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REGISTRATION RIGHTS AGREEMENT, dated as of October 4, 1996, among Home
State Holdings, Inc., a Delaware corporation (the "Company"), Swiss Reinsurance
America Corporation , a New York corporation ("Swiss Re") and Reliance Insurance
Company, a Pennsylvania corporation ("Reliance"). Capitalized terms used but not
otherwise defined herein shall have the meanings assigned to such terms in the
Purchase Agreement dated the date hereof, among the Company and the purchasers
named therein (as from time to time assigned, supplemented or amended or as the
terms thereof may be waived, the "Purchase Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement certain purchasers are
investing in Preferred Shares and Warrants (exercisable for shares of Common
Stock) of the Company, all on the terms and subject to the conditions therein
set forth; and
WHEREAS, the Purchase Agreement contemplates the execution and delivery
of this Agreement contemporaneously therewith;
NOW, THEREFORE, in connection with the Purchase Agreement and for the
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
Section 1. Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
"Commission" means the Securities and Exchange Commission and
any other successor agency of the federal government administering the
Securities Act or the Exchange Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute, and the rules, regulations
and interpretations of the Commission thereunder, all as the same shall be in
effect at the time.
"Existing Holder Demand" has the meaning set forth in Section
2.1(b) hereof.
"Existing Registration Rights" means the registration rights
granted under the Existing Registration Rights Agreement.
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"Existing Registration Rights Agreement" means the
Registration Rights Agreement dated as of October 3, 1994, as from time to time
assigned, supplemented or amended or as the terms thereof may be waived, among
the Company and the Investors named therein.
"Future Holders" means the Holder or Holders of Future Holder
Securities.
"Future Holder Demand" has the meaning set forth in Section
2.1(b) hereof.
"Future Holder Securities" means at any time, (i) the shares
of Common Stock obtainable upon exercise of each Future Holder Warrant and (ii)
the shares of Common Stock outstanding from any previous exercise of a Future
Holder Warrant.
"Future Holder Warrants" means the Warrants issued as
permitted by Section 11.2 of the Purchase Agreement, as such Warrants may be
assigned or transferred from time to time.
"Holder" means any person owning or having the right to
acquire Registrable Securities or Warrants (each as defined herein) or any
assignee or transferee thereof in accordance with the provisions of the Purchase
Agreement, the Warrants and the Stockholders' Agreement, as the case may be.
"Person" or "person" means an individual, corporation,
partnership, association, joint venture, trust or unincorporated organization,
or a government, governmental body, court, or any agency or political
subdivision thereof.
"Register", "registered" or "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document.
"Registrable Securities" means collectively, the Swiss Re
Registrable Securities and the Reliance Registrable Securities.
"Registration Demand" shall mean a written notice (i) from one
(1) or more Swiss Re Holders stating that the Holder or Holders of a majority of
the Swiss Re Registrable Securities desire to sell all or part of such Swiss Re
Registrable Securities under circumstances requiring registration under the
Securities Act and requesting that the Company effect registration with respect
to such Registrable Securities or (ii) from one (1) or more Reliance Holders
stating that the Holder or Holders of at least a majority of the Reliance
Registrable Securities desire to sell such Reliance Registrable Securities under
circumstances requiring registration under the Securities Act and requesting
that the Company effect registration with respect to such Registrable
Securities.
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"Reliance Holders" means the Holder or Holders of Reliance
Registrable Securities.
"Reliance Registrable Securities" means at any time, (i) the
shares of Common Stock obtainable upon exercise of the Reliance Warrants and
(ii) the shares of Common Stock outstanding from any previous exercise of the
Reliance Warrants.
"Reliance Warrants" means the Warrants issued to Reliance
pursuant to the Purchase Agreement, as such Warrants may be assigned or
transferred from time to time.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar successor federal statute, and the rules, regulations and
interpretations of the Commission thereunder, all as the same shall be in effect
at the time.
"Swiss Re Holders" means the Holder or Holders of Swiss Re
Registrable Securities.
"Swiss Re Registrable Securities" means, at any time, (i) the
shares of Common Stock obtainable upon exercise of the Swiss Re Warrants and
(ii) the shares of Common Stock outstanding from any previous exercise of the
Swiss Re Warrants.
"Swiss Re Warrants" means the Warrants issued to Swiss Re
pursuant to the Purchase Agreement (including pursuant to Section 11.1 thereof)
, as such Warrants may be assigned or transferred from time to time.
"Warrants" means the Class A Warrants issued to Swiss Re and
Reliance pursuant to the Purchase Agreement, as such Warrants may be assigned or
transferred from time to time.
Section 2. Registration Rights.
