-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P1GOVYRLUqAoflxUtvloIPIa9X8iCGiUKL317XfyMaeVEL52L4IwzdGUjLFQhBtW fs9njTD9q2pBMS20gjGzRw== 0000950142-97-000301.txt : 19970423 0000950142-97-000301.hdr.sgml : 19970423 ACCESSION NUMBER: 0000950142-97-000301 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19970421 SROS: NASD GROUP MEMBERS: INSURANCE GENPAR (BERMUDA) MGP, L.P. GROUP MEMBERS: INSURANCE GENPAR (BERMUDA) MGP, LTD. GROUP MEMBERS: INSURANCE GENPAR (BERMUDA), L.P. GROUP MEMBERS: INSURANCE GENPAR MGP, INC. GROUP MEMBERS: INSURANCE GENPAR MGP, L.P. GROUP MEMBERS: INSURANCE GENPAR, L.P. GROUP MEMBERS: INSURANCE PARTNERS LP GROUP MEMBERS: INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P. GROUP MEMBERS: INSURANCE PARTNERS, L.P. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SUPERIOR NATIONAL INSURANCE GROUP INC CENTRAL INDEX KEY: 0000810463 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 953994873 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-46333 FILM NUMBER: 97584447 BUSINESS ADDRESS: STREET 1: 26601 AGOURA RD STREET 2: ` CITY: CALABASAS STATE: CA ZIP: 91302 BUSINESS PHONE: 8188801600 MAIL ADDRESS: STREET 1: 26601 AGOURA ROAD CITY: CALABASAS STATE: CA ZIP: 91302 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: INSURANCE PARTNERS LP CENTRAL INDEX KEY: 0001012376 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133753044 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 201 MAIN ST CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173908500 MAIL ADDRESS: STREET 1: 201 MAIN STREET CITY: FORT WORTH STATE: TX ZIP: 76102 SC 13D 1 SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 Superior National Insurance Group, Inc. (Name of Issuer) Common Stock (par value $.01 per share) (Title of Class of Securities) 868224106 (CUSIP Number) Insurance Partners Advisors, L.P. One Chase Manhattan Plaza, 44th Floor New York, New York 10005 Attention: Mr. Steven B. Gruber Tel. No. (212) 898-8700 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) April 11, 1997 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this statement because of Rule 13d-1(b)(3) or (4), check the following box [ ]. Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Exhibit Index on Page 24 Page 1 of 24 Pages SCHEDULE 13D CUSIP No. 868224106 Page 2 of 24 Pages --------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Insurance Partners, L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS OO -- Contributions from Partners 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware 7 SOLE VOTING POWER NUMBER OF -0- SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER 1,369,856 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER 1,369,856 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,369,856 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES Not Applicable 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 23.5% 14 TYPE OF REPORTING PERSON PN SCHEDULE 13D CUSIP No. 868224106 Page 3 of 24 Pages --------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Insurance GenPar, L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware 7 SOLE VOTING POWER NUMBER OF -0- SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER 1,369,856 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER 1,369,856 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,369,856(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES Not Applicable 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 23.5% 14 TYPE OF REPORTING PERSON PN (1) Solely in its capacity as sole general partner of Insurance Partners, L.P. SCHEDULE 13D CUSIP No. 868224106 Page 4 of 24 Pages --------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Insurance GenPar MGP, L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware 7 SOLE VOTING POWER NUMBER OF -0- SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER 1,369,856 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER 1,369,856 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,369,856(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES Not Applicable 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 23.5% 14 TYPE OF REPORTING PERSON PN (1) Solely in its capacity as sole general partner of Insurance GenPar, L.P., which is the sole general partner of Insurance Partners, L.P. SCHEDULE 13D CUSIP No. 868224106 Page 5 of 24Pages --------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Insurance GenPar MGP, Inc. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware 7 SOLE VOTING POWER NUMBER OF -0- SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER 1,369,856 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER 1,369,856 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,369,856(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES Not Applicable 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 23.5% 14 TYPE OF REPORTING PERSON CO (1) Solely in its capacity as sole general partner of Insurance GenPar MGP, L.P., which is the sole general partner of Insurance GenPar, L.P., which is the sole general partner of Insurance Partners, L.P. SCHEDULE 13D CUSIP No. 868224106 Page 6 of 24 Pages --------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Insurance Partners Offshore (Bermuda), L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS OO -- Contributions from Partners 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda 7 SOLE VOTING POWER NUMBER OF -0- SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER 754,978 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER 754,978 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 754,978 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES Not Applicable 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.0% 14 TYPE OF REPORTING PERSON PN SCHEDULE 13D CUSIP No. 868224106 Page 7 of 24Pages --------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Insurance GenPar (Bermuda), L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda 7 SOLE VOTING POWER NUMBER OF -0- SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER 754,978 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER 754,978 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 754,978(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES Not Applicable 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.0% 14 TYPE OF REPORTING PERSON PN (1) Solely in its capacity as sole general partner of Insurance Partners Offshore (Bermuda), L.P. SCHEDULE 13D CUSIP No. 868224106 Page 8 of 24 Pages --------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Insurance GenPar (Bermuda) MGP, L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda 7 SOLE VOTING POWER NUMBER OF -0- SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER 754,978 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER 754,978 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 754,978(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES Not Applicable 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.0% 14 TYPE OF REPORTING PERSON PN (1) Solely in its capacity as sole general partner of Insurance GenPar (Bermuda), L.P., which is the sole general partner of Insurance Partners Offshore (Bermuda), L.P. SCHEDULE 13D CUSIP No. 868224106 Page 9 of 24 Pages --------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Insurance GenPar (Bermuda) MGP, Ltd. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS Not Applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda 7 SOLE VOTING POWER NUMBER OF -0- SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER 754,978 9 SOLE DISPOSITIVE POWER -0- 10 SHARED DISPOSITIVE POWER 754,978 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 754,978(1) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES Not Applicable 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.0% 14 TYPE OF REPORTING PERSON CO (1) Solely in its capacity as sole general partner of Insurance GenPar (Bermuda) MGP, L.P., which is the sole general partner of Insurance GenPar (Bermuda), L.P., which is the sole general partner of Insurance Partners Offshore (Bermuda), L.P. CUSIP NO. 868224106 PAGE 10 OF 24 PAGES ITEM 1. SECURITY AND ISSUER The title of the class of equity securities of Superior National Insurance Group, Inc., a Delaware corporation (the "Company"), to which this Schedule 13D (this "Statement") relates is the Company's common stock, par value $.01 per share (the "Common Stock"). The address of the principal executive offices of the Company is 26601 Agoura Road, Calabasas, California 91302. ITEM 2. IDENTITY AND BACKGROUND (a) Pursuant to Rules 13d-1(f)(1)-(2) of Regulation 13D-G of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Statement is hereby filed by Insurance Partners, L.P., a Delaware limited partnership ("IP Delaware"), Insurance GenPar, L.P., a Delaware limited partnership ("Insurance GenPar"), Insurance GenPar MGP, L.P., a Delaware limited partnership ("IMGPLP"), Insurance GenPar MGP, Inc., a Delaware corporation ("IMGPI"), Insurance Partners Offshore (Bermuda), L.P., a Bermuda limited partnership ("IP Bermuda"), Insurance GenPar (Bermuda), L.P., a Bermuda limited partnership ("Insurance GenPar Bermuda"), Insurance GenPar (Bermuda) MGP, L.P., a Bermuda limited partnership ("IBMGPLP") and Insurance GenPar (Bermuda) MGP, Ltd., a Bermuda corporation ("IBMGP"). IP Delaware, Insurance GenPar, IMGPLP, IMGPI, IP Bermuda, Insurance GenPar Bermuda, IBMGPLP and IBMGPI are sometimes hereinafter collectively referred to as the "Reporting Persons." IP Delaware and IP Bermuda are sometimes hereinafter collectively referred to as "Insurance Partners." The Reporting Persons are making this single, joint filing because they may be deemed to constitute a "group" within the meaning of Section 13(d)(3) of the Exchange Act, although neither the fact of this filing nor anything contained herein shall be deemed an admission by the Reporting Persons that a group exists. (b)-(c) IP DELAWARE IP Delaware is a Delaware limited partnership, formed to invest in securities of insurance entities to be selected by its investment committee. The principal business address of IP Delaware, which also serves as its principal office, is 201 Main Street, Fort Worth, Texas 76102. Pursuant to Instruction C to Schedule 13D of the Exchange Act, information with respect to Insurance GenPar, the sole general partner of IP Delaware, is set forth below. INSURANCE GENPAR Insurance GenPar is a Delaware limited partnership, the principal business of which is serving as the sole general partner of IP Delaware. The principal business CUSIP NO. 868224106 PAGE 11 OF 24 PAGES address of Insurance GenPar, which also serves as its principal office, is 201 Main Street, Forth Worth, Texas 76102. Pursuant to Instruction C to Schedule 13D of the Exchange Act, information with respect to IMGPLP, the sole general partner of Insurance GenPar, is set forth below. IMGPLP IMGPLP is a Delaware limited partnership, the principal business of which is serving as the sole general partner of Insurance GenPar. The principal business address of IMGPLP, which also serves as its principal office, is 201 Main Street, Fort Worth, Texas 76102. Pursuant to Instruction C to Schedule 13D of the Exchange Act, information with respect to IMGPI, the sole general partner of IMGPLP, is set forth below. IMGPI IMGPI is a Delaware corporation, the principal business of which is serving as the sole general partner of IMGPLP. The principal business address of IMGPI, which also serves as its principal office, is 201 Main Street, Fort Worth, Texas 76102. Pursuant to Instruction C to Schedule 13D of the Exchange Act, the name, residence or business address, and present principal occupation or employment of each director, executive officer and controlling person of IMGPI are as follows: RESIDENCE OR PRINCIPAL OCCUPATION NAME BUSINESS ADDRESS OR EMPLOYMENT - ---- ---------------- -------------------- Robert A. Spass One Chase Manhattan Plaza Managing Partner of Insurance 44th Floor Partners Advisors, L.P. New York, NY 10005 Daniel L. Doctoroff 65 East 55th Street Managing Partner of Insurance New York, NY 10022 Partners Advisors, L.P. Steven B. Gruber 65 East 55th Street Managing Partner of Insurance New York, NY 10022 Partners Advisors, L.P. Insurance Partners Advisors, L.P. is a Delaware limited partnership, the principal business of which is performing investment banking services for IP Delaware, IP Bermuda and their portfolio companies. The principal business address of Insurance Partners Advisors, L.P. is One Chase Manhattan Plaza, 44th Floor, New York, New York 10005. CUSIP NO. 868224106 PAGE 12 OF 24 PAGES IP BERMUDA IP Bermuda is a Bermuda limited partnership, formed to invest in securities of insurance entities to be selected by its investment committee. The principal business address of IP Bermuda, which also serves as its principal office, is Cedar House, 41 Cedar Avenue, P.O. Box HM 1179, Hamilton, HM EX, Bermuda. Pursuant to Instruction C to Schedule 13D of the Exchange Act, information with respect to Insurance GenPar Bermuda, the sole general partner of IP Bermuda, is set forth below. INSURANCE GENPAR BERMUDA Insurance GenPar Bermuda is a Bermuda limited partnership, the principal business of which is serving as the general partner of IP Bermuda. The principal business address of Insurance GenPar Bermuda, which also serves as its principal office, is Cedar House, 41 Cedar Avenue, P.O. Box HM 1179, Hamilton, HM EX, Bermuda. Pursuant to Instruction C to Schedule 13D of the Exchange Act, information with respect to IBMGPLP, the sole general partner of Insurance GenPar Bermuda, is set forth below. IBMGPLP IBMGPLP is a Bermuda limited partnership, the principal business of which is serving as the sole general partner of Insurance GenPar Bermuda. The principal business address of IBMGPLP, which also serves as its principal office, is Cedar House, 41 Cedar Avenue, P.O. Box HM 1179, Hamilton, HM EX, Bermuda. Pursuant to Instruction C to Schedule 13D of the Exchange Act, information with respect to IBMGPI, the sole general partner of IBMGPLP, is set forth below. IBMGPI IBMGPI is a Bermuda corporation, the principal business of which is serving as the sole general partner of IBMGPLP. The principal business address of IBMGPI, which also serves as its principal office, is Cedar House, 41 Cedar Avenue, P.O. Box HM 1179, Hamilton, HM EX, Bermuda. Pursuant to Instruction C to Schedule 13D of the Exchange Act, the name, residence or business address, and present principal occupation or employment of each director, executive director and controlling person of IBMGPI are as follows: CUSIP NO. 868224106 PAGE 13 OF 24 PAGES RESIDENCE OR PRINCIPAL OCCUPATION NAME BUSINESS ADDRESS OR EMPLOYMENT - ---- ---------------- -------------------- Robert A. Spass See above See above Daniel L. Doctoroff See above See above Steven B. Gruber See above See above (d) None of the entities or persons identified in this Item 2 has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the entities or persons identified in this Item 2 has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) All of the natural persons identified in this Item 2 are citizens of the United States of America. