
(k) make available to its security holders, as soon as
reasonably practicable, an earnings statement covering a period of twelve
months, beginning within three months after the effective date of the
registration statement, which earnings
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statement shall satisfy the provisions of Section 11(a) of the Securities Act;
(l) use its best efforts to cause all such Registrable
Securities to be listed on each securities exchange on which similar securities
issued by the Company are then listed or quoted on any inter-dealer quotation
system on which similar securities issued by the Company are then quoted;
(m) if any event contemplated by Section 5(d)(v) above shall
occur, as promptly as practicable prepare a supplement or amendment or
post-effective amendment to such registration statement or the related
prospectus or any document incorporated therein by reference or promptly file
any other required document so that, as thereafter delivered to the purchasers
of the Registrable Securities, the prospectus will not contain an 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 not misleading; and
(n) cooperate and assist in any filing required to be made
with the National Association of Securities Dealers, Inc. and in the performance
of any reasonable due diligence investigation by any underwriter.
The Company may require each Selling Holder to promptly
furnish in writing to the Company such information regarding the distribution of
the Registrable Securities as it may from time to time reasonably request and
such other information as may be legally required in connection with such
registration. Notwithstanding anything herein to the contrary, the Company shall
have the right to exclude from any offering the Registrable Securities of any
Selling Holder who does not comply with the provisions of the immediately
preceding sentence.
Each Selling Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
5(d)(v) hereof, such Selling Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable
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Securities until such Selling Holder's receipt of the copies of the supplemented
or amended prospectus contemplated by Section 5(d)(v) hereof, and, if so
directed by the Company, such Selling Holder will deliver to the Company all
copies, other than permanent file copies, then in such Selling Holder's
possession, of the most recent prospectus covering such Registrable Securities
at the time of receipt of such notice. In the event the Company shall give such
notice, the Company shall extend the period during which such registration
statement shall be maintained effective (including the period referred to in
Section 5(b) hereof) by the number of days during the period from and including
the date of the giving of notice pursuant to Section 5(d)(v) hereof to the date
when the Company shall make available to the Selling Holders of Registrable
Securities covered by such registration statement a prospectus supplemented or
amended to conform with the requirements of Section 5(d)(v) hereof.
6. Underwriting Agreement. (a) If requested by the
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to a registration requested under Section 2 or 3, the Company shall
enter into an underwriting agreement with the underwriters for such offering,
such agreement to be reasonably satisfactory in substance and form to the
Selling Holders, the Managing Underwriter and the Company and to contain such
representations and warranties by the Company and such other terms and
provisions as are customarily contained in agreements of this type, including,
without limitation, indemnities to the effect and to the extent provided in
Section 8. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the agreements on the part of, the Company to and for the benefit of such
underwriters be made to and for the benefit of such holders of Registrable
Securities and that any or all of the conditions precedent to the obligations of
such underwriters under such underwriting agreement shall also be conditions
precedent to the obligations of such holders of Registrable Securities.
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(b) No underwriting agreement referred to in Section 6(a)
above (or other agreement in connection with such offering) shall require any
holder of Registrable Securities to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such holder, the ownership of such holder's
Registrable Securities and such holder's intended method or methods of
disposition and any other representation required by law or to furnish any
indemnity to any Person which is broader than the indemnity furnished by such
holder in Section 8(b).
7. Registration Expenses. (a) In connection with any
registration statement required to be filed hereunder, the Company shall pay the
following registration expenses (the "Registration Expenses"): (i) all
registration and filing fees (including, without limitation, with respect to
filings to be made with the National Association of Securities Dealers, Inc.),
(ii) fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) word processing,
duplicating and printing expenses, (iv) internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), (v) transfer agents', trustees', depositories',
registrars' and fiscal agents' fees, (vi) the fees and expenses incurred in
connection with the listing on an exchange of the Registrable Securities, (vii)
reasonable fees and disbursements of counsel for the Company and customary fees
and expenses for independent certified public accountants retained by the
Company (including the expenses of any comfort letters requested pursuant to
Section 5(j) hereof), (viii) the reasonable fees and expenses of any special
experts retained by the Company in connection with such registration, (ix) the
reasonable fees and disbursements of any one counsel retained by the Selling
Holders and (x) any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, but excluding underwriting fees, discounts and
commissions and transfer taxes, if any.