2.1 Demand Registration Rights.
(a) At any time after October 4, 1996 and on or before October
4, 2006, the Swiss Re Holders holding a majority of the Swiss Re Registrable
Securities or the Reliance Holders holding a majority of the Reliance
Registrable Securities may make a Registration Demand requesting registration
under the Securities Act of all or part of their Registrable Securities. The
Company shall use its best efforts to cause the Registrable Securities as to
which registration is requested in the Registration Demand to be promptly
registered under the Securities Act (and in any event, such registration shall
be effected within one hundred and eighty (180) days following receipt of a
Registration Demand). Within ten (10) days after receipt of any such
Registration Demand, the Company shall give written notice of the proposed
registration to all other Holders of Registrable Securities. All Holders of
Registrable Securities
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shall have the option, subject to the provisions of Section 2.5(b), to have all
or part of their Registrable Securities included in any registration under this
Section 2.1. Any Holder may exercise such option by delivering written notice of
exercise to the Company within thirty (30) days after receiving notice from the
Company of the proposed registration. Any such notice to the Company shall
specify the number of Registrable Securities to be included in such registration
and the Company, subject to the provisions of Section 2.5(b), shall be obligated
to include such Registrable Securities in any such registration.
(b) In the event of a Registration Demand by either the Swiss
Re Holders or the Reliance Holders, or in the event of a request for
registration by the holders of Existing Registration Rights pursuant to Section
2 of the Existing Registration Rights Agreement (an "Existing Holder Demand"),
or in the event of a registration demand made by any Future Holder pursuant to a
future registration rights agreement permitted under the Purchase Agreement, (a
"Future Holder Demand"), any subsequent Registration Demand, Existing Holder
Demand or Future Holder Demand received by the Company within thirty (30) days
after the initial Registration Demand, Existing Holder Demand or Future Holder
Demand, as the case may be, shall be treated (together with the initial
Registration Demand, Existing Holder Demand or Future Holder Demand, as the case
may be) as one (1) Registration Demand (a "Collective Demand") and the Company
shall be required to effect only one (1) registration statement with respect to
the securities subject to the Collective Demand. In the event of a Collective
Demand, each of the Swiss Re Holders and the Reliance Holders shall be deemed to
have made a Registration Demand (subject to Section 2.2 hereof).
2.2 Number of Demand Registrations. Subject to the terms and
conditions hereof, the Swiss Re Holders shall be entitled to request (and the
Company shall be required to effect) up to two (2) registrations under the
Securities Act of all or part of the Swiss Re Registrable Securities and the
Reliance Holders shall be entitled to request (and the Company shall be required
to effect) up to two (2) registrations under the Securities Act of all or part
of the Reliance Registrable Securities. For purposes hereof, if (i) the Company
withdraws a registration statement prior to the effectiveness thereof, (ii) the
sale of securities subject to a registration statement filed pursuant to any
Registration Demand is not consummated because of the failure of the Company to
comply with the terms of this Agreement, (iii) upon the consummation of a sale
of securities subject to a registration statement filed pursuant to any
Registration Demand, less than eighty percent (80%) of the securities registered
for sale or requested to be registered for sale thereunder are sold, or (iv) a
revocation notice has been delivered and expenses of the Company have been paid
as provided in Section 2.3 hereof, such registration statement shall not be
counted as one of the registrations to which such Holders are entitled under
this Section 2.2.
2.3 Right of Holders to Revoke Registration Demand. After the
delivery of a Registration Demand under this Section 2, at any time prior to the
effective date of the registration relating to such Registration Demand, the
Holder or Holders making such Registration Demand may revoke such request by
providing written notice of such revocation to
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the Company. Any such revocation shall count as one (1) of the registrations to
which such revoking Holder or Holders are entitled under Section 2.2 hereof
unless the revoking Holder or Holders pay all of the Company's out-of-pocket
expenses with respect to such registration and qualification incurred to the
date of the revocation notice. In any such event, the registration statement
initiated by the revoked Registration Demand need not be filed.
2.4 Right of Company to Delay or Postpone Registration. The
Company may delay or postpone the registration of Registrable Securities
following a Registration Demand for a period of not more than one hundred and
twenty (120) days after receipt of such Registration Demand if the Company
furnishes to each Holder of Registrable Securities to be included in the
applicable registration a copy of a resolution of the Board of Directors
certified by the Secretary of the Company stating that (i) the Company is in
possession of material non-public information which, in the good faith judgment
of the Board of Directors, it considers prudent not to disclose in a
registration statement, or (ii) such registration would, in the good faith
judgment of the Board of Directors, adversely affect a material pending third
party financing, reorganization, recapitalization, merger, consolidation or
similar transaction, or (iii) such registration would, in the good faith
judgment of the Board of Directors, have a Material Adverse Effect on the
Company's business or financial condition and, in each case, stating the basis
of such good faith judgment; provided, however, that the Company during such
delay or postponement may not file a registration statement for securities to be
issued and sold for its own account or that of anyone other than the Holders.