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS As more fully described in Item 6 below, IP Delaware purchased an aggregate of 1,369,856 shares of Common Stock for an aggregate purchase price of $10,315,015 and IP Bermuda purchased an aggregate of 754,978 shares of Common Stock for an aggregate purchase price of $5,684,984. Both IP Delaware and IP Bermuda used contributions from their respective partners to fund such purchases. ITEM 4. PURPOSE OF TRANSACTION The Reporting Persons consummated the transactions described herein in order to acquire a significant interest in the Company and for investment purposes. The Reporting Persons do not intend to obtain control (as defined in Rule 12b-2 of the Exchange Act) of the Company. The Reporting Persons intend to review continuously their position in the Company. Depending upon future evaluations of the business prospects of the Company and upon other developments, including, but not limited to, general economic and business conditions and stock market conditions, each of the Reporting Persons may retain or from time to time dispose of all or a portion of its holdings, CUSIP NO. 868224106 PAGE 14 OF 24 PAGES subject to any applicable legal and contractual restrictions on its ability to do so, including, without limitation, the restrictions set forth in the Company's Certificate of Incorporation described in Item 6 below. In addition, the matters set forth in Item 6 below are incorporated in this Item 4 by reference as if fully set forth herein. Except as set forth in this Item 4, the Reporting Persons have no present plans or proposals that relate to or that would result in any of the actions specified in clauses (b) through (j) of Item 4 of Schedule 13D of the Exchange Act. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) IP DELAWARE IP Delaware may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 1,369,856 shares of Common Stock, which constitutes approximately 23.5% of the 5,837,144 shares of Common Stock deemed outstanding pursuant to Rule 13d(d)(l)(i) of the Exchange Act. INSURANCE GENPAR In its capacity as the sole general partner of IP Delaware, Insurance GenPar may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 1,369,856 shares of Common Stock, which constitutes approximately 23.5% of the 5,820,808 shares of Common Stock deemed outstanding pursuant to Rule 13d- 3(d)(1)(i) of the Exchange Act. IMGPLP In its capacity as the sole general partner of Insurance GenPar, which is the sole general partner of IP Delaware, IMGPLP may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 1,369,856 shares of Common Stock, which constitutes approximately 23.5% of the 5,837,144 shares of Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. IMGPI In its capacity as the sole general partner of IMGPLP, which is the sole general partner of Insurance GenPar, which is the sole general partner of IP Delaware, IMGPI may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 1,369,856 shares of the Stock, which constitutes approximately 23.5% of the 5,837,144 shares of Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. CUSIP NO. 868224106 PAGE 15 OF 24 PAGES IP BERMUDA IP Bermuda may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 754,978 shares of Common Stock, which constitutes approximately 13.0% of the 5,837,144 shares of Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. INSURANCE GENPAR BERMUDA In its capacity as the sole general partner of IP Bermuda, Insurance GenPar Bermuda may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 754,978 shares of Common Stock, which constitutes approximately 13.0% of the 5,837,144 shares of Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. IBMGPLP In its capacity as the sole general partner of Insurance GenPar Bermuda, which is the sole general partner of IP Bermuda, IBMGPLP may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 754,978 shares of Common Stock, which constitutes approximately 13.0% of the 5,837,144 shares of Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. IBMGPI In its capacity as the sole general partner of IBMGPLP, which is the sole general partner of Insurance GenPar Bermuda, which is the sole general partner of IP Bermuda, IBMGPI may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of 754,978 shares of Common Stock, which constitutes approximately 13.0% of the 5,837,144 shares of Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Exchange Act. (b) Prior to the closing of the transactions contemplated by the Stock Purchase Agreement described in Item 6 below, none of the Reporting Persons has any power to vote or to direct the vote or to dispose or to direct the disposition of any shares of Common Stock. (c) Except as set forth herein or in the Exhibits filed herewith, none of the persons named in response to paragraph (a) has effected any transactions in shares of Common Stock during the past 60 days. (d) Each of the Reporting Persons affirms that no person other than such Reporting Person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock owned by such Reporting Person. CUSIP NO. 868224106 PAGE 16 OF 24 PAGES (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE ISSUER Pursuant to the Stock Purchase Agreement, dated as of September 17, 1996, as amended and restated effective as of February 17, 1997 (the "Stock Purchase Agreement"), by and among the Company, IP Delaware, IP Bermuda and such other persons or entities who execute the form of Stock Subscription Agreement attached thereto as Exhibit A, the Company agreed to issue and sell to IP Delaware and IP Bermuda, and IP Delaware and IP Bermuda agreed to purchase from the Company, an aggregate of not more than $18,000,000 worth of shares of Common Stock. The Company and Insurance Partners agreed that such $18,000,000 would be reduced, and such $18,000,000 was reduced, by the amount of Common Stock purchased by other persons or entities executing Stock Subscription Agreements with the Company. As a result, IP Delaware agreed to purchase an aggregate of 1,369,856 shares of Common Stock for an aggregate purchase price of $10,315,016 and IP Bermuda agreed to purchase an aggregate of 754,978 shares of Common Stock for an aggregate purchase price of $5,684,984. The description of the Stock Purchase Agreement that follows is not, and does not purport to be, complete and is qualified in its entirety by reference to the Stock Purchase Agreement. The Stock Purchase Agreement is incorporated herein by reference to the Stock Purchase Agreement filed by the Company with the Securities and Exchange Commission (the "Commission") as Annex A of the Company's Proxy Statement, dated March 10, 1997, and filed with the Commission. As more fully described in Section 4.2 of the Stock Purchase Agreement, so long as the shares of Common Stock owned by Insurance Partners and its Associates (as hereinafter defined), directly or indirectly, represent 15% (the "15% Threshold") of the outstanding shares of the Company on a fully diluted basis (including, without limitation, the Company's 14.5% Senior Subordinated Voting Notes due April 1, 2002 (the "Voting Notes")), the Company and Insurance Partners agreed as follows: (a) Pursuant to Section 4.2(a) of the Stock Purchase Agreement, Insurance Partners agreed with respect to itself and any person or entity that controls, is under common control with, or is controlled by Insurance Partners or such persons or entities, and all individuals who are officers, directors or control persons of any such entities, including Insurance Partners, that are not signatories to the Stock Purchase Agreement (collectively, "Associates") that Insurance Partners and Insurance Partners's Associates will not, subject to certain exceptions set forth in Section 4.2 of the Stock Purchase Agreement, (a) acquire or offer or agree to acquire, directly or indirectly, by purchase or otherwise, any shares of Common Stock or voting securities of the Company (or direct or indirect rights or options to acquire any such securities), (b) enter, agree to enter into or propose to enter into, directly or indirectly, any merger or business combination involving the Company, (c) make, or in any way participate, directly or indirectly, in any "solicitation" of "proxies" (as such terms are used in the rules of the Securities and Exchange Commission) or consent to vote, or seek to advise or influence any person or entity with respect to the voting of, any voting securities of the Company or (d) form, join or in any way participate in a "group" (within the meaning of Section 13d-3 of the Exchange Act) with any persons not referred to in Section 4.2 of the Stock Purchase Agreement with CUSIP NO. 868224106 PAGE 17 OF 24 PAGES respect to any of the foregoing, PROVIDED, HOWEVER, that nothing in Section 4.2(a) of the Stock Purchase Agreement shall restrict Insurance Partners or any of its Associates from (A) acquiring shares of Common Stock or voting securities as a result of a stock split, stock dividend or similar recapitalization of the Company, (B) exercising the warrant issued to International Insurance Advisors, Inc. pursuant to the Note Purchase Agreement, dated as of March 31, 1992, among the Company and each of the several purchasers listed on Schedule I thereto and the warrant issued to CentreLine Reinsurance Limited pursuant to the Preferred Securities Purchase Agreement, dated as of June 30, 1994, among the Company, Superior National Capital Holding Corporation, Superior National Capital, L.P. and Centre Reinsurance Services (Bermuda) III Limited, (C) making, or in any way participating, directly or indirectly, in any "solicitation" of "proxies" (as such terms are defined in Rule 14a-1 under the Exchange Act) in connection with the election to the Board of Directors of directors nominated by Insurance Partners or any of its Associates (to the extent not otherwise inconsistent with the Stock Purchase Agreement) or (D) with respect to a tender or exchange offer or a merger or other business combination involving the Company (a "Business Combination"), which was initiated without the encouragement by or the participation of Insurance Partners or any of its Associates, making a tender or exchange offer or a proposal with respect to a Business Combination, or forming, joining or participating as a "group" to make such offer or proposal, in either case upon more favorable terms than those of the unsolicited tender or exchange offer or Business Combination; and PROVIDED FURTHER, that nothing contained in Section 4.2(a) of the Stock Purchase Agreement shall affect or impair the right of any director of the Company to (x) act as a member of the Board of Directors or any committee thereof or (y) take any action necessary or advisable to carry out his obligations and duties as a director of the Company. Notwithstanding anything to the contrary contained in the Stock Purchase Agreement, nothing in Section 4.2(a) of the Stock Purchase Agreement shall prohibit or restrict any Associate who is a director of the Company from acquiring, in one or more transactions, in his individual capacity, an aggregate of 25,000 shares of Common Stock so long as such acquisition does not violate any provision of the Company's charter as in effect from time to time. (b) The limitations set forth in Section 4.2(a) of the Stock Purchase Agreement and described in paragraph (a) above may be waived by the affirmative vote of the nearest whole number representing 66 2/3% or more of (i) the directors of the Company, excluding from the total number of directors voting, those who are Associates of Insurance Partners and those who are employees of the Company or (ii) the shares of the Company, not including in such total number of shares voting, those beneficially owned by those executive officers of the Company subject to the reporting requirements of Section 16 of the Exchange Act and those owned by Insurance Partners and its Associates. In addition, any material business relationship between the Company and Insurance Partners or any Associate of Insurance Partners must be approved in the manner described in the preceding sentence. CUSIP NO. 868224106 PAGE 18 OF 24 PAGES (c) Other than with respect to the election of directors of the Company, with respect to any vote of the stockholders of the Company on a particular matter, if the aggregate number of all shares that are voted in like manner by Insurance Partners and its Associates are greater than 35% of the total number of shares voted, then those votes that exceed such 35% threshold shall be voted in the same proportion as the other shareholders voted their shares with respect to such matter. The