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8. Indemnification; Contribution. (a) Indemnification by the
Company. The Company agrees to indemnify and hold harmless each Selling Holder,
each Person, if any, who controls such Selling Holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, and the
officers, directors, agents, general and limited partners, and employees of each
Selling Holder and each such controlling person from and against any and all
losses, claims, damages, liabilities, and reasonable expenses (including
reasonable costs of investigation) directly or indirectly arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the
Registrable Securities or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or reasonable expenses arise out of, or are
based upon, any such untrue statement or omission or allegation thereof based
upon information furnished to the Company by such Selling Holder or on such
Selling Holder's behalf expressly for use therein; and the Company will
reimburse such Indemnified Party for any legal or other expenses reasonably
incurred by them in connection with enforcing its rights hereunder, provided,
however, that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus, the indemnity
agreement contained in this paragraph shall not apply to the extent that any
such loss, claim, damage, liability or expense results from the fact that a
current copy of the prospectus was not sent or given to the Persons asserting
any such loss, claim, damage, liability or expense at or prior to the written
confirmation of the sale of the Registrable Securities concerned to such Person
if it is determined that (i)(A) it was the responsibility of such Selling Holder
to provide such person with a current copy of the prospectus, (B) such Selling
Holder was provided with a current copy of the prospectus prior to the written
confirmation of sale and (C) such current copy of the prospectus would have
cured the defect giving rise to such loss, claim, damage, liability or expense
or (ii) the Selling Holder
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provided a prospectus to any Person in violation of the last paragraph of
Section 5 hereof.
(b) Indemnification by Holder of Registrable Securities. Each
Selling Holder agrees to indemnify and hold harmless the Company, and each
Person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act and the officers,
directors, agents and employees of the Company and each such controlling Person
to the same extent as the foregoing indemnity from the Company to such Selling
Holder, but only with respect to written information furnished by such Selling
Holder or on such Selling Holder's behalf expressly for use in any registration
statement or prospectus relating to the Registrable Securities. The liability of
any Selling Holder under this Section 8(b) shall be limited to the net amount of
proceeds received by such Selling Holder pursuant to the sale of Registrable
Securities covered by such registration statement or prospectus.
(c) Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any Person entitled to indemnification under Section 8(a) or
8(b) above (an "Indemnified Party") in respect of which indemnity may be sought
from any party who has agreed to provide such indemnification under Section 8(a)
or 8(b) above (an "Indemnifying Party"), the Indemnified Party shall give prompt
notice to the Indemnifying Party, provided that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Section 8, except to the extent that such
Indemnifying Party is materially prejudiced by such failure to give notice. The
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party, and shall assume the
payment of all reasonable expenses of such defense. Such Indemnified Party shall
have the right to employ separate counsel in any such action or proceeding and
to participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the Indemnifying
Party has agreed to pay such fees and expenses or
17
(ii) the Indemnifying Party fails promptly to assume the defense of such action
or proceeding or fails to employ counsel reasonably satisfactory to such
Indemnified Party or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both such Indemnified Party and
Indemnifying Party (or an Affiliate of the Indemnifying Party), and such
Indemnified Party shall have been advised by counsel that there is a conflict of
interest on the part of counsel employed by the Indemnifying Party to represent
such Indemnified Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Party). Notwithstanding the foregoing, the Indemnifying Party shall
not, in connection with any one such action or proceeding or separate but
substantially similar related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable at any
time for the fees and expenses of more than one separate firm of attorneys
(together in each case with appropriate local counsel). The Indemnifying Party
shall not be liable for any settlement of any such action or proceeding effected
without its written consent (which consent will not be unreasonably withheld),
but if settled with its written consent, or if there be a final judgment for the
plaintiff in any such action or proceeding, the Indemnifying Party shall
indemnify and hold harmless such Indemnified Party from and against any loss or
liability (to the extent stated above) by reason of such settlement or judgment.
The Indemnifying Party shall not consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release, in form and
substance satisfactory to the Indemnified Party, from all liability in respect
of such action or proceeding for which such Indemnified Party would be entitled
to indemnification hereunder.
(d) Contribution. If the indemnification provided for in this
Section 8 is unavailable to the Indemnified Parties in respect of any losses,
claims, damages, liabilities or judgments
18
referred to herein, then each such Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities and
judgments as between the Company on the one hand and each Selling Holder on the
other, in such proportion as is appropriate to reflect the relative fault of the
Company and of each Selling Holder in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of each Selling Holder on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Selling Holders agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8(d), no Selling Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Selling Holder were offered to
the public exceeds the amount of any damages which such Selling Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
19
9. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the Person entitled hereunder to approve
such arrangements, (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and this Agreement,
and (c) if requested by another Person participating in such underwritten
registration, provides that all securities convertible or exchangeable into
Common Stock that are included in such underwritten registration shall be so
converted or exchanged on or prior to the consummation thereof.
10. Miscellaneous. (a) Rule 144 etc. The Company will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the Commission thereunder, and will
take such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (i) Rule 144 under the Securities
Act, as such rule may be amended from time to time, or (ii) any successor rule
or regulation hereafter adopted by the Commission. Upon the request of any
holder of Registrable Securities, the Company will deliver to such holder a
written statement as to whether it has complied with such requirements.