2.5 Underwriter's Clawback.
(a) The Company may propose including Common Stock to be
publicly offered and sold by it in any registration statement to be filed
pursuant to a Registration Demand under this Section 2. The holders of Existing
Registration Rights may propose including Common Stock to be publicly offered
and sold by the Company in any registration statement to be filed pursuant to a
Registration Demand under this Section 2. If, in the written opinion of
underwriters selected (pursuant to Section 2.6 hereof) for the proposed
offering, the inclusion of all of the securities proposed to be offered and sold
in connection with a Registration Demand (or a Collective Demand, as the case
may be) would jeopardize the success of the offering, then the number of shares
to be registered shall be allocated (i) first, pro rata among the Holders making
such Registration Demand, or, if applicable, pro rata among the parties making a
Collective Demand; (ii) second, to the extent that the underwriters have
determined that additional shares may be registered, pro rata among the holders
of Existing Registration Rights exercising their piggyback rights under Section
3 of the Existing Registration Rights Agreement, the Holders exercising
piggyback rights pursuant to Section 3 hereof and any Future Holders exercising
piggyback rights pursuant to any future registration rights agreement permitted
under the Purchase Agreement; and (iii) third, to the Company and all other
holders of piggyback rights. To the extent clawbacks are made on the number of
shares proposed to be registered by the Holder or Holders making such
Registration Demand, such Holder or Holders may elect to convert their proposed
offering to an offering pursuant to Section 3 hereof. If the selling Holder
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or Holders elect to convert the offering pursuant to this Section 2.5(a), the
number of registrations to which such Holders are entitled under Section 2.2
hereof shall not be reduced as a result of the participation by such Holders in
such offering.
2.6 Selection of Underwriters. The managing underwriter and
all other underwriters participating in any underwritten public offering covered
by a Registration Demand shall be selected by the Holders of a majority of the
shares of Registrable Stock that participate in such registration, subject to
the approval of the Board of Directors of the Company, which shall not be
unreasonably withheld.
Section 3. Piggyback Registrations.
3.1 Piggyback Registration. If at any time or from time to
time, the Company shall propose to register any Common Stock (or any warrants,
units, convertibles, rights or other securities related or linked to any shares
of the Common Stock) for public sale under the Securities Act, whether pursuant
to an Existing Holder Demand, a Future Holder Demand or otherwise, then the
Company shall give prompt written notice to all Holders of the proposed
registration (but in no event shall such notice be given later than forty-five
(45) days before any such registration is filed with the Commission). If any
Holders so request within thirty (30) days after receipt of such notice, the
Company, subject to the provisions of Section 3.3, shall include in such
registration the Registrable Securities held or to be held by such Holders and
requested to be included in such registration.
3.2 Right of Company to Withdraw Registration. The Company may
at any time prior to the effectiveness of any such registration statement, in
its sole discretion and following notice to any Holder that has, or may, elect
to participate in such registration, abandon the proposed offering. In the event
of any such abandonment, the Company shall bear all reasonable expenses incurred
by such Holder in connection with such withdrawn registration statement.
3.3 Underwriter's Clawback. Notwithstanding anything contained
in Sections 3.1 and 3.2 hereof, the Company shall not be obligated to include
such Registrable Securities in such offering if the Company is advised in
writing by the managing underwriter or underwriters of such offering (with a
copy to each Holder) that such offering would in its or their good faith
judgment be materially adversely affected by such inclusion, in which case
Holders shall be entitled to participate in any such reduced number of
Registrable Securities (if any) which may be included in such registration in
proportion to their relative holdings of Registrable Securities. Notwithstanding
the foregoing, any such clawback shall be imposed pro rata on the Holders
exercising piggyback rights, the Future Holders exercising piggyback rights and
the holders of Existing Registration Rights exercising piggyback rights under
the Existing Registration Rights Agreement (to the extent such rights are
exercised).
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Section 4. Registration on Form S-3.
4.1 Form S-3 Registration Rights. In addition to the rights
provided the Holders of Registrable Securities in Sections 2 and 3 above, if the
registration of Registrable Securities under the Securities Act can be effected
on Form S-3 (or any similar form promulgated by the Commission), the Company
will at any time, and from time to time, thereafter, as expeditiously as
possible, but not more than once in any six-month period, use its best efforts
to effect qualification and registration under the Securities Act on said Form
S-3 of all or such portion of the Registrable Securities as the Holder or
Holders shall specify.