Company agreed that during the term of the Stock Purchase Agreement, the Board of Directors of the Company (the "Board of Directors") shall nominate one individual (the "IP Designee") designated by Insurance Partners (provided that such individual is reasonably acceptable to the Board of Directors) for election as a director of the Company at each annual meeting of the shareholders, PROVIDED that, subject to the 15% Threshold, as more fully described in Section 4.2(e) of the Stock Purchase Agreement, Insurance Partners agreed that Insurance Partners and its Associates may not elect a total or more than five persons (or the highest number that is less than a majority of the Board of Directors, as the case may be), including the IP Designee, who are Associates of Insurance Partners to be directors of the Company. In addition, subject to the 15% Threshold, Insurance Partners agreed not to transfer, assign, sell or otherwise dispose of (each, a "Transfer") any of its shares of Common Stock, except for Transfers made in accordance with Section 4.3 of the Stock Purchase Agreement. Pursuant to Section 4.3 of the Stock Purchase Agreement, Insurance Partners may at any time Transfer any or all of its shares of Common Stock (i) to any Associate of Insurance Partners, if such Associate executes and delivers to the Company, prior to any such Transfer, an instrument in form and substance reasonably satisfactory to the Company pursuant to which such Associate agrees to be bound by the provisions of Sections 4.2 and 4.3 of the Stock Purchase Agreement, (ii) pursuant to Rule 144 under the Securities Act of 1933, as amended (the "Securities Act") or any successor such rule, (iii) pursuant to a tender offer or exchange offer made by the Company or any "Affiliate" (as such term is defined in Rule 12b-2 of the Exchange Act) of the Company, (iv) pursuant to a tender offer or exchange offer initiated by any person or "group" (within the meaning of Section 13d-3 of the Exchange Act) other than Insurance Partners or any Associate thereof or a Business Combination, which is approved or recommended by the Board of Directors of the Company or with respect to which the Board of Directors of the Company has announced its intention to remain neutral, (v) so long as the shares of Common Stock to be transferred represent, in the aggregate, not greater than 10% of the outstanding Common Stock, in a transaction or series of transactions exempt from the registration and prospectus delivery requirements of the Securities Act, (vi) by the Transfer of greater than 10% of the outstanding shares of Common Stock in a transaction or series of transactions exempt from the registration and prospectus delivery requirements of the Securities Act to (x) one purchaser, (y) one purchaser and its Affiliates or (z) a "group" of purchasers, if such purchaser or purchasers of CUSIP NO. 868224106 PAGE 19 OF 24 PAGES Common Stock in any such transaction or series of transactions execute and deliver to the Company prior to any such purchaser or purchases an instrument in form satisfactory to the Company pursuant to which such purchaser or purchasers agree to be bound by the provisions of Sections 4.2 and 4.3 of the Stock Purchase Agreement (treating such purchaser or purchasers as an "Associate" for purposes of such Sections 4.2 and 4.3) or (vii) pursuant to a registration statement filed under the Securities Act pursuant to the Registration Rights Agreement (as hereinafter defined) or otherwise. In addition, the Transfer by Insurance Partners of its shares of Common Stock is also restricted by the Company's Certificate of Incorporation, which restricts, until three years after the closing date of the consummation of the transactions contemplated by the Stock Purchase Agreement, any direct or indirect transfer of "stock" (which term includes the Common Stock and any interest in the Company that would be treated as stock under Section 382 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder (collectively, "Section 382")) of the Company if the effect would be to increase the ownership of stock by any person who during the preceding three-year period owned 4.90% of more of the Company's stock, would otherwise increase the percentage of stock owned by a "5 percent shareholder" (as defined in Section 382, substituting "4.90 percent" for "5 percent") or otherwise would cause an "ownership change" of the Company within the meaning of Section 382. Insurance Partners also agreed that Robert A. Spass will abstain from the votes of the investment committees of each of IP Delaware and IP Bermuda with respect to their investment in the Company. Mr. Spass is the sole stockholder of the sole general partner of International Insurance Investors, L.P. ("III"), which owns all of the issued and outstanding Voting Notes. The Voting Notes may be voted in the election of directors of the Company, the removal of such directors, votes on amending such right to vote and changes in the authorized number of directors. On the date hereof, the number of votes attached to the Voting Notes, and held by III by virtue of its ownership of the Voting Notes, is equivalent to 1,566,465 shares of Common Stock. In connection with the Stock Purchase Agreement, the Company, IP Delaware and IP Bermuda entered into the Registration Rights Agreement, dated as of April 11, 1997 (the "Registration Rights Agreement"). The description of the Registration Rights Agreement that follows is not, and does not purport to be, complete and is qualified in its entirety by reference to the Registration Rights Agreement, a copy of which is attached hereto as Exhibit 1. Pursuant to the Registration Rights Agreement, Insurance Partners and its affiliates (as defined in Rule 12b-2 of the Exchange Act) to which shares of Common Stock are transferred have the right, subject to certain limitations set forth in the Registration Rights Agreement, to request the Company at any time to register under the Securities Act, at the Company's expense, all or part of the shares of Common Stock owned by Insurance Partners and its affiliates (a "Demand Registration"). The Company agreed to pay such expenses in connection with three Demand Registrations, PROVIDED that such number of Demand Registrations may be reduced if the certain conditions set forth in Section 3(d) of the Registration Rights Agreement are satisfied. IP Delaware and IP Bermuda also have certain piggyback registration rights in connection with registrations by the Company under the Securities Act. CUSIP NO. 868224106 PAGE 20 OF 24 PAGES In connection with the Stock Purchase Agreement, the Company, IP Delaware, IP Bermuda, International Insurance Advisors, Inc. ("IIA"), International Insurance Investors, L.P. ("III") (including its general partner and those limited partners that are signatories to the Letter Agreement), certain individuals listed on Schedule 2 thereto (the "Management Warrantholders") and Centreline Reinsurance Limited ("Centreline"), entered into a letter agreement (the "Letter Agreement"), dated as of November 25, 1996. The description of the Letter Agreement that follows is not, and does not purport to be, complete and is qualified in its entirety by reference to the Letter Agreement, a copy of which is attached hereto as Exhibit 2. Insofar as the Letter Agreement specifically relates to Insurance Partners, the Letter Agreement clarifies the relationship between the registration rights of IP Bermuda and IP Delaware under the Registration Rights Agreement and the registration rights of IIA, III, the Management Warrantholders and Centreline (collectively, the "Warrantholders") under their respective warrants. Specifically, the Letter Agreement provides that in the event of a demand registration by either the Warrantholders or Insurance Partners, the other party may participate in such registration, pro rata based on the number of shares proposed to be registered. The letter agreement also provides that in the event the Company proposes to register in an underwritten offering any shares of its Common Stock, then the number of shares of Common Stock that are entitled to be included in such offering shall be allocated (i) first, to the Company for shares of Common Stock being sold for its own account, (ii) second, among requesting Warrantholders and Insurance Partners, pro rata based on the number of shares requested to be included in such offering and (iii) third, to any other requesting shareholder. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Incorporated by reference to Annex Stock Purchase Agreement, dated as A of the Company's Proxy Statement, of September 17, 1996, as amended dated March 10, 1997, filed with and restated effective February 17, the Commission 1997 by and among Superior National Insurance Group, Inc., Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P. and such other persons or entities who execute the form of Stock Subscription Agreement attached thereto as Exhibit A. Exhibit 1: Registration Rights Agreement, dated as of April 11, 1997, among the Superior National Insurance Group, Inc., Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda), L.P. Exhibit 2: Letter Agreement, dated as of November 25, 1996 among Superior National Insurance Group, Inc. (the "Company"), Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P. and each of the several holders of warrants of the Company signatory thereto. CUSIP NO. 868224106 Page 21 of 24 Pages SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 21, 1997 INSURANCE PARTNERS, L.P., a Delaware limited partnership By: Insurance GenPar, L.P., a Delaware limited partnership, its General Partner By: Insurance GenPar MGP, L.P., a Delaware limited partnership, its General Partner By: Insurance GenPar MGP, Inc., a Delaware corporation, its General Partner By: /S/ DANIEL L. DOCTOROFF --------------------------------------- Name: Daniel L. Doctoroff Title: Vice President INSURANCE GENPAR, L.P., a Delaware limited partnership By: Insurance GenPar MGP, L.P., a Delaware limited partnership, its General Partner By: Insurance GenPar MGP, Inc., a Delaware corporation, its General Partner By: /S/ DANIEL L. DOCTOROFF --------------------------------------- Name: Daniel L. Doctoroff Title: Vice President CUSIP NO. 868224106 Page 22 of 24 Pages INSURANCE GENPAR MGP, L.P., a Delaware limited partnership By: Insurance GenPar MGP, Inc., a Delaware corporation, its General Partner By: /S/ DANIEL L. DOCTOROFF --------------------------------------- Name: Daniel L. Doctoroff Title: Vice President INSURANCE GENPAR MGP, INC., a Delaware corporation By: /S/ DANIEL L. DOCTOROFF --------------------------------------- Name: Daniel L. Doctoroff Title: Vice President INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P., a Bermuda limited partnership By: Insurance GenPar (Bermuda), L.P., a Bermuda limited partnership, its General Partner By: Insurance GenPar (Bermuda) MGP, L.P., a Bermuda limited partnership, its General Partner By: Insurance GenPar (Bermuda) MGP, Ltd., a Bermuda corporation, its General Partner By: /S/ DANIEL L. DOCTOROFF --------------------------------------- Name: Daniel L. Doctoroff Title: Vice President CUSIP NO. 868224106 Page 23 of 24 Pages INSURANCE GENPAR (BERMUDA), L.P., a Bermuda limited partnership By: Insurance GenPar (Bermuda) MGP, L.P., a Bermuda limited partnership, its General Partner By: Insurance GenPar (Bermuda) MGP, Ltd., a Bermuda corporation, its General Partner By: /S/ DANIEL L. DOCTOROFF --------------------------------------- Name: Daniel L. Doctoroff Title: Vice President INSURANCE GENPAR (BERMUDA) MGP, L.P., a Bermuda corporation By: Insurance GenPar (Bermuda) MGP, Ltd., a Bermuda corporation, its General Partner By: /S/ DANIEL L. DOCTOROFF --------------------------------------- Name: Daniel L. Doctoroff Title: Vice President INSURANCE GENPAR (BERMUDA) MGP, LTD., a Bermuda corporation By: /S/ DANIEL L. DOCTOROFF --------------------------------------- Name: Daniel L. Doctoroff Title: Vice President CUSIP NO. 868224106 Page 24 of 24 Pages EXHIBIT INDEX Number Document Page on which - ------ -------- Exhibit Appears --------------- Stock Purchase Agreement, dated as of Incorporated by September 17, 1996, as amended and reference to Annex A restated effective February 17, 1997 by of the Company's and among Superior National Insurance Proxy Statement, Group, Inc., Insurance Partners, L.P., dated March 10, Insurance Partners Offshore (Bermuda), 1996, filed with the L.P. and such other persons or entities Commission who execute the form of Stock Subscription Agreement attached thereto as Exhibit A Registration Rights Agreement, dated as of 1 April 11, 1997, among Superior National Insurance Group, Inc., Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda), L.P. 25 Letter Agreement, dated as of November 25, 2 1996 among Superior National Insurance Group, Inc. (the "Company"), Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P. and each of the several holders of warrants of the Company signatory thereto. 