(b) Amendment. Any provision of this Agreement may be altered,
supplemented, amended, or waived only by the written consent of each of the
parties hereto.
(c) Specific Performance. The parties hereto recognize that
the obligations imposed on them in this Agreement are special, unique, and of
extraordinary character, and that in the event of breach by any party, damages
will be an insufficient remedy; consequently, it is agreed that the parties may
have specific performance and injunctive relief (in addition to
20
damages) as a remedy for the enforcement hereof, without proving damages.
(d) Assignment. Except as otherwise expressly provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto. In
addition, and provided that an express assignment shall have been made, a copy
of which shall have been delivered to the Company, the provisions of this
Agreement which are for the benefit of a holder of Registrable Securities shall
be for the benefit of and enforceable by any subsequent holder of any
Registrable Securities. Any purported assignment made in violation of this
Section 10(d) shall be void and of no force and effect.
(e) Notices. Any and all notices, designations, consents,
offers, acceptances, or other communications provided for herein (each a
"Notice") shall be given in writing by overnight courier, telegram, or telecopy
(with receipt confirmed) which shall be addressed, or sent, to the respective
addresses as follows (or such other address as any party may specify to the
Company and all other parties by Notice):
The Company:
Highlands Insurance Group, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Secretary
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
21
Am-Re:
American Re-Insurance Company
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy Number (▇▇▇) ▇▇▇-▇▇▇▇
Copy to::
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
All Notices shall be deemed effective and received (a) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified above and
receipt thereof is confirmed; (b) if given by overnight courier, on the business
day immediately following the day on which such Notice is delivered to a
reputable overnight courier service; or (c) if given by telegram, when such
Notice is delivered at the address specified above. No party shall be entitled
to receive a Notice hereunder (or a copy of a Notice delivered to the Company)
if, at the time such Notice is to be sent, such party (including its Affiliates
and the employees of such party and its Affiliates) no longer owns any
Registrable Securities.
(f) Counterparts. This Agreement may be executed in two or
more counterparts and each counterpart shall be deemed to be an original and
which counterparts together shall constitute one and the same agreement of the
parties hereto.
(g) Section Headings. Headings contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit, or extend
the scope or intent of this Agreement or any provisions hereof.
22
(h) No Punitive Damages; Waiver of Jury Trial; Prevailing
Party's Fees and Expenses. The parties hereto agree to waive any and all rights
to request or receive punitive damages in connection with any action or
proceeding related to the subject matter of this Agreement. The parties hereto
waive all right to trial by jury in any action or proceeding to enforce or
defend any rights under this Registration Rights Agreement. The substantially
prevailing party in any action or proceeding relating to this Agreement shall be
entitled to receive an award of, and to recover from any non-prevailing party,
any fees or expenses incurred by him or it (including, without limitation, fees
and disbursements of such prevailing party's counsel) in connection with any
such action or proceeding.
(i) Choice of Law. This Agreement will be governed by and
construed and enforced in accordance with the laws of the State of Delaware
(without regard to the principles of conflicts of law) applicable to a contract
executed and to be performed in such state. Each of the parties hereto (i)
agrees to submit to personal jurisdiction and to waive any objection as to venue
in the State or federal courts located in the County of New Castle, State of
Delaware, (ii) agrees that any action or proceeding shall be brought exclusively
in such courts, unless subject matter jurisdiction or personal jurisdiction
cannot be obtained, and (iii) agrees that service of process on any party in any
such action shall be effective if made by registered or certified mail addressed
to such party at the address specified herein, or to any party hereto at such
other addresses as it or he may from time to time specify to the other parties
in writing for such purpose. The exclusive choice of forum set forth in this
Section 9(i) shall not be deemed to preclude the enforcement of any judgment
obtained in such forum or the taking of any action under this Agreement to
enforce such judgment in any appropriate jurisdiction.
(j) Entire Agreement. This Agreement, together with the
Stockholders Agreement, contains the entire understanding of the parties hereto
respecting the subject matter hereof and supersedes all prior agreements,
discussions and understandings with respect thereto.
23
(k) Cumulative Rights. The rights of the Parties and the
Company under this Agreement are cumulative and in addition to all similar and
other rights of the parties under other agreements.
(l) Severability. If any term, provision, covenant, or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void, or unenforceable, the remainder of the terms, provisions,
covenants, and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired, or invalidated.
(m) Termination. This Agreement shall terminate on the tenth
anniversary hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Registration Rights Agreement as of the date first above written.
HIGHLANDS INSURANCE GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President and Treasurer
AMERICAN RE-INSURANCE COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
25