4.2 Right of Company to Delay or Postpone Registration. The
Company may delay or postpone the registration of Registrable Securities under
this Section 4 for a period of not more than one hundred and twenty (120) days
after receipt of a request for such registration if the Company furnishes to
each Holder of Registrable Securities to be included in the applicable
registration a copy of a resolution of the Board of Directors certified by the
Secretary of the Company stating that (i) the Company is in possession of
material non-public information which, in the good faith judgment of the Board
of Directors, it considers prudent not to disclose in a registration statement,
or (ii) such registration would, in the good faith judgment of the Board of
Directors, adversely affect a material pending third party financing,
reorganization, recapitalization, merger, consolidation or similar transaction,
or (iii) such registration would, in the good faith judgment of the Board of
Directors, have a Material Adverse Effect on the Company's business or financial
condition and, in each case, stating the basis of such good faith judgment;
provided, however, that the Company during such delay or postponement may not
file a registration statement for securities to be issued and sold for its own
account or that of anyone other than the Holders.
Section 5. Expenses. Subject to the limitations contained in this
Section 5 and except as otherwise specifically provided in this Agreement, the
entire costs and expenses of the registrations and qualifications pursuant to
this Agreement shall be borne by the Company. Such costs and expenses shall
include, without limitation, (i) the fees and expenses of counsel for the
Company and of its accountants, (ii) all other costs, fees and expenses of the
Company incident to the preparation, printing and filing under the Securities
Act of the registration statement and all amendments and supplements thereto,
(iii) the cost of furnishing copies of each preliminary prospectus, each final
prospectus and each amendment or supplement thereto to underwriters, dealers and
other purchasers of the Registrable Securities, (iv) the costs and expenses
(including fees and disbursements of counsel) incurred in connection with the
qualification of the Registrable Securities under the securities or Blue Sky
laws of various jurisdictions, and (v) the reasonable fees and expenses of
counsel for each of the Swiss Re Holders and the Reliance Holders in connection
with each registration of their Registrable Securities.
Section 6. Obligations of the Company. Without limiting any other
provision hereof, in connection with any registration of Registrable Securities
pursuant to Section 2, 3 or 4 hereof, the Company shall (i) use its best efforts
to prepare and file with the Commission as soon as
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reasonably practicable, a registration statement with respect to the shares
required to be so registered; (ii) use its best efforts to register and qualify
the shares covered by such registration statement under the securities or Blue
Sky Laws of such jurisdictions as any Holder may reasonably request; (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the Securities Act, the Exchange Act, and all applicable rules
and regulations promulgated thereunder; (iv) obtain the withdrawal of any order
suspending the effectiveness of the registration statement at the earliest
possible time; and (v) provide a transfer agent and registrar for the
Registrable Securities not later than the effective date of any registration
statement.
Section 7. Procedures.
(a) In the case of each registration or qualification pursuant
to this Agreement, the Company will keep all Holders advised in writing as to
the initiation of proceedings for such registration and qualification and as to
the completion thereof, and will advise any such Holder, upon request, of the
progress of such proceedings.
(b) The Company will use its best efforts, at the Company's
sole expense, to keep each registration and qualification under this Agreement
effective (and in compliance with the Securities Act) by such action as may be
necessary or appropriate for a period of one hundred twenty (120) days after the
effective date of such registration statement, including, without limitation,
the filing of post-effective amendments and supplements to any registration
statement or prospectus necessary to keep the registration statement current and
the further qualification under any applicable Blue Sky or other state
securities laws to permit such sale or distribution, all as requested by the
Holder or Holders.
(c) The Company shall immediately notify each Holder on whose
behalf Registrable Securities have been registered pursuant to this Agreement,
at any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement (including any preliminary
prospectus), as then in effect, includes an untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances then
existing.
(d) The Company will furnish to each Holder on whose behalf
Registrable Securities have been registered pursuant to this Agreement a signed
counterpart, addressed to such Holder, of (i) an opinion of counsel for the
Company, dated the effective date of such registration statement, and (ii) a
so-called "cold comfort" letter signed by the independent public accountants
certifying the Company's financial statements included in such registration
statement, and such opinion of counsel and accountants' letter shall cover
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel
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and in accountants' letters delivered to underwriters in connection with
underwritten public offerings of securities.
(e) Without limiting any other provision hereof, in connection
with any registration of Registrable Securities under this Agreement, the
Company will comply with the Securities Act, the Exchange Act, all applicable
rules and regulations of the Commission, and all other applicable laws and will
make generally available to its securities holders, as soon as reasonably
practicable, an earnings statement covering a period of at least twelve (12)
months, beginning with the first month of the first fiscal quarter after the
effective date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
(f) In connection with any registration of Registrable
Securities under this Agreement, the Company will, if requested by underwriters
for any Registrable Securities included in such registration, enter into an
underwriting agreement with such underwriters for such offering, such agreement
to contain such representations and warranties by the Company and such other
terms and provisions as are customarily contained in underwriting agreements
with respect to secondary distributions, including, without limitation,
provisions relating to indemnification. The Holders on whose behalf Registrable
Securities are to be distributed by such underwriters shall be parties to any
such underwriting agreement, and the representations and warranties by, and the
other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such Holders. Such
underwriting agreement shall also comply with Section 9 hereof.
(g) If the Company at any time proposes to register any of its
securities under the Securities Act, other than pursuant to a request made under
Section 2 hereof, whether or not for sale for its own account, and such
securities are to be distributed by or through one or more underwriters, then
the Company will use its best efforts, if requested by any Holder requesting
registration of Registrable Securities in connection therewith pursuant to
Section 3 or 4 hereof, to arrange for such underwriters to include such
Registrable Securities among the securities to be distributed by or through such
underwriters.
(h) In connection with the preparation and filing of each
registration statement registering Registrable Securities, the Company will give
any Holders on whose behalf such Registrable Securities are to be so registered,
any underwriters participating in any such disposition of Registrable Securities
and their respective counsel and accountants, the opportunity to participate in
the preparation of such registration statement, each prospectus included therein
or filed with the Commission, and each amendment thereof or supplement thereto,
and will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers, its
counsel and the independent public accountants who have certified its financial
statements, as shall be necessary, in the opinion of such Holders or such
underwriters or their respective counsel, in order to conduct a reasonable and
diligent investigation within the meaning of the Securities Act. Without
limiting the
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foregoing, each registration statement, prospectus, amendment, supplement or any
other document filed with respect to a registration under this Agreement shall
be subject to review and reasonable approval by the Holders registering
Registrable Securities in such registration and by their counsel.
Section 8. Furnishing of Documents. The Company will, at its sole
expense, furnish to each holder with respect to which registration has been
effected, such number of registration statements, prospectuses, offering
circulars and other documents incident to any registration or qualification
referred to in this Agreement as any such Holder from time to time may
reasonably request.
Section 9. Indemnification of Holders.
(a) Subject to the conditions set forth below, in connection
with any registration of Registrable Securities pursuant hereto, the Company
agrees to indemnify and hold harmless each Holder and any underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in a distribution covered by a registration statement, their
respective officers, directors and affiliates (collectively, the "Indemnitees"):
(i) against any and all losses, claims,
damages or liabilities, joint or several, and expenses
whatsoever arising out of or based upon (including, but not
limited to, any and all expense whatsoever reasonably incurred
by any of the Indemnities in investigating, preparing or
defending any litigation, commenced or threatened, or any
claim whatsoever based upon or arising out of) (A) any untrue
or alleged untrue statement of a material fact contained in
any preliminary prospectus, or any amendment or supplement
thereto, the registration statement or the prospectus (each as
from time to time amended and supplemented), or in any
application or other document executed by the Company or based
upon written information furnished by the Company filed in any
jurisdiction in order to qualify the Common Stock under the
securities laws thereof or otherwise incident to the
registration or the qualification of the Common Stock under
the Securities Act or any state securities laws applicable to
the Company; or (B) the omission or alleged omission from any
item referred to in the preceding clause of a material fact
required to be stated therein or necessary to make the
statements therein not misleading; or (C) any other violation
or alleged violation of applicable federal or state law, rule
or regulation relating to action or inaction by the Company in
connection with any such registration or qualification;
provided, however, that with respect to an Indemnitee, the
indemnity agreement contained herein shall not apply to any
loss, claim, damage, liability or action of or involving such
Indemnitee arising out of or based upon any untrue or alleged
untrue statement or omission made in reliance upon and in
conformity with any information furnished in writing to the
Company by such Indemnitee expressly for use therein;
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(ii) subject to the proviso contained in
subsection (i) above, against any and all losses, claims,
damages and liabilities, joint or several, and expenses
whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or
omission or any such alleged untrue statement or omission
(including, but not limited to, any and all expenses
whatsoever reasonably incurred by the Indemnitees or their
respective counsel in investigating, preparing or defending
against any such litigation or claim) if such settlement is
effected with the written consent of the Company which consent
shall not be unreasonably withheld.
(b) The Company will enter into an underwriting agreement and
other agreements with the underwriter or underwriters for any offering
registered under the Securities Act pursuant to this Agreement and with the
Holders selling Registrable Securities pursuant to such offering, and such
underwriting agreement and other agreements shall contain customary provisions
with respect to indemnification which shall, at a minimum, provide the
indemnification set forth above.
(c) The procedure for indemnification by the Company under
this Section 9 shall be as follows:
(i) if any action or proceeding (including
any governmental investigation or inquiry) shall be brought or
asserted against an Indemnitee in respect of which indemnity
may be sought from the Company, such Indemnitee shall promptly
notify the Company in writing, and the Company shall be
entitled to assume the defense thereof, including the
employment of counsel reasonably satisfactory to such
Indemnitee and the payment of all reasonable expenses related
thereto (including those of such counsel), by delivering
written notice of its election to do so within fifteen (15)
days following receipt of notice from such Indemnitee;
provided that the failure of the Indemnitee to give the
Company prompt notice as provided herein shall not relieve the
Company of its indemnification obligations hereunder except to
the extent, if any, the Company shall have been prejudiced
thereby.
(ii) such Indemnitee shall have the right to
employ separate counsel in any such action and to participate
in the defense thereof, but the fees and expenses of such
separate counsel shall be the expense of such Indemnitee
unless (A) the Company has agreed to pay such fees and
expenses, or (B) the Company has failed to assume the defense
of such action or proceeding by delivering the notice referred
to in subsection (i) hereof or (C) the Company has failed to
employ counsel reasonably satisfactory to the Indemnitee
within ten (10) days after the Company has elected to assume
the defense of such action pursuant to subsection (i) hereof,
or if such counsel has been employed by the Company, at
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any time after such employment, such counsel ceases (in the
reasonable judgment of the Indemnitee) to be reasonably
satisfactory, or (D) the named parties to any such action or
proceeding (including any impleaded parties) include both such
Indemnitee and the Company, and such Indemnitee shall have
been advised by counsel that there may be one or more legal
defenses available to such Indemnitee that are different from
or additional to those available to the Company creating a
conflict of interest on the part of such counsel to represent
both parties; and
(iii) if such Indemnitee notifies the
Company in writing that it elects to employ separate counsel
at the expense of the Company as permitted by the provisions
of the preceding subsection (ii), the Company shall not have
the right to assume the defense of such action or proceeding
on behalf of such Indemnitee. The foregoing notwithstanding,
the Company shall not be liable for the reasonable fees and
expenses of more than one (1) separate firm of attorneys at
any time for such Indemnitee and any other Indemnitee (which
firm shall be designated in writing by such Indemnitee) in
connection with any one such action or proceeding or separate
but substantially similar or related actions or proceedings in
the same jurisdiction arising out of the same general
allegations or circumstances.
Section 10. Indemnification of the Company.
Each Holder, in any registered offering pursuant hereto, agrees to
indemnify and hold harmless the Company, its officers and directors and agents
and each other person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act against any and all losses, liabilities,
claims, damages and expenses of the kind indemnified against by the Company
under Section 9 above based upon statements or omissions or alleged statements
or omissions, if any, made in any preliminary prospectus, the registration
statement or prospectus or any amendment or supplement thereof or any
application or other document in reliance upon, and in conformity with, written
information furnished by such Holder to the Company expressly for use in any
preliminary prospectus, the registration statement or prospectus or any
amendment or supplement thereof or in any such application or other document. In
no event, however, shall the liability hereunder of any Holder be greater than
the dollar amount of the proceeds received by such Holder upon sale of its
Registrable Securities in the offering giving rise to such indemnification
obligation. In case any action shall be brought against the Company, or any
other person so indemnified, in respect of which indemnity may be sought against
any Holder, such Holder shall have the rights and duties given to the Company,
and each person so indemnified shall have the rights and duties given to such
Holder, by the provisions of Section 9 above and the procedure for
indemnification shall be as provided for in Section 9.
Section 11. Reports Under Exchange Act . With a view to making
available to each Holder the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the Commission that may at
any time permit the Holder to sell securities of the
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13
Company to the public without registration or pursuant to a registration with
the information required to be disclosed on Form S-3, the Company agrees to use
its best efforts to satisfy the requirements of all such rules and regulations
(including the requirements for public information, registration under the
Exchange Act and timely reporting to the Commission) at the earliest possible
date after their first registered public offering. The Company shall (whether or
not it shall then be required to do so) timely file such information, documents
and reports as the Commission may require or prescribe under Section 13 or 15(d)
(whichever is applicable) of the Exchange Act, for so long as the Company is
subject to the reporting requirements of either Section 13 or 15(d) of the
Exchange Act. The Company shall forthwith upon request furnish any Holder of
applicable Registrable Securities (i) a written statement by the Company that it
has complied with such reporting requirements, (ii) a copy of the most recent
annual or quarterly report of the Company and (iii) such other reports and
documents field by the Company with the Commission as such Holder may reasonably
request.
Section 12. Obligations of Holders. It shall be a condition precedent
to the obligation of the Company to register any Registrable Securities pursuant
hereto that each Holder shall (i) furnish to the Company such information
regarding the Registrable Securities and the intended method of disposition
thereof and other information concerning such Holder as the Company shall
reasonably request and as shall be required in connection with the registration
statement to be filed by the Company, and (ii) agree to abide by such additional
customary terms affecting the proposed offering as may be reasonably requested
by the managing underwriter of such offering.
Section 13. Certain Limitations in Connection with Future Grants of
Registration Rights.
(a) From and after the date of this Agreement, except with
respect to the agreements with Future Holders which are permitted under the
Purchase Agreement, the Company shall not enter into any agreement with any
holder or prospective holder of any of its Common Stock providing for the
granting to such holder of demand registration rights unless such agreement
includes provisions to the effect that (i) the Company will give each Holder
notice at least thirty (30) days prior to the filing of a registration statement
pursuant to the exercise of such rights and (ii) if any Holder requests
inclusion of Registrable Securities in such registration statement within thirty
(30) days after receipt of such notice, then such Holder's Registrable
Securities requested to be so included will be given priority over the
securities sought to be registered by the holders of such demand registration
rights if marketing factors require a limitation on the number of securities to
be included in such registration statement.
(b) From and after the date of this Agreement, the Company
shall not enter into any agreement with any holder or prospective holder of any
of its Common Stock providing for the granting to such holder of incidental or
"piggyback" registration rights unless such agreement includes provisions to the
effect that, in the case of a registered underwritten public offering of the
Common Stock to which Section 3 hereof applies, such agreement gives
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14
priority to the Holders of Registrable Securities requested to be so included if
marketing factors require a limitation on the number of shares of Common Stock
to be included in such offering.
Section 14. Suspension of Sales. Upon receipt of written notice from
the Company that a registration statement, preliminary prospectus or prospectus
contains an untrue statement of a material fact or an omission to state a
material fact required to be stated in a registration statement or prospectus or
necessary to make the statements in a registration statement, prospectus or
preliminary prospectus not misleading, each Holder shall forthwith discontinue
disposition of Registrable Securities until such Holder has received copies of
the supplemented or amended prospectus, or until such Holder is advised in
writing by the registrant that the use of the prospectus may be resumed, and, if
so directed by the registrant, such Holder shall deliver to the registrant (at
the registrant's expense) all copies, other than permanent file copies then in
such Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
Section 15. Holdback. Except for transfers made in transactions exempt
from the registration requirements under the Securities Act pursuant to Section
4(2) thereof or pursuant to Rule 144A, upon the written request of the managing
underwriter of any underwritten offering of the Common Stock, neither the
Company nor any Holder shall sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Common Stock (other than
those included in such registration) without the prior written consent of such
managing underwriter for a period (not to exceed thirty (30) days before the
effective date and ninety (90) days thereafter) that such managing underwriter
reasonably determines is necessary in order to effect the underwritten public
offering. In addition, the Company will cause each of the officers and directors
of the registrant to enter into substantially similar hold-back agreements with
such managing underwriter covering at least the same period.
Section 16. Specific Performance. The Company agrees and stipulates
that the remedies at law of the Holders in the event of any default by the
Company in the performance of or compliance with any of the terms of this
Agreement are not and will not be adequate and that, to the fullest extent
permitted by law, 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. Such remedies and
all other remedies provided for in this Agreement shall, however, be cumulative
and not exclusive and shall be in addition to any other remedies which a party
may have under this Agreement or otherwise.
Section 17. Notices. Except as otherwise provided herein, all notices,
requests, demands, consents and other communications hereunder shall be in
writing and shall be delivered personally, sent by reputable express courier
service (charges prepaid) or sent by registered or certified mail, return
receipt requested, postage prepaid and shall be deemed to have been given when
so delivered, sent or deposited in the U.S. Mail (i) to Swiss Re, at 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000, Attention: Xxxxxx X. Xxxxxxx, Senior Vice
President and General Counsel, or at such other address as Swiss Re may
otherwise indicate in a written
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15
notice delivered to the Company; (ii) to Reliance, at c/o Reliance Group
Holdings, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, New York,
Attention: Treasurer (with a copy to the General Counsel) and with a copy to
Reliance Reinsurance Corp., 0 Xxxx Xxxxxx Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx
00000, Attention: President, or at such other address or addresses as Reliance
may otherwise indicate in a written notice delivered to the Company; (iii) if to
any other Holder of Registrable Securities, at the Holder's address set forth in
the records of the Company or at such other address as the Holder thereof may
otherwise indicate in a written notice delivered to the Company; or (iv) if to
the Company, at Three South Revmont Drive, Shrewsbury, New Jersey 07702,
Attention: Xxxx X. Xxxxx, or at such other address as the Company may otherwise
indicate in a written notice delivered to the Holders.
Section 18. CONSENT TO JURISDICTION AND SERVICE OF PROCESS
THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND
IRREVOCABLY AGREES THAT, SUBJECT TO THE ELECTION OF ANY PURCHASER OR ANY HOLDER
OF REGISTRABLE SECURITIES, ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT
MAY BE LITIGATED IN SUCH COURTS. THE COMPANY ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENCE, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE
MAILED BY REGISTERED MAIL TO THE COMPANY AT THE ADDRESS OF THE COMPANY PROVIDED
IN SECTION 20 HEREOF, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW,
ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF
PROCESS. AS AN ALTERNATIVE TO SERVICE OF PROCESS ON SUCH AGENT (WHETHER OR NOT
ANY SUCH AGENT HAS BEEN APPOINTED), THE COMPANY HEREBY AGREES THAT SERVICE UPON
IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE AND SERVICE OF PROCESS. NOTHING
HEREIN SHALL AFFECT RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR SHALL LIMIT THE RIGHT OF ANY HOLDER OF REGISTRABLE SECURITIES TO BRING
PROCEEDINGS OR OBTAIN OR ENFORCE JUDGMENTS AGAINST THE COMPANY IN THE COURTS OF
ANY OTHER JURISDICTION.
Section 19. WAIVER OF JURY TRIAL. THE COMPANY HEREBY WAIVES ITS RIGHT
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS AGREEMENT OR ARISING OUT OF ANY DEALINGS BETWEEN THE COMPANY AND ANY HOLDER
OF REGISTRABLE SECURITIES RELATING TO SUBJECT MATTER OF THIS TRANSACTION. THE
COMPANY ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH
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16
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY HOLDER. THE SCOPE OF
THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY
BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE COMPANY FURTHER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL,
AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS
OF) THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY COURT.
Section 20. Miscellaneous.
(a) The rights and remedies of each Holder hereunder shall be
independent of the rights and remedies of any other Holder, except as otherwise
expressly provided herein. Without limiting the foregoing, if the Company or any
other person has any rights, claims or defenses against any Holder, such rights,
claims or defenses shall not apply with respect to any other Holder, except as
otherwise expressly provided herein. The taking of any action or the failure to
take any action by any Holder with respect to the subject matter of this
Agreement shall not, and shall not be deemed to, constitute the taking of any
action or the failure to take any action by any other Holder, except as
expressly set forth in this Agreement.
(b) This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
(c) The headings and captions in this Agreement are for
convenience of reference only and shall not define, limit or otherwise affect
any of the terms or provisions hereof.
(d) The terms of this Agreement shall be binding upon, and
inure to the benefit of, the parties and their respective successors and
permitted assigns whether so expressed or not. The Company may not assign any of
its obligations, duties or rights under this Agreement except with the consent
of each Holder. In addition to any assignment by operation of law, (i) each
Holder may assign, in whole or in part, any or all of its rights (and/or
obligations) under this Agreement to any person, provided that any such transfer
or assignment is in compliance with the Purchase Agreement and/or the terms of
the Warrants and (unless such
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17
assignment expressly provides otherwise) any such assignment shall not diminish
the rights the Holder would otherwise have under this Agreement or with respect
to any remaining Registrable Securities held by the Holder.
(e) Except as otherwise provided herein, the provisions of
this Agreement may be amended, and compliance with any covenant or provision
herein set forth may be omitted or waived, only if the Company has obtained the
written consent of the Holders of at least seventy-five percent (75%) of the
Registrable Securities, including the consent of the Holder or Holders of at
least fifty-one percent (51%) of the Swiss Re Registrable Securities and the
Holder or Holders of at least fifty-one percent (51%) of the Reliance
Registrable Securities. In each such case, the Company shall deliver copies of
such consent in writing to any Holders who did not execute the same. Any waiver
or consent may be given subject to satisfaction of conditions stated therein and
any waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
(f) Any provision hereof which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or thereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
(g) By executing this Agreement, each of the undersigned
represents and warrants, severally and not jointly, that (i) it has all
necessary power and has taken all necessary action to make all the provisions of
the Agreement the valid and binding obligation of the undersigned and
enforceable in accordance with its terms; and (ii) the Agreement is a legal,
valid and binding obligation of the undersigned enforceable in accordance with
its terms.
(h) This Agreement shall be governed by and construed and
enforced in accordance with, the laws of the State of New York (other than any
conflict of laws rules which might result in the application of the laws of any
other jurisdiction).
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
HOME STATE HOLDINGS, INC.
By: /s/ Xxxx Xxxxxx
-----------------------------
Name: Xxxx Xxxxxx
Title: Acting President
SWISS REINSURANCE AMERICA
CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
and General Counsel
RELIANCE INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President
[SIGNATURE PAGE TO THE REGISTRATION RIGHTS AGREEMENTS]