49 EX-1 2 REGISTRATION RIGHTS AGREEMENT ================================================================================ REGISTRATION RIGHTS AGREEMENT among SUPERIOR NATIONAL INSURANCE GROUP, INC., INSURANCE PARTNERS, L.P. and INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P. --------------------------- Dated: April 11, 1997 --------------------------- ================================================================================ TABLE OF CONTENTS PAGE 1. Definitions......................................................1 2. General; Securities Subject to this Agreement....................4 (a) Grant of Rights............................................4 (b) Registrable Securities.....................................4 (c) Holders of Registrable Securities..........................4 3. Demand Registration..............................................5 (a) Request for Demand Registration............................5 (b) Limitation on Demand Registrations.........................5 (c) Effective Demand Registration..............................6 (d) Expenses...................................................6 (e) Underwriting Procedures....................................6 (f) Selection of Underwriters..................................7 4. Incidental or "Piggy-Back" Registration..........................7 (a) Request for Incidental Registration........................7 (b) Reduction in Registrable Securities to be Registered.......8 (c) Expenses...................................................9 5. Holdback Agreements..............................................9 (a) Restrictions on Public Sale by Designated Holders..........9 (b) Restrictions on Public Sale by the Company.................9 6. Registration Procedures.........................................10 (a) Obligations of the Company................................10 (b) Seller Information........................................12 (c) Preparation; Reasonable Investigation.....................12 (d) Notice to Discontinue.....................................13 7. Indemnification; Contribution...................................13 (a) Indemnification by the Company............................13 i PAGE (b) Indemnification by Designated Holders.....................14 (c) Conduct of Indemnification Proceedings....................15 (d) Other Indemnification.....................................16 (e) Contribution..............................................16 (f) Insurance.................................................16 8. Rule 144........................................................17 9. Miscellaneous...................................................17 (a) Recapitalizations, Exchanges, etc.........................17 (b) No Inconsistent Agreements................................17 (c) Remedies..................................................18 (d) Amendments and Waivers....................................18 (e) Notices...................................................18 (f) Successors and Assigns; Third Party Beneficiaries.........19 (g) Counterparts..............................................20 (h) Headings..................................................20 (I) GOVERNING LAW.............................................20 (j) Severability..............................................20 (k) Entire Agreement..........................................20 (l) Further Assurances........................................20 ii REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated April 11, 1997 (this "Agreement"), among Superior National Insurance Group, Inc., a California corporation (the "Company"), Insurance Partners, L.P., a Delaware limited partnership ("IP"), and Insurance Partners Offshore (Bermuda), L.P., a Bermuda limited partnership ("IP Bermuda" and, together with IP, "Insurance Partners"). WHEREAS, pursuant to the Amended and Restated Stock Purchase Agreement, dated as of September 17, 1996, as amended and restated effective as of February 17, 1997 (the "Stock Purchase Agreement"), by and among the Company, IP, IP Bermuda and such other persons or entities that execute the form of subscription agreement attached thereto as Exhibit A, pursuant to which the Company has agreed to, among other things, issue and sell to (a) IP, and IP has agreed to purchase from the Company, an aggregate of 1,369,856 shares of Common Stock and (b) IP Bermuda, and IP Bermuda has agreed to purchase from the Company, an aggregate of 754,978 shares of Common Stock; and WHEREAS, in order to induce each of IP and IP Bermuda to purchase its shares of Common Stock (in the aggregate, the "Shares"), the Company has agreed to grant registration rights with respect to the Registrable Securities (as hereinafter defined) as set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows: 1. DEFINITIONS. As used in this Agreement the following terms have the meanings indicated: "AFFILIATE" shall mean any Person who is an "affiliate" as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. "APPROVED UNDERWRITER" has the meaning set forth in Section 3(f). "CENTRELINE" means CentreLine Reinsured Limited, a Bermuda corporation. "CENTRELINE WARRANT" means the Common Stock Purchase Warrant, dated as of June 30, 1994, issued by the Company to CentreLine pursuant to the Preferred Securities Purchase Agreement, dated as of June 30, 1994, by and 2 between the Company, Superior National Capital Holding Corporation, Superior National Capital, L.P. and Centre Reinsurance Services (Bermuda) III Limited. "COMMISSION" means the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act. "COMMON STOCK" means the Common Stock, no par value per share, of the Company or any other equity securities of the Company into which such securities are converted, reclassified, reconstituted or exchanged. "COMPANY" has the meaning assigned to such term in the recital to this Agreement. "COMPANY INDEMNIFIED PARTY" has the meaning set forth in Section 7(b). "DEMAND REGISTRATION" has the meaning set forth in Section 3(a). "DESIGNATED HOLDER" means each of the Insurance Partners Stockholders and any transferee thereof to whom Registrable Securities have been transferred in accordance with Section 9(f). "DESIGNATED INDEMNIFIED PARTY" has the meaning set forth in Section 7(a). "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "IIA" means International Insurance Advisors, Inc., a Delaware corporation. "III" means International Insurance Investors, L.P., a Bermuda limited partnership. "INCIDENTAL REGISTRATION" has the meaning set forth in Section 4(a). "INDEMNIFIED PARTY" has the meaning set forth in Section 7(c). "INITIATING HOLDER" has the meaning set forth in Section 3(a). "INSURANCE PARTNERS" has the meaning assigned to such term in the recital to this Agreement. 3 "INSURANCE PARTNERS STOCKHOLDERS" means each of IP, IP Bermuda and any Affiliate thereof to whom or which Registrable Securities are transferred. "IP" has the meaning assigned to such term in the recital to this Agreement. "IP BERMUDA" has the meaning assigned to such term in the recital to this Agreement. "1992 COMMON STOCK PURCHASE WARRANTS" means each of the Common Stock Purchase Warrants, dated as of March 31, 1992, issued by the Company pursuant to the Note Purchase Agreement, dated as of March 31, 1992, among the Company and the purchasers listed on Schedule I thereto. "OTHER RIGHTHOLDERS" has the meaning set forth in Section 3(a). "PERSON" means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company, government (or an agency or political subdivision thereof) or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "REGISTRABLE SECURITIES" means each of the following: (a) any and all Shares owned by the Designated Holders and (b) any shares of Common Stock issued or issuable to any of the Designated Holders with respect to the Shares by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise and shares of Common Stock issuable upon conversion, exercise or exchange thereof. "REGISTRATION EXPENSES" means all expenses arising from or incident to the Company's performance of, or compliance with, this Agreement, including, without limitation, all registration, filing and listing fees; all fees and expenses of complying with securities or "blue sky" laws (including reasonable fees and disbursements of counsel in connection with "blue sky" qualifications of Registrable Securities); all printing, messenger and delivery expenses; the fees and disbursements of counsel for the Company and its independent public accountants; the fees and disbursements of one firm of counsel (other than in-house counsel) retained by the holders of Registrable Securities being registered; the expenses of any special audits required by or incident to such performance and compliance; and any liability insurance or other premiums for insurance obtained in connection with any registration pursuant to the terms of this Agreement; PROVIDED, HOWEVER, that Registration Expenses shall not include underwriting discounts and commissions and transfer taxes, if any; and PROVIDED FURTHER, that in any case where Registration 4 Expenses are borne by the holders pursuant to Section 3(d), Registration Expenses shall not include general overhead expenses of the Company or other expenses for the preparation of financial statements or other data normally prepared by the Company in the ordinary course of its business. "REGISTRATION STATEMENT" means a registration statement filed pursuant to the Securities Act. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "SHARES" has the meaning assigned to such term in the recital to this Agreement. "STOCK PURCHASE AGREEMENT" has the meaning assigned to such term in the recital to this Agreement. "SUBSIDIARY" has the meaning set forth in Section 6(c). 2. GENERAL; SECURITIES SUBJECT TO THIS AGREEMENT. (a) GRANT OF RIGHTS. The Company hereby grants registration rights to the Insurance Partners Stockholders upon the terms and conditions set forth in this Agreement. (b) REGISTRABLE SECURITIES. For the purposes of this Agreement, Registrable Securities will cease to be Registrable Securities when (i) a Registration Statement covering such Registrable Securities has been declared effective under the Securities Act by the Commission and such Registrable Securities have been disposed of pursuant to such effective Registration Statement, (ii) the entire amount of Registrable Securities proposed to be sold in a single sale by a Designated Holder, in the opinion of counsel satisfactory to the Company and the Designated Holder, each in their reasonable judgment, may be distributed to the public without any limitation as to volume pursuant to Rule 144 (or any successor provision then in effect) under the Securities Act and the Designated Holder is not then an Affiliate of the Company, or (iii) the Registrable Securities are proposed to be sold or distributed by a Person not entitled to the registration rights granted by this Agreement. (c) HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to be a holder of Registrable Securities whenever such Person owns of record Registrable Securities, or holds an option to purchase, or a security convertible into or exercisable or exchangeable for, Registrable Securities whether or not such acquisition or conversion has actually been effected and disregarding any legal restrictions upon the exercise of such rights. If the Company receives conflicting 5 instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company may act upon the basis of the instructions, notice or election received from the registered owner of such Registrable Securities. Registrable Securities issuable upon exercise of an option or upon conversion of another security shall be deemed outstanding for the purposes of this Agreement. 3. DEMAND REGISTRATION. (a) REQUEST FOR DEMAND REGISTRATION. At any time any of the Insurance Partners Stockholders (the "Initiating Holders") shall be entitled to request in writing that the Company use its best efforts to effect the registration under the Securities Act, and under the securities or "blue sky" laws of any jurisdiction designated by such Initiating Holders, of all or part of such Initiating Holders' Registrable Securities in accordance with this Section 3 (a "Demand Registration"). Any such request for a Demand Registration shall specify the amount of Registrable Securities proposed to be sold and the intended method of disposition thereof. Upon receiving a request for a Demand Registration, the Company will promptly, but in no event more than 10 days after the receipt from the Initiating Holders of a request for a Demand Registration, give written notice of such Demand Registration to all of the Insurance Partners Stockholders (other than the Initiating Holders) and all holders of (x) the 1992 Common Stock Purchase Warrants and (y) the CentreLine Warrant (the "Other Rightholders"), and thereupon will, as provided in Section 6, use its best efforts to effect the registration under the Securities Act of (i) the Registrable Securities which the Company has been so requested by the Initiating Holders to register and (ii) all other shares of Common Stock which the Company has been requested in writing to register by such Insurance Partners Stockholders and Other Rightholders (which requests shall specify the number of shares of Common Stock proposed to be sold and the intended method of disposition thereof and shall be given to the Company within 30 days after the giving of such written notice of the Demand Registration by the Company). (b) LIMITATION ON DEMAND REGISTRATIONS. Notwithstanding anything to the contrary set forth in Section 3(a), the Company shall not be obligated to file a Registration Statement with respect to a Demand Registration upon a request by the Initiating Holders under Section 3(a) if (i) the Company has any other Registration Statement on file but not yet declared effective, (ii) the Company has filed any other Registration Statement that has an effective date within a period of 180 days prior to the filing of the Registration Statement with respect to the Demand Registration, (iii) Registrable Securities having an anticipated aggregate net offering price of less than $7,500,000 are to be registered in such Demand Registration or (iv) the Company has paid the Registration Expenses for the maximum number of Demand Registrations for which it is obligated to pay under Section 3(d). 6 (c) EFFECTIVE DEMAND REGISTRATION. A registration shall not constitute a Demand Registration until it has become effective and remains continuously effective for the lesser of (i) the period during which all Registrable Securities registered in the Demand Registration are sold and (ii) 180 days; PROVIDED, HOWEVER, that a registration shall not constitute a Demand Registration if (x) after such Demand Registration has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Initiating Holders and such interference is not thereafter eliminated or (y) the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such Demand Registration are not satisfied or waived, other than by reason of a failure by the Initiating Holders. (d) EXPENSES. The Company will pay all Registration Expenses in connection with three Demand Registrations under this Section 3 that either become effective under the Securities Act or are withdrawn prior to the effective date thereof; PROVIDED, HOWEVER, that the Company shall be obligated to pay all Registration Expenses in connection with only two Demand Registrations under this Section 3 that either become effective under the Securities Act or are withdrawn prior to the effective date thereof if (i) there shall have been an Incidental Registration pursuant to Section 4(a) and (ii) the Company shall have registered in such Incidental Registration Registrable Securities held by the Insurance Partners Stockholders having an anticipated aggregate net offering price of not less than $5,000,000; PROVIDED FURTHER, that any such withdrawal as the result of the actions of any Person or Persons other than the Initiating Holders, or based upon material adverse information relating to the Company that is different from the information known by or available (upon request from the Company or otherwise) to the Initiating Holders at the time of their request for a Demand Registration under this Section 3, shall not diminish the number of registrations in connection with which the Company agrees to pay Registration Expenses; and PROVIDED FURTHER, that if such withdrawal is the result of the actions of the Initiating Holders, then such Initiating Holders may in their sole and unlimited discretion elect to bear the Registration Expenses of such Demand Registration, in which case such registration shall not be counted as a Demand Registration pursuant to this Section 3. In the event that the Initiating Holders elect to bear the Registration Expenses (and underwriting discounts and commissions and transfer taxes, if any) in connection with any Demand Registration requested under this Section 3, such Registration Expenses shall be apportioned among the holders whose shares of Common Stock are then being registered, on the basis of the respective amounts (by number of shares) of Common Stock then being registered by them or on their behalf. (e) UNDERWRITING PROCEDURES. If the Initiating Holders so elect, the offering of Registrable Securities pursuant to a Demand Registration shall be in the form of a firm commitment underwritten offering and the managing 7 underwriter or underwriters selected for such offering shall be the Approved Underwriter (as hereinafter defined) selected in accordance with Section 3(f). In connection with any Demand Registration under this Section 3 involving an underwriting, none of the Registrable Securities held by any of the Insurance Partners Stockholders (other than the Initiating Holders) or shares of Common Stock held by any Other Rightholders making a request for inclusion thereof pursuant to Section 3(a) shall be included in such underwriting unless such Insurance Partners Stockholders or Other Rightholders, as the case may be, accept the terms of the underwriting as agreed upon by the Company, the Initiating Holders and the Approved Underwriter, and then only in such quantity as will not, in the opinion of the Approved Underwriter, jeopardize the success of such offering. If the Approved Underwriter advises the Company in writing that in its opinion the aggregate amount of Common Stock requested to be included in such offering is sufficiently large to have a material adverse effect on the success of such offering, then the Company shall include in such registration only the aggregate amount of Common Stock that in the opinion of the Approved Underwriter may be sold without any such material adverse effect and shall reduce, as to the Initiating Holders, the Insurance Partners Stockholders (other than the Initiating Holders) and the Other Rightholders as a group, the amount of Common Stock to be included in such registration, pro rata within such group based on the number of Registrable Securities and other shares of Common Stock included in the request for registration pursuant to Section 3(a). (f) SELECTION OF UNDERWRITERS. If any Demand Registration of Registrable Securities is in the form of an underwritten offering, the Initiating Holders holding a majority of the Registrable Securities held by all such Initiating Holders shall select and obtain an investment banking firm of national reputation to act as the managing underwriter of the offering (the "Approved Underwriter"); PROVIDED, HOWEVER, that the Approved Underwriter shall, in any case, be acceptable to the Company in its reasonable judgment. 4. INCIDENTAL OR "PIGGY-BACK" REGISTRATION. (a) REQUEST FOR INCIDENTAL REGISTRATION. If the Company, at any time or from time to time, proposes to register any of its shares of Common Stock for its own account under the Securities Act (other than a registration of shares of Common Stock solely in connection with any plan for the acquisition of shares of Common Stock by employees of the Company or any dividend reinvestment plan, and other than a registration of shares of Common Stock, the Registration Statement pertaining to which does not permit secondary sales or include substantially the same information as would be required to be included in a Registration Statement covering the sale of Registrable Securities), then it will at each such time give written notice (given at least 30 days prior to the proposed filing date) describing the proposed registration and distribution to each of the Designated Holders of its intention to do so and, upon the written request of each of the Designated Holders, made within 30 days 8 after the receipt of any such notice (which request shall specify the amount of Registrable Securities proposed to be sold by such Designated Holder and the intended method of disposition thereof), the Company will, as provided in Section 6, use its best efforts to effect the registration under the Securities Act of all of the Registrable Securities that the Company has been so requested to register by the Designated Holders, to the extent required to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities to be registered (each, an "Incidental Registration"); PROVIDED, HOWEVER, that if, at any time after giving written notice of its intention to register any of its shares of Common Stock and prior to the effective date of the Registration Statement filed in connection with such Incidental Registration, the Company shall determine for any reason not to register such shares of Common Stock, the Company may, at its election, give written notice of such determination to each of the Designated Holders and, thereupon, shall be relieved from its obligation to register any Registrable Securities in connection with such Incidental Registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any Insurance Partners Stockholder to request that such registration be effected as a Demand Registration under Section 3. In connection with any Incidental Registration under this Section 4(a) involving an underwriter, or a distribution with the assistance of a selling agent, the right of any Designated Holder to participate in such Incidental Registration shall be conditioned upon such Designated Holder's participation in such underwriting or distribution. (b) REDUCTION IN REGISTRABLE SECURITIES TO BE REGISTERED. Notwithstanding anything to the contrary set forth in Section 4(a), if a proposed Incidental Registration is for a registered public offering involving an underwriting and the representative of the underwriters advises the Company in writing that the registration of all or part of the shares of Common Stock to be underwritten in such Incidental Registration would materially adversely effect such offering, then the Company shall so advise the Designated Holders and any other holders of shares of Common Stock requesting registration in such Incidental Registration, and the number of shares of Common Stock that are entitled to be included in the Incidental Registration shall be allocated (i) first, to the Company for shares of Common Stock being sold for its own account, (ii) second, among the Designated Holders and any other holders of shares of Common Stock entitled to "incidental" registration rights and requesting inclusion of shares of Common Stock in such Incidental Registration, pro rata on the basis of the number of shares of Common Stock requested to be included in such Incidental Registration, and (iii) third, any other shares of Common Stock requested to be included in such Incidental Registration; PROVIDED, HOWEVER, that if any Insurance Partners Stockholder or Other Rightholder does not request inclusion of the maximum number of shares of Common Stock allocated to it pursuant to the foregoing procedure, then the remaining portion of its allocation shall be reallocated among those Insurance Partners Stockholders and Other Rightholders whose allocations were not satisfied on the basis of the number of shares of Common 9 Stock requested to be included in such Incidental Registration, and this procedure shall be repeated until all of the shares of Common Stock that may be included in the registration on behalf of the Insurance Partners Stockholders and the Other Rightholders have been so allocated. The Company shall not limit the number of shares of Common Stock to be included in an Incidental Registration pursuant to this Agreement in order to include shares held by stockholders with no registration rights or to include any shares of stock issued to employees, officers, directors or consultants pursuant to any stock option plan, or in order to include in such registration securities registered for the Company's own account. If any shares of Common Stock are withdrawn from the Incidental Registration or if the number of shares of Common Stock to be included in such Incidental Registration was previously reduced as a result of marketing factors, then the Company shall then offer to all Persons who have retained the right to include Common Stock in the Incidental Registration the right to include additional shares of Common Stock in the registration in an aggregate amount equal to the number of shares of Common Stock so withdrawn, with such shares of Common Stock to be allocated among the Persons requesting additional inclusion pro rata in accordance with the terms of this Section 4(b). (c) EXPENSES. The Company shall pay all Registration Expenses in connection with any Incidental Registration pursuant to this Section 4, whether or not such Incidental Registration becomes effective. No Incidental Registration under this Section 4 shall relieve the Company of its obligations to effect a Demand Registration upon request under Section 3(a). 5. HOLDBACK AGREEMENTS. (a) RESTRICTIONS ON PUBLIC SALE BY DESIGNATED HOLDERS. Each of the Designated Holders agrees not to effect any public sale or distribution of any Registrable Securities being registered or of any securities convertible into or exchangeable or exercisable for such Registrable Securities, including a sale pursuant to Rule 144 under the Securities Act, during the 90 day period beginning on the effective date of such Registration Statement (except as part of such registration), (i) in the case of a non-underwritten public offering, if and to the extent requested by the Company or (ii) in the case of an underwritten public offering, if and to the extent requested by the Approved Underwriter (in the event of a Demand Registration pursuant to Section 3) or the Company's underwriters (in the event of an Incidental Registration pursuant to Section 4(a)), as the case may be. (b) RESTRICTIONS ON PUBLIC SALE BY THE COMPANY. The Company agrees not to effect any public sale or distribution of any of its securities, or any securities convertible into or exchangeable or exercisable for such securities (except pursuant to registrations on Form S-4 or Form S-8 or any successor thereto), 10 during the period beginning on the effective date of any Registration Statement in which the Designated Holders of Registrable Securities are participating and ending on the earlier of (i) the date on which all Registrable Securities registered on such Registration Statement are sold and (ii) 180 days after the effective date of such Registration Statement. 6. REGISTRATION PROCEDURES. (a) OBLIGATIONS OF THE COMPANY. If and whenever the Company is requested to effect the registration of any Registrable Securities under the Securities Act as provided in Sections 3 and 4, then the Company will promptly use its best efforts to: (i) prepare and (in any event within 90 days after the end of the period within which requests for registration may be given to the Company) file with the Commission a Registration Statement with respect to such Registrable Securities and use its best efforts to cause such Registration Statement to become effective; (ii) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Registration Statement until such time as all of such securities have been disposed of in accordance with the intended methods of disposition thereof by the seller or sellers thereof set forth in such Registration Statement, but in no event for a period of more than six months (or, with respect to any Registration Statement covering Registrable Securities the distribution of which has been deferred pursuant to Section 4(c), nine months) after such Registration Statement becomes effective; (iii) as soon as reasonably possible, furnish to each seller of Registrable Securities, prior to filing a Registration Statement, such number of conformed copies of such Registration Statement and of each such amendment and supplement thereto (in each case including all exhibits, except that the Company shall not be obligated to furnish any seller of Registrable Securities with more than two copies of such exhibits), such number of copies of the prospectus contained in such Registration Statement (including each preliminary prospectus and any summary prospectus), in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; 11 (iv) register or qualify such Registrable Securities covered by such Registration Statement under such other securities or "blue sky" laws of such jurisdictions as each seller of Registrable Securities shall request, and do any and all other acts and things which may be necessary or advisable to enable such seller to consummate the disposition in such jurisdic tions of the Registrable Securities owned by such seller, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, or to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction; (v) cause the Registrable Securities covered by such Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the seller or sellers of Registrable Securities to consummate the disposition of such Registrable Securities; (vi) notify each seller of any Registrable Securities covered by such Registration Statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make statements therein not misleading in the light of the circumstances then existing, and prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (vii) advise each seller of Registrable Securities as to the time when such Registration Statement becomes effective and as to the threat of or the issuance by the Commission of any stop order suspending the effectiveness of such Registration Statement or the institution of any proceedings for that purpose, and use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible the removal thereof, if issued; (viii)comply with all applicable rules and regulations of the Commission, and make available to each seller of Registrable Securities, as soon as reasonably practicable, an earnings statement covering the period of 12 at least 12 months, but not more than 18 months, beginning with the first month after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (ix) list all the Registrable Securities on any securities exchange (or The Nasdaq Stock Market, Inc. or the over-the-counter market) on which similar securities are then listed, if such securities are not already so listed and such listing is then permitted under the rules of such exchange; (x) cooperate with each seller of Registrable Securities and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc.; and (xi) furnish to each seller a signed counterpart, addressed to the sellers, of (x) an opinion of counsel representing the Company for purposes of such registration, dated the effective date of such Registration Statement, and (y) a "comfort letter" signed by the independent public accountants of the Company who have certified the Company's financial statements included in such Registration Statement, in each case, covering substantially the same matters with respect to such Registration Statement (and the prospectus included therein) and, in the case of such accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities; PROVIDED, HOWEVER, that the Company shall not be obligated to furnish such accountants' letter except in connection with an underwritten offering. (b) SELLER INFORMATION. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding the distribution of such securities as the Company may from time to time reasonably request in writing and as shall be required by law in connection therewith. (c) PREPARATION; REASONABLE INVESTIGATION. In connection with the preparation and filing of each Registration Statement registering Registrable Securities under the Securities Act, the Company will give the holders of such Registrable Securities so registered and their underwriters, if any, and their respective counsel and financial advisors, the opportunity to participate in the preparation of such Registration Statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each 13 of them such access to its books and records (including the books and records of its Subsidiaries (as hereinafter defined)) and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act; PROVIDED, HOWEVER, that the Company shall not be obligated to give such opportunities and access to any holder of Registrable Securities holding less than 150,000 Registrable Securities other than the Initiating Holders, as a group, requesting a Demand Registration pursuant to Section 3(c). A "Subsidiary" means, with respect to the Company, a corporation or other entity of which 50% or more of the voting power of the outstanding voting securities or 50% or more of the outstanding equity interests is held, directly or indirectly, by the Company. (d) NOTICE TO DISCONTINUE. Each Designated Holder of Registrable Securities agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 6(a)(vi), such Designated Holder shall forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Designated Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 6(a)(vi) and, if so directed by the Company, such Designated Holder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Designated Holder's possession, of the prospectus covering such Registrable Securities that is current at the time of receipt of such notice. If the Company shall give any such notice, the Company shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement (including, without limitation, the period referred to in Section 6(a)(ii)) by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(a)(vi) to and including the date when the Designated Holder shall have received the copies of the supplemented or amended prospectus contemplated by and meeting the requirements of Section 6(a)(vi). 7. INDEMNIFICATION; CONTRIBUTION. (a) INDEMNIFICATION BY THE COMPANY. In the event of any registration of any Registrable Securities pursuant to the terms of Section 3 or Section 4, (i) the Company will indemnify and hold harmless, to the fullest extent permitted by law, each of the Designated Holders and their respective directors, officers, partners, trustees, employees, legal counsel, accountants, financial advisors and agents, and each other Person, if any, who controls (within the meaning of the Securities Act and the Exchange Act) such Designated Holder or any such directors, officers, partners, trustees, employees, legal counsel, accountants, financial advisors and agents (each of the foregoing, a "designated indemnified party") against any and 14 all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation), joint or several, to which such designated indemnified party may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings in respect thereof) arise out of or are based upon (x) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement under which such Registrable Securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, any notification or offering circular, or any amendment or supplement thereto or (y) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; and (ii) the Company will reimburse such designated indemnified party for any legal or any other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, liability or action; PROVIDED, HOWEVER, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability (or actions or proceedings in respect thereof) arises out of or is based upon (x) any untrue statement or alleged untrue statement of any material fact made in such Registration Statement, any such preliminary prospectus, final prospectus, summary prospectus, notification or offering circular, or any amendment or supplement thereto or (y) any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, in reliance upon and in conformity with written information concerning such Designated Holder and furnished to the Company through an instrument duly executed by such Designated Holder specifically stating that it is for use in the preparation thereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such designated indemnified party and shall survive the transfer of such securities by any Designated Holder. (b) INDEMNIFICATION BY DESIGNATED HOLDERS. The Company may require, as a condition to including any Registrable Securities in any Registration Statement filed pursuant to Section 3 or Section 4, that the Company shall have received an undertaking from each Designated Holder selling such Registrable Securities to indemnify and hold harmless the Company, its directors, officers, legal counsel, accountants and financial advisors and each other Person, if any, who controls (within the meaning of the Securities Act and the Exchange Act) the Company or any such directors, officers, legal counsel, accountants and financial advisors (each of the foregoing, a "Company indemnified party") against any losses, claims, damages, liabilities or expenses, joint or several, to which such Company indemnified party may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings in respect thereof) arise out of or are based upon any statement of a material fact or omission to state a material fact in such Registration Statement, any preliminary prospectus or final prospectus contained therein, any notification or offering circular, or any amendment or supplement thereto, if such statement or omission was made in 15 reliance upon and in conformity with written information concerning such Designated Holder and furnished to the Company through an instrument duly executed by such Designated Holder specifically stating that it is for use in the preparation of such Registration Statement, preliminary prospectus, final prospectus, summary prospectus, notification or offering circular, or amendment or supplement thereto. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Company indemnified party and shall survive the transfer of such securities by any Designated Holder. (c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt by any designated indemnified party or Company indemnified party (each, an "indemnified party") of notice of the commencement of any action, suit, proceeding or investigation or threatened thereof in writing for which the indemnified party intends to claim indemnification or contribution pursuant to this Agreement, such indemnified party will give written notice thereof to the indemnifying party; PROVIDED, HOWEVER, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Agreement, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. If notice of commencement of any such action is brought against an indemnified party, the indemnifying party may (and, upon request by the indemnified party, will), at its expense, participate in and assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; PROVIDED, HOWEVER, that in the event of any failure by the indemnifying party diligently to assume and conduct such defense, the indemnifying party will pay all costs and expenses (including legal fees and expenses) incurred by such indemnified party in connection with such claim or litigation. The indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be paid by the indemnified party unless (i) the indemnifying party agrees to pay the same, (ii) the indemnifying party fails to assume the defense of such action with counsel satisfactory to the indemnified party in its reasonable judgment or (iii) the named parties to any such action (including any impleaded parties) have been advised by such counsel in writing that either (x) representation of such indemnified party and the indemnifying party by the same counsel would be inappropriate under applicable standards of professional conduct or (y) there may be one or more legal defenses available to the indemnified party which are different from or additional to those available to the indemnifying party. In either of such cases, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party. No indemnifying party, in the defense of any such claim or litigation, shall, except with the written consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. 16 (d) OTHER INDEMNIFICATION. Indemnification similar to that specified in this Section 7 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any registration or other qualification of such Registrable Securities under any federal or state law or regulation of governmental authority other than the Securities Act. (e) CONTRIBUTION. If the indemnification provided for in this Section 7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified party in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative faults of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Sections 7(a), 7(b) and 7(c), any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7(e) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person. (f) INSURANCE. In connection with any Demand Registration or Incidental Registration, the Company will provide at its expense a binder or binders of insurance in form satisfactory to the Designated Holders participating in such registration, and, as soon as practicable thereafter, a policy or policies of insurance, insuring each such Designated Holder, and each Person, if any, who controls such Designated Holder within the meaning of the Securities Act and the Exchange Act, for the aggregate amount of the public offering price received for the Registrable Securities disposed of by such Designated Holder (subject to such deductible as is customarily contained in underwriting insurance policies at such time) against all losses, claims, damages, liabilities and expenses which arise out of or are based upon any untrue statement, alleged untrue statement, omission or alleged 17 omission of the character described in this Section 7 in connection with such registration and disposition and which are customarily covered under underwriting insurance policies; PROVIDED, HOWEVER, that the Company shall not be obligated to provide such insurance if it determines in good faith that such insurance is not available on commercially reasonable terms at the time of such registration, and the holders of a majority of the Registrable Securities to be registered reasonably agree. 8. RULE 144. The Company covenants that it shall file (a) any reports required to be filed by it under the Exchange Act and (b) take such further action as each Designated Holder of Registrable Securities may reasonably request (including providing any information necessary to comply with Rule 144 under the Securities Act), all to the extent required from time to time to enable such Designated Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such rule may be amended from time to time, or (ii) any similar rules or regulations hereafter adopted by the Commission. The Company shall, upon the request of any Designated Holder of Registrable Securities, deliver to such Designated Holder a written statement as to whether it has complied with such requirements. 9. MISCELLANEOUS. (a) RECAPITALIZATIONS, EXCHANGES, ETC. The provisions of this Agreement shall apply, to the full extent set forth herein, with respect to (i) the shares of Common Stock and (ii) any and all equity securities of the Company or any suc cessor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise), which may be issued in respect of, in conversion of, in exchange for or in substitution of, the shares of Common Stock, and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof. The Company shall cause any successor or assign (whether by merger, consolidation, sale of assets or otherwise) to enter into a new registration rights agreement with the Designated Holders on terms substantially similar to this Agreement as a condition of any such transaction. (b) NO INCONSISTENT AGREEMENTS. The Company shall not enter into any agreement with respect to its securities that is inconsistent with the registration rights granted in this Agreement or grant any additional registration rights to any Person or with respect to any securities that are not Registrable Securities that are prior in right to or inconsistent with the rights granted in this Agreement. If at any time after the date hereof, any Person other than an Other Rightholder shall advise or give notice to the Company of such Person's exercise of registration rights granted by the Company to such Person prior to the date hereof, the Company shall use its best efforts to cause such Person to acknowledge the registration rights granted pursuant to this Agreement and agree that such Person's registration rights shall not be prior in right to the rights granted in this Agreement. 18 (c) REMEDIES. The Designated Holders, in addition to being entitled to exercise all rights granted by law, including recovery of damages, shall be entitled to specific performance of their rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive in any action for specific performance the defense that a remedy at law would be adequate. (d) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless consented to in writing by (i) the Company and (ii) the Insurance Partners Stockholders holding Registrable Securities representing (after giving effect to any adjustments) at least 60% of the aggregate number of Registrable Securities owned by all of the Insurance Partners Stockholders. Any such written consent shall be binding upon the Company and all of the Designated Holders. (e) NOTICES. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be made by registered or certified first-class mail, return receipt requested, telecopier, courier service, overnight mail or personal delivery: (i) if to the Company: Superior National Insurance Group, Inc. 26601 Agoura Road Calabasas, California 91302 Telecopy: (818) 880-8615 Attention: Chief Financial Officer with a copy to: Riordan & McKinzie 5743 Corsa Avenue, Suite 116 Westlake Village, California 91362 Telecopy: (818) 706-2956 Attention: Dana M. Warren, Esq. 19 (ii) if to IP or IP Bermuda c/o Insurance Partners Advisors, L.P. One Chase Manhattan Plaza 44th Floor New York, New York 10005 Telecopy: (212) 898-8720 Attention: Mr. Steven B. Gruber with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Telecopy: (212) 757-3990 Attention: Judith R. Thoyer, Esq. (iii) if to any other Designated Holder, at its address as it appears on the record books of the Company. All such notices and communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier or overnight mail, if delivered by commercial courier service or overnight mail; five (5) Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if telecopied. (f) SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. The Demand Registration rights of the Insurance Partners Stockholders contained in Section 3 and the other rights of each of the Insurance Partners Stockholders with respect thereto and the incidental or "piggyback" registration rights of the Designated Holders contained in Section 4 and the other rights of each of the Designated Holders with respect thereto shall be, with respect to any Registrable Security, automatically transferred to any Person who is the transferee of such Registrable Security, provided that such transfer was made in compliance with applicable securities laws and such transferee is made a party to this Agreement and, after such transfer, is the holder of not less than 150,000 Registrable Securities. All of the obligations of the Company hereunder shall survive any such transfer. Subject to Section 7, no Person other than the parties hereto and their successors and permitted assigns is intended to be a beneficiary of any of the rights granted hereunder. 20 (g) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (I) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. (j) SEVERABILITY. If any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, it being intended that all of the rights and privileges of the Designated Holders shall be enforceable to the fullest extent permitted by law. (k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and in the Stock Purchase Agreement. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (l) FURTHER ASSURANCES. Each of the parties shall execute such documents and perform such further acts as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement. 21 IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement on the date first written above. SUPERIOR NATIONAL INSURANCE GROUP, INC. By: /S/ J. CHRIS SEAMAN ------------------------------- Name: Title: INSURANCE PARTNERS, L.P. By: Insurance GenPar, L.P., its General Partner By: Insurance GenPar MGP, L.P., its General Partner By: Insurance GenPar MGP, Inc., its General Partner By: /S/ STEVEN B. GRUBER ------------------------------- Name: Steven B. Gruber Title: Vice President INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P. By: Insurance GenPar (Bermuda), L.P., its General Partner By: Insurance GenPar (Bermuda) MGP, L.P., its General Partner By: Insurance GenPar (Bermuda) MGP, Ltd., its General Partner By: /S/ STEVEN B. GRUBER ------------------------------- Name: Steven B. Gruber Title: Vice President EX-2 3 LETTER AGREEMENT Exhibit 2 SUPERIOR NATIONAL INSURANCE GROUP, INC. 26601 Agoura Road Calabasas, California 91320 November 25, 1996 Insurance Partners, L.P. 201 Main Street, Suite 2600 Fort Worth, Texas 76102 Insurance Partners Offshore (Bermuda), L.P. Cedar House 41 Cedar Avenue P.O. Box HM 1179 Hamilton HM EX, Bermuda International Insurance Advisors, Inc. One Chase Manhattan Plaza 44th Floor New York, New York 10005 International Insurance Investors, L.P. c/o International Insurance Investors (Bermuda) Limited Cumberland House One Victoria Street Hamilton HM HX, Bermuda The persons listed on Schedule 1 hereto at the addresses set forth opposite the names of such persons CentreLine Reinsurance Limited Cumberland House One Victoria Street Hamilton HM HX, Bermuda The persons listed on Schedule 2 hereto c/o Superior National Insurance Group, Inc. 26601 Agoura Road Calabasas, California 91320 EXERCISE OF WARRANTS AND REGISTRATION RIGHTS Ladies and Gentlemen: Reference is made to the Note Purchase Agreement, dated as of March 31, 1992 (the "Note Purchase Agreement"), among Superior National Insurance 2 Group, Inc. (the "Company") and each of the several purchasers listed on Schedule I thereto and the Preferred Securities Purchase Agreement, dated as of June 30, 1994 (the "Preferred Securities Purchase Agreement"), among the Company, Superior National Capital Holding Corporation, Superior National Capital, L.P. and Centre Reinsurance Services (Bermuda) III Limited. Pursuant to (a) Section 1.2 of the Note Purchase Agreement, the Company issued to (i) International Insurance Advisors, Inc. ("IIA"), as agent for the general partner and the limited partners of International Insurance Investors, L.P. ("III"), warrants (the "IIA Warrants") to purchase (subject to adjustment) 1,474,306 shares, no par value per share, of Common Stock of the Company (the "Common Stock") and (ii) the individuals listed on Schedule 2 hereto (the "Management Warrantholders") warrants (the "Management Warrants") to purchase (subject to adjustment) 92,159 shares of Common Stock and (b) Section 5.8 of the Preferred Securities Purchase Agreement, the Company issued to CentreLine Reinsurance Limited ("CentreLine") a warrant (the "CentreLine Warrant") to purchase (subject to adjustment) 579,356 shares of Common Stock. Each of the IIA Warrants, the Management Warrants and the CentreLine Warrant may be hereinafter referred to collectively as the "Warrants" or individually as a "Warrant". Pursuant to Section 5.2(e) of the Stock Purchase Agreement, dated as of September 17, 1996 (as amended, the "Stock Purchase Agreement"), by and among the Company, Insurance Partners, L.P. ("IP"), Insurance Partners Offshore (Bermuda), L.P. ("IP Bermuda") and certain other persons or entities who executed the form of subscription agreement attached thereto as Exhibit A, it is a condition to close the transactions contemplated by the Stock Purchase Agreement that IIA distribute the IIA Warrants to the general partner and the limited partners of III listed on Schedule 1 hereto (the "III Partners"). Concurrently with the execution and delivery of this letter agreement, IIA is distributing the IIA Warrants to the III Partners. 1. RESTRICTION ON EXERCISE OF WARRANTS AND REGISTRATION RIGHTS. Each of the III Partners, the Management Warrantholders and CentreLine acknowledge and agree that the exercise of a Warrant could cause, or increase the risk of, an "ownership change" within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations (as amended from time to time, the "Regulations") promulgated thereunder (collectively, "Section 382"). Notwithstanding anything to the contrary set forth in this letter agreement or in each of the IIA Warrants, the Management Warrants or the CentreLine Warrant, from and after the date hereof through and including the end of the 36th month following the date of the closing of the transactions contemplated by the Stock Purchase Agreement (the "Restriction Termination Date"), each of the III Partners, the Management Warrantholders and CentreLine covenant and agree that (a) it or he shall not exercise or attempt to exercise its or his Warrant, (b) it or he shall not Transfer (as hereinafter defined) or attempt to Transfer its or his Warrant to any individual or any "entity" (as 3 that term is defined in Regulations Section 1.382-3(a)) unless, prior to such Transfer, it or he shall deliver to the Company an instrument, in form and substance reasonably satisfactory to the Company, duly executed by the transferee of such Warrant pursuant to which such transferee has agreed to be bound by the terms and conditions of this letter agreement, (c) it or he shall not exercise or attempt to exercise the registration rights granted by its or his Warrant and (d) any exercise or attempted exercise thereof in violation of subsection (a) or subsection (c) above or any Transfer or attempted Transfer thereof in violation of subsection (b) above shall be void ab initio; PROVIDED, HOWEVER, that notwithstanding the foregoing, prior to the Restriction Termination Date, (i) each of the III Partners, the Management Warrantholders and CentreLine may exercise its or his Warrant in the event of a tender or exchange offer or a merger or other business combination involving the Company, which is approved by the Board of Directors of the Company (the "Board of Directors") or with respect to which the Board of Directors has announced its intention to remain neutral and (ii) each of the III Partners, the Management Warrantholders and CentreLine may exercise its or his (x) Warrant other than in the event of a tender or exchange offer or a merger or business combination described in clause (i) above or (y) registration rights upon the prior written approval of the Board of Directors, which approval shall be granted in its sole and absolute discretion after considering all facts and circumstances, including, without limitation, future events the occurrence of which are deemed by the Board of Directors to be reasonably possible; and PROVIDED FURTHER, that the Company hereby consents to the distribution by IIA of the IIA Warrants to the III Partners. Each of IIA and each of the III Partners hereby acknowledges and represents that no consideration was or shall be given or received by any such party in connection with the distribution of the IIA Warrants to the III Partners as contemplated hereunder. For purposes of this letter agreement, "Transfer" means, with respect to the Warrants, any direct or indirect acquisition or disposition thereof, whether by sale, exchange, merger, consolidation, transfer, assignment, conveyance, distribution, pledge, inheritance, gift, mortgage, creation of a security interest in, or lien or encumbrance upon, or any other acquisition or disposition of any kind and in any manner, whether voluntary or involuntary, knowing or unknowing, by operation of law or otherwise. 2. LEGEND. All Warrants shall bear the following conspicuous legend describing the restrictions set forth in paragraph 1 hereof and the Board of Directors shall take such actions as it deems necessary to substitute for the Warrants, new warrants bearing such legend: THE EXERCISE AND TRANSFER OF THIS WARRANT AND THE EXERCISE OF THE REGISTRATION RIGHTS CONTAINED HEREIN ARE SUBJECT TO CERTAIN RESTRICTIONS PURSUANT TO THE CHARTER OF SUPERIOR NATIONAL INSURANCE GROUP, INC. ("THE COMPANY") AND THAT CERTAIN LETTER AGREEMENT, RELATING TO THIS WARRANT, AMONG THE COMPANY, THE RECORD HOLDER OF THIS WARRANT AND CERTAIN OTHER PARTIES 4 THERETO (THE "LETTER AGREEMENT"). ANY EXERCISE OR TRANSFER OF THIS WARRANT OR EXERCISE OF REGISTRATION RIGHTS IN VIOLATION OF THE CHARTER OF THE COMPANY OR THE LETTER AGREEMENT SHALL BE VOID AB INITIO. A COPY OF THE CHARTER OF THE COMPANY AND THE LETTER AGREEMENT MAY BE OBTAINED FROM THE COMPANY WITHOUT CHARGE UPON WRITTEN REQUEST. 3. REGISTRATION RIGHTS AGREEMENT. The parties hereto acknowledge that on the date hereof, the Company, IP and IP Bermuda are entering into a Registration Rights Agreement (the "Registration Rights Agreement"). 4. DEMAND REGISTRATIONS. Subject to paragraph 1 hereof, if at any time pursuant to Section 8.3 of the IIA Warrants, the Management Warrants or the CentreLine Warrant any holder (the "Initiating Holder") thereof requests in writing that the Company effect the registration under the Securities Act of 1933, as amended (the "Securities Act"), and under the securities or "blue sky" laws of any jurisdiction designated by such holder (a "Demand Registration"), of all or part of such holder's shares of Common Stock issued or issuable upon exercise of its Warrant, then the Company shall, in addition to its obligations under Section 8.3 of each of the Warrants, promptly give written notice of such Demand Registration to the Insurance Partners Stockholders (as defined in the Registration Rights Agreement) and use its best efforts to effect the registration under the Securities Act of the Registrable Securities (as defined in the Registration Rights Agreement) which the Company has been requested by the Insurance Partners Stockholders to register. In connection with any Demand Registration involving an underwriting, if the managing underwriter of the offering advises the Company in writing that in its opinion the aggregate amount of shares of Common Stock requested to be included in such offering is sufficiently large to have a material adverse effect on the success of such offering, then the Company shall include in such registration only the aggregate amount of shares of Common Stock that in the opinion of such managing underwriter may be sold without such material adverse effect and shall reduce, as to each Initiating Holder, each holder of Warrants (other than the Initiating Holder) requesting registration of shares of Common Stock in such Demand Registration pursuant to Section 8.3 of such Warrants (the "Other Rightholders") and the Insurance Partners Stockholders as a group, the amount of Common Stock to be included in such registration, pro rata within such group based on the number of shares of Common Stock included in the request for registration by such Initiating Holder, Other Rightholders and Insurance Partners Stockholders. The Insurance Partners Stockholders covenant and agree that in the event that any of the Insurance Partners Stockholders requests a Demand Registration pursuant to the Registration Rights Agreement (an "IP Demand Registration"), each of the holders of the IIA Warrants, the Management Warrants and the CentreLine Warrant shall be entitled to participate in such IP Demand Registration to the same extent that the Insurance Partners Stockholders are entitled to participate in a Demand Registration pursuant to this paragraph 4. 5 5. INCIDENTAL REGISTRATIONS. Subject to paragraph 1 hereof, if (a) the Company, at any time or from time to time, proposes to register in an underwriting any of its shares of Common Stock for its own account under the Securities Act (subject to the limitations set forth in Section 4(a) of the Registration Rights Agreement) (an "Incidental Registration") and (b) the representative of the underwriters advises the Company in writing that marketing factors require a limitation of the number of shares of Common Stock to be underwritten, then the number of shares of Common Stock that are entitled to be included in the Incidental Registration shall be allocated (i) first, to the Company for shares of Common Stock being sold for its own account, (ii) second, among each holder of Warrants requesting registration of shares of Common Stock in such Incidental Registration pursuant to Section 8.4(a) of such Warrants, each of the Insurance Partners Stockholders requesting registration of its Registrable Securities in such Incidental Registration pursuant to Section 4(a) of the Registration Rights Agreement and any other holders of Common Stock entitled to "incidental" registration rights and requesting inclusion of shares of Common Stock in such Incidental Registration, pro rata on the basis of the number of shares of Common Stock requested to be included in such Incidental Registration and (iii) third, any other shares of Common Stock requested to be included in such Incidental Registration. The Insurance Partners Stockholders covenant and agree that pursuant to the Registration Rights Agreement, in the event of an Incidental Registration in which marketing factors require a limitation of the number of shares of Common Stock to be underwritten, the allocation of the shares of Common Stock that are entitled to be included in such Incidental Registration shall be identical to the allocation described in the preceding sentence. 6. WAIVER OF ADJUSTMENTS OF WARRANT PRICE AND PREEMPTIVE RIGHTS. The parties hereto acknowledge that pursuant to the Stock Purchase Agreement, the Company agreed to issue an aggregate of $18,000,000 worth of shares of Common Stock (the "Shares") for a purchase price per share of $7.53. With respect to the issuance by the Company of the Shares pursuant to the Stock Purchase Agreement, (a) each of the III Partners hereby waives its or his rights to any adjustments under Section 2 of the IIA Warrants, including, without limitation, Section 2.2.1 thereof, and its or his preemptive rights under Section 9 of the IIA Warrants, (b) each of the Management Warrantholders hereby waives his rights to any adjustments under Section 2 of the Management Warrants, including, without limitation, Section 2.2.1 thereof, and his preemptive rights under Section 9 of the Management Warrants and (c) CentreLine hereby waives its rights to any adjustments under Section 2 of the CentreLine Warrant, including, without limitation, Section 2.3.1 thereof, and its preemptive rights under Section 9 of the CentreLine Warrant. 7. CONSENTS AND NOTICES. Each of IIA, CentreLine, the III Partners and the Management Warrantholders acknowledges receipt of notice duly given from the Company of any and all transactions described or mentioned in the Company's Proxy Statement to its shareholders dated November 11, 1996, and consents to each such transaction. 6 8. WAIVER OF COVENANTS. With respect to the issuance by the Company of the Shares pursuant to the Stock Purchase Agreement and the acquisition by the Company of Pac Rim Holding Corporation ("Pac Rim") pursuant to the Agreement and Plan of Merger, dated as of September 17, 1996, among the Company, SNTL Acquisition Corp. and Pac Rim, International Insurance Investors, L.P. hereby waives its rights under Section 7 of the Note Purchase Agreement. 9. COUNTERPARTS. This letter agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same letter agreement. 10. GOVERNING LAW. This letter agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to the principles of conflicts of law thereof. 11. BINDING EFFECT. This letter agreement shall be binding upon and inure to the benefit of the parties hereto and their permitted successors and assigns. 12. RATIFICATION OF WARRANTS. Except as otherwise expressly provided herein, all of the terms and conditions of each of the IIA Warrants, the Management Warrants and the CentreLine Warrant are ratified and shall remain in full force and effect. 13. TERMINATION. If the transactions contemplated by the Stock Purchase Agreement are not consummated and such agreement thereby terminates, then upon such termination, this letter agreement shall immediately terminate without further action by the parties hereto, and all terms, rights, restrictions and conditions created hereunder, including, without limitation, all terms, rights, restrictions and conditions created by paragraph 1 hereof, and the enforceability and effect of the restrictive legend placed on each of the Warrants as contemplated by paragraph 2 hereof, shall terminate and have no further force and effect. 7 14. FURTHER ASSURANCES. Each of the parties shall execute such documents and perform such further acts as may be reasonably required or desirable to carry out or to perform the provisions of this letter agreement. Very truly yours, SUPERIOR NATIONAL INSURANCE GROUP, INC. By: /S/ SUPERIOR NATIONAL INSURANCE GROUP, INC. ---------------------------------------------- Name: Title: Agreed and accepted on this 25th day of November, 1996 INSURANCE PARTNERS, L.P. By: Insurance GenPar, L.P., its General Partner By: Insurance GenPar MGP, L.P., its General Partner By: Insurance GenPar MGP, Inc., its General Partner By: /S/ INSURANCE PARTNERS, L.P. -------------------------------------------------- Name: Title: INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P. By: Insurance GenPar (Bermuda), L.P., its General Partner By: Insurance GenPar (Bermuda) MGP, L.P., its General Partner By: Insurance GenPar (Bermuda) MGP, Ltd., its General Partner By: /S/ INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P. -------------------------------------------------- Name: Title: 8 INTERNATIONAL INSURANCE ADVISORS, INC. By: /S/ INTERNATIONAL INSURANCE ADVISORS, INC. -------------------------------------------------- Name: Title: INTERNATIONAL INSURANCE INVESTORS, L.P. By: International Insurance Investors (Bermuda) Limited, its General Partner By: /S/ INTERNATIONAL INSURANCE INVESTORS, L.P. -------------------------------------------------- Name: Title: INTERNATIONAL INSURANCE INVESTORS (BERMUDA) LIMITED By: /S/ INTERNATIONAL INSURANCE INVESTORS (BERMUDA) LIMITED -------------------------------------------------------- Name: Title: CENTRE REINSURANCE LIMITED [transferred warrant to Centre Reinsurance Bermuda Limited] By: /S/ CENTER REINSURANCE LIMITED ---------------------------------- Name: Title: TRUSTEES OF THE ESTATE OF BERNICE P. BISHOP By: /S/ TRUSTEES OF THE ESTATE OF BERNICE P. BISHOP --------------------------------------------------- Name: Title: CARLISLE VENTURES, INC. By: /S/CARLISLE VENTURES, INC. ------------------------------ Name: Title: 9 J.P. MORGAN CAPITAL CORP. By: ------------------------- Name: Title: BEACH HAVEN INVESTORS, INC. By: /S/ BEACH HAVEN INVESTORS, INC. ----------------------------------- Name: Title: BACARDI CAPITAL LTD. By: /S/ BARCARDI CAPITAL LTD. ----------------------------- Name: Title: FLUOR REINSURANCE INVESTMENTS, INC. By: /S/ FLOUR REINSURANCE INVESTMENTS, INC. ------------------------------------------ Name: Title: INTERNATIONAL INSURANCE ADVISORS, INC. 401(K) AND PENSION PLANS By: /S/ INTERNATIONAL INSURANCE ADVISORS, INC. 401(K) AND PENSION PLANS ----------------------------------------------------------------------- Name: Title: 10 /S/ ROBERT A. SPASS - ------------------------------------------ Robert A. Spass /S/ PAUL H. WARREN - ------------------------------------------ Paul H. Warren /S/ BRADLEY E. COOPER - ------------------------------------------ Bradley E. Cooper /S/ CRAIG SCHWARBERG - ------------------------------------------ Craig Schwarberg CENTRELINE REINSURANCE LIMITED By: /S/ CENTRELINE REINSURANCE LIMITED -------------------------------------- Name: Title: /S/ KARL O. JOHNSON - ------------------------------------------ Karl O. Johnson /S/ JOSEPH P. WOLONSKY - ------------------------------------------ Joseph P. Wolonsky /S/ J. CHRIS SEAMAN - ------------------------------------------ J. Chris Seaman /S/ RICHARD D. HOTCHKISS - ------------------------------------------ Richard D. Hotchkiss /S/ EDWIN J. WILSON - ------------------------------------------ Edwin J. Wilson SCHEDULE 1 III PARTNERS ------------ III PARTNER ADDRESS ----------- ------- International Insurance Investors Cumberland House (Bermuda) Limited One Victoria Street, Seventh Floor Hamilton HM HX, Bermuda Centre Reinsurance Limited Cumberland House One Victoria Street, Seventh Floor Hamilton HM HX, Bermuda Trustees of the Estate of Bernice P. 567 South King Street Bishop Suite 200 Honolulu, Hawaii 96813 Carlisle Ventures, Inc. 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202 J.P. Morgan Capital Corp. 60 Wall Street New York, New York 10260 Beach Haven Investors, Inc. 10 Floral Court Westfield, New Jersey 07090 Bacardi Capital Ltd. Pitts Bay Road Hamilton, Bermuda Fluor Reinsurance Investments, Inc. 3333 Michaelson Drive Irvine, California 92730 Robert A. Spass One Chase Manhattan Plaza 44th Floor New York, New York 10005 Paul H. Warren One Chase Manhattan Plaza 44th Floor New York, New York 10005 Bradley E. Cooper One Chase Manhattan Plaza 44th Floor New York, New York 10005 Craig Schwarberg 221 West 48th Street, #1802 Kansas City, Missouri 64112 International Insurance Advisors, Inc. One Chase Manhattan Plaza 401(k) and Pension Plans 44th Floor New York, New York 10005 SCHEDULE 2 MANAGEMENT WARRANTHOLDERS ------------------------- Karl O. Johnson Joseph P. Wolonsky J. Chris Seaman Richard D. Hotchkiss Edwin J. Wilson -----END PRIVACY-ENHANCED MESSAGE